MINISTER EXPECTS EXPORTS TO DOUBLE BY NEXT YEAR
Minister for National Health Services, Regulations and Coordination Saira Afzal Tarar informed the Senate on Monday of a substantial increase in pharmaceutical exports from the country, expecting them to double by the end of next year.
Winding up discussion on a deferred motion about Drug Regulatory Authority of Pakistan (DRAP), the minister also expressed hope that the body would be able to meet international standards in terms of performance within the next five years.
The minister said that a quality assurance directorate has been set up in DRAP to regulate quality of drugs being sold, adding that some 5,500 samples were collected from across the country resulting in cases being filed against 1,450 sellers.
PAK-POLAND: PRESIDENT URGES INCREASED COOPERATION
President Mamnoon Hussain has called for joint investment by Pakistan and Poland in different sectors especially energy, agriculture and food processing.
He was talking to a Polish parliamentary delegation, led by Marshal of Senate of Poland Stanislaw Karczewski on Monday. Chairman Senate Mian Raza Rabbani was also present on the occasion.
The President expressed the confidence that increased interaction between parliamentarians, businessmen and people of the two countries will help in promoting mutual cooperation and strengthen bilateral relations. He thanked Poland for supporting Pakistan in securing GSP Plus status from the European Union and hoped for continued cooperation. He also called for greater exchanges in education, culture and science and technology.
GOVT WORKING ON LPG RATE FORMULA TO CURB EXCESSIVE PROFIT-MAKING
The government is working on a formula of “controlