Tuesday, January 18, 2011

Pakistan's Exports and Remittances Rise to New Highs

In addition to significant foreign institutional investments (FII) in Karachi shares last year, the reports of surging remittances by overseas Pakistanis and the nation's growing exports are the only two other pieces of good news amidst an avalance of bad news on the economic front in Pakistan in 2010.

The State Bank of Pakistan has reported that overseas Pakistanis sent home $5.291 billion during July-Dec, 2010, an increase of $761 million or 17 per cent year over year, according to Pakistan's Dawn newspaper.

Remittances of $863 million were sent by overseas Pakistanis last month, up 23.72 per cent or $165 million compared to December, 2009.

Exports in the July-December 2010 touched almost $11 billion – $1.8 billion, or 20.6per cent, higher than last year’s exports in the corresponding period. Meanwhile, imports stood at $19.2 billion, marking a growth of 19.6 per cent, or $3.2 billion, in the first half, according to the Express Tribune.

Pakistani government has been relying heavily on remittances by overseas Pakistanis to fund the massive trade imbalance, which exceeded $8 billion during the first six months of this fiscal.

The increased remittances and rising exports have helped bring down the nation's current account deficit to $504 million for six months, or 0.6 percent of GDP, about 30% lower than the same period in the previous year.

Foreign direct investment (FDI) declined 15.5 per centin the first six months of the current fiscal year to $828.5 million from $968.9 million in the same period last year, according to the Nation quoting figures from the State Bank of Pakistan.

However, in spite of Pakistan's multiple serious crises, the foreign buyers have continued to be relatively sanguine about Pakistan's prospects.

Pakistan's main stock market ended 2010 with a 28 percent annual gain, driven by foreign buying mainly in the energy sector, despite concerns about the country's macroeconomic indicators after summer floods, according to Reuters. Although it was less than half of the 63% gain recorded in 2009, it is still an impressive rise in KSE-100 index when compared favorably with the performance of Mumbai(+17%) and Shanghai(-14.3%) key indexes. Among other BRICs, Brazil is up just 1% for the year, and the dollar-traded Russian RTS index rose 22% in the year, reaching a 16-month closing high of 1,769.57 on Tuesday, while the rouble-based MICEX is also up 22%.

Pakistan's key share index KSE-100 was just over 1000 points at the end of 1999, and it closed at 12022.46 on Dec 31, 2010, sgnificantly outperforming BRIC markets for the decade. Pakistan rupee remained quite stable at 60 rupees to a US dollar until 2008, slipping only recently to a range of 80-85 rupees to a dollar. In spite of the currency decline, Pakistan's KSE-100 stock index surged 55% in 2009 in US dollar terms and 65% in rupee terms. During the same period of 1999-2009, Mumbai Sensex index moved from just over 5000 points to close at 17,464.81.

If you had invested $100 in KSE-100 stocks on Dec. 31, 1999, you'd have over $1000 today, while $100 invested in Mumbai's Sensex stocks would be worth about $400. Investment of $100 in emerging-market stocks in general on Dec. 31, 1999 would get you about $300 today, while $100 invested in the S&P500 would be essentially flat at $100 today.

Related Links:

Haq's Musings

Pakistan's KSE Outperforms BRIC Exchanges in 2010

High Cost of Failure to Aid Flood Victims

Karachi Tops Mumbai in Stock Performance

India and Pakistan Contrasted in 2010

Pakistan's Decade 1999-2009

Musharraf's Economic Legacy

Copper, Gold Deposits Worth $500 Billion at Reko Diq, Pakistan

China's Trade and Investment in South Asia

India's Twin Deficits

Pakistan's Economy 2008-2010

88 comments:

Anonymous said...

probably a statistical quirk

the numbers don't add up power supply is falling,politics is in a coma,bombs go off every week yet record exports???

What's the logic?The FX can be explained by IMF funds being transferred this time,the exports??
Don't think so probably a base effect 2009 was the nadir for global trade so from that base anything looks great...

Riaz Haq said...

Anon: "probably a statistical quirk"

To the contrary, it shows Pakistanis' resilience in the face of multiple serious crises, terrible economic management and bad governance.

Anon: "The FX can be explained by IMF funds being transferred this time"

IMF has transfered no money to Pakistan during July-Dec 2010 period other than the $450 million flood assistance.

Tahir said...

Very useful and encouraging picture of the economy in Pakistan, the different news items predicts only doom and gloom for the future of Pakistan in economic fields, let us hope these figures are correct and they continue an upward trend.

Riaz Haq said...

Tahir:"let us hope these figures are correct and they continue an upward trend."

I think it shows Pakistanis' resilience in the face of multiple serious crises, terrible economic management and bad governance.

Things can improve dramatically if there is even half decent governance.

Mayraj said...

FII is hot money.
Can be dangerous if not managed properly.

Riaz Haq said...

Mayraj: "FII is hot money.
Can be dangerous if not managed properly."

I agree. But the $515 million FII in Pakistan is a very tiny fraction of its $180 billion economy.

Anonymous said...

agree. But the $515 million FII in Pakistan is a very tiny fraction of its $180 billion economy.

:)

Riaz jee what is pakistan's CAD.You called India's 3-3.5% CAD 'huge' just wondering what the pakistani equivalents are...

Mayraj said...

Thank goodness.
I wish Pakistan had invested more in tourism.
In looking at some of the pictures of Tunisia, I could see that tourism was a major part of its economy.
http://en.wikipedia.org/wiki/Tunisia

Pakistan needs to get off its reliance on ag products. Water and soil management is of poor quality and we are now in era of global warming. It is irresponsible not to broaden economic base with growing population. It needs to broaden its economic base.

Riaz Haq said...

Pakistan’s current account surplus for July-December 2010 was a provisional $26 million, compared with a deficit of $2.570 billion in the same period last year, the central bank said on Tuesday, according to Dawn newspaper.

In December, the current account stood at a provisional surplus of $601 million, compared with a deficit of $17 million in November, the State Bank of Pakistan said.

The current account deficit for the fiscal year 2009/10 was $3.946 billion, compared with $9.261 billion in fiscal year 2008/09.

Rahul said...

The info given by the author is wrong. India's CAD is neither 3-3.5%. It is less than 2%, but yes it is at a alerting mark. But the exports are set to increase to 225 billion. So this will narrow the CAD to less than 2%..


As for Pakistan, CAD last year was 6% of the GDP, and this year with Turkey putting duties on imports and Pakistan needing to import cotton, this is set to increase more than that. Remember the Pakistan's financial year does not start in april.

Riaz Haq said...

Rahul:"The info given by the author is wrong. India's CAD is neither 3-3.5%. It is less than 2%...As for Pakistan, CAD last year was 6% of the GDP...

What are your sources?

The sources I have quoted are Reserve Bank of India and State Bank of Pakistan. And according to these sources, India's current account deficit for July-Sept 2010 was $35.4 billion while Pakistan had a account surplus of $26 million in July-Dec 2010.

Riaz Haq said...

Pakistan is Striving for Consensus to Spur Ailing Economy, Says Businesswek:

Jan. 20 (Bloomberg) -- Pakistan’s government and the main opposition met today in a bid to hammer out a consensus on ways to contain the nation’s expanding budget deficit and revive an economy battered by terrorism and floods.

Prime Minister Yousuf Raza Gilani’s economic team, led by Finance Minister Abdul Hafeez Shaikh, will begin “substantive and meaningful” negotiations with its chief rival, the Pakistan Muslim League of former prime minister Nawaz Sharif, Ahsan Iqbal, a spokesman for Sharif, said in a phone interview in Islamabad today.
----------
Any political agreement on a reform program will force the government to cut spending by 30 percent, restructure state- owned money-losing companies, including Pakistan International Airlines Corp. and Pakistan Steels, and set a new price mechanism for power and gas consumers, Iqbal said.

“Politics is driving economic decision making here,” Abid Qayum Sulehri, executive director at the Islamabad-based Sustainable Policy Institute, said in a phone interview. “This will provide Gilani much-needed political cover to take tough economic decisions.”

The government’s economic team met with Sharif’s party, Pakistan Muslim League-Quaid, and coalition partners Muttahida Qaumi Movement and Awami National Party on Jan. 18 to brief them about the state of the economy. Gilani reached out to the opposition after Sharif demanded the premier implement a 10- point economic agenda within six weeks and move against corrupt officials or face a campaign for his ouster.

The Karachi Stock Exchange’s 100 Index, which advanced 28 percent last year, fell 1.3 percent to 12,411.87 today in Karachi. The rupee traded at 85.73 against the dollar, after falling 1.65 percent last year.

“I’m not too optimistic that this political give-and-take will change things substantially on the ground,” said Asif Ali Qureshi, head of research at Invisor Securities Ltd. in Karachi. “Investors usually get nervous when foreign exchange reserves start shrinking and the currency comes under pressure. That hasn’t happened so far this year.”

Partner Returns

Gilani on Jan. 7 succeeded in winning back the support of his partner, the MQM, after reversing the fuel-price rise. His Pakistan Peoples Party lost its majority Jan. 2 when the MQM had quit the coalition. President Asif Ali Zardari’s grip on power was further undermined by the Jan. 4 assassination of a key aide, the governor of the Punjab province.
The petrol-price rollback, which runs the risk of a wider budget deficit, was criticized by U.S. Secretary of State Hillary Clinton, who urged Pakistan not to “reverse progress.”
“We have moved forward in a concrete way,” Ishaq Dar, a former finance minister and a key aide to Sharif, told reporters after the meeting. “You’ll see things moving in the next few weeks.”
Maria Kuusisto, an analyst at consultant Eurasia Group, said in a Jan. 14 telephone interview from London, that Pakistan’s budget shortfall may touch 8 percent of gross domestic product, or 1.3 trillion rupees ($15.15 billion) in the year through June from 6.3 percent in the previous year.
The central bank governor last month blamed government borrowing for price pressures and said raising interest rates may impede investments and undermine economic growth.
The government borrowed 401 billion rupees from the central bank between July 1 and Jan. 8, more than double the amount it borrowed in the same period last year, according to data from the State Bank of Pakistan.
“Pakistan is operating without any fiscal order,” Sakib Sherani, an economic adviser in Pakistan’s finance ministry from July 2009 to December 2010, said in an interview. “The fiscal mismanagement may produce the biggest budget deficit in Pakistan’s history in absolute terms.”

Riaz Haq said...

Pakistan's foreign exchange reserves continued to rise through Jan 15, 2011, according to report in Express Tribune:

KARACHI: Foreign exchange reserves rose to a record $17.28 billion in the week ended January 15, up from $17.09 billion in the previous week, the central bank said on Thursday.

Reserves held by the State Bank of Pakistan (SBP) rose to $13.66 billion from $13.44 billion, while those held by commercial banks fell to $3.62 billion from $3.65 billion, said Syed Wasimuddin, chief spokesman for the central bank.

“The main reason for the increase in foreign exchange reserves is the rise in remittances received from overseas Pakistanis,” said Wasimuddin. According to official data, remittances rose 17 per cent to $5.3 billion in the first six months (July-December) of fiscal year 2010-11.

Foreign exchange reserves previously hit a record high in the week ended January 1 as the country received more than $633 million from the US for providing military and logistical support in the fight against terror.

In May last year, the government received $1.13 billion – the fifth tranche of an $11.3 billion International Monetary Fund bailout programme.

In the currency market, the rupee ended weaker at 85.73/80 to the dollar, compared with Wednesday’s close of 85.68/73 because of rising international oil prices.

In the money market, overnight rates fell to 11 per cent, compared with Wednesday’s close of between 12 and 12.50 per cent, because of increased liquidity in the interbank market. Dealers said there are scheduled outflows of Rs53 billion ($613 million) on Friday.

Riaz Haq said...

Here are excerpts from a report on Pakistan's retail sector:

The ongoing shift in population from rural to urban areas has underpinned the expansion of the retail sector. Strong real GDP growth until fiscal year 2006/07 (July-June) provided the foundation for years of double-digit growth in net retail sales in US dollar terms. However, net retail sales contracted by 1.2% in 2008. Sales then grew by only 5.7%, to US$75bn, in 2009, as the inflationary surge of 2008, which reduced spending power, abated only moderately. In local-currency terms retail sales growth in 2009 is estimated at 22.7%, owing to depreciation in the value of the Pakistan rupee against the US dollar. A gradual shift towards more formal retail facilities will facilitate the expansion of sales in 2012-14, but this process will be slow and confined to urban areas. (In 2010-11 retail sales expansion will be subdued, as overall private consumption growth slows sharply owing to the catastrophic floods that struck Pakistan in August-September 2010. Electronic retailing is almost non­existent in Pakistan because of the low levels of Internet penetration and credit-card use in the country.

Consumer finance accounted for 4.2% of the total stock of credit in the country in June 2010, according to the State Bank of Pakistan (SBP, the central bank). Credit for purchases of consumer durables was down by 25% year on year..... Because of their limited financial resources, most retailers sell on a cash-only basis. This is gradually changing, and credit-card use is likely to become an increasingly important element of personal finance in the long term. However, in the short to medium term credit-card use will be constrained by the poor economic climate: outstanding credit-card loans were down by 25% year on year in June 2010. Large, centralised shops have not been popular in Pakistan, as low levels of car ownership mean that people prefer "corner shops" near their homes. More importantly, frequent and often prolonged power failures reduce the advantages of refrigeration, leading to a preference for fresh goods bought for immediate consumption from neighbourhood retailers. Online retail sales are negligible, owing to the country's extremely low levels of Internet penetration and credit-card ownership and the absence of Internet merchant accounts to facilitate online credit-card transactions.

The retail market is highly fragmented and underdeveloped. There are over 125,000 retail outlets across the country, according to the Small and Medium Enterprise Development Authority, but around 95% of these are tiny corner shops. The few supermarkets that exist are concentrated in Karachi and Lahore. USC is the largest supermarket chain by far, with 5,850 outlets throughout the country in 2009, according to Planet Retail, an international industry consultancy. The other major chains are Whitbread (with 17 outlets in 2009), GNC (with six outlets), Metro (five outlets) and Carrefour (one outlet). However, even USC's market share is virtually insignificant in terms of retailing as a whole, according to Planet Retail, accounting for only 1.2% of total grocery spending in the country. The vast majority of retailers in Pakistan are small family-run shops, and this will remain the case throughout the forecast period (2010-14).

Riaz Haq said...

Here's a story in the Economist on economic mismagement in Pakistan:

ON JANUARY 3rd Pakistan’s central bank began printing rupee notes carrying the signature of Shahid Kardar, who was appointed governor of the State Bank of Pakistan in September. Unfortunately inflation has robbed money of over 15% of its value in the past year, and no let-up is in sight for the new notes. It is the most visible sign of an economy slouching towards another financial crisis.

At the start of the year the government raised petrol prices, prompting the Muttahida Qaumi Movement (MQM) to quit the coalition government led by the Pakistan People’s Party (PPP). It left the PPP “with a choice between saving the government and saving the economy,” as Maleeha Lodhi, Pakistan’s former ambassador to the United States and Britain, put it in the News, a Pakistani daily.

On January 6th the PPP made its choice, reversing the price rise. The decision has rescued the government but also robbed the exchequer of 5 billion rupees ($58m) a month. By the end of the fiscal year in June, the government’s deficit could reach 6.5% of GDP, according to Sayem Ali of Standard Chartered bank, or even 8% if oil prices continue to rise, according to Mohsin Khan of the Peterson Institute, in Washington, DC.

Pakistan’s budget has a lot to bear. The World Bank reckons that recovering from the summer’s devastating floods, which damaged over 1.6m homes, will cost up to $10.8 billion. To date, aid has been modest. Donors have pledged just $2.1 billion, or $11 per person, compared with $363 per person promised to Haiti after its earthquake —a slightly unfair comparison perhaps.

Yet Pakistan’s fiscal troubles are antediluvian. It is one of the most lightly taxed countries in the world. Fewer than a quarter of the country’s firms declare any taxable revenues, and only 11 out of every 1,000 of its citizens pay tax on their incomes, according to the World Bank. As a result, tax revenues amount to a mere 10% of Pakistan’s GDP.

The government had hoped to raise that ratio by broadening its sales tax, which is riddled with exemptions. Yet it lacked the heart to defy lobbies which slip through the threadbare tax net. They include exporters who escape tax on their domestic sales, as well as retailers and wholesalers who elude tax altogether. The proposed reforms also proved unpopular with the broader public, who resent paying anything to a government that gives them so little in return.

The government’s failure has jeopardised its agreement with the IMF, which is withholding the remaining $3.5 billion of the bail-out funds it offered back in 2008. At that time, the rupee was tumbling and Pakistan’s foreign-exchange reserves barely covered three weeks’ worth of imports. If the country is not yet in similar trouble, it can thank Pakistani folk abroad, whose remittances surged by 16.8% in the second half of 2010, compared with a year earlier (see chart). This is one reason why the rupee has not sunk further, and why the central bank’s reserves still cover six months’ worth of imports.

Yet foreign investment has slowed to a trickle, and higher commodity prices will add to the country’s import bill. Meanwhile, Pakistan’s foreign debt must be serviced. The finance minister is in a pickle. If Pakistanis lose heart, too, they may quit the currency, scrambling for dollars instead. Should that happen, Pakistan’s reserves will quickly vanish. And here is the big difference between 2008 and today: Pakistan has already had its IMF rescue.

Anonymous said...

PAkistan's basic problem isn't govt expenditure which @ 20% of GDP is well within range of comparable countries.The problem is that of revenue which at 10% of GDP is banana republic category!

Unfortunately as long as the feudal-politico nexus remains this is unlikely to change...

Anonymous said...

Rural income of Pakistani farmers are on rise for last three years.
Pakistani farmers now has disposable income to play with.
I asked an acquaitance of mine where sugar mill's profit is going. His answer was to the bank.
He said that farmers are rich and cash loaded in Pakistan. They have money now to buy consumer goods.
Consumer goods maker are having good days as higher price for freezers, air cons, tractors, tiles, wood and steel.manufactured goods are in great demand in the rural towns. farmers making more money in cotton crop due to BT cotton seeds. They are also looking toward winter cotton crop as weather is mild in Pakistan. My stocks going up and up. Fertilizer companies will be announding annual profit next week. I am in for good dividends, perhaps increase in dividend by fifty paisa to one ruppee. lets hope so.
Hey, that disposible income is going some where.

Riaz Haq said...

Anon: "Rural income of Pakistani farmers are on rise for last three years."

I am not surprised...higher food and clothing prices are naturally transfering income from urban to rural folks in the form of higher farm incomes which are not taxed.

It's also probably contrinbuting to lower revenue receipts by the government.

Riaz Haq said...

Pakistan's agriculture sector remained robust in spite of heavy flooding last year, according to Dawn:

ENCOURAGING news from export front, mainly about wheat, dominated trading on the Karachi wholesale markets last week where prices showed tendency to rise as some exporters covered their forward sales to meet their shipment deadlines.

A major breakthrough on the wheat front was widely welcomed by commercial traders and exporters who hoped the exportable surplus would add to foreign exchange earnings, market sources said.

But leaders of flour mills association opposed the official move fearing rise in flour prices in coming weeks. But the government was seized with the problem of disposing of the surplus of over a million tons well before the arrival of new crop, they said.

“It is a good beginning on wheat export front,” said a commercial exporter. He said the “profit-margin is not attractive but new export outlets are being explored to dispose of future surplus.”

With a loaded consignment of 27,000 tons of wheat for some African destination, a loader has already left, while another Bangladesh ship is on the port loading a consignment of 20,000 tons for Chittagong, exporters said.

But the news from sugar front was not encouraging as price tussle between growers and mill owners continued after the later reduced the cane procurement price from Rs230 per maund to Rs210 without any reason. The growers in some areas had stopped supply of sugarcane to mills.

However, sugar prices in retail and wholesale markets rose further high despite mills’ claim that supplies of new crop to commercial dealers are being made
regularly and prices should remain stable around previous levels.

Much of the physical activity, meanwhile, remained confined to some essential counters where floor brokers reported pressure on supplies.

