PRO 02-06-2013_Layout 1 6/2/2013 1:23 AM Page 1
If you cannot work with love but only with distaste, it is better that you should leave your work. — Khalil Gibran
buSIneSS Sunday, 2 June, 2013
Dry ports association says exports have stopped after FBR action
SIALKOT: All Pakistan Dry Ports Association (APDPA) Chairman Muhammad Ishaque Butt has expressed concern over the blockade of bonded carriers' licenses of all upcountry dry ports. The abrupt action of the Collector (Appraisement) Karachi played havoc with exports and hampered logistic planning of exporters of the region. The licenses of up-country dry ports were blocked for want of bank guarantee of Rs 5 million to cover the risk of loss of custom duties if import cargo en route was damaged or lost, he told the media on Saturday. He asked why exports were stopped and reiterated that exports had nothing to do with bank guarantee and they were unjustifiably blocked. Due to the energy crisis, law and order and rising cost of doing business, exporters are facing difficulties to manage their supplies and to compete at international level and the blockade of exports will result in missing of vessels and other serious repercussions which may lead to cancellation of export orders and huge loss to the national exchequer, he said. The chairman said that officials of APDPA met with the Federal Bureau of Revenue (FBR) Chairman and the member customs to discuss the issue but no action had been taken. The All Pakistan Dry Ports Association has written a number of letters to FBR over important issues but nobody responded, he alleged. Butt said Pakistan Railways and NLC were exempted from bank guarantee as bonded carriers and up-country dry ports being permanent establishments should also be treated the same way. He said they would meet the new prime minister to discuss issues related to upcountry dry ports. APP
Pakistan may be next in line for an IMF bailout isLAMABAD
foreign investment. Most experts see another IMF bailout as inevitable and are urging the governITh foreign reserves di- ment to immediately seek at least $5 bilminishing fast, Pakistan is lion. They worry that any delay in asking on the brink of an eco- for IMF help could spark a crisis of connomic crisis that may force fidence that would snowball. "The writing is on the wall that Pakits new government to ask for an unpopular bailout from the Interna- istan is going to the IMF. The only thing tional Monetary Fund requiring a sweep- left is to give a date," said Ashfaque hasan Khan, head of the business school ing overhaul of the country's economy. The troubles could inject a new ele- at the National University of Sciences ment of instability into the nuclear-armed and Technology in the Pakistani capital, nation of 180 million people that Wash- Islamabad. Khan said the official reserve figure ington is relying on to combat Islamic militants at home and to help negotiate understates the problem because the cenan end to the war in neighbouring tral bank has also borrowed more than $2.3 billion from commercial banks in Afghanistan. Pakistan's foreign currency reserves the forward swap market to prevent the rupee from depreciating. That stood at just $6.4 billion as of May means the actual reserve 17, down from more than figure is closer to $4 $14 billion two years Most experts billion, he said. ago. That is only Adding to enough to cover see another IMF those woes, about 1.5 months' bailout as inevitable Pakistan has worth of imports while the IMF and are urging the govt to very large debt payconsiders adeimmediately seek at ments comquate foreign reserves for any least $5 billion. They worry ing due over the next country enough that any delay in asking for year that to cover three will further months of imIMF help could spark a drain reserves. ports. crisis of confidence Most notably, it Bottoming out owes the IMF could bring painful that would about $2.5 billion consequences: A run snowball. by the end of this calon the banks by panicked endar year. citizens anxious to convert There have already been worsavings into dollars amid fears of a devaluation, a withdrawal from the stock rying signs in Islamabad, where commermarket, a collapse of economic activity cial banks have begun telling customers trying to withdraw dollars that they are and higher unemployment. The presumptive head of the new not available, or that they need to make a government, former prime minister special request. Foreign exchange compaNawaz Sharif, has made fixing the nies in the capital have also reported a economy his main priority. But even shortage of dollars. Pakistan's two largest though a crisis may be only six to nine cities, Lahore and Karachi, show no sign months away, his incoming government of similar problems. Khan, however, said appears hesitant about taking IMF that was only a matter of time. Foreign investment, dampened by money. They know it will come with conditions attached that would likely both political and economic instability, is stir discontent on the streets, such as only expected to be about 0.5 percent of raising energy prices and broadening tax GDP this fiscal year, while the average emerging market country runs at about 3 collection significantly. "If we manage for six months, then of to 4 percent, according to the IMF. Still Aziz, the adviser, said he is course we don't have to go" to the IMF, said Sartaj Aziz, a key economic adviser hopeful the incoming government can to the government about to take power. he take emergency steps to grow the econtold The Associated Press that in his view, omy that will help Pakistan avoid going the country might not need a bailout if it for an IMF bailout, or at least make the moves quickly enough to boost growth loan conditions less painful. he said the and gets help from key allies such as government will likely ask Saudi Arabia, Saudi Arabia, which would come with a major oil supplier, to defer payments on oil imports. fewer strings attached. And he predicted the IMF would imStepping up growth, however, is a daunting challenge in a country plagued pose tough conditions if Pakistan does reby severe electricity shortages and a quest a new loan now. "Not only would we find it difficult bloody Taliban insurgency, both of which have hampered economic expansion and to fulfill them, but they would stifle