Arrivals from upcountry markets remained steady, which, in turn, did not allow speculative increase in prices and most of the increases were orderly. Dealers said changes in prices were mostly orderly and did not reflect speculative rise on any counter amid two-way activity and higher ready off-take.

The industrial sector showed two-way active trading as some commodities showed rise under the lead of guar seeds and cotton-based items because of a record rise in cotton prices owing to a short crop, they said.

On essentials’ counters, including wheat and sugar, prices remained stable despite higher demands followed by reports of steady arrivals from upcountry market.

Sugar prices remained stable early but rose later, although dealers reported a fairly large business at the unchanged rates in an apparent effort to sell it later at higher rates, they said.

Rice exporters said the recent increase in global prices was expected to significantly add to export earnings of the private sector exporters. They said talks were going on with some importers and hopes of some deals were bright during the next couple of days.

On the other hand, cotton prices showed wild either way movements amid alternate bouts of buying and selling but late in the week a sharp decline in New York cotton futures pushed them lower around Rs9,000 per muand, which spinners said were still higher than their export parity level for textiles.

Riaz Haq said...

As food prices and farm incomes rise, Pakistan is seeing record tractor sales in rural areas, according to The Nation newspaper:

LAHORE - Millat Tractors Limited set a new record of highest ever sales of 41,500 tractors in the calendar year 2010, improving upon its previous year sales of 37,537 tractors.
Out of these 41500 tractors, a record 5000 tractors have been produced and sold in the month of Dec, 2010.
This has been outcome of Company’s commitment to provide maximum number of tractors to increase farm productivity and accelerate the pace of farm mechanization in the country, according to a Press release.
Millat Tractors has further taken steps to increase productivity and quality of tractors in order to provide timely delivery to its customer in future.


Here's another report from Dawn on increasing rural sales of bikes:

Motorcycle and car sales enjoy over 50 per cent and 40-45 per cent market share in rural areas as country’s 60-65 per population lives in the rural areas.

After witnessing decline in August, many car and bike makers had registered recovery in sales in September.

Total car sales in July-September 2010 (including Suzuki Bolan) rose by 12 per cent to 30,030 units as compared to 26,812 units in the same period of 2009.

In the category of 1,300cc and above, Honda Civic and City sales in September 2010 rose to 548 and 832 units as compared to
492 and 688 units in August 2010. However, sale of these cars had plunged in August 2010 as compared to July 2010.

In July-September 2010, sales of Civic and City had risen to 1,558 and 2,274 units from 1,308 and 1,955 units in the same period of 2009.

Toyota Corolla sales slightly went up to 3,070 units in September 2010 as compared to 2,901 units in August 2010 while its July 2010 sales were 4,400 units.Overall Toyota sales in July-September 2010 increased to 10,371 units as compared to 8,951 units. Suzuki Swift sales rose to 252 units in September 2010 as compared to 226 units in August 2010.

In 1,000cc segment, a total of 1,106 units of Suzuki Cultus were sold in September 2010 as compared to 1,050 units in August 2010 while Alto sales slightly fell to 1,047 in September 2010 from 1,141 units in August 2010. The overall sales of Cultus and Alto in July-September swelled to 2,860 and 2,819 units from 2,852 and 2,365 units in the corresponding period of 2009...

Anonymous said...

There's a pattern here going back to Ayub Khan:

1) Ayub Khan -- Massive economic progress
2) Bhutto -- Nationalization and economic collapse
3) Zia ul Haq -- Some economic progress
4) Bhutto & Sharif -- Economic collapse and near bankruptcy
5) Musharraf -- Massive economic progress
6) Zardari -- Economic collapse and near bankruptcy

Do you get the pattern? It's unmistakable that military rule brings economic growth but the politicians bring economic collapse. They've nearly bankrupted the country several times.

Why do you think our 'best friend' India is so pro democracy in Pakistan and ambivilant about it elesewhere like Burma,Afghanistan, Nepal etc??

Riaz Haq said...

Anon: "It's unmistakable that military rule brings economic growth but the politicians bring economic collapse. They've nearly bankrupted the country several times."

Pakistani economy grew at a fairly impressive rate of 6 percent per year through the first four decades of the nation's existence. In spite of rapid population growth during this period, per capita incomes doubled, inflation remained low and poverty declined from 46% down to 18% by late 1980s, according to eminent Pakistani economist Dr. Ishrat Husain. This healthy economic performance was maintained through several wars and successive civilian and military governments in 1950s, 60s, 70s and 80s until the decade of 1990s, now appropriately remembered as the lost decade.

So, the bottom line is the current crop of leadership is the worst we have seen in Pakistan since its inception.

Riaz Haq said...

Here are excerpts from a piece by Christine Fair on "What Pakistan Did Right" in 2010 floods:

Arguably, the Pakistan Meteorological Department (PMD) is one of the most important reasons why the floods claimed relatively fewer lives than may have been expected, given the scale of the event. In January, I met with the Director General Arif Mahmood and his team in Islamabad. They walked me through, in painstakingly scientific detail, how their organization saved lives in 2010, as they had done before and as they will continue to do in the future.
-----------
Some six months have passed since the onset of the floods. Surprisingly, many of the predicted disasters did not happen. Pakistan did not have the predicted second wave of deaths in the camps for the millions of internally displaced persons. Astonishingly, none of the predicted epidemics (such as cholera) took place. Pakistan has even managed to stave off the expected food insecurity.
-----------------
Pakistan's National Disaster Management Agency (NDMA), headed by Major General (Ret.) Nadeem Ahmed is part of the reason these catastrophes were prevented. The NDMA, along with the four Provincial Disaster Management Agencies, coordinated the massive effort to rescue flood victims, establish camps for internally displaced people, provide the victims with shelter, water and sanitation facilities, food and other logistical requirements. The NDMA coordinates with international donors and maintains a situation room where staff track calls and resolve problems. In a country that routinely sustains criticism for organizations that that underperform, NDMA excels.

Some of the worst fears about lost crops have not materialized. While many of Pakistan's fields have not been properly prepared for planting this year, NDMA working with its domestic and international partners was able to provide seeds to many cultivators. In many cases, they simply flung the seed into the land once the water receded. Many of these efforts are resulting in bumper crops. This was not expected in September of 2010. To be sure, this is only the beginning and much more needs to be done. But measures of this type helped stave off some of the gravest outcomes expected.
----------------
There are still challenges. Complaints persist about corruption with the pre-paid ATM cards (Watan cards) distributed to IDPs. In Sindh, serious charges of corruption persist regarding the purchase of tents, blankets, medicines and food for the flood-affected people. Reports continue that food supplies are languishing in depots while IDPs go without in Sindh. Indeed, the IDP camp I visited in near the office of the District Coordination Officer for Dadu, was saddening. The residents and the camp administrator claimed that there had been no food distributed in a month.
-----------
Nonetheless, half a year after the floods devastated the country and after most of the media has left the story behind, 20 million Pakistanis still need help -- and they need help now. While Pakistan must expand its own tax net to contribute to the long-term costs of rebuilding its infrastructure and preparing for future disasters, the international community should also continue to support immediate needs such as winterization, food support and rehabilitation of the flood victims.

Riaz Haq said...

Pakistan suffered a decline in FDI inflow in July-Dec 2010 of 15.5 per cent to $828.5 million from $968.9 million in the same period last year, according to The Nation newspaper.

Increased exports and remittances still helped Pakistan achieve a small current account surplus of $26 million in July-Dec 2010 period, according to Dawn News.

Pakistan wasn't the only developing nation in South Asia to see FDI decline. India suffered 31.5% decline in FDI in 2010, according to UNCTAD.

FDI inflow in India declined from $34.6 billion in 2009 to $23.7 billion in 2010.

With decline in FDI, India is now running a huge current account deficit of over 3.0% of its GDP for July-Dec, 2010, according to Trading Economics.

Riaz Haq said...

Here's a Tribune Express report on Karachi shares 2010 performance:

KARACHI: The Karachi Stock Exchange (KSE) witnessed the traditional year-end rally to give a cheerful farewell to 2010. Despite late selling on the last trading day of the year, KSE-100 index registered an increase of 1.4 per cent to end the outgoing year at 12,022 points – its highest since July 2008.

Overall, the benchmark index provided returns of about 28 per cent year-on-year.

Foreign inflows for the week clocked in at higher levels with the net amount standing at $12.2 million, compared with just $5.5 million in the preceding week. The net inflow of foreign investments for the year tallied at an impressive $526 million.

United Bank Limited (UBL) and Fauji Fertiliser Company (FFC) dominated discussions at the bourse during the week. Bestway Group’s acquisition of an additional 20 per cent stake in the bank encouraged positivity amongst investors, as did the disbursement of $633 million to the country as part of the Coalition Support Fund from the United States.

FFC’s stock ticker continued to rise despite an explanation call issued by the government to fertiliser companies over the increase in the price of fertiliser.

Although the market did not immediately respond positively to the International Monetary Fund’s nine-month extension for meeting conditions attached to the standby arrangement, the decision eased uncertainty on the political front to some extent.

Market activity during the week was heavily concentrated in blue-chip stocks, particularly from the energy sector as investors took cue from rising international oil prices. “Despite political noise, the oil and gas sector along with the banking sector stole the show at the bourse during the week,” read a KASB research report.

While the index ended the year at its highest level since July 2008, market volumes told a different tale. Average daily volumes were down 30 per cent compared with 2009, standing at a meagre average of 121 million shares.

What to expect this year?

InvestCap analyst Imran Safdar termed the immediate outlook for equity prices ‘neutral’, citing the tug of war on the political front, coupled with the silver lining of earnings growth and economic recovery.

“With the election of new directors at the exchange, a new round of negotiations on the leverage product may start and any positive outcomes should drive the index up,” stressed analyst Imtiaz Gadar in a research report. The report also termed the commencement of trial operations at Engro’s new urea plant positive for future trade sessions at the bourse.

After a difficult year, analysts maintain a positive view on the market on the back of foreign inflows, strong growth in earnings, potential introduction of a leverage product and post-flood reconstruction activities.

Nonetheless, it is important to note that higher-than-anticipated commodity prices and discontinuation of the IMF programme remain key risks.

Riaz Haq said...

Swiss ambassador to Pakistan says his naton's investors are ready to invest in Pakistan, according to The Nation newspaper:

He said the country has abundant natural resources and skilled cheap manpower but lacks technology. It is a key market of 155 million people. It is gateway to the Central Asian Republics, South Asia and Gulf countries.
Population of SAFTA alone stands at 1.4 billion people. The market of these countries including Afghanistan can be effectively and conveniently serviced from Pakistan.
In his address the LCCI Senior Vice President Sheikh Muhammad Arshad said that Swiss economy is one of the most developed economies of the world. It has highly advanced industries such as machinery, chemicals, watches, textiles and precision instruments.
He invited Swiss Businessmen to invest in Pakistan on 100 percent equity basis or in the form of joint ventures with local industries.
Such experiences have been very successful in Pakistan. Bayer, Abbot, Searle, Toyota, Hyundai, Honda, Massey Ferguson, Fiat, Nestle etc. are all success stories.
He said that present government has adopted a liberal investment policy and there is no restriction on sending back the principal, dividends, profits and royalties. He urged the Swiss businessmen to come forward and seize upon the unprecedented investment opportunities in Pakistan.

Riaz Haq said...

Swedish trade mininster says Swdedes want to expand investments in Pakistan, according to news reports:

Swedish Minister for Trade Ms. Ewa Bjorling said on Wednesday that a good number of Swedish companies were already working in Pakistan and more companies were interested to start business ventures.

She said in a meeting here with Islamabad Chamber of Commerce and Industry (ICCI) for the promotion of two-way trade between Pakistan and Sweden.

She said that she had meetings with Prime Minister of Pakistan and other government officials and discussed the possibilities of more cooperation between the countries.

She said that Tetra Pack has presence in Pakistan for the last several years, and it has set up a new plant in Pakistan. She said that Swedish Trade Council is responsible for trade between both the countries and hoped for great business prospects in the fields of common interest.

Fredrik Fexe, Vice President of Export Radet, a Swedish Trade Council said that Pakistan is large consumer market. He identified telecom, energy, environmental technology, water purification, waste management, automobiles, healthcare, and supply of construction equipment for having trading, investments and joint ventures with the Pakistani companies.

Charlotte Kalin, Vice President of the Stockholm Chamber of Commerce and Industry informed that three Swedish delegations visited Pakistan last year and current delegation was quite optimistic of good business prospects here.

Mahfooz Elahi, ICCI President, thanked the Trade Minister for bringing a trade delegation for building trade and investment relations with Pakistani companies.

He said that Swedish companies including Panasian, Volvo, Ericson, Sabba, Tatra Pak, Skanska, Wah Nobel, H&M, Ikea and Atlas Packages Limited are operating successfully in Pakistan and said that more Swedish should invest in hydro power projects, dams, tunnels, infrastructure development, food and beverages and dairy and milk products.

Mahfooz Elahi said that perception about good image of Pakistan is needed to be improved to encourage foreign investor to invest in the country.

Riaz Haq said...

Pakistan's exports to China rose 37% in 2010, according to Dawn News:

BEIJING: From January to December 2010, Pakistan’s exports to China increased by nearly US $ 500 million and their overall growth rate was 37.4 per cent.

According to the figures released by China Customs, the total Pakistani exports to China last year were US $ 1.7 billion compared to US $ 1.2 billion in 2009.

Since 2006, Pakistani exports to China has been gradually climbing. The total volume of Pakistan-China trade rose by US $ 2 billion to US $ 8.7 billion approximately.

Last year, textiles, ores and mineral products, leather, chemicals and plastics, sports goods, iron and steel, surgical instruments showed the trend of faster growth rates.

In 2010, Pakistan’s imports from China also increased by US $ 1.4 billion and the total volume of imports from China stood at US $ 6.9 billion. The trade deficit right now for Pakistan is US $ 5.2 billion.

“The two governments have agreed on a series of measures to reduce the trade deficit” said Ambassador Masood Khan on Friday adding that in this regard, China would be sending purchase missions to Pakistan to identify suitable Pakistani products for Chinese markets.

He pointed out that Pakistani traders and businessmen will be attending major trade exhibitions in Kunming, Guangzhou, Xi’an, Urumqi, Kashghar, Dalian, and Beijing.

Trade seminars would also be held to create greater space for Pakistani products in China.

Meanwhile, Pakistan has requested assistance from China in vocational and technical training in the areas of value added textiles, gems and jewelry, ceramics, surgical instruments, leather and light engineering.

At the last meeting of the Free Trade Commission (FTC), China agreed to consider the proposal and invite Pakistan to identify specific training needs in these areas.

Pakistan has also requested China to give unilateral tariff concessions to 268 Pakistani product lines.

Pakistan is the second largest trading partner of China in South Asia.

Riaz Haq said...

Here's an interesting assessment of Pakistan's economy in 2H-2010:

...“The country’s exports, money sent by overseas Pakistanis, balance-of-payments position and foreign exchange reserves have reflected an encouraging growth during July-December FY11, showing strong signs of improvement in the economy,” Saad-bin-Naseer, CEO of Pearl Capital, told Central Asia Online January 28. Pakistan’s exports were $10.97 billion, an increase of US $1.88 billion, in the first six months of FY11.

That 21% increase was a very positive sign for the growth of export-oriented industry and the national economy, he said.

In FY11 exports could cross the $22 billion mark for the first time because of a significant increase in the value of Pakistani products on world markets, Naseer added.

“The textile industry had taken the lead by fetching $1.28 billion in additional foreign exchange through exports,” Anisul Haq, secretary of All Pakistan Textile Mills, told Central Asia Online.“The textile industry had taken the lead by fetching $1.28 billion in additional foreign exchange through exports,” Anisul Haq, secretary of All Pakistan Textile Mills, told Central Asia Online by telephone from Lahore. “From July-December FY11 textile exports increased to $6.28 billion” compared to 2010 figures.

Total annual textile exports could exceed $13 billion for the first time, he added. In 2009-10, they totalled $10.5 billion.
“The textile industry had taken the lead by fetching $1.28 billion in additional foreign exchange through exports,” Anisul Haq, secretary of All Pakistan Textile Mills, told Central Asia Online.
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Another pillar of the economy is remittances from overseas Pakistanis. The money they sent home increased by $780m in the first half of FY11, to $5.3 billion, Haq said.

“We hope the country would receive $11 billion from overseas Pakistanis in 2010-11 with major increase in inflows from Pakistanis staying in Arab countries and other western countries,” Haq said.

Foreign aid from institutions and countries, not just individuals, helped. The disbursement of $633m in coalition support and the extension that the IMF gave the government for imposing the Reformed General Sales Tax (RGST) helped improve some of the major economic indicators, Naseer said.

The picture did much to bolster Pakistan’s balance sheet, which has had its ups and downs. Pakistan recorded a current account surplus in the first six months of the fiscal year, which enabled growth in foreign exchange reserves and stabilised the dollar-rupee exchange rate, Pearl Capital’s Naseer added.

In 2009-10, the country incurred a $2.5 billion current account deficit from July-December, but for the same period in 2010-11 it enjoyed a surplus of $26m – a dazzling switch from red ink to black, he said.

The robust performance of exports and remittances enabled Pakistan to accrue a record $17.3 billion in foreign exchange reserves by January 21, he said.

Investor confidence has grown in response to these positive indicators. The stock market capitalisation grew to $36 billion in January 2011 from $32 billion in October 2010, he said, adding that such growth would encourage foreign and local investment.
-----
warned.

Islamabad, which still hasn’t imposed the RGST the IMF wants, doesn’t collect enough taxes, Khan said. It levies only about 9% of GDP against the required international standard of a minimum 15% tax-to-GDP ratio, Khan said.

The government must implement tax reform, reduce reliance on borrowing from the IMF and generate its own resources to enhance tax revenues and to bolster economic growth, he added.

Serious efforts to solve chronic gas and power shortages are also imperative, he said.

Riaz Haq said...

With rising cotton and yarn prices, Pakistan has the potential to export $50 billion in textiles, according to a report in Gulf Today:

KARACHI: Pakistan has a potential of at least $50 billion in value-added textile exports if human resource in this sector is fully developed, said Textile Commissioner Muhammad Idrees.

Addressing the closing ceremony of 9th round of apparel manufacturing and management training programme at the Readymade Garments Technical Training Institute, the official said that the present volume of exports was not at all satisfactory.

The stakeholders could easily double this volume by improving skills of workers and through compliance with the standards of buyers, he added.

The skills development programme comprised one-month training, which covered cutting, sewing, production management, industrial engineering and quality control. Experts and consultants from Technopak, a world renowned consultancy firm, were hired for the training.

Thirty-one master trainers or middle management professionals from Artistic Milliners, Naz Textiles, Rajby Industries and Selimpex International and Soorty Enterprises attended the ninth round of training project.

The training project has so far been successfully implemented in 30 factories in Sindh and has trained 279 master trainers/middle management professionals and 3,693 workers.

The project delivered complete training system, course curriculum, manuals and consulting guidelines to the factories. Training manuals are also translated into Urdu language to transfer appropriate knowledge and skills to workers.

Pakistan’s textile sector is optimistic about meeting the annual export target, as high cotton prices in domestic and international markets have caused an increase in prices of value-added textile products, industry people say.

The government had fixed the textile export target at $14 billion for the current fiscal year. Members of the textile sector are of the view that achieving the target is possible, as exports of highly value-added items such as knitwear and garments have increased in terms of value.

Statistics released by the Federal Bureau of Statistics (FBS) show the textile sector has performed well in the first half (July to December) of the current fiscal year, as its exports increased by 25.79 per cent as compared to the corresponding period of the previous year.

The industry, however, believes they would need to import up to five million bales of cotton because the 11 million bales produced so far in the country will not meet the requirements as some of the crop has been destroyed by flood.

The industrialists also expressed reservations about gas shortage in the country that has already caused a huge loss to the industry, particularly in Punjab. All Pakistan Textile Processing Mills Association Chairman Maqsood Ahmad Butt stressed that cotton prices reached Rs13,000 per maund (37.324 kg) and the sector may face a shortage of cotton in June if India did not lift the ban on exports.

“There is a possibility that exports will cross $14 billion target if cotton shortages are met and gas supply is restored,” he opined.

Riaz Haq said...

Here's a report in The News on how Pakistan's Engro company sees the economy:

KARACHI: Engro Corporation remains unsure about Pakistan’s economic trajectory as the country battles militants and tries to contain a growing fiscal deficit, a top company official said on Tuesday.

“Nobody knows what will happen in the coming months,” said Ruhail Mohammad, Engro’s Chief Financial Officer. “I have my numbers worked out. I know where sales and profit will be. But things are changing so fast that being sure remains almost impossible.”

Political and economic events of the past six months that saw the government retreating on key reforms such as raising taxes and cutting borrowing from the central bank have left businesses without a firm outlook, he said.

Although Engro posted a 79 percent rise in yearly profit to Rs6.8 billion in 2010, it continues to face problems, he said. “The policy of gas curtailment to fertiliser-makers is unjustified. The government has given us a commitment for uninterrupted supply, especially for the new plant.”

Expansion of Engro’s flagship fertiliser plant completed last year. The corporation can now produce 2.3 million tons of urea annually.

Mohammad, who was briefing journalists a day after the announcement of corporation’s financial results, said that Engro has no problem with increase in the price of gas that is used for making fertilisers. “The government must increase the price of fertiliser. We have been saying it for the last two years,” he said. “The agricultural products such as cotton, rice and wheat have seen a substantial increase in price. Farmers have the capacity to absorb rise in cost of urea.”

He, however, said that contractual obligations must not be breached once it comes to the additional capacity of 1.3 million tons, which the corporation has recently added. “For this project, we were offered gas at concessional rates for making the investment.”

The price of feedstock gas, which is used for making fertiliser, is subsidised by the government through a controversial method of making textile and other industries pay a higher price for the fuel. This has been a bone of contention for years.

“The government will be giving Rs37 billion in subsidy on urea in 2011,” he said. “There is no justification for this at all.”

On the other hand, curtailment of gas, which is basically a raw material for fertiliser, brings down production and leaves the manufacturers with no option but to raise prices to make up for the lost sales, he said.

He said the corporation plans to list Engro Foods, Engro Energy and Fertilisers at the stock exchange this year.

Mohammad said that work on Engro Energy’s venture into mining of coal at Tharparkar, Sindh, for power generation continues. “China is showing a lot of interest in the project. Financing won’t be an issue.”

The corporation will need between $300 million and $350 million for the Thar project by the end of 2012, he said.

“We have been cited as a heavily indebted group but if you look at the books closely we generate Rs35 cash for every Rs100 of debt. I think that gives us a lot of room to easily pay off the loans.”

Riaz Haq said...

News about 2010-2011 budgets in South Asia:

The BBC is reporting that "the budget deficit has reduced to 5.1% of GDP this fiscal year, down from more than 6%. The plan is to cut this to 4.6% next year".

Pakistan's budget deficit for first six months of 2010-2011 stood at 2.9%, up from 2.7% last year, according to CNBC and Reuters.

KARACHI, Feb 28 (Reuters) - Pakistan's budget deficit for the first six months of the 2010/11 fiscal year (July-June) was 2.9 percent of gross domestic product, the Finance Ministry said on its Web site (www.finance.gov.pk) on Monday. This compared with a deficit of 2.7 percent in the same period last year. In the October-December quarter, the deficit eased to 1.3 percent from 1.6 percent in the preceding quarter. Analysts said the lower second-quarter deficit was largely due to payments by the United States for logistical support provided by Pakistan in the war against Islamist militants. In November 2010, Pakistan agreed with the International Monetary Fund (IMF) that it would keep the country's budget deficit at 4.7 percent for the 2010/11 fiscal year. However, analysts agree Pakistan will likely overshoot this figure. Some forecast the deficit to be around 8 percent, higher than the central bank's prediction of between 6.0 and 6.5 percent, if fiscal reforms are not implemented. The original target of 4 percent was revised following the devastating summer floods, which caused around $10 billion in damages.

Riaz Haq said...

The Obama administration has proposed $3.1 billion in the 2012 budget allocation for Pakistan, according to The Express Tribune:

The administration’s spending for Pakistan is broken into two parts, the “enduring core part” – meaning long-term assistance programs – and the Overseas Contingency Operations (OCO), an administration official said at a briefing on President Barack Obama’s budget proposals for the fiscal year 2012, beginning October 1, 2011.

As part of the long-term economic and security assistance, President Obama is seeking $1.9 billion in the year 2012. The amount will also cover the cost of American aid operations and diplomatic presence.

Of the $1.9 billion, around $1.5 billion is annual money to be allocated under the Kerry-Lugar-Berman five-year aid measure.

It also includes $350 million in foreign military financing programs, which is part of the five-year agreement between the two countries.

Under the Kerry-Lugar-Berman initiative, the US funds a number of programs including development of democracy and wide-ranging infrastructure projects to assist Pakistan’s economic progress.

On the OCO side of the budget, the administration has proposed $1.2 billion, out of which $146 million is for operational expenditure.

Under the OCO, $1.1 billion is to be devoted to the Pakistan Counterinsurgency Capability Fund (PCCF). The PCCF seeks to train Pakistani forces for a more effective fight against insurgents along the country’s western border with Afghanistan.

Riaz Haq said...

Pakistan could replace India as the biggest recipient of British bilateral aid, according to the Guardian newspaper:

Britain is to stop sending direct aid to Burundi and Niger, two of the world's poorest countries, the government announced as it unveiled plans to rebalance the £8.4bn international development budget.

The two African nations, which are ranked second and fourth respectively in a World Bank list of the world's poorest states, are among 16 countries that will no longer receive bilateral aid from Britain by 2016. Direct aid will also be halted to Lesotho which is ranked 28th on the World Bank list.

Burundi, a landlocked country in the unstable Great Lakes region of Africa, is still suffering from the consequences of the Hutu-Tutsi massacres in the 1990s when 200,000 of its citizens died. Niger, a landlocked country in west Africa, depends on foreign aid for half of the government's budget.

The cuts were outlined to MPs by Andrew Mitchell, the international development secretary, as he unveiled the conclusions of two reviews into Britain's bilateral and multilateral aid programmes. Cutting aid to the 16 countries would allow Britain to concentrate its resources on 27 countries which include Afghanistan, Pakistan and South Africa.
---------
Ethiopia will become the biggest recipient of bilateral aid over the next two years. Pakistan could become the biggest recipient of British aid within three years, with a major focus on education, British officials in Islamabad said, but only if the government reduces chronic corruption.

Just 56% of Pakistani children between five and nine years' old attend primary school, a rate that British officials want to boost to the world average of 87%. But the school system is chronically dysfunctional due to political interference, "ghost schools" and unqualified teachers. "It's an education emergency," said one official.

As well as reducing graft, British officials want to see Pakistan increase its tax collection, currrently at a disastrously low rate of nine per cent of GDP with many parliamentarians paying little tax. The Pakistani government has vowed to improve education spending from two per cent GDP to seven per cent.

British officials said they recognised that British aid was a "drop in the bucket" in a country of 180 million people, but hoped that a targeted aid programme could "catalyse change" in critical areas like education.

Direct financial transfers to the Pakistani exchequer, which amounted to £120 million over four years under the last aid programme, are likely to be scrapped, officials said.

Riaz Haq said...

Thailand alone (population 66 million) exports (about $188b), more than Afghanistan, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Syria and Tunisia (combined population 345 million) altogether. The countries of the Middle East barely trade among each other, let along with the economic powerhouses of Asia, according to the Wall Street Journal.

Riaz Haq said...

KSE-100 is so far flat this year but BSE is in sharp decline as foreign buyers are fleeing.

Whatever happened to the Indian equity market? asks the BBC:

Back in November, the Sensex squeezed past 21,000 for a day before starting a three month, 16% fall.

In the same time, the world's main indices, the FTSE Dow and Nikkei have all gained up to 7%, two of the remaining BRIC countries have fallen no more than 7%, and Russia's RTS Index has gained 26%.

Unsurprisingly foreign funds have been fleeing Indian equities in the last three months.

India is in a pickle and two reasons spring to mind - the stock market was heavily overvalued and the Central Bank has been raising interest rates.

At the end of the year the price of the average share on the Sensex was 23 times its earning power (ie its p/e ratio was 23 x). The Shanghai Index was 18 x, Brazil's Bovespa 14 x and Russia's just 9 x (the Dow's p/e was 13 x). That kind of valuation may be fine if future growth seems assured, but there are signs it may be falling off.
'Leg down'

GDP in real terms expanded at an annual rate of 8.2% in the last quarter - slowing from the 8.9% rate recorded in April to June. Now, this isn't a serious problem and no one is suggesting that the Indian growth story is in serious trouble, but it may be more than just a blip.

Maya Bhandari, senior economist at Lombard Street Research, says that, on a seasonally adjusted basis, growth was pretty much flat. She adds: "I would expect another leg down in the market in the coming few months."

Food inflation has been entrenched for some time, which means the Reserve Bank started putting up interest rates a year ago and has since hiked them seven times.

"In the last 25 months or so, we have had negative real interest rates and the central bank is going to have its work cut out to bring down inflation. And while it may be raising rates, the bank is holding more auctions and lowering the statutory liquidity levels for banks - all of which has inflationary consequences," says Ms Bhandari.

On top of domestic inflation pressures, the Middle East and North Africa crisis sent oil prices belting up above $100 a barrel, adding to the central bank's imperative to keep the upward pressure on rates.
Rate rises?

India is the world's the fourth largest oil importer and imports over 70% of its oil requirements. Oil prices, which will stay high for as long as the Arab crisis lasts, will damage India's economy more than most of its main rivals. At the moment, most economists are pencilling in another half to one percentage point rise in rates.

Oil is also going to hurt government finances. In his March budget, Finance Minister Pranab Mukherjee estimated that the deficit would fall from an estimated 5.1% of GDP in the year ending March 31, to 4.6% next fiscal year.

But if oil prices keep on going up, the government will have to decide whether to keep on paying out fuel subsidies or deregulate diesel prices.

Keeping the deficit under control would suggest the latter.

Five state elections in the next few months would suggest the former.

London-based India investment consultancy director Deepak Lalwani points out that foreign confidence in India has also not been helped by a slew of scandals, the biggest being allegations that the 2008 sale of second-generation, or 2G, cellular licenses resulted in losses of nearly $36bn in potential revenue for the government.

http://www.bbc.co.uk/news/business-12650610

Riaz Haq said...

Here's a summary of Pakistan Planning Commission report Part 1 on economy:


Real Sector

In the post flood scenario, Pakistan economy is likely to manage a growth between 2.5 to 3% this year. Agriculture sector received major blow from the flood and two major Rabi crops, cotton and rice missed the production target by 17.5% and 42%, respectively. Sugarcane and Maize managed to achieve the target while Wheat, the major Kharif crop has achieved 97.34% of the sowing target by the end of January 2011.
Large scale manufacturing (LSM) sector posted a negative growth of 1.77% during July-December 2010 compared to the same period last year. Growth of Textile, Food, Petroleum products, and fertilizers was negative during the period, while production of Pharmaceuticals, Chemicals, Automobiles, Electronics and Engineering items grew positively. The decline in LSM can be attributed to the loss of production due to high oil prices and energy shortages. In the coming months, there is optimism that with the start of crushing season of sugarcane and better supply of gas, production activity will be revived.

Inflation

Inflation rate based on Consumer Price Index (CPI), Sensitive Price Index (SPI) & Wholesale Price Index (WPI) for July to January 2010-11 have increased over the same period of 2009-10 by 14.55%, 19.20% and 22.37%, respectively. Food inflation has increased to 18.8% for July - Jan. 2011, which was 10.9% in the corresponding period last year, while Non-Food inflation has increased from 10.7% to 11.0% in July-Jan. 2011. The current inflationary trend in the food group is the continuation of the domestic and international surge in prices of agricultural products and losses suffered due to floods. Other factors contributing to rising inflationary trend are higher government borrowings through monetization to meet expenditures on security and flood affectees, currency depreciation, high mark-up rates, and higher adjustments in utility prices.

Monetary Developments

The broad money aggregate (M2) increased by 8.18% during July-mid February 2011. Overall Credit to government sector for July to January 2011 increased by 12.5%, while State Bank of Pakistan's credit to government sector grew by 9.53% for the same period.
Credit extended to the private sector also showed a positive growth of 7.37% for the period of July-3m. 2011, which was a positive development for the revival of the economy.

Fiscal Position

Federal Board of Revenue (FBR) has collected tax revenue of Rs. 770 billion during July-Jan. of current financial year (2010-11) showing an increase of 10.8% as compared with the same period last year. Government has set the target of Rs. 1667 billion for the fiscal year 2010-11. First seven months tax collection accounts for about 46.2% of the target, which is an alarming signal for the tax authorities. In this scenario, prudent tax collection policy and Reformed General Sales Tax (RGST) is of utmost importance. According to the World Bank estimates, implementation of the RGST is likely to increase Pakistan's tax-to-GDP ratio to around 11 percent by fiscal year 2013. The Tax to GDP ratio is currently around 9% which calls for immediate measures, like the reformed GST, to broaden the tax base.

Riaz Haq said...

Here's a summary of Pakistan Planning Commission report Part 2 on economy:


Balance of Payments

Country's current account deficit has declined by 97.3% during July-January, 2011 over the corresponding period last year. The current account deficit during this period stood at $81 million as compared to $3,052 million during the same period last year. The ease in the current account deficit is owed largely to the relatively high export growth and workers remittances during th's period. The export of goods showed impressive improvement of 20.3% while the imports also grew by 10.4% during the period under review.
Workers' remittances surged by 17.7% during July-Jan. 2011 over the same period last year and reached $6117.97 million. In the same period last year, $5,197 million were sent home by the overseas Pakistanis. The growth in remittances can be attributed to the joint initiative of the SBP, Finance and Overseas Pakistanis Ministries launching "Pakistan Remittance Initiative (PRI)". The initiative has started materializing and hence remittances through formal channels have been
consistently showing considerable growth.
The net inflow of foreign investment in Pakistan fell by 14.2% during July-Jan. 2011 over the corresponding period last year. The economy also witnessed a downward slide in foreign direct investment (FDI) by 16% but certain sectors witnessed significant improvement in inflow of FDI
like; Sugar, Pharmaceuticals, Cement, Cosmetics, Ceramics and Information Technology. The deteriorated law and order situation, fragile political climate and the prolonged war on terror have been deterrents to new investment ventures in the country

New Developments and Reforms

According the recently released labor force survey, the overall labor force participation rate has increased from 32.8% in 2008-09 to 32.98% in 2009-10, while female participation rate has increased from 14.9% to 15.45%, which is an encouraging sign for the Pakistan economy. Unemployment rate has been increased marginally from 5.46% in 2008-09 to 5.55% in 2009-10.
The federal government has imposed income tax (withholding tax) at the rate of 3.5 per cent on farm produce dealers from January 1, 2011. The Federal Board of Revenue (FBR) has issued a notification in this regard, directing the local and provincial governments to collect the tax.
The amended Bill for the autonomy of State Bank of Pakistan is in the process of approval. The amendment aims to weaken the power of the federal government to borrow from the SBP through specific statutory measures that will make borrowing extremely complex. According to the new legislation government borrowings from the central bank will be limited to the 10% of the previous year's revenue.

Riaz Haq said...

Here's a Business Recorder report on threats from inflation and capital inflows in Asia:

ISLAMABAD: Inflation has become or continues to be an important risk to macroeconomic and social stability in a number of countries in Asia Pacific, including Vietnam, Sri Lanka, India, Indonesia, Mongolia, Cambodia, Cook Islands, Fiji, Pakistan, and Bangladesh.

This was revealed in a report titled "Asia-Pacific Sovereigns In 2011: Generally Stable Credit Quality; Inflation, Capital Flows Make Policy Environment Tricky.

Issued by the Standard & Poor's Ratings Services, the report said the challenges of strong capital inflows and rising inflationary pressures bring in important credit risks. Domestic politics and increasing geopolitical risks further complicate policy decisions, it said.

The ability of Asia-Pacific governments to navigate external and domestic challenges adroitly while pushing ahead with economic reforms will determine the pace of ascent in their credit ratings.

"In our base-case scenario, strong growth will support credit quality in Asia-Pacific," said Standard & Poor's credit analyst Elena Okorotchenko Asia continues to outperform other regions in terms of growth and sovereign credit trends.

The report said, despite generally stable credit quality, various factors have combined to make the policy environment tricky for sovereigns in the region, said in a report available here Monday.

Economic growth will enable the public sector of high-income economies to reduce fiscal deficits and resume fiscal consolidation and allow emerging market governments to speed up structural reforms.

But the downside risks to this scenario are growing beyond just a slower U.S. economy or the eurozone debt woes.

Food and energy price increases, the familiar bugbears, are providing a strong inflationary impetus across the board, and present low-income sovereigns in particular with difficult political and fiscal choices.

In addition to inflation, a number of sovereigns, such as Indonesia, Thailand, and Korea, could be facing problems with capital flows, either as a result of large inflows/outflows complicating exchange rate management or because of potential policy mistakes in trying to control such flows.

Recent developments in several Middle Eastern countries have raised questions about contagion effects.

Such popular uprisings are highly unpredictable, although the risks appear to be more pronounced where high unemployment among the young, inflation, poverty or wide income gaps are combined with growing political disillusionment in an autocratic and often corrupt regime.

In Asia, there are countries with ongoing political/social tensions and risks independent of recent events in the Middle East: Fiji, Pakistan, Bangladesh, and Thailand.

"We have factored these risks into current ratings on these sovereigns," said Ms. Okorotchenko.

In a number of other countries, the risk of social unrest is present but mitigating factors are currently strong. These are China, Vietnam, Sri Lanka, Malaysia, and Cambodia.

"The risks in these countries are mitigated by some combination of strong growth, low unemployment, and a degree of popular support for the government," she added.

Of the 22 sovereigns that Standard & Poor's rates in the region, 17 have stable outlooks on their ratings. Indonesia and Fiji have a positive outlook, and only three sovereign ratings are on negative outlooks: New Zealand, Vietnam, and the Cook Islands.

Riaz Haq said...

Here are some excerpts from an Op Ed in Newsweek Pakistan by Meekal Ahmed, a former IMF official:

The government hopes to generate Rs. 53 billion during the last quarter of the current financial year, which concludes on June 30. It hopes to achieve this by imposing a 15 percent surcharge on income tax paid by Pakistan’s paltry 1.7 million registered, individual taxpayers. Given the small tax base and modest yield, the surcharge seems unfair and not worth it. In a move that is regressive and potentially inflationary, depending on the market, excise duty on certain import items has been increased from 1 percent to 2.5 percent until end-June. While these measures are better than doing nothing at all—which is what happened during the first three quarters—they are far from ideal, and don’t go far enough to address the big problems with the economy.

But it’s not all bad. The elimination of tax exemptions for agricultural inputs (including tractors, fertilizers, and pesticides) was long overdue. With a strong agro-lobby preventing taxation on their handsome incomes in a sector that contributes 21 percent of GDP, the government might as well tax the inputs. Tax exemptions for export quality textiles sold within Pakistan have also been nixed despite resistance from the fierce textile lobby. The freeze on additional hiring in the public sector, and the 50 percent cut in several spending categories should also be welcomed.