our revival agenda," he said of the expected conditions. "The important thing, therefore, is to try to revive investment and growth." Since 1988, Pakistan has signed onto eight IMF programs that demanded structural changes in the economy. But it has never managed to resolve its chronic problems. Sakib Sherani, head of Macro Economic Insights Ltd. in Islamabad, said the government will make a mistake if it delays a request for a new IMF bailout. "There are structural issues here. No amount of Chinese money or Saudi money can get us out of this," he said. If Pakistan does have to turn to the IMF, it will bring its own set of challenges. For one, the country has a patchy track record in upholding promised reforms that secured past IMF loans, including an $11 billion program granted amid the last foreign reserves crisis in 2008. The former government abandoned that program in 2011 because it refused to carry out the strict financial reforms required by the IMF. But it still owes the lending agency nearly $5 billion from that old loan. The new government will have to convince the IMF with quick actions that this time around will be different. The IMF will want to see far-reaching reforms fast-tracked to reduce the chance of another reversal part way through a multiyear program. And the lending agency is expected to demand vast improvements in a woeful tax system that collects very little money. Taxes currently bring in only about 10 percent of gross domestic product, one of the lowest effective rates in the world. The IMF is also likely to press for major changes in the energy sector such as raising prices and phasing out costly subsidies that disproportionately benefit the wealthy, who use far more energy than the poor. The government spends about $1 billion in foreign currency each month to import oil to run its power plants — a costly way to generate electricity and another drain on foreign reserves. Building new hydroelectric plans or converting to less expensive natural gas production would be very expensive and take years. The IMF is also expected
to demand some kind of plan to curb losses from state-owned enterprises that amount to billions of dollars a year. Pakistan's budget deficit — the difference between what it spends and takes in — is expected to be at least 7 percent of GDP this year. The IMF does not consider that sustainable and would likely press for a scaling back to about 3-4 percent of GDP. The economy is expected to grow around 3.5 percent for the fiscal year ending June 30, and though that figure may look good in comparison to Europe or America, it is less than half the rate needed to supply jobs to the growing population. And it is also low by historical standards. Aziz said growth from 1960-2010 averaged about 5.5 percent annually but in the last five years, it slowed to 3 percent. Despite the enormous challenges, there are some in Pakistan who remain sanguine that an IMF bailout will come through no matter what because the U.S. — the largest shareholder in the organization — considers Pakistan too strategic to fail. "By now, just about everybody knows that it's U.S. strategic interests that dictate the disbursement of this money and not really any progress or timeline on reforms," said Khurram husain, a busin e s s columnist.
IF WE MANAGE FOR SIX MONTHS, THEN OF COURSE WE DON'T HAVE TO GO TO THE IMF
Govt shares in energy companies to be reduced Monitoring Desk The Pakistan Muslim League – Nawaz (PML-N) is contemplating reducing the government’s share in state-owned energy companies to around 51%, in a bid to raise the cash necessary to clear the circular debt in the system, as well as restrict the ability of future politicians to engage in populist moves in the energy sector, according to local media reports. The move to retain a majority-government
ownership in energy companies appears to be a retreat PML-N’s manifesto, where it called for complete privatisation. Now it appears that the incoming ruling party wants to test the waters before an all-out onslaught. Sources familiar with the matter say that the PML-N leadership believes that bringing in more private sector investors into stateowned companies will help improve the governance of these companies. Under the current arrangement, the CEOs of these companies are appointed by the prime minister. This level of direct government control has exposed these companies to political interference, which has reduced their efficiency. The PML-N wants to give the power to appoint chief executives to the board of directors, and have more private sector investors represented on the boards to limit government influence. This proposal is likely to find no major
opposition, as one of the main opposition parties, the Pakistan Tehreek-e-Insaf, is also in favour of such a move. Companies most likely to see their government shareholding reduced include the nine state-owned electricity distribution companies, two of the state-owned gas distribution companies (Sui Southern Gas Company and Sui Northern Gas Company) as well as primary energy production companies like the Oil and Gas Development Company and possibly others. The government’s weighted average stake in these companies is around 81.5%, according to the latest available financial statements. Reducing that share to 51% would raise approximately Rs455 billion for the government, at Friday’s prices, a number very close to the Rs500 billion that the PML-N is looking to raise to pay down the circular debt in the system in one go.