Then there is the profusion of what many Pakistani media outlets call “petrol bombs”—highly unpopular oil price adjustments at the start of each month. The government announces the adjustments, and then rolls them back under popular and political pressure. The fuel price adjustments are unavoidable. Pakistan is a net oil importer and can’t insulate itself from global price shocks. Oil prices have risen steeply in the last three months, and have now crossed the psychologically important 100-dollar mark. Pakistan’s fuel subsidies—at an estimated Rs. 5 billion per month that could have been spent on development—are unaffordable and unsustainable. Oil prices will remain high for a while. Pakistanis must adjust to this reality. .....
...
Despite the new measures, doubts remain about the revised tax-revenue targets and the state’s capacity to achieve them. The Federal Board of Revenue is notorious for its chronic underperformance. The justification that there is a tax revenue shortfall because the economy is in recession holds no water. An economy expected to grow at around 3 percent is not, technically speaking, in recession, but is growing below its potential. There is no cycle for fiscal revenues in Pakistan: whether the economy grows at 3 percent or 7 percent, whether inflation is 2 percent or 25 percent, tax revenues fail to keep up. If they did not, there would be a constant tax-to-GDP ratio, which is actually falling. This trend points to the existence of deep-rooted structural deficiencies in the tax system, which is regressive, anti-poor and plagued by too many exemptions and concessions. Then there’s also corruption, abuse of the system, and evasion. Even taxes withheld at source are not deposited in the government’s account because of alleged connivance between withholding agents and tax officials.

Riaz Haq said...

Here's State Bank of Pakistan (SBP) assessment of the effect of Arab revolt and Japan quake-tsunami on Pakistan's economy:

KARACHI: The State Bank of Pakistan (SBP) said on Saturday that the global trade shock due to the conflict in Arab world and earthquake and tsunami in Japan remained beneficial for the country’s economy.

In its Monetary Policy Statement for the next two months, SBP said that the scenario helped the country to fetch better export price in international markets.

SBP said that there remains growing uncertainty in the global economic environment. The popular uprising in the Middle East and North Africa (MENA) region and unprecedented damage to the Japanese economy because of an historic earthquake and tsunami have shaken the global economy, which has yet to fully recover from the repercussions of the financial and economic crisis of advanced economies, it said.

One consequence of these developments has been high international commodity prices, especially of oil, it added.

“So far, the terms of trade shock have been favorable for Pakistan’s economy. More than 90 percent of the incremental increase in export earnings during July ñ February, FY11 over the corresponding period of last year has been due to high international prices of Pakistan’s exports.”

SBP said that the contribution of high import prices, particularly of oil, to the import bill has been relatively low, but is substantial and rising.

SBP further said that the turmoil in the Arab region may also influence the flow of remittances to Pakistan. “However, assuming that the inflow of remittances continue its current trend for the remaining months of FY11, there are no immediate risks to the external current account balance,” SBP added.

The financial account inflows such as foreign direct investment and portfolio investments have remained fairly modest during July ñ February FY11, almost half the level of inflows seen in the corresponding period of the last year, which was also small compared to historical levels.

SBP said that the overall balance of payment position appears to be strong at the moment with a gradual build-up of foreign exchange reserves and a stable foreign exchange market. “However, given the uncertainty with respect to foreign inflows, the developments in the external sector will need to be monitored closely in the coming months.”

Riaz Haq said...

Here are some excepts from an Op Ed by Pak industrialist Yousuf Shirazi of Atlas Group:


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Pakistan’s mineral resources – oil, gas and copper, much less gold – remain unexploited. Whatever the case, Pakistan is basically an agricultural economy. Before Partition, the area now comprising Pakistan had fed the entire India. Even now when the floods have affected the crops, Pakistan is exporting rice and wheat. And the cotton prices are so high that, together with wheat and rice prices – reinforced by global revival – it has fed the entire rural area, with unusual liquidity, so as to give a fillip to consumer demand seldom seen before!

Pakistan’s major exports consist of textile, rice, leather goods, sports goods, chemicals and carpets. More than 50 per cent of its export earnings still come from textiles – now yarn being in the forefront. Only if Pakistan focuses on agriculture in the right way can it replace the import with export economy. The current year is expected to record export of over $25 billion but, on the other hand, imports are also expected to exceed exports – $35 billion at the close of the year. The deficit finance – July-December FY10, $6.895 billion – is not any pride whatsoever. The existing situation can be remedied through exploration of mines and optimising agricultural growth and export
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In a situation like this, perhaps, the only course remains increased reliance on aid, loans and credit, which, in essence, has been worsening the economy. These loans and credits, in fact, help the economies of the developed world more than the economies of the developing countries. This is achieved through massive import – of machinery, raw materials, if not food – the PL480 of the USA – depriving the recipient countries of local investment, production and export. This has been leading to unemployment and poverty from which the developing countries traditionally suffer. The solution for the developing countries lies in reliance on education, healthcare and socio-economic infrastructure – more so in Pakistan.
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Socio-politico-economic harmony will depend, among others, on development finance through development finance institutions like PICIC and IDBP that provided long-term development finance. Now there is none. The commercial banks are doing it, but not adequately enough. It is not the job of commercial banks either. However, they are not only providing development finance of whatever worth, but all sorts of non-commercial banking – investment banking, leasing, to say nothing of asset management, and mutual funds. Jack of all trades, master of none. It is all at the cost of commercial banking, per se. The regulators may take note of it. The sooner this anomaly is rectified the better for the export orientation of the economy, and for the socio-politico-economic development of the country as a whole.

An immediately available solution is facilitating remittances, now roughly $1 billion per month and taxing the 57 per cent underground economy, under-invoicing and tax evasion, if not smuggling. The World Bank’s recent report claims this deprives the exchequer of over $500 billion annually. This will be equal to, if not, more than the aid, loans and credits which are always given at a high cost to the economy. Taxing the underground economy will reinforce localisation of investment, production and exports – glocalisation, creating employment opportunities, providing the roti, kapra aur makaan (bread, clothing and shelter) promised to the masses of people, not globalisation, which serves global interests. It will enable also much sought after access to the developed world based on outright merit.

Riaz Haq said...

Here's some UNCTAD data on cotton production and consumption in the world:

In 2007, cotton was grown in 90 countries. In 2006/07, the four main producing countries were China, India, the USA and Pakistan and accounted for approximately three quarters of world output. If we added Uzbekistan and Brasil, six countries would account for 83% of world cotton production. This concentration in cotton production, which appears to increase for several years, has to be put into perspective by considering the impact of domestic policy reforms in the largest cotton producing countries, as well as climatic and sanitary contingencies.
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The main cotton producing economies also account for a large part of consumption. According to ICAC data, China, the United States, India, and Pakistan as a whole have accounted for approximately more than 55% of global cotton consumption over the period 1980 to 2008. Their overall consumption has risen considerably in volume (see figure below). For example, consumption multiplied by 3 in China and by more than 3 in India. Pakistan has had the largest increase in volume (which multiplied by 6 between 1980 and 2008) in order to responde to export-driven demand for textiles.

Riaz Haq said...

Here are some excerpts from an ADB report on Pakistan as quoted by Daily Times:

Pakistan’s budget deficit may cross 5.5 percent of the gross domestic product (GDP) due to less than expected revenues, excess expenditure on floods, security and subsidies.
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According to the report, severe floods in July-August 2010 have affected fiscal year (FY) 2011’s prospects. Damage was less severe than initially feared, but agriculture and communications were hit hard.

The report says that Pakistan’s public debt (excluding guarantees) as a share of the GDP continued to climb in FY 2010. Government domestic debt amounted to 37.0 percent of the GDP, including commodity debt and liabilities of State Owned Entities (SOEs). External debt rose to 31.9 percent of the GDP, including 0.6% of the GDP in external liabilities of SOEs. Interest payments due on domestic debt represent a heavy burden, accounting for 3.9 percent of the GDP in FY 2010, or 43 percent of the Federal Board of Revenue’s (FBR) revenue. External debt amortisation payments, excluding amounts owed to the IMF, are relatively stable for FY 2010 – FY 2013 at about $3.3 billion. Amounts due for FY 2012 and beyond will be raised substantially by repayment obligations to the IMF. The report maintains that the inflation accelerated after the floods, to 15.7 percent in September, reflecting actual and expected shortages. It remained above 15 percent through December, falling to 14.2 percent in January owing to a government-freeze on oil and electricity prices. It is expected to stay high through FY 2011, for an average annual 16.0 percent, and is then expected to recede in FY 2012 to 13.0 percent (moderation in international food prices is likely to be at least partly offset by electricity price rises).

ADB expects Pakistan’s economy to continue to build on the vital signs of recovery. The good news is that Asia is maintaining a strong growth trajectory, and expanding South to South links presents supplementary opportunities for developing Asia, including Pakistan. Pakistan’s recent entry into Central Asian Regional Cooperation (CAREC) opens up new trade and development corridors ... but it all depends on getting back on course in implementing the fiscal reforms and creating an enabling environment for the industry and job creation for the youth in the years ahead, the ADB country director added.

The total disbursements made to Pakistan by ADB during the calendar year 2010 were $799.18 million that were 117 percent more than the projected amount of $683.28 million.
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According to the report, Pakistan’s external reserves reached a record-high of $17.4 billion in early February 2011, amounting to more than five months of imports of goods and services. This build-up essentially reflects IMF releases of $7.1 billion under the Stand-by Arrangement programme, an additional $450 million in emergency support in September 2010, and support from the Coalition Support Fund ($633 million).

Riaz Haq said...

Pakistan's ministry of finance is projecting 4% growth in fiscal 2011-12, according to The News:

“We are looking at a growth rate of four percent for the next year because of a good services sector and on the hope of better farm output,” said a Finance Ministry official who did not want to be identified.

The figure compares with a 3.7 percent growth forecast by the Asian Development Bank (ADB) in its Outlook 2011 report released on Wednesday.

The ADB expects persistent energy problems and security issues will continue to check Pakistan’s growth in 2011/12, with surging inflation posing a further major risk.
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Last year, the worst-ever floods that hit the country inflicted $10 billion in losses, forcing officials to slash growth estimates in between 2.5-3 percent for the current year, down from an expected 4.5 percent.

The services sector, however, is likely to grow by four percent in the current year to June and there are signs that the farm sector is recovering from the flooding.
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Higher cotton, rice and sugar output is expected in the coming year, analysts said.

“We expect that 2011/12 will be much better than this year ... Our own (growth) forecast is close to 4.5 percent,” said Sayem Ali, an economist at the Standard Chartered Bank.

An official at the Planning Commission, which prepares growth targets, also spoke of likely four percent growth next year, but said that was contingent on continuing support from remittances from Pakistanis working abroad and on exports, which have grown by 20-25 percent during the first eight months of the current financial year.

However, the large-scale manufacturing sector, which dominates the overall industry making up 12.2 percent of Pakistan’s GDP, remains a major concern as it faces chronic energy shortages and high interest rates that discourage private sector borrowing.

The sector grew 1.03 percent up to January, against 2.34 percent during the corresponding period last year.

“Energy shortfalls are lowering real growth by at least two percentage points annually,” the ADB said in its report.

Improved prospects for Pakistan’s economy, however, will largely depend on the implementation of measures to address key problems such as inflation, the budget deficit and the need for transparent revenue policies, according to the ADB.

“Increasing prices are on the warning level, not just for Pakistan, but for the whole region,” said Rune Stroem, ADB’s Pakistan country director.

The ADB forecasts inflation in Pakistan will quicken to 16 percent in 2011, the highest in Asia. Revenue generation is another grey area.

The central bank chief said this week that quick steps were needed to broaden the tax base in Pakistan, which has one of the lowest tax-to-GDP ratios in the world, currently around 10 percent.

The IMF has not yet released the latest tranche of the $11 billion loan due in May last year because of the government’s inability to implement a reformed general sales tax, seen as a key to expanding the tax base.

The fiscal deficit, meanwhile, is expected in between 5.3 percent and 5.5 percent of the GDP in 2010/11, but could be higher if some external flows, including grants, are not received soon.

Stroem said that 5.5 percent deficit estimates seemed unrealistic and there are signals that these might slip even further.

Riaz Haq said...

The $20m grant by USAID for Pakistani version of Sesame Street is part of $1.5 billion a year Kerry-Lugar Bill passed last year. Most of the $1.5 billion has not been disbursed, according to a piece in Foreign Policy Magazine:

U.S. economic aid to Pakistan, which totals over $1.5 billion per year, is a key part of the Obama administration's strategy to strengthen the U.S.-Pakistan strategic partnership. However, most of the aid that was allocated for last year is still in U.S. government coffers.

Only $179.5 million out of $1.51 billion in U.S. civilian aid to Pakistan was actually disbursed in fiscal 2010, the Government Accountability Office stated in a report released last week. Almost all of that money was distributed as part of the Kerry-Lugar aid package passed last year.

$75 million of those funds were transferred to bolster the Benazir Income Support Program, a social development program run by the Pakistani government. Another $45 million was given to the Higher Education Commission to support "centers of excellence" at Pakistani universities; $19.5 million went to support Pakistan's Fulbright Scholarship program; $23.3 million went to flood relief; $1.2 billion remains unspent.

None of the funds were spent to construct the kind of water, energy, and food infrastructure that former Special Representative for Afghanistan and Pakistan (SRAP) Richard Holbrooke advocated for diligently when he was the lead administration official in charge of managing the money. Moreover, according to the report, the Obama administration hasn't yet set up the mechanisms to make sure the money isn't misspent.
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"While the facts of the GAO report are accurate, it doesn't reflect the big picture nor adequately represent what we've achieved with civilian assistance over the last year," said Jessica Simon, a spokesperson for the SRAP office. "As the FY 2010 funding was appropriated in April 2010, it is hardly surprising that only a portion of the funding was disbursed by the end of the year."

Simon said that in total, the U.S. government has disbursed $878 million of Pakistan-specific assistance since October 2009, which includes over $514 million in emergency humanitarian assistance in response to the devastating July 2010 floods.

The floods also slowed the progress of the Kerry-Lugar program, Sen. John Kerry's spokesman Frederick Jones told The Cable.

"The floods last summer changed the Pakistani landscape, literally and figuratively, and required us to take a step back and reexamine all of our plans," Jones said. "Bureaucracies move slowly and redirecting aid at this level requires time and some patience. It is difficult to allocate billions of dollars in a responsible way without proper vetting, which takes time."

Experts note that the disparity between U.S. promises to Pakistan and funds delivered is a constant irritant in the U.S.-Pakistan relationship.

"There are always complaints and in terms of the delays there are pretty valid reasons on both sides," said Shuja Nawaz, director of the South Asia Center at the Atlantic Council. He said that Congress's requirement that the money be tracked and accounted for is a source of contention.

"For a long time the U.S. didn't ask any questions about the money. And so it became a bit of a shock," he said.

The GAO has long called for better oversight of the funds, especially in Pakistan's Federally Administered Tribal Areas (FATA). This lack of accountability is what spurred Congress to mandate better oversight of the Kerry-Lugar money, including provisions that require reporting on the Pakistani military's level of assistance to the United States.

...

Riaz Haq said...

Here's a Dawn-AFP story about a modest job recovery in Pakistan's textile sector with rising exports:

KARACHI: After a year of unemployment and wondering if his family would be better off if he died, Pakistani textile worker Murad Ali has got the spring back in his step.

One of thousands laid off by textile bosses last year, the father of four is now back at work and one of those to benefit from a surge in Pakistani exports in the current fiscal year, which ends on June 30.

Experts say rising global commodity prices, a government decision to prioritise power supply to industry and currency devaluation that has made Pakistani products more competitive, have fired an export boom.

Compared with the same period last year, the Trade Development Authority of Pakistan says textile exports such as silk rose 25.8 per cent and agricultural produce, such as basmati, rose 6.2 per cent from July to February 7, 2011.

The textiles sector is one of the key drivers of the Pakistani economy, accounting for 55 per cent of all exports and 38 per cent of the workforce, according to official figures.

Bosses have rehired staff who were laid off, but Ali is only getting a third of the salary as a skilled garment worker that he used to command.

“I’m earning less than last year. It is difficult to live a better life due to price rises, but I’m happy,” Ali said.

He has re-enrolled his sons at school but his wife will continue to work as a maid. Money is too tight for her to go back to being a housewife.

“The situation has drastically changed in the favour of the country’s economy,” said textile tycoon Mirza Ikhtiar Baig, who employs more than 2,000 workers and predicts exports will rise 10 per cent for the fiscal year 2010 to 2011.

“Now with demand for Pakistani products rising internationally we are employing more workers.

“Our exports are getting healthier because of an increase in international commodity prices and the government’s will to give top priority to the country’s economy,” said Baig, an advisor to Prime Minister Yousuf Raza Gilani.

The Asian Development Bank forecasts GDP growth for Pakistan of 2.5 per cent for fiscal year 2011 despite pressures from unprecedented floods in 2010, with a relatively modest rebound to 3.7 per cent for fiscal year 2012.
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Pakistan suffers from a profound electricity crisis that restricts production to around 80 per cent of its needs — a situation that will only worsen as the temperatures crawl higher in the coming months.

The budget deficit has grown to 5.5 per cent of GDP, above a 4.9 per cent target for the current fiscal year to June 30.

To fund the shortfall, the government borrowed $4.4 billion from the central bank from July 1 to February 28, a move that worsened inflation, rather than raise taxes and cut spending as the IMF and World Bank would like.
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Mohammad Sohail, head of the Karachi-based Topline Securities research and brokerage house, said the export boom would contribute to economic recovery, yet warned the gains were minimal.

“It is very fragile because the fiscal deficit is much higher than the target of 5.3 per cent because of the government’s heavy borrowing from the central bank,” he said.
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“Furthermore, the overall security situation in Pakistan is very uncertain, which is making the foreigners and local investors wary all the time.” Independent economist A.B. Shahid said rising international oil prices had hit the country’s economy hard, adding $4 billion to the oil bill.

Pakistan could have benefited more from 8-9 per cent export growth, he said, by exporting cloth in its value-added forms rather than raw cotton and yarn.

While Ali is content with life, he is also wary of uncertainties ahead.

“Life has become too insecure. Everyone is ill at ease. Let’s just wait and see.” – AFP

Riaz Haq said...

Pakistan's July 2010-March 2011 current account surplus at $99 mln, according to Reuters:

Pakistan's current account surplus for July-March period was a provisional $99 million, compared with a deficit of $3.106 billion in the same period last year, the central bank said on Monday.

In March, the current account was a provisional surplus of $347 million, compared with a deficit of $2 million in February.

The current account deficit for the fiscal year 2009/10 was $3.946 billion, compared with $9.261 billion in fiscal year 2008/09.

Riaz Haq said...

South Korea's LOTTE is planning to invest $500m in Pakistan, according to The News:

KARACHI: Lotte, the parent company of Lotte Pakistan PTA Limited, has hinted at expanding its operations in Pakistan, besides entering into other businesses such as confectioneries and constructions, officials said on Tuesday.

“If government of Pakistan offers us some concessions in taxation then we are keen to expend operations of Lotte Pakistan with a fresh investment of $500 million,” said Jung Neon Kim, Executive Director of Lotte Pakistan.

The PTA plant was acquired by Lotte in September 2009 and renamed as Lotte PTA Pakistan Limited.

Kim said Lotte is also in the process of acquiring Kolson. Therefore, it is about to enter the confectionary and food businesses in the country, as well.

The parent company also wanted to concentrate on the beverage industry, as well as expand into the chemicals and construction sectors, he said.

To attract more foreign investment and foreigners to the country, he said, Lotte wanted to develop and build residential projects exclusively for foreigners where they could live and enjoy sports and cultural facilities along with full security.

“Pakistan is a big market and the government could help encourage foreign investment if it supports persistency in tariff rates and offers lower taxes and tax breaks.”

He said that his company was the tenth largest taxpayer in Pakistan, contributing around Rs20 billion to the national exchequer in the form of taxes.

In his opinion, the tax rates in Pakistan were among the highest in the region and should be reduced to attract more investment.

Lotte Pakistan took CSR (Corporate Social Responsibility) very seriously and spent Rs400 million on CSR activities last year, besides contributing to the relief efforts for flood victims. He said Lotte is intensely involved in education and around Port Qasim where Lotte Pakistan PTA plant is located. Lotte, he said, is committed to spending Rs60 million annually on education in the area.

Riaz Haq said...

Pakistan’s exports were projected at an estimate of USD 24 billion, highest figure so far. Moreover, the remittances in Pakistan are expected to touch USD 11 billion this year and growth rate is estimated at 4.1%, according a report in The News:

ON the invitation of Punjab Board of Investment and Trade (PBIT), world renowned expert on investment promotion Carlos Bronzatto spoke at a seminar “Investment Promotion 101”. Carlos Bronzatto is visiting Pakistan in the capacity of the Chief Executive of the World Association of Investment Promotion Agencies (WAIPA).

Chief Executive Officer, PBIT Saadat Muzaffar, welcomed the high level participants from government and the private sector and said that despite the global economic slowdown, Pakistan was poised to make an economic recovery. He said Pakistan’s exports were projected at an estimate of USD 24 billion, highest figure so far. Moreover, the remittances in Pakistan are expected to touch USD 11 billion this year and growth rate is estimated at 4.1%. He also said that Carlos Bronzatto’s visit signalled a very positive sign from the international community to support Pakistan’s aim to increase FDI in the country.

Chief Executive WAIPA Carlos Bronzatto delivered a comprehensive way forward for Pakistan to promote its investment opportunities. During that session, he provided insight about the investment evolution, core functions and key concept.

He particularly talked about the use of information to influence investment decisions, incentives for long-term development, the targeting of investors and the integration of large global corporations with local stakeholders and communities.

Punjab Board of Investment and Trade is a strategic member of the steering committee of WAIPA which represents South Asia in this committee.

PBIT is the first Investment Promotion Agency from Pakistan to be a part of this international organisation. WAIPA was created in 1995. It was established as an Association under Swiss law. WAIPA Members include 244 national and sub-national agencies from 162 different countries. Through its wide range of activities, WAIPA provides the opportunity for investment promotion agencies (IPAs) to network and exchange best practices in investment promotion.

Riaz Haq said...

Pakistan posts over $700 million current account surplus in forst ten months of fiscal 2010-11, thanks to rising remittances and record exports, according to The Nation:

KARACHI - Pakistan’s current account has recorded a surplus of $784 million in the first ten months of current fiscal year 2010-11 against deficit of $3.456 billion in the same period of last year due to rising remittances from overseas Pakistanis and steady exports, the SBP reported on Tuesday.
The current account deficit lowered to 0.5 per cent of GDP when compared to the growth of 2.4 per cent of GDP during the same period last year.
The reduction in the growth of current account deficit was caused by increase in exports and record inflow of current transfers especially workers’ remittances. The current transfer increased to $12.907 billion in Jul-Apr FY11 from $10.458 billion during the same period of previous fiscal year.
According to balance of payments statistics released by the State Bank of Pakistan yesterday, as on April 30, 2011 current account balance without off transfers amounted to $271 million against $3.866 billion over the equivalent period of FY10.
Trade account, which is the largest component of the current account, declined to $8.285 billion compared to $9.292 billion. Balance of goods and services stood at $9.677 billion during the first ten months of current financial year against $11.229 billion in the past year. Total goods exports rose to $21 billion during Jul-Apr FY11 from $17 billion of the reported period of the previous year while imports also up $29 billion from $26 billion.
From July 01 to April 30, 2011, capital account dropped to $86 million against $154 million while financial account declined to $412 million against $3.533 million due to delay in IMF funding and below than expected financing from the other international financial institutions.

Riaz Haq said...

State Bank of Pakistan Holds Discount Rate at 14.00%, according to Central Bank Info:

The State Bank of Pakistan held its discount rate unchanged at 14.00% as inflation pressures eased somewhat, and as the Bank waits to analyze next month's annual government budget. The Bank noted: "The government is mindful of fiscal pressures and has expressed its resolve to address these issues, especially containment of the fiscal deficit. The budget for FY12 is expected to reflect this commitment,". Pakistan reported annual inflation of 13.04% in April (with prices rising 1.62% month on month), on inflation the Bank commented that "the average CPI inflation for FY11 is likely to remain between 14 and 14.5 percent, which is lower than the central bank's earlier projections,".

Riaz Haq said...

Here are a few excerpts from an Express Tribune story on Pakistan's growing meat exports:

Halal meat is also one of the fastest growing segments within the global food trade. Between 2001 and 2009, the global beef trade grew at an average of 10.4 per cent to reach just over $30 billion, according to data available from the UN Food and Agriculture Organisation (FAO). However, the market for halal beef imports in the Middle East and Southeast Asia alone grew by over 18.2 per cent to reach just under $2 billion a year during that same period.

Pakistan’s market share within this rapidly growing market is a paltry 2.9 per cent. However, Pakistani exporters seem to be determined to make up for lost time. In the six years ending in 2009, Pakistani red meat exports have risen by an average of 68.6 per cent a year, though admittedly from a very low base.

Yet with the advent of more and more new players, and with surprisingly robust support from the government, Pakistan is on the verge of becoming one of the largest players in the meat trade, at least within the Middle East and Southeast Asia.

Perhaps the single biggest advantage that Pakistan has is proximity. The country is closer to the Middle East than any of its biggest rivals in the market. The three countries with the largest market shares are Australia, Brazil and India, each of which has considerably higher shipping costs to these export markets compared to Pakistan.
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“The Brazilian animal is exactly the same as most of our breeds of cattle. The quality of meat is also the same. The only difference is their ability to market their meat better than us,” said Namazi. He argues that Pakistan can easily displace Brazil as the Middle East’s leading meat supplier.

Iran, in particular, seems to be keen for Pakistani beef. The Iranian government has invested 50 per cent of the capital in the Lahore Meat Company, a dedicated abattoir that will export meat to Iran.

Australian beef, with a powerful branding effort and a larger source animal, has a specific niche market that industry experts believe will be difficult for Pakistan to compete with in the medium term.

India, the one country that could completely destroy Pakistan’s potential in the meat trade, has placed itself outside the global beef market after a 2005 Indian Supreme Court ruling that upheld a ban on cow slaughter as constitutional.

Indian exporters only sell carabeef – meat from buffalo – which is considered inferior and commands lower prices and margins. Nevertheless, Indian exporters dominate the market in Malaysia for the lower end of beef, while Australians command the higher end.

“Malaysia is ripe for a middle-market meat supplier from Pakistan,” said another expert in the meat business. Malaysia has had a free-trade agreement with Pakistan since 2007.

Several companies from Pakistan have entered the red meat export business and even more are in the process of entering the market. The oldest and one of the most successful of these is PK Livestock, a Karachi-based abattoir which has been exporting red meat to the Middle East for over two decades.

Zenith, a Lahore-based exporter, became the first Pakistani company to sell beef to Malaysia, after the Malaysian government relaxed its regulatory requirements for Pakistani exporters.

Others, such as OMC and the Al Shaheer Corporation, have also successfully begun exporting to the Middle East and are aggressively seeking regulatory approvals for markets further afield in Southeast Asia.

Pakistan’s total meat exports may come close to $100 million in 2011 and could surpass the $500 million mark in about five years, according to projections by ASI Partners.
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Despite having the eighth largest herd of cattle and the third largest herd of goats in the world, Pakistan’s animal population is very scattered, which makes procurement of the animals for the abattoir expensive...

Riaz Haq said...

Pakistan Per capita income rises to $1254, according to Daily Times:

ISLAMABAD: Pakistan’s per capita income rose to $1,254 in 2010-11 from $1,073 during last year, showing tremendous increase of 16.9 percent, according to the Economic Survey of Pakistan. Enhancement in per capita income is mainly because of stable exchange rate as well as higher growth in nominal gross national product (GNP). Per capita real income has risen by 0.7 percent in 2010-11 against last year’s 2.9 percent. Real private consumption rose by 7 percent as against 4 percent attained last year, it added. However, gross fixed capital formation lost its strong growth momentum and real fixed investment growth contracted by 0.4 percent as against the contraction of 6.1 percent last year. Total investment has declined from 22.5 percent of GDP in 2006-07 to 13.4 percent of GDP in 2010-11. National savings rate has decreased to 13.8 percent of GDP in 2010-11 against last year’s 15.4 percent of GDP. Domestic savings also declined substantially from 16.3 percent of GDP in 2005-06 to 9.5 percent of GDP in 2010-11. The national budget for the fiscal year 2011-12 would be unveiled today (Friday). app

Riaz Haq said...

Pakistan harvests bumper crop of wheat in spite of floods, reports Dawn:

ISLAMABAD: Pakistan is expected to produce at least 25 million tonnes of wheat in its 2010/11 crop, Finance Minister Hafiz Shaikh said on Friday, higher than the initial estimate.

“We are expecting that our wheat crop this year will cross 25 million tonnes,” he told reporters.

Industry officials had earlier feared the output would fall to 23.5 million tonnes against a target 25 million tonnes, after a decline in the area under wheat cultivation because of massive floods in 2010 and fertiliser shortages.

A food ministry official said good output was expected because of increased fertility in wheat-growing areas after the floods.

Pakistan produced a bumper crop of 23.8 million tonnes of wheat last year. The country consumes about 22 million tonnes a year. Harvesting of the 2010/11 crop is underway.

Asia’s third-largest wheat producer, Pakistan resumed wheat exports in January for the first time in three years after the government lifted a ban in December.

The three-year ban was lifted when the 2009/10 crop and carryover from the previous stocks led to market surplus.

Traders earlier hoped to export up to three million tones of wheat this year, but the quantity may now exceed that following new wheat output estimates.

The country had already exported or contracted to sell about 1.5 million tonnes of wheat so far.


http://www.dawn.com/2011/04/08/pakistan-sees-at-least-25-mln-t-wheat-from-201011-crop.html

Riaz Haq said...

Agriculturists expect substantial crop growth in financial year 2011/12 because of timely availability of water, according to The News:

General Secretary Sindh Abadgar Board, Syed Mehmood Nawaz Shah, told The News on Thursday that contrary to outgoing financial year, all crops are likely to record bumper output in 2011-2012 thanks to timely and sufficient availability of water.

He said that the problem is management of the upcoming bumper crops and they fear decline in prices as prices of cotton have gone down in the international market.

Pakistan Central Cotton Committee has set a target of 15 million bales this year. Cotton has a share of 6.9 percent in agriculture and 1.4 percent in GDP.

In 2010/11, major crops declined by four percent and farm sector recorded a modest growth of 1.2 percent.

Cotton and rice production remained low because of floods and rain, but wheat and sugarcane recorded growth, which saved the agriculture sector from negative growth.

Economic Survey of Pakistan 2010-11 said cotton was cultivated on an area of 2,689 thousand hectares, 13.4 percent less than last year (3,106 thousand hectares). The production is estimated at 11.5 million bales, lower by 11.3 percent over the last year’s production of 12.9 million bales and 17.9 percent less than the target of 14 million bales.

The reasons for decrease in production is loss in area under cultivation due to floods, rains, widespread attack of Cotton Leaf Curl Virus (CLCV) and sucking pest in core and non-core area, shortage of water due to canal closure during flood.

Shah said that CLCV attacked cotton in Punjab in the end of June, so this year they have sown early crop, whose results are still not known.

Sugarcane was cultivated on an area of 988,000 hectares, 4.8 percent higher than last year’s level of 943,000 hectares.

Sugarcane production for the year 2010-11 is estimated at 55.3 million tons as against production of 49.3 million tons last year, a rise of 12 percent.

Sugarcane is a major raw material for the production of white sugar and gur and is also a cash crop. Its share in value-added sector of agriculture and GDP is 3.6 percent and 0.8 percent, respectively.

Sources say that better market prices and timely payments by sugar mills encouraged farmers to grow more crop.

Area sown for rice is estimated at 2,365,000 hectares, 17.9 percent less than last year (2,883,000 hectares).

Rice has a share of 4.4 percent in agriculture and 0.9 percent in GDP. Pakistan grows high quality rice to meet both domestic demand and exports.

Rice production is likely to decline by 26 percent to 5 million tons in 2010-11 from 6.8 million tons last year, said a market source.

Rice export from Pakistan would be 2.6 million tons in FY2010-11 as compared with 3.8 million tons in 2009-10.

Rice productivity in Pakistan increased from the 1960s to the 1990s. Since then, it has seen a fall of about one percent per year. Therefore, it could not keep up the pace with growing demand, Ahmad Jawad, CEO of Harvest Trading told The News.

Major reasons for fall in rice production were floods and low market prices last year. Floods attacked mostly paddy growing areas in Sindh.

Area and production target of wheat for 2010-11 had been set at 9,045,000 hectares and 25 million tons, respectively. Wheat was cultivated on 8,805,000 hectares, showing a decrease of 3.6 percent over last year’s area of 9,132,000 hectares. However, a bumper wheat crop of 24.2 million tons has been estimated with 3.9 percent increase over the last year’s crop of 23.3 million tons.

Production of wheat increased due to timely fertiliser use and rainfall during pre-harvesting period.

Wheat is the main staple food for most of the population and largest grain source of the country. It contributes 13.1 percent to the value-added sector of agriculture and 2.7 percent to GDP.

Riaz Haq said...

Here's an interesting Op Ed by Kamal Monnoo, a Pakistani industrialist, as published in The Nation:

Agreed, that some of the macro-indicators in Pakistan are showing healthy trends or resilience, exports are up, current account deficit is down, remittances are climbing, reserves are stable and the Pak Rupee is holding out, but gauging from the manufacturing and productivity figures over the last two quarters could Pakistan’s economy be finally sliding into a serious recession? Riding on the back of some positive figures, the economic managers have thus far not only been blowing their own trumpet of success, but also literally ignoring and mocking their critics, who have tried to draw their attention to the missed opportunities and rather weak economic scaffolding that can simply crumble one day without warning like a house of cards!
Based on industrial production and productivity (especially in the small and medium enterprise sector) Pakistan’s economy contracted by nearly 4 percent - much more than expected - for at least two quarters running now, which basically means that technically we have already entered recession. Going by this, the big question actually should be that does the country have the political and economic will to fight its way out? The data underlines how the worst natural disaster (floods) to hit Pakistan in decades has foiled all hope of recovery and how the government’s addiction to borrow and the absence of visionary economic policies have contributed to the decline leaving the country in a vicious trap of high debt and a low growth amidst a rapidly rising population.
The global scenario is not helping either. Serious downturns both in the United States (where the predictions of recovery continue to be proven wrong) and the Western European economies, the two main markets for Pakistani goods, mean that the coming months for Pakistani exporters will be even tougher. All political endeavours on ‘trade not aid’ and preferential ‘market access’ in lieu of our help in the war on terror have also not been fruitful so far. What this basically tells us is that to avoid sinking we need to look inwards and start taking our own measures to embark on a path of economic recovery before the recession turns into an economic quicksand. Time and again, I have pointed out to the examples of China, India and Bangladesh, who have consciously maintained focus on manufacturing at home as their ticket to sustained economic activity and job creation. To help keep their engine of the industry running all related state and private sector institutions, banking/financial, power and energy, human resource, commerce and trade, have played their due role.


http://nation.com.pk/pakistan-news-newspaper-daily-english-online/Opinions/Columns/29-Jun-2011/Is-economy-entering-recession

Riaz Haq said...

Remittances from by overseas Pakistanis rose to $1,096.31 million in July, 2011-12,a 38.57% jump over $791.18 million during the same period of last fiscal year, according to a report in Daily Times:

This was the fifth consecutive month when Pakistani workers remitted over $1 billion. They had remitted an amount of $1,052.90 million, $1,030.43 million, $1,049.80 million and $1,104.56 million in March, April, May and June 2011 respectively.

The inflow of remittances in July, 2011 from Saudi Arabia, UAE, USA, UK, other GCC countries (including Bahrain, Kuwait, Qatar and Oman), and EU countries amounted to $291.83 million, $257.65 million, $194.87 million, $118.55 million, $116.45 million and $32.59 million respectively as compared with the inflow of $194.94 million, $177.03 million, $143.86 million, $85.57 million, $101.25 million and $23.85 million respectively in July, 2010. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first month of current fiscal year (July FY12) amounted to $ 84.37 million as against $ 64.68 million received in the first month of last fiscal year (July FY11).

Earlier Pakistani workers had remitted a record amount of over $11.2 billion during the last fiscal year that ended on June 30, 2011.

It may be recalled that the State Bank of Pakistan, Ministry of Finance and Ministry of Overseas Pakistanis had undertaken a joint initiative called ‘Pakistan Remittance Initiative (PRI)’ with a view to facilitating the flow of remittances in the country through formal channels. This initiative has shown remarkable progress as the remittances through formal channels have beaten all previous records.


http://www.dailytimes.com.pk/default.asp?page=2011\08\11\story_11-8-2011_pg5_1

Riaz Haq said...

Here's a VOA report on Bahraini govt recruiting Pakistan Army and Police veterans to put down the Shia rebellion:

Former CIA officer Bruce Riedel, who has extensive experience in South Asia, says Bahrain has been recruiting Pakistani veterans for decades. But he says the eruption of the pro-democracy demonstrations in the Gulf state in March has sparked a sharp increase in the recruiting.

"This winter, when the very serious demonstrations began and it looked like the regime might even be toppled at a certain point, their hiring of mercenaries went up substantially," said Riedel. "And they began sending out basically want ads in major Pakistani newspapers advertising well-paying jobs in the Bahraini police and the Bahraini National Guard for any experienced soldier or policeman in Pakistan."

The ads placed in Pakistani newspapers call for ex-riot police and riot control instructors, military police, non-commissioned officers, and other military and security specialists - as well as cooks and mess hall waiters - for the Bahrain National Guard. The ads were placed by the Fauji Foundation, an organization set up to help veterans and their families. Calls to the foundation seeking comment were not returned.

A senior Pakistani source says President Zardari and King Hamad discussed the issue of recruitment during the Pakistani leader’s visit to Bahrain Wednesday. But asked to comment on the matter, a Pakistani embassy spokesman said the recruitment of veterans is done through private channels and has nothing to do with the Pakistani government.

Riedel says hundreds, if not thousands, of unemployed Pakistani military and police veterans were hired. Most have come from the province of Baluchistan in southwest Pakistan.
-----
Bruce Riedel, now a senior fellow at the Brookings Institution’s Saban Center for Middle East Policy, says the Bahraini policy has aggravated the Shia-Sunni sectarian divide.

"The fact that the [ruling] Khalifa family is importing Sunni Pakistani mercenaries to repress the Shia majority only underscores the perception of the Shia majority that the regime is not interested in genuine reforms, not interested in building a constitutional monarchy, but interested in repressing the majority simply because they are Shias," he said.

Repeated calls and e-mails to the Bahrain Embassy in Washington seeking comment got no response.

Riedel adds that for Bahrain's rulers, there is a side agenda to the recruitment.

"Many of these Sunni Pakistani troops, if they’ve served well and served long enough, will also be offered Bahraini citizenship at the end of their career - an offer that is intended to try to increase the demographic size of the Sunni minority on the island. And that only intensifies Shia frustration with the way things are governed in Bahrain," he said.

The issue also has diplomatic repercussions. Iran, a Shi’ite nation, has voiced concern about the Bahraini government’s response to the demonstrations. In March, a 1,600-man Gulf Cooperation Council force, led by another Sunni monarchy, Saudi Arabia, went into Bahrain. In April, Iran summoned the Pakistani ambassador to hear official concern about Bahrain's recruitment of Pakistani mercenaries to help put down the protests. According to Iranian press reports, Iranian officials warned of “serious ramifications” for Pakistani-Iranian relations if the recruitment continued.

Riaz Haq said...

Pakistan to end IMF program, reports Dawn:

..The government’s inability to implement three major economic policy commitments — limiting fiscal deficit to 4.7 per cent of GDP, introducing integrated value added tax (VAT) and power sector reforms — will lead to technical completion of an unsuccessful $11.3 billion programme with the International Monetary Fund (IMF) on September 30, according to Finance Minister Dr Abdul Hafeez Shaikh.

This is the eighth programme with the IMF to conclude on an unsuccessful note. On the eve of the departure of Pakistan’s economic team for Washington to attend annual meetings of the IMF and World Bank, the finance minister told journalists that Pakistan would not waste its energy on revival of the incomplete programme or seek a fresh programme owing to a comfortable external balance of payments position.

He, however, said the government would stay on course on power sector reforms and macroeconomic adjustment and stabilisation programme and take steps so that it has reasonable credibility to return to the IMF programme with ease in case of any difficulty with external account.