This estimate does not take into account the amount that the government will earn if it listed the eight state-owned power distribution companies on the stock exchange. Nishat Group and the Crescent Group, two of the largest diversified financial and industrial conglomerates in the country have expressed an interest in buying the Lahore Electric Supply Company and the Faisalabad Electric Supply Company. The PML-N’s market-oriented proposals to resolve the energy crisis stand in contrast to the outgoing left-leaning Pakistan People’s Party administration’s plans, which typically tried to retain heavy government involvement. It tried to outsource the operations and maintenance of state-owned power plants, but faced enormous protests from the unionised workers at those plants. It tried to break up the two giant gas distribution companies into 20 smaller companies, but saw that plan run into legal complications.
PRO 02-06-2013_Layout 1 6/2/2013 1:24 AM Page 2
I think that there is nothing, not even crime, more opposed to poetry, to philosophy, ay, to life itself than this incessant business. — Henry David Thoreau
buSIneSS B Sunday, 2 June, 2013
QUETTA: A man buys caps from a roadside vendor. INP
IWCCI urges attractive schemes for expats to boost forex reserves isLAMABAD APP
The Islamabad Women's Chamber of Commerce and Industry (IWCCI) on Saturday stressed the need for introducing friendly schemes for overseas Pakistanis to help boost dwindling foreign exchange reserves. There are over ten million Pakistanis working in around 79 countries including USA, UK, Canada, UAE, Saudi Arabia and government could use the potential of overseas Pakistanis to augment forex reserves in order to bring meaningful economic reforms, said Farida Rashid, President IWCCI. Talking to President Pakistan Economy Watch, Dr Murtaza Mughal, she said that friendly schemes must be introduced to restore confidence of overseas Pakistanis. Government can announce a scheme in which if a person sends remittance of up to one million dollars, he/she would be eligible to bring a duty-free automobile in Pakistan, she said.Farida Rashid said that if 10,000 persons respond to this scheme which constitutes to 0.1 per cent of the total overseas Pakistanis, the government can get ten billion dollar in foreign exchange. As per the Economic Survey of Pakistan of 2011-2012 total number of the imported cars and jeeps stood at 1,079,856.
Rs 15bn must be allocated as infrastructure fund for agri sector, says Jawad isLAMABAD
CONOMIC renaissance in Pakistan is totally dependent on agriculture growth and as such Pakistan urgently needs an agricultural infrastructure to improve the balance of trade and put the economy back on the track. The Finance Ministry should allocate at least Rs 15 billion to this sector in the upcoming budget, said harvest Trading CEO Ahmad Jawad on Saturday. Speaking at workshop, he said our agriculture sector faces huge post-harvest losses of 40-80 percent when compared with global benchmark. Currently, Pakistan's sugarcane yield is 40 percent lower against global benchmarks, wheat yield is 20 percent lower, non-basmati rice yield is 40 percent lower, cotton yield is 20 percent lower and milk yield per animal is 90 percent lower. Low output also adversely affects the farmers' earning capability. however, export of Pakistani dates, if properly processed and packaged, could fetch between 200 and 240 million dollar per annum. Currently, Pakistan earns around $28 million per annum from dates export because of a lack of infrastructure. Last year, 135,000 tons of mangoes were exported
against a normal target of 150,000 tons, which generated revenue of just $39 million only. It could exceed too as much as $100 million but here again, the issue of infrastructure proved a big impediment, Jawad said. he said over the past five years, an average of 2,960 tons of apples with a retail value of about Rs6.7 billion were exported on an annual basis, and that constituted just 0.5 percent of the total production in Baluchistan, as thousands of tons of apples to wasted in Swat because of absence of technical expertise and infrastructure, while the production also remains limited, he said, adding that Pakistan is one among top apple producers in the world. Ahmad Jawad said that Balochistan annually produces more than a million tons of various varieties of fruits, 90 percent grapes, cherry, and almonds; 60 percent peach, pomegranate, and apricot; 34 percent apples. The province is the fifth largest producer of dates with an estimated production volume of 583,000 tons but, again, its exports suffer because of non-availability of infrastructure. “It needs of the hour that establishment of modern cold storages, testing labs & conduct local trainings to curtail post harvest losses & proper rooms for wheat storages at production hubs in the fiscal year of 2013-14.”