--

Officials said the government might have to increase electricity tariff by 10-12 per cent if it succeeded in pushing forward the power sector reforms to reduce subsidies. The Deputy Chairman of the Planning Commission, Dr Nadeem ul Haque, said he could not even imagine the quantum of tariff increase required to be introduced in case reforms failed to progress because the power sector’s financing gap stood at about Rs250 billion this year.

Officials said the government had committed to the IMF to contain the fiscal deficit below 4.7 per cent of the GDP after the last year’s floods, which was later revised to 5.3 per cent of the GDP. However, the government could not meet even the revised fiscal deficit limit which officially exceeded 5.9 per cent at the end of the financial year on June 30 this year.

The government also could not introduce the value added tax in an integrated form and then it could not show a good performance on power sector reforms which also contributed to higher than anticipated fiscal deficit.

The official said both the government and the IMF understood that spending energy on revival of existing programme for a couple of billions of dollars were of no use.

The government’s comfortable feeling stems from anticipated $37 billion earnings from a five per cent growth in exports and strong workers’ remittances during the current fiscal year, enough to meet the country’s foreign exchange requirements with a current account deficit of about 1-2 per cent.

The officials said the government would have to repay $1.2 billion to IMF during the current year in two instalments and it estimated a gap of $500 million to a maximum of $2 billion during the year.

The finance minister tried to explain how the government could remain fiscally responsible in the absence of an IMF programme when elections were fast nearing. Reminded that the previous government had given up the IMF programme prematurely which later led to a freezing of power tariffs and build-up of oil-related subsidies and that the current government was also following the same path ahead of elections to leave a poor economy for the next government, the minister said elections were never discussed in any official meeting.


http://www.dawn.com/2011/09/17/pakistan-to-end-imf-programme.html

Riaz Haq said...

S&P to maintain Pakistan's B- rating, reports Bloomberg:

Oct. 31 (Bloomberg) -- Pakistan will be able to maintain an adequate level of foreign-exchange reserves because of funds provided by donor countries, Standard & Poor’s said as it affirmed the South Asian nation’s credit rating.

“We expect donor commitments will ensure at least an adequate level of external liquidity in the next two years,” S&P said in an e-mailed statement today. The rating company maintained its B- foreign- and local-currency rating for Pakistan. The rating is six levels below investment grade.

The stable rating outlook “balances adequate external liquidity against vulnerability stemming from ongoing structural fiscal weaknesses and significant political and security risk,” S&P said. The International Monetary Fund in May 2010 suspended disbursements to Pakistan after the country failed to meet conditions such as reducing the budget deficit that were attached to a $11.3 billion loan.

Pakistan didn’t seek a new program after the previous one expired on Sept. 30.

Pakistan’s foreign-exchange reserves stood at $17.2 billion as of Oct. 27, compared with a record $18.3 billion at the end of July, according to the central bank.

While the “current level of external liquidity is likely to diminish somewhat” after the expiry of the IMF loan program, the pledge by donor nations will help boost Pakistan’s “external liquidity,” S&P said.

Pakistan’s high public and external indebtedness and sectarian strife are preventing S&P from upgrading Pakistan’s credit rating, according to the statement.

“The weak revenue performance also poses a direct constraint on monetary policy effectiveness, as the government is compelled to resort to borrowing from the central bank for deficit financing,” the statement showed.

Policy makers aim to boost Pakistan’s economic growth to 4.2 percent in the fiscal year through June from 2.4 percent in the previous year.

Terror attacks in the South Asian nation have killed at least 35,000 people since 2006, according to government estimates.


http://www.businessweek.com/news/2011-10-31/s-p-maintains-pakistan-s-b-credit-rating-on-reserves-outlook.html

Riaz Haq said...

Pakistani textile industry moving to Bangladesh, according to News reports:

Pakistani entrepreneurs plan to relocate their textile manufacturing units to Bangladesh in a bid to reap advantages given to least developed countries (LDC) of duty-free markets in the European Union.
clearpxl

The manufacturers blame Pakistan for rising costs of production, power shortages, higher taxes and poor market access to developed countries, former textile minister Mushtaq Ali Cheema told Pakistan's Daily Times newspaper.

Bangladesh offered lucrative incentives, including uninterrupted power supply and tax-free status for the first 10 years and tariff-free access to markets in the European Union.

In September, a Pakistan business delegation held parleys with Bangladesh trade bodies and expressed their eagerness to relocate their textile industries to Bangladesh.

The exporters and manufacturers are disappointed with the Pakistan government for its poor business vision, which left the Pakistan textile industry in tatters, said Cheema.

Cheema said the cost of textile production is very high in Pakistan, while labor costs in Bangladesh are cheaper and the workers are more efficient.

Already several Pakistani entrepreneurs have invested in composite textile units in Bangladesh. The entrepreneurs argue that several facilities give way to profit margins an average 30 percent higher for textile exporters than in Pakistan, Cheema added.

International buyers and retail giants are reluctant to place orders with exporters because of unpredictable breakdowns in the supply chain, said the official.


Read more: http://www.allheadlinenews.com/articles/90064529?Pakistan%20textile%20producers%20to%20relocate%20in%20Bangladesh#ixzz1dQ40f67l

Riaz Haq said...

Chemical, pharma products export up 43%, reports Daily Times:

KARACHI: The export of chemicals and pharmaceutical products increased by 43 percent in first quarter of 2011-2012 July, September as compared to same period last year, Federal Bureau of Statistics FBS data said.

Pakistan exported chemicals, pharmaceutical products worth $257 million during July-September 2011 as against $179 million in July- September 2010. Chemicals products export rose by 39.76 percent, increasing from $82.40 million to $115.17 million. Pharmaceutical products export stood at $29.10 million as against $33.90 million in same period of last fiscal.

http://www.dailytimes.com.pk/default.asp?page=2011\11\15\story_15-11-2011_pg5_6

Riaz Haq said...

Here's the latest IMF assessment of Pak economy, as reported by The News:

ISLAMABAD: The International Monetary Fund (IMF) on Saturday said that Pakistan’s economy is braving serious challenges of an energy crisis and fast dwindling investment that is why it needs to ramp up efforts to carve out a long-term recipe to stimulate growth and reduce rising unemployment.

Pakistan’s economy is exposed to the worst effects of the floods and appalling security. The government has though undertaken many economic reforms, yet there are many serious challenges of energy crisis and dwindling investment.

Adnan Mazarei, Assistant Director of IMF for Middle East and Central Asia, after a seminar on “Revival of Pakistan Economy” stated this during a press briefing here on Saturday.

Mazarei expressed his dissatisfaction over the government’s performance in the energy sector and asked it to restructure the power sector to make it turn around. “The broadening of the tax base is also one of the biggest challenges the Pakistan economy is braving as the political consequences also negatively impact on the economy and people avoid paying taxes because they wanted an honest government and some dividends in return.”

He said that fiscal imbalances are also needed to be addressed. “Pakistan needs inclusive growth and employment generation as well as better distribution of resources and lowering of poverty rate to ensure equitable benefit to the people.”
-------------
Finance Minister Dr Abdul Hafeez Sheikh said that role of the government representative during the day-long seminar was to listen to the economists, business community and development partners and share with them the steps taken for the economic reforms in the country. He said the economic team held very constructive discussion with the IMF during Article IV discussion in Dubai on economic reforms and about way forward policy mix to move on to high growth path.

Hafeez Sheikh said that first four months of the current fiscal year were very positive with exports going over 6 billion dollar which were 23% more than the same period of previous year and remittances 4.2 billion dollars, 23% up by the same period of last year. The minister said the growth in taxes during the first four months was 28% with total collection of Rs509 billion compared to the same period of last year.


http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=10412&Cat=13

Riaz Haq said...

Here's a Businessweek report on IMF's assessment of Pakistan's economy:

Pakistan faces a “challenging” economic outlook and should seek to contain its deficit while adopting a cautious monetary policy, the International Monetary Fund said after an annual review of the country’s policies.

Economic growth is expected to reach about 3.5 percent for the fiscal year started July 1 and inflation is forecast to slow down, the Washington-based IMF said in a press release today.

Still, “the external current account balance is projected to return to a deficit, and global risk aversion and security concerns may limit capital inflows,” the IMF mission said. Beyond fiscal and monetary policies, “a responsive exchange rate would reduce vulnerabilities, contain inflation and protect Pakistan’s international reserve,” the fund said.

An $11.3 billion loan program to Pakistan expired in September with no payments disbursed since May 2010 because the country didn’t meet the conditions attached to it.

The IMF mission and Pakistani authorities, who met in Dubai and Islamabad Nov. 9-19, also discussed policies for the medium term, including changes to the tax system and in the energy sector.

A detailed report of Pakistan’s economy will be examined by the IMF board in late January, the mission said.


http://www.bloomberg.com/news/2011-11-22/pakistan-faces-challenging-outlook-may-grow-3-5-imf-says.html#

Riaz Haq said...

Here's is an APP report on UAE Trade & Investment Expo 2011 in Karachi:

KARACHI, Dec 01 (APP): Speakers at UAE trade and investment conference at Karachi Expo Centre said Thursday that Pakistan was a growing market and UAE companies operating here would stay and make long term strategic investment. President and CEO of Pakistan Telecommunication Company Ltd (PTCL) Walid Irshaid said that his company will make more investment in Pakistan to fully transform PTCL into a world class telecome company.
“We have transformed PTCL into a modern company offering all ICT products in Pakistan and we are here to stay”, he said while sharing the experience of his company in Pakistan and investment opportunities.
He said that “Pakistan is a growing market and we are making long term investment to offer world class network to local consumers who are quality conscious”. Do not underestimate Pakistani consumers, he suggested.
Regional general manager Asia Pacific North and Indian sub continent Etihad Airways, Joost den Hartog said that his airline was doing great business in Pakistan.
“We are running daily flights from Karachi, Islamabd, Lahore to UAE and twice a week from Peshawar. We are planning to enhance our operations in Pakistan in future with the expansion of our fleet”, he noted.
Hartog said that his airline is now catering for Pakistanis living in USA, Canada, Europe and Middle East and will soon start lifting Pakistani passengers for Frankfurt and Munich.
Pakistani Ambassador in UAE Jamil Ahmed Khan advised Pakistani businessmen to take full advantage of opportunities in the Emirates for re-export business. He said that 40 percent of the exports to UAE are re-exported to African countries.
He said that Pakistani exports to UAE can be enhanced from 2 percent of Emirates’ global trade to 6 percent with the help of planned efforts.
Chief Executive Officer of Bank Al Falah, Atif Aslam Bajwa said that his bank is growing fast in Pakistan and “we have plans to further expand our operations in the country”.
Chief Executive Officer, FlyDubai, Ghaith Al Ghaith said that the business of his airline has increased in Pakistan by 10 percent while it is growing worldwide at 12 percent. “We are planning to further expand our business here”.
CEO Dubai Islamic Bank Junaid said his bank has plan to expand its branch network from 73 to 100 in Pakistan by next year and offer the entire range of Shariah compliant products in Pakistan.
Director of IBA Dr Ishrat Husain said that foreign investors were never touched in Pakistan by any regime even during the nationalization in 1972.
He said Pakistan has liberalized its foreign exchange regime and profits, royalties, fees can be fully repatriated.
Acting President of FPCCI Khalid Tawab said that business chambers are playing their full to expand bilateral trade and investment between Pakistan and UAE.
Meanwhile, consul generals and commercial officers of USA, China, Germany, Japan, Russia, Afghanistan and Korea also visited UAE Expo 2011 Magnificent 7 and took keen interest in the products at display.


http://ftpapp.app.com.pk/en_/index.php?option=com_content&task=view&id=168041&Itemid=49

Riaz Haq said...

World Bank’s new estimates released on Thursday placed Pakistan among top 10 recipients of remittances among developing countries, fetching $12 billion this year, reports Dawn:

India leads with $58 billion followed by China at $57 billion, Mexico $24 billion and the Philippines $23 billion.

Bangladesh follows Pakistan with $12 billion, Nigeria 11 billion, Vietnam $9 billion and Egypt and Lebanon $8 billion each.

Remittance costs have fallen steadily from 8.8 per cent in 2008 to 7.3 per cent in the third quarter of 2011.

The ‘Outlook for Remittance Flow 2012-14’ shows that the officially recorded remittance flows to developing countries are estimated to have reached $351 billion in 2011, up 8 per cent over 2010.

Worldwide remittance flows, including those to high-income countries, reached $406 billion in 2011 and are expected to rise to $515 billion by 2014.

There are several sources of vulnerability to forecasts for remittances to developing countries.

The ongoing debt crisis in Europe and high unemployment rates in high-income OECD countries are adversely affecting economic and employment prospects of migrants.

These persistently high unemployment rates have created political pressures to reduce current levels of immigration.

There are risks that if the European crisis deepens, immigration controls in these countries could become even tighter.

This would affect remittance flows to all regions – especially to countries in Eastern Europe and Central Asia.

The World Bank report says that high oil prices, which have hovered over $100 a barrel in recent months, continue to provide a much-needed cushion for migrant employment in, and remittance flows from, the Gulf Cooperation Countries (GCC) and Russia. Oil driven economic activities and increased spending on infrastructure development are making these countries attractive for migrants from developing countries.

Remittances from the GCC countries to Bangladesh and Pakistan where the GCC countries account for 60 per cent or more of overall remittance inflows grew by 8 per cent and 31 per cent, respectively in the first three quarters of 2011 on a year-on-year basis.

The Pakistan Remittance Initiative (PRI), a joint initiative of the central bank and Pakistan’s government, has been working actively with commercial banks and money transfer operators to lower the cost of inward remittances and improve the payments systems and delivery channels in order to bring a larger share of remittances into formal channels.

The indigenisation programmes being considered or implemented in the GCC countries like the ‘Nitaqat’ programme in Saudi Arabia have raised concerns of adverse implications for future remittances to the Philippines, Pakistan, Bangladesh and other migrant-sending countries, it says.

http://www.dawn.com/2011/12/02/wb-report-pakistan-among-top-10-recipients-of-remittances.html

Riaz Haq said...

Pakistan's food exports are surging, reports PPI:

ISLAMABAD, (Asia Pulse) - Pakistan's exports of food commodities surged by 22.73 percent during the first five months of the current fiscal year to reach at $1.514 billion, Federal Bureau of Statistics (FBS) reported.
The overall food exports were recorded at 1.514 billion during July-November (2011-12) as compared to the exports of $1.233 billion during July-November (2010-11), according to FBS figures issued.

The food products that contributed to positive growth included fish and fish preparations, exports of which increased from $106.742 million last year to $125.959 million during the first five months of this year, showing an increase of 15.83 per cent.

Exports of fruits also increased by 13.94 per cent from $77.753 million to $88.595 during the period under reviews, showing positive growth of 13.94 per cent, the data revealed.

Exports of vegetables and tobacco increased by 28.47 percent and 27.62 per cent respectively during the period under review.

During the month of November 2011, the food exports witnessed negative growth of 25.85 per cent and 6.93 per cent when compared to the exports of October 2011 and November 2010 respectively.

The overall food exports during November 2011 were recorded at $223.360 million against the exports of $301.246 million in October 2011 and $239.984 million in November 2010, the data revealed.


http://www.lankabusinessonline.com/fullstory.php?nid=152011880

Riaz Haq said...

Here's a News story on Pakistan missing kinnow orange export target:

Pakistan’s kinnow export target of 300 million tons for this year seems difficult to achieve due to the hurdles created by the customs authorities, an exporter said on Thursday.

The Co-chairman of All Pakistan Fruit and Vegetable Exporters, Importers and Merchants Association (PFVA) told The News that exporters suffered a loss of $10 million on export of kinnow, as shipments were delayed because of complete checking of consignments. “In many consignments planes left and cargo was not taken,” he said.

CEO Harvest Tradings Ahmad Jawad said Japan may be good market for Pakistan kinnow in the coming years if Pakistan Horticulture Development and Export Company (PHDEC) and Ministry of Commerce make serious efforts to explore this market as we did in mangoes last year. “The planners need to realise that there are certain areas where the private sector cannot help exports grow,” he said.

The import of citrus in Japan has doubled in 2010/11 due to decline in local production Jawad said quoting a report of the US Department of Agriculture (USDA). The US and Australian citrus import to Japan has increased substantially during the period.

The import of fresh produce in Japan increased to 21,406 tons for the 12 months to September 2011, up from 10,797 tons for the same period a year before, the USDA Global Agricultural Information Network (GAIN) report said.

The US accounted for the majority of the increased volume, with a 93 per cent jump to 17,650 tons giving it a market share of 82 per cent.

Matching with Japan’s new role as Australia’s largest citrus export market, Australian imports jumped 136 percent to 2,276 tons. New Zealand, Chilean and Taiwanese imports also grew over the period.

Japan’s citrus imports are expected to decline by about 12 percent to 19,000 tons in 2011/12, the report added, because of Japanese Mikan production bouncing back.

“On the other hand Pakistan’s export target for kinnow set at 300,000 tons this year is becoming harder to meet as the season unfolds due to unlimited blunders,” he said.

The CEO Harvest Tradings further emphasized that starting with Pakistan’s image building the trade or counsellors should work as marketing managers fully knowing about the market demand there and about the quality of products and selling tactics by Pakistan’s competitors.

They should be very much in touch with the business communities there, exchange business data and information, provide businessmen at both ends with proper consultation meant to increase bilateral trade and investment, help resolve trade disputes between entrepreneurs of Pakistan and any other country.


http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=86002&Cat=3

Riaz Haq said...

Here's a Reuters report on increase in Pak forex reserves:

Pakistan’s foreign exchange reserves rose to $16.85 billion in the week ending Dec. 30, compared with $16.77 billion the previous week, the central bank said on Thursday.

Reserves held by the State Bank of Pakistan (SBP) were flat at $12.81 billion, unchanged from the previous week, while those held by commercial banks rose to $4.04 billion, compared with $3.96 billion the previous week.

Foreign exchange reserves hit a record $18.31 billion in the week ending July 30, but have since eased due to debt repayments.

Reserves were boosted in June last year by inflows of $411 million, including a $191.9 million loan from the World Bank, and a $196.8 million loan from the Asian Development Bank.

Higher export proceeds and a record inflow of remittances have also helped support Pakistan’s foreign exchange reserves.

According to official data, remittances rose 18.33 per cent to $5.24 billion in the first five months of the fiscal year (July-June), compared with $4.43 billion in the same period a year earlier.

However, they fell slightly to $923 million in November, compared with $926.89 million received in November last year.

Islamabad has to start repaying an $8 billion International Monetary Fund loan in early 2012. Without additional sources of revenue, that will put further pressure on Pakistan’s foreign exchange reserves.


http://www.dawn.com/2012/01/05/pakistani-forex-reserves-rise-to-16-85-billion.html

Riaz Haq said...

Here's Express Tribune on Saudi Arabia hiring thousands of Pakistani doctors:

Dr Nawaz* (not his real name) is a medical officer (MO) at Mayo Hospital and, like all government-employed doctors in BPS-17, got a Rs15,000 raise last year, taking his monthly pay to Rs44,000. Yesterday, the Saudi Arabian Ministry of Health offered him a job for 6,000 riyals (Rs145,000) a month.

“It’s a handsome offer. I’m going to take it,” said the doctor after an interview with the Overseas Employment Corporation, a Pakistani government agency that is hiring doctors for Saudi Arabia.

At Mayo Hospital, Dr Nawaz has to serve in shifts of up to 48 hours straight. In Saudi Arabia, he will get two days off each week and work eight-hour days.

“Here we have a lot of uncertainty. We cannot get a raise unless we protest and boycott work. I am getting out of it,” he said.

Dr Nawaz has been in a government job for three years and said he would resign before leaving. However, many doctors with more years in government service will likely seek permission from the government to go on leave to Saudi Arabia so they can return to their government jobs upon coming back to Pakistan.

Two private Saudi agencies are also interviewing Pakistani doctors for posts in government hospitals in Saudi Arabia. Saturday was the last day of interviews in Lahore. Interviews in Islamabad will take place from January 11 to 13.

“Around 3,000 doctors have been interviewed in Lahore for different positions including residents and consultants,” an OEC official told The Express Tribune.

He said that the Saudi government had recently built a lot of new hospitals and they were short of doctors. He did not say how many doctors the Saudis aimed to hire from Pakistan.

Residents (trainee doctors) are being offered salaries of between 5,000 (Rs121,000) and 8,000 riyals (Rs193,000), while consultants with a fellowship are being offered between 12,000 (Rs290,000) and 16,000 (Rs387,000) riyals. Senior professors and associate professors are being offered up to 30,000 riyals (Rs725,000) per month.

Last year, the Saudi Ministry of Health hired a thousand Pakistani doctors. Shortly afterwards, government-employed doctors in Punjab went on strike to demand better pay.

“This time they are going to hire more doctors,” said a senior doctor who went for an interview.

“The Indian government has just increased the salaries of public doctors and no Indian doctors are going to Saudi Arabia. They are focusing more on Pakistani doctors this year.” The Pakistan Medical Association warned that the country was losing its best doctors to Saudi Arabia and urged the government to improve the service structure for health professionals to stop the brain drain.

“The government on one hand claims to invest in health and education and on the other it does nothing to stop the brain drain,” said PMA Joint Secretary Dr Salman Kazmi.

“The government announces a pay package for doctors and nurses only when they go on strike or take to the streets. This is no solution. The government needs to develop a structure otherwise we may run out doctors.”

A Health Department spokesman said that the government couldn’t match the salaries offered to doctors abroad, especially when they had only recently been given raises. He said the government spent hundreds of millions of rupees on educating and training doctors and they should consider reasons other than monetary for working in Pakistan.


http://tribune.com.pk/story/318194/saudi-arabia-to-import-thousands-of-pakistani-doctors/

Riaz Haq said...

Here's Pakistan's report card on balance of payments in Jul-Dec 2011 period as reported by Daily Times:

“Cumulative figure shows that Pakistan’s exports during July-December 2011-12 were $11.241 billion, while in the corresponding period of the last year 2010-11 exports were $10.815 billion, which shows 3.94 percent growth,” TDAP official said. “Imports during July-December 2011-12 were $22.713 billion compared to $19.102 billion during the same period of the year 2010-11, registered a 18.9 percent growth,” it added.

“Pakistan’s exports during December 2011 were valued at $1.854 billion, which was 11.5 percent lower than the level of $2.094 billion during December 2010,” the official said. “Imports during December 2011 were valued at $4.261 billion registering a growth of 13.6 percent over the level of imports valued at $3.751 billion in December 2010,” he said.

According to the State Bank of Pakistan, overseas Pakistani remitted an amount of $6.33 billion in the first half (July–December 2011), showing an impressive growth of 19.54 percent or $1.034 billion compared with $5.291.43 billion received during the same period of last fiscal year (July- December 2010).

The monthly average remittances for July-December 2011 period comes out to $1.054 billion as compared to $881.91 million during the same corresponding period of the last fiscal year, registering an increase of 19.54 percent.

Pakistani currency (Pak rupee) fell to a record low against US dollar owing to the country’s trade deficit.

Rupee slid 0.3 percent, most since December 27, before Federal Bureau of Statistics published trade data for last six months this week.

Rupee is being traded around at Rs 91.00 to Rs 91.50 against a dollar, weakest level at least since 1988. It may fall to 95 by end of June, Standard Chartered’s Ali predicted.

Last week, the governor SBP has informed the Senate Standing Committee on Finance, “the likelihood of a sharper fall in foreign exchange reserves is strong in the second half of 2011-12 due to large repayments of external debt, including $1.2 billion of IMF loan, are due in second half.”

SBP officials agreed with the members that in case foreign inflows were not materialised, reserves might fall by $5 billion from current level. It was informed that pressures on foreign exchange reserves and exchange rate have increased, reserves have declined by $1.2 billion up till December 30 ongoing fiscal year 2011-12. Rupee, against the dollar, has depreciated by 4.4 percent up till December 30. SBP is managing excess volatility in Pak Rupee, but is not going against market fundamentals. Timely realisation of planned official inflows is essential for maintaining comfortable level of reserves.

Inflation is declining but still high, trends in cotton and oil prices are severely affecting the external current account.

Net capital and financial flows are inadequate to finance the current account deficit.

The year-on-year inflation in December 2011 is 9.7 percent, but the full year inflation is expected to remain close to the target of 12 percent.

Country, foreign exchange reserves have again touched to $17 billion and keeping in view the trade trends, Pakistan trade deficit would not go beyond $14.5 billion.


http://www.dailytimes.com.pk/default.asp?page=2012\01\11\story_11-1-2012_pg5_1

Riaz Haq said...

Here's a Daily Times report on Finance Minister Hafeez Shaikh's assessment of Pak economy:

Federal Minister for Finance and Economic Affairs Dr Abdul Hafeez Shaikh while briefing the parliamentarians about the national economy informed that the government would receive $2.5 billion in foreign exchange in the coming months from Etisalat’s pending dues, CSF from US, and Auction of 3-G Spectrum Licence.

He highlighted the achievements so far made by this present government, hurdles and subsequent solutions in the way of Pakistan’s economy. He apprised of the three factors, which are for causing the burden on our national economy. First, great flood in 2010, which caused damage of $10 billion as estimated by the World Bank, increase in oil prices at the international level and security situation.

While highlighting the tax revenue position he said that 17 percent increase has been achieved during the last six months, export touched historical way by up to 28 percent with respect to previous year, and remittances showed a star performance. In addition to that, foreign exchange reserves touched the highest figure in the history of Pakistan, he said.

He also said that we are facing certain issues in power and gas sector, Pakistan International Airlines, Pakistan Railways (PR), and Pakistan Steel Mills (PSM) but he said that the Cabinet Committee on Restructuring of the Public Sector Enterprises has been relentlessly working on revamping these enterprises and we have made certain very good advances in this regard, and hopefully these corporations shall start functioning under the economic vision of the present government. He said these issues are overshadowing our tremendous performance in the economy and said that like PSM are always source of criticism on our government and this must be seen in the political context only. While pondering on the PR, he said that the government has managed to create a consortium of banks to provide the requested Rs 6 billion to PR and said that government of Pakistan is paying the salaries and pension of PR’s service and retired workers. Although the PR is a public sector corporation, which should by itself arrange their salaries and pensions, moreover the government is going to pay to the electricity bill of PR also.

The meeting was told that the government has reached single digit inflation and in addition to that, export witnessed an increase by 4 percent in last six months, import increased by 18 percent, which is also an indicator of increasing activity in our economic and commercial field.

The minister hoped that the government would receive $2.5 billion in foreign exchange in the coming months, from Etisalat’s pending dues, CSF form US, and Auction of 3-G Spectrum Licence. The minister has also said that the government must be credited for some of the outstanding measures taken for the improvement of the country’s poor, that is the provision of Balochistan package, funding to the Gilgit Baltistan province and AJK, plus the alleviation of poor through the Benazir Income Support Programme through which almost 6 million poor families are getting financial help. As the gas is not been provided to the fertilizer plants, the government has decided to import 1.2 million tonnes of fertilizers so that the poor farmers may not be affected. And in this regard, the government is providing subsidy of Rs 40-50 billion on the prices of fertilizer to the farmers, the minister said.


http://www.dailytimes.com.pk/default.asp?page=2012\01\14\story_14-1-2012_pg5_1

Riaz Haq said...

Here's an FT story on EU trade concessions for Pakistan textile exports to Europe:

... the proposal has been held up in a series of negotiations at the World Trade Organisation, which must approve the exemptions.

EU officials are optimistic that countries that had raised objections – including India, Bangladesh, Brazil, Indonesia and Vietnam – are now prepared to endorse the measures at a series of WTO meetings in February. France, Italy and Portugal had also initially been wary of the deal, fearing it might hurt their domestic textile industries.

With the WTO hurdles cleared, the EU could enshrine the trade terms as soon as April or May, said Lars-Gunnar Wigemark, the EU ambassador to Pakistan.

“We are hopeful these trade concessions will finally be approved by the WTO, and then adopted into law by the European Union,” Mr Wigemark told the Financial Times on Monday. “It looks very positive.”

The EU hopes the concessions – which are due to last at least two years – will buttress a broader drive by Brussels to improve relations at a time when Pakistan’s ties with the US are at their most strained in a decade.

Pakistan has long lobbied western countries for greater access for its textiles – which account for some 60 per cent of its exports – with limited success.

Under the deal, the EU will remove tariffs on a list of more than 70 items, mainly textile products but also some ethanol.

India, Pakistan’s regional rival, had been one of the first countries to oppose the plan, but shelved its objections last year as both sides began to take steps to improve ties. EU officials have lobbied other countries who had raised objections to follow suit.

The prospect of EU concessions is a ray of light for Pakistan’s battered economy. The country of 180m people achieved robust growth in the first half of the last decade, but expansion has slowed significantly in more recent years due to in part to energy shortages, floods and militant violence.

The central bank warned at the weekend that it would be difficult for Pakistan to achieve its target of 4.2 per cent GDP growth in the 2012 financial year as global prices for its farm exports softened and chronic gas shortages persisted.

Suleman Maniya, an analyst at IGI Securities in Karachi, the commercial capital, believes the EU trade package could generate $100m-$300m of additional textile export earnings a year. Pakistan exported about $13bn of textile products last year, he said. “It’s not a game-changer, but it’s still a welcome boost,” he said of the EU deal.

Pakistan’s textile industry is in the throes of a consolidation that has seen severe shortages of electricity and natural gas force smaller, family-run businesses to close, while the biggest players record healthy profits.

Mr Maniya believes the EU concessions will largely benefit major textile concerns such as Nishat Mills or Gadoon because he says many of the tariff exemptions apply to products such as yarn or cloth that such companies produce in large quantities.


http://www.ft.com/intl/cms/s/0/6de2759e-4b63-11e1-a325-00144feabdc0.html#axzz1kzb4lWPl

Riaz Haq said...

Here's a Business Recorder story on 23% YoY increase in remittances to Pakistan:

KARACHI: Overseas Pakistani workers remitted $8,592.79 million in first eight months (July 2011- February 2012) of current fiscal year 2011-12 (FY12), showing impressive growth of 23.40percent or $1,629.51 million when compared with $6,963.28 million received during same period of last fiscal year (July- February 2011).

Remittances received from all countries of the world showed growth in first eight months of current fiscal year. Inflow of remittances during July- February 2012 from Saudi Arabia, UAE, USA, UK, GCC states (including Bahrain, Kuwait, Qatar & Oman) and EU countries amounted to $2,325.98 million, $1,903.89 million, $1,525.45 million, $991.20 million, $968.91 million and $244.91 million respectively as compared with $1,563.00 million, $1,627.09 million, $1,298.26 million, $770.91 million, $820.02 million and $220.24 million respectively in July- February 2011, State Bank of Pakistan SBP said Friday.

Remittances from Norway, Switzerland, Australia, Canada, Japan and other countries in first eight months of current fiscal (July- February 2012) amounted to $632.45 million as against $663.73 million received in first eight months of last fiscal (July- February 2011).

Monthly average remittances for July-February 2012 period comes out to $1,074.10 million as compared to $870.41 million during corresponding period of last fiscal, registering increase of 23.40%. Last month, $1,156.81 million was sent home by overseas Pakistanis, up 36.86%, when compared with $845.28 million received in same month of February, 2011.

Almost all of this growth in remittances during February, 2012 over corresponding period of last fiscal year was through banking channels.

In February, 2012, inflow of remittances from Saudi Arabia, UAE, USA, UK, GCC states (including Bahrain, Kuwait, Qatar & Oman) and EU countries amounted to $317.51 million, $259.55 million, $197.14 million, $137.73 million, $123.50 million and $29.27 million respectively as compared with $209.60 million, $190.04 million, $152.55 million, $101.21 million, $98.55 million and $24.58 million respectively in February 2011.

Remittances from Norway, Switzerland, Australia, Canada, Japan and other countries in February 2012 amounted to $92.11 million as against $68.75 million received in same month (February 2011) of last fiscal.

The continued impressive growth in workers' remittances is result of efforts made by Pakistan Remittance Initiative (PRI) in collaboration with other stakeholders to facilitate both Overseas Pakistanis and their families back home.....


http://www.brecorder.com/top-news/1-front-top-news/48902-pakistan-workers-remittances-rise-over-23pc-to-859bn-.html

Riaz Haq said...

Cotton availability in Pakistan rises 25% YoY, reports fiber2fashion:

There has been a substantial increase of more than 25 percent in arrival of cotton in Pakistan markets this season compared to last season.

Besides, there has also been a significant rise of 77 percent year-on-year in cotton exports from Pakistan this season.

Citing figures from Pakistan Cotton Ginners Association (PCGA), Mr. Muhammad Azam, Secretary-General and Chief Operating Officer of All Pakistan Textile Mills Association (APTMA), told fibre2fashion, “Compared to total arrivals of 11,502,408 cotton bales of 170 kg each during 2010-11 season up to March 1, 2011, a total of 14,378,962 bales have arrived in market this season up to March 1, 2012. Thus, there has been an increase of 2,876,534 bales or 25.01 percent over the previous season.”

Informing about the number of cotton bales pressed by various ginneries across Pakistan, he says, “Up to March 1, 2012, this season, 14,301,516 bales were pressed at various ginneries. In comparison, 11,467,821 bales were pressed during the same period in 2010-11 season. Thus, 2,833,695 bales or 24.71 percent more bales have been pressed this season.”

Talking about cotton exports, he says, “The exports have boomed 77.89 percent this season. Pakistan exported 920,706 bales up to March 1 this season, against exports of 517,567 bales registered during the same period last season. Thus, 403,139 more bales have been exported this season.”

“The textile mills in Pakistan have consumed only 17.68 percent or 1,871,840 more bales this season compared to previous season. Up to March 1, 2012, textile mills in Pakistan purchased 12,462,112 cotton bales, against their purchase of 10,590,272 bales during the same period in 2010-11 season,” he mentions.


http://www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=109064

Riaz Haq said...

Here's an APP report on Pak food exports so far this fiscal year:

The exports of fish and fish preparations surged by 14.69 percent during the first eight months of current fiscal year (2011-12) against the corresponding period of last year.



The exports of fish and fish preparations were recorded at $195.284 million during July-February (2011-12) as against the exports of $170.274 million during July-February (2010-11), according to data of Pakistan Bureau of Statistics (PBS).



However, in terms of quantity, the fish exports witnessed nominal increase of 0.34 percent by going up from 74,265 metric tons to 74,518 metric tons.



On month-on-month basis, the seafood exports also witnessed positive growth of 13.88 percent during February 2012 when compared

to the same month of last year.



The fish exports during February 2012 were recorded at $21 million against the exports of $18.441 million during February 2011.



However, as compared to the exports of $21.401 million recorded during January 2012, the exports during February witnessed negative growth of 1.35 percent, the data revealed.



In terms of quantity, the fish exports increased by 5.57 percent in February 2012 when compared to the exports of February 2011, however decreased by 2.62 percent when compared to the exports

of January 2012.



The overall food exports from the country witnessed nominal increase of 0.59 percent during the first eight months by going up from $2.601 billion during July-February (2010-11) to $2.616 billion in July-February (2011-12).



The major food products that witnessed positive growth in exports included.



The food products that witnessed increase in exports during the period under review included rice (other than basmati), exports of which increased by 2.91 percent, fruits (15.02%), leguminous vegetables (1,315%), tobacco (37.85%), oil, seeds, nuts and kernels (59.84%), meat and meat preparation (16.46%) and other food products

(45.80%).



The commodities that witnessed negative growth in exports included basmati rice (17.78%), vegetables (36.69%), wheat (53.22%) and spices (1.49%).



The overall exports from the country during the period under review witnessed negative growth of 0.48 percent by going down from $15.263 billion to $15.189 billion.



Imports into the country, during the period, increased by 16.36 percent by going up from $25.600 billion to $29.788 billion.



Based on the figures, the trade deficit during the first eight months of the current fiscal year was recorded at $14.599 billion, against the deficit of $10.337 billion last year, showing an increase of 41.23 percent.


http://www.thenews.com.pk/article-42262-Pakistan-seafood-exports-surge-by-15pc-in-8-months

Riaz Haq said...

Here's a Pak Observer report on Pak fishing industry exports:

Karachi—Holland’s Ambassador to Pakistan Mr Gajus Scheltema disclosed that a powerful lobby of international fish exporters was strongly opposing the exports of fish from Pakistan to the European Union countries. Talking to mediamen in Karachi he said that the international fish exporters lobby was actively involved in creating obstacles in the way of Pakistan’s fish exports to EU nations.

When asked to name the lobby, the Dutch Ambassador said that the leading international exporters do not want to see fish exports from Pakistan. He, however, that Netherland was assisting the Balochistan government to develop Pasni Port and Fish Harbour that would help Pakistan to enhance fish exports to European Union countries. He pointed out that a firm, engaged in the exports of fish, had demanded license to export fish from Pasni to EU.

Mr Scheltema pointed out that the government of Japan had provided a grant of Rs800 million for the rehabilitation of Pasni Fish Harbour in Balochistan. Holland is engaged in rehabilitation of the harbour so that it meets the required international standards to export fish to EU and other countries in the world.

He said that the Japanese grant would be utilised for the procurement of a dredger; maintenance and dredging of the harbour; and extension and improvement of the breakwater.

Holland’s Ambassador further stated that his country could invest in agriculture, dairy and livestock in Pakistan. He said that Holland is one of the leading producers and exporters of dairy and livestock products in the world. He said that Holland and Pakistan should explore the agriculture, dairy and livestock sectors for mutual investment. Some Dutch companies are willing to explore avenues of investment in these areas in Pakistan and the companies could export agriculture, dairy and livestock products to European Union.

He said that Holland was keen to enhance trade with Pakistan and also supporting Pakistani business people who seek to export to the Netherlands. Scheltema said that their ‘Centre for Promotion of Imports from Developing Countries’ waseducating Pakistani exporters for improvement of their products to export level quality.

He said that Pakistan has a huge potential in agriculture and food processing sector and Holland is planning to invest in these sectors. He also pointed some trade hurdles in importing of cows and cattle from Netherlands to Pakistan.

He further said that Holland was willing to help government of Pakistan in promoting the wind energy in the country. He said that he had recently met the Federal Minister for Water and Power Syed Naveed Qamar and apprised him of the Dutch companies interest in developing wind energy projects in Pakistan.

Mr Scheltema said that Holland had strongly supported Pakistan in getting the GPS+ facility from the European Union that would help this country to enhance its textile exports share to EU markets. He said Holland was enjoying very cordial relationship with Pakistan and he was making efforts to strengthen the bilateral ties between the two countries. Holland plans to earmark 30 million euros for clean drinking projects in urban cities and some other water-related projects in Pakistan, he said. He said Holland had already worked in various water sector projects and keen to invest in water management, flood control, clean drinking water, waste water treatment and de-silting projects.


http://pakobserver.net/detailnews.asp?id=147970

Riaz Haq said...

Here's a News story on oil leading Pak imports:

Pakistan has spent 43.5 percent (or $3.815 billion) more dollars during the July-April 2011-12 period on import of petroleum products as during the ten-month period the country imported petroleum products worth $12.58 billion against $8.76 billion in corresponding period last year, according to official data.



During the period petroleum imports were one-third of the country’s total imports of $37.04 billion. Petroleum group was followed by agricultural and other chemical group imports of $5.98 billion showing an increase of 16.77 percent over $5.12 billion last year.



Machinery imports also secured a sizable share in country’s total imports during the period under review and it stood at $4.567 billion against $4.41 billion last year, showing a rise of 3.5 percent.



Pakistan Bureau of Statistics (PBS) bulletin indicates that under the petroleum group, petroleum products import stood at $8.35 billion against $4.92 billion last year, showing an increase of 69.8 percent. Besides, crude petroleum import also showed an increase of 49.9 percent to $4.23 billion during these ten months from $3.85 billion in same period last year.