Pakistani business delegation leaves for China to attend trade fairs kArACHi NNI
Pakistan is scheduled to participate in Chengdu Forum 2013 in order to boost Pak-China trade. The Chengdu Forum 2013 is commencing from June 3, 2013 in Sichuan Province’s Capital, Chengdu. A large trade delegation led by President Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Zubair Ahmed Malik along with Vice President Confederation of Asia Pacific Chambers of Commerce and Industry (CACCI) and Patron In-Chief Pak-China Business Council, Tariq Sayeed. FPCCI is also participating in the 1st South Asia Exposition 2013 in Kunming 6th-10th June, and the 3rdChina-Sichuan
Import Commodity Fair starting from June 14th -18th in Chengdu. FPCCI is sending 85 and 43 exhibitors to attend the fairs. Along the sidelines of these exhibitions, in the cities of Chengdu and Kunming business Forums are being held, namely 4th South Asia Sichuan Business Promotion Roundtable Conference from 34 June and China South Asia B u s i n e s s Forum, Kunming 6-8 June). The Delegation aims to explore prospects of enhancing trade and Development be-
tween Pakistan and China, especially with the Yunnan and Sichuan provinces. The CCPIT Sichuan and CCPIT Kunming have been instrumental in facilitating helping FPCCI promote Pakistani goods in China by helping organize participation in various Fairs, Exhibitions and Forums over the years. The delegation also comprises Vice President FPCCI Gulzar Firoz, Shaheen Ilyas Sarwana, Chairman Standing Committee on Exhibitions, Nasir
Uddin Shaikh, Shaikh Abdur Razzaq, Khurram Saeed, Muhammad Shoaib Khan, Rizwana Shahid, Muhammad Shariq Vohra, Muhammad Azeem Shariq, Afshan Shaheen, Munawwar Baig Mughal, Khalilur Rehman, Yawar Raza Chawla, Anum Niaz Baloch, Zahid Maqbool, hina Mansab Khan, humayun Laiq, Muhammad Shahid, Arshad Aziz, Ali Jaffar, Jawaid Khalili. Tariq Sayeed and Zubair Malik would deliver keynote address at the Forum. The delegation would also visit Kunming to attend Kunming Forum and participate in Kunming Fair being held there from June 6, 2013. FPCCI has set up a large pavilion at the fair and as many as 85 exhibitors are setting up their stalls to display their products.
SC moved to remove SECP insurance commissioner isLAMABAD ONLINE
The Supreme Court has been moved to remove Commissioner Insurance SECP from his post due to clear conflict of interest, supporting powerful cartels and squeezing smaller insurance companies. Kokab Iqbal Advocate who is also President of human Rights and Welfare Trust, has filed a writ petition under Article 184 (3) of the Constitution in the Apex Court praying that the former chairman SECP Muhammad Ali was relieved by the Supreme Court (SC) but his appointee, Commissioner Insurance Asif Arif is still serving the institution. The petitioner alleged that Asif Arif was appointed as commissioner due to influence of the insurance cartel comprising Eastern Federal Union (EFU), Adamjee Insurance, and Jubilee Insurance having 70 per cent market share in the Rs 36 billion market. After appointment, he was allegedly bribed by EFU by opening an insurance agency in the name of his wife and amount worth tens of millions was transferred to her as agency commission making the regulator an indirect agent of EFU and insurance cartel which is clear conflict of interest. he further alleged that after getting benefits, Asif Arif started victimising and harassing 35 smaller insurance companies having 30 per cent market share. This act has brought many companies to their knees and put thousands of jobs at stake, he claimed. Moreover, the petitioner said the Commissioner Insurance has selected some blue eyed firms to conduct audit depriving other companies. The petition also questioned the transfer of Insurance Division of the SECP to Karachi without justification whereas the rest of the divisions have been discharging duties from Islamabad. “Rules were framed forcing insurance companies to invest in stock market making all other venues unattractive for them,” the petition added. The petitioner further submitted that the former chairman carried out hundreds of recruitments including eight directors with salary around Rs 300,000 per month putting additional burden of Rs 120 million on the SECP.