Under the agricultural and other chemical group, manufactured fertilizers import up by 116.5 percent to $1.082 billion, plastic materials by 1.88 percent to $1.28 billion, while imports of insecticides were down by 9.76 percent to $110.39 million and medicinal products reduced by 3.1 percent to $548.66 million over July-April 2010-11.



In the machinery group, textile machinery import declined by 15.11 percent to $339 million against $399.4 million same period last year. Telecom sector import was up by 22.85 percent to $1.05 billion; power generation machinery import increased by 1.3 percent to $877 million; electrical machinery and apparatus import increased by 0.07 percent to $675.3 million; agriculture machinery by 32.7 percent to $103 million; office machinery by 22.6 percent to $239.8 million; construction and mining machinery by 12.6 percent to $111 million over same period last year. During the period, Pakistan spent $568.75 million which was 29 percent more than last year imports of $441.05 million.



In the transport group, imports reduced by 7.26 percent to $1.67 billion from $1.8 billion last year. However, under the completely built units (CBU) during July-April 2011-12 imports of buses, trucks and other heavy vehicles imports increased by 91.3 percent to $122 million and motor cars 161 percent to $285.4 million.



While, under the completely knocked down/semi knocked down category, imports of buses, trucks and other heavy vehicles imports up by 27.1 percent to $120.47 million, motorcycles 27.1 percent to $74.92 million, however, motor cars imports down by 1.14 percent to $389.78 million over same period last year.



The food import declined by 1.73 percent to $4.23 billion from $4.31 billion in July-April 2010-11. In this group, on palm oil import economy spent $1.89 billion which is 18 more than last year. Tea imports up by 4.76 percent to $301.9 million, while pulses import down by 7 percent to $320.27 million and spices imports down by 5.16 percent to $86.57 million over same period of last year.



In textile group, total import was of $1.98 billion against $2.42 billion depicting 18.26 percent decline over corresponding period of last year.



Under this head, raw cotton imports down by 56.68 percent to $369.4 million, synthetic and artificial silk yarn by 6.36 percent to $434.6 million, while synthetic and artificial silk yarn has up by 13.3 percent to $503.87 million and worn clothing import up by 16 percent to 122.48 million over last year...


http://www.thenews.com.pk/Todays-News-3-109601-Pakistan-imports-petroleum-products-worth-$126bn

HopeWins Junior said...

Dr. Haq,

In a number of discussions, that Datacruncher fellow has been pointing out to you that our exports have not been growing at the same rate as that of either India or Bangladesh.

Of course, as is typical of most posters, he did not provide any data or quality references to validate his assertion.

So here are the data--
http://www.tradingeconomics.com/sri-lanka/exports-of-goods-and-services-bop-us-dollar-wb-data.html
http://www.tradingeconomics.com/pakistan/exports-of-goods-and-services-bop-us-dollar-wb-data.html
http://www.tradingeconomics.com/india/exports-of-goods-and-services-bop-us-dollar-wb-data.html
http://www.tradingeconomics.com/bangladesh/exports-of-goods-and-services-bop-us-dollar-wb-data.html

What do we see?

Since the post-Cold-War reforms began all over South-Asia in 1992, the following are clearly observable:

1) Sri-Lanka's Exports have increased from 3 Billion$ to 11 Billion$ (3.7 times)
2) Pakistan's Exports have increased from 8.5 Billion$ to 28 Billion$ (3.3 times)
3) India's Exports have increased from 25 Billion$ to 350 Billion$ (14.0 times)
4) Bangladesh's Exports have increased from 2.5 Billion$ to 22 Billion$ (8.8 times)

At the start of the South-Asia-wide post Cold War reforms, the 1992 exports were:
1) Sri-Lanka at 3 Billion$
2) Pakistan at 8.5 Billion$
3) India at 25 Billion$
4) Bangladesh at 2.5 Billion$

In 2010, 18 years after the reforms began, the exports were as follows:
1) Sri-Lanka at 11 Billion$
2) Pakistan at 28 Billion$
3) India at 350 Billion$
4) Bangladesh at 22 Billion$

In summary, here are the rankings in percent-growth terms over the 1992-2010 period:
1) India's Export Growth was 1400%
2) Bangladesh's Export Growth was 880%
3) Sri-Lanka's Export Growth was 370%
4) Pakistan's Export Growth was 320%

While we are more or less keeping pace with Sri-lanka, Bangladesh has been zooming up from behind and is very close to catching up with us! In the next 4-5 years, there is a good chance that Bangladesh will be a bigger exporter than our country! And it's not just Jute...

Thank you.

HopeWins Junior said...

Dr. Haq,

To follow up on my previous post regarding Export Growth, I would also like to address the issue of Remittances, especially since you refer to them in this blog article.

So here are the remittances data--
http://www.tradingeconomics.com/sri-lanka/workers-remittances-and-compensation-of-employees-received-us-dollar-wb-data.html
http://www.tradingeconomics.com/pakistan/workers-remittances-and-compensation-of-employees-received-us-dollar-wb-data.html
http://www.tradingeconomics.com/india/workers-remittances-and-compensation-of-employees-received-us-dollar-wb-data.html
http://www.tradingeconomics.com/bangladesh/workers-remittances-and-compensation-of-employees-received-us-dollar-wb-data.html

What do we see?

Since the post-Cold-War reforms began all over South-Asia in 1992, the following are clearly observable:

1) Sri-Lanka's Remittances have increased from 0.55 Billion$ to 4.1 Billion$ (7.5 times)
2) Pakistan's Remittances have increased from 1.6 Billion$ to 9.7 Billion$ (6.1 times)
3) India's ERemittances have increased from 2.9 Billion$ to 54 Billion$ (18.6 times)
4) Bangladesh's Remittances have increased from 0.9 Billion$ to 10.8 Billion$ (12.0 times)

At the start of the South-Asia-wide post Cold War reforms, the 1992 Remittances were:
1) Sri-Lanka at 550 Million $
2) Pakistan at 1.6 Billion$
3) India at 2.9 Billion$
4) Bangladesh at 900 Million$

In 2010, 18 years after the reforms began, the Remittances were as follows:
1) Sri-Lanka at 4.1 Billion$
2) Pakistan at 9.7 Billion$
3) India at 54 Billion$
4) Bangladesh at 10.8 Billion$

In summary, here are the rankings in percent-growth terms over the 1992-2010 period:
1) India's Remittances Growth was 1860%
2) Bangladesh's Remittances Growth was 1200%
3) Sri-Lanka's Remittances Growth was 750%
4) Pakistan's Remittances Growth was 610%

Just as in the case of Exports, ONCE AGAIN we notice that while we are just about keeping relative pace with Sri-Lanka, Bangladesh has been zooming up from behind and has now surpassed us!

Something to keep in mind while our Government pats itself on the back on the issue of the rising remittances.

Thank you.

Riaz Haq said...

Here's a BR story on inflow of foreign loans and grants in 2011-12:

Rupees 114 billion ($1.3 billion) were disbursed to Pakistan in 2011-12 according to the Economic Affairs Division data, however, budget documents reveal Rs 226.1 billion ($2.6 billion) as revised foreign inflows for the year. The rupee-dollar parity taken for the budget 2011-12 stood at Rs88.

The economic managers budgeted Rs 413.9 billion as foreign inflows for 2011-12 but were compelled to revise the amount downward to Rs 226.1 billion due to three major factors. First, the International Monetary Fund (IMF) did not extend a Letter of Comfort which is a prerequisite for programme lending (budgetary support) by other multilaterals (World Bank and ADB).

This resulted in the non-materialisation of Rs 118 billion budgeted for the year under programme loans. Second, Pakistan had estimated Rs 44 billion under Euro Bonds but this also did not materialise due to international financial crisis as well as Pakistan's domestic economic crunch. And finally, the tensions between Pakistan and the US post-Salala led to considerable reduction in releases under Coalition Support Fund as well as under Kerry Lugar package.

Documents available with Business Recorder reveal that the country received Rs 89 billion ($1.01 billion) from multilaterals; $497.2 million from the Asian Development Bank (ADB), $479 million from the World Bank and $35.4 million from the Islamic Development Bank (IDB) while the amount received from bilaterals stood at Rs 23.9 billion ($271 million).

The US remained the major grant provider to Pakistan during last fiscal year despite the fact that relations remained tense between the two for the latter part of the year. The US released $114 million to Pakistan with $2.7 million released by Bureau for Population, Refugees and Migration (BPRM), $0.4 million by the US government, $1.8 million from Office of US Foreign Disaster Assistance USA OFDA, $108 million from USAID, and $0.5 million released by then United States Department for Agriculture.

During the last fiscal year, Australia released $23 million to Pakistan, Belgium $8.8 million, Canada $13.3 million, China $0.5 million, Denmark $1.6 million, UN $50 million, European Union $13.5 million, Netherlands released $18 million and $86 million from other bilateral donors such as UK, Germany, Switzerland, international private donors and France, etc.


http://www.brecorder.com/money-a-banking/198/1213603/

Riaz Haq said...

Here's Express Tribune of disproportionate impact of energy crisis on small textile mills:

The energy crisis has hit Pakistan’s textile industry badly, but not all textile companies are hurt: the largest players are doing just fine, relying on a combination of the advantages of their economies of scale but also government-sanctioned privileges not available to smaller industrial players.

At least part of the reason why the bigger companies are doing better than the smaller ones appears to be the natural advantages that come with being a larger player, such as having a vertically integrated business model.

Kamal Yousaf, CEO of the Kamal Group of Industries, a textile conglomerate based in Faisalabad, says that part of his group’s advantage over smaller rivals in their ability to harness synergies within the group. The weaving, processing and dyeing, garment manufacturing, and trading arms all work as a unit, helping the group weather price hikes in raw material or other issues.

The Nishat Group, meanwhile, benefits from the fact that it owns the fourth-largest bank in the country – MCB Bank – allowing it to avoid cash flow issues and raise capital for efficiency improvement projects. Nishat Textile, therefore, never has a problem in paying wages to its employees and was able to raise Rs1 billion to invest in a 6.2-megawatt power generation unit that runs on biomass. Electricity produced in this manner is expected to be about 6% more expensive than that provided by the grid, but is far more reliable at a time when Punjab’s industry is especially hampered by severe power outages that last several hours a day.

And many larger textile mills are able to purchase large stocks of raw materials that insulate them from price shocks. More than half the cost of producing a piece of clothing is often still the cost of cotton, even for some of the largest players.

Yet at least part of the advantage appears to be built in by the government. One of the biggest reasons why larger textile mills, particularly in Punjab, have been able to do well is that most have installed captive power plants that – despite operating at one-third the efficiency of the grid’s power station – are getting gas supplies to produce power at a marginally lower cost than what they would get from the grid.

However, these captive plants have been getting gas even at the expense of the rest of the grid, meaning that even while the largest and richest textile exporters save a few pennies on their production costs (power accounts for 3% of all costs for the larger firms), all of Punjab is going through massive power outages because the power plants that supply electricity to ordinary citizens and smaller industries are getting less gas, sometimes even no gas.

Meanwhile, smaller textile players have less reliable power from the grid, a supply that is made more intermittent by the fact that the fuel for the grid’s power goes to their larger textile rivals. At the same time, banks charge the smaller players higher interest rates, since they are viewed as bigger risks for not having their own captive power supply.

“The smaller guys cannot afford to run their factories on diesel generators,” said Muzammil Aslam, managing director at Emerging Economics Research....


http://tribune.com.pk/story/426553/while-small-players-get-squeezed-textiles-big-guns-are-doing-just-fine/

Riaz Haq said...

Here's Fiber2fashion on Pakistan's rising textile exports:

Pakistan’s textile exports grew to US$ 5.4 billion during first five months of the current Pakistani fiscal year that began on July 1, 2012, showing a year-on-year rise of 7.81 percent, Pakistan Bureau of Statistics (PBS) data showed.

Pakistan exported textiles worth US$ 5.009 billion during same period of last fiscal.

Product-wise, the items that depicted positive year-on-year export growth during July- November this year, include cotton yarn which grew by 38 percent year-on-year, yarn increased by 62.73 percent, cotton cloth by 12.31 percent, towels by 10.98 percent, readymade garments by 14.26 percent, tents by 25.49 percent and other textile materials by 70 percent.

On the negative side were raw cotton, exports of which declined by 44.35 percent year-on-year, cotton carded by 86 percent, knitwear by 2.02 percent, bed wear by 9.61 percent, art silk and synthetic textiles by 18.1 percent and made-up articles by 2.14 percent.


http://www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=119255

Riaz Haq said...

Here's PakistanToday on record remittances from Pak diaspora:

KARACHI - Economic observers expect the inflow of ever-increasing worker remittances to the country rise to a historic $ 16 billion by the end of this financial year.
“Home remittances continue to remain upbeat reaching the level of USD 7.1 billion during the first six months of FY13,” said analysts at InvestCap Research.
Terming it as one of the major supporting tools for the current deficit, the remittances from expatriates, they said, continued its upward trajectory.
During the first half of FY13, remittances posted a colossal growth of 12.5% YoY to USD 7.12 billion, in absolute terms increasing by USD 791 million.
However, on a monthly basis, the head registered a growth of 11% reaching USD 1.13billion in December 2012.
Such increase was however misleading, emanating from a low base effect of November, 2012, rather than depicting an actual increasing trend.
“The country witnessed a huge influx of remittances, touching USD 1.37 b, in October, 2012, due to the Eid factor,” viewed Abdul Azeem at the InvestCap Research.
Following this, the analyst said, remittances in November, 2012, remained extraordinarily depressed at the level of USD 1.02 billion thus leading to a low base effect in December, 2012.
The huge chunk of remittances received from the Middle East continued to play a significant role in the overall inflows into the country.
Within this region, the major oil economy, Saudi Arabia remained the key contributor with 28% weight in total remittances; remittances from Saudi Arabia posted a growth of 18% YoY to USD 1.96 billion during the first half of FY13. One of the strongest economies of the world, Saudi Arabia continued to import employees from Pakistan, therefore, a positive impact was observed in remittances from this country.
Another region of the Middle East, United Arab Emirates also remained a key source of remittances as it maintained 21% weight in total remittances from where the over all remittances increased by 3% YoY to USD 1.46 billion in the first half of FY13.
Amongst the Western countries, USA was the most important contributor, accounting for 16% share in the total home remittances although the growth was flat (0.5% YoY) but inflow of USD 1.16 billion was witnessed during the first six months of FY13. Furthermore, remittances coming in from the UK experienced massive growth of 38% YoY during the same period. UK ranked second amongst the major contributors to increase in remittances in the first six months of FY 13.
“We expect the consistent upward trend in remittances to provide support to the current account (C/A) during the remaining period of FY13,” Azeem said.
However, he warned, IMF payments were likely to exert pressure on the current account deficit, as the country has to pay USD 1.7billion during the second half of FY13.
Although, lower imports and rising exports continue supporting the trade deficit, in the latter half of FY13, we expect a significant draw back to be evident in the form of shortage of gas, absorbing any such positives. We foresee such shortage to injure exports of the country, mainly the textile sector, being a major contributor to the country’s exports.


http://www.pakistantoday.com.pk/2013/01/14/news/profit/remittances-to-swell-by-16b-by-end-of-fy13/

Riaz Haq said...

Here's PakistanToday on Pak trade figures in FY 2012-13:

KARACHI - The country’s trade balance slid by a significant 19.7% MoM to a comfortable $ 1.743 billion in Jun-13, said the analysts at InvestCap Research citing data recently issued by the Pakistan Bureau of Statistics. Whereas the exports on a monthly basis inched up slightly by 1% MoM to $2.197 billion in Jun-13, the imports stepped down by 9.4% MoM to USD3.940 billion. “Such a trend can be explained by the absence of fertilizer imports in Jun-13, whereas the same stood at 97k tons in May-13 (USD53.7mn), the contribution of Urea to Jun-13 figures was absent due to delay in supply which is now expected to be received by the end of July-13,” said InvestCap analyst Muniba Saeed. Further, she said, contributors to the declining imports are expected to be fall in palm oil imports (importers already having stocked up for Ramadan), decline in imports of textile machinery and falling imports of generators. On an annual basis, the imports remained essentially stagnant increasing by a meager 0.08% YoY, climbing to a level of $44.950 billion in FY13. “Such a trend was witnessed despite decline in imports of petroleum products, fertilizer and the food group; the three heads combined contributing roughly 60% to total imports for the year,” the analyst said. The same was, however, negated by increased imports of machinery and the textile group leading to the imports head remaining effectively the same as last year, she said. Exports on the other hand increased by 3.78% YoY adding an additional USD894mn to the head to reach USD24,518mn. Such expansion is expected to be led by increased exports from the food group where sugar is projected to be the major contributor in fuelling such growth. Exports from the other heads are however expected to have subsided during the same period where major contribution is anticipated from the textile and petroleum group. The trade balance for FY13 as a result posted a decline of 4% YoY, descending to an amount of USD 20,432mn.

http://www.pakistantoday.com.pk/2013/07/16/news/profit/rising-exports-providing-breather-to-fy13-trade-balance/

Riaz Haq said...

As Indian pharmaceutical companies prepare to increase the volume of their trade in Nigeria, it is becoming clear that they would have to compete companies from their closest neighbour, Pakistan, which have given the signal that they are keen to take a slice of Nigeria's growing market in the health sector as well as pharmaceutical products.

The Pakistani companies plan to achieve this by establishing hospitals and partnering with Nigerians to establish pharmaceutical companies, Pakistan's High Commissioner to Nigeria, Muhammed Saleem, has said.

"We are also looking at having joint ventures in opening up hospitals. We are not looking at Nigeria as a market, we are looking at Nigeria as a partner and that is our intention in this part of the world", Saleem said.

As part of the move, the Nigeria-Pakistan Pharma Investment Forum (NIPIF 2014) was held in the Nigerian commercial capital, Lagos, last month.

About 50 investors from Pakistan attended the forum together with two each from Jordan, the United Arab Emirates (UAE) and Ghana. This shows how serious Pakistani companies are in their bid to make an inroad into Nigeria.

Saleem said Pakistan, currently exporting $200 million of pharmaceutical products, was planning to increase that to $500 million. Out of the $200 million, trade with Nigeria accounts for only $7 million.

He said his country wanted to produce quality drugs and medicines in Nigeria which would be made available to hospitals locally.

http://www.business-standard.com/article/news-ians/indian-pharma-firms-face-competition-from-pakistan-in-nigeria-114071300242_1.html

Riaz Haq said...

#Pakistan ranks 8th with its 6 million strong diaspora sending $20 billion home in remittances http://www.pakistantoday.com.pk/?p=503292 via @ePakistanToday

Pakistan stands on the eight place among the top 10 recipients of remittances this year at $20.1 billion, according to a report.

According to Khaleej Times, the World Bank estimates that more than 247 million people, or 3.4 per cent of the world population, live outside their countries of birth among which more than six million are Pakistanis.

These Pakistanis, between July 2015 and January 2016, have sent an estimated $11.2 billion a marked increase of about 6 per cent compared with July 2014 to January 2015.

Overseas Pakistanis are remitting more than $1.5 billion a month, making a significant contribution to their families and bringing about a socio-economic change. The State Bank of Pakistan expects remittances to cross $20 billion this financial year, the highest ever and these expectations are in line with the World Bank’s calculations that place Pakistan on the eight rung among the top 10 recipients of remittances this year at $20.1 billion.

“The inflows from remittances (at current levels) now fully cover the country’s petroleum imports. Currently, international remittances are moving six per cent of the total GDP of Pakistan,” says Rizwan Wyne, a Pakistan-based expert on international remittances from Middle East to South Asia. The Migration and Remittance Factbook 2016 produced by the World Bank notes as of 2015 international migrants are expected to have sent $601 billion to their families in their home countries, of which developing countries like Pakistan received $441 billion.

At more than three times the size of development aid, international migrants’ remittances provide a lifeline for millions of households in developing countries. In addition, migrants hold more than $500 billion in annual savings. Together remittances and migrant savings offer a substantial source of financing for development projects that can improve lives and livelihoods in developing countries, says the report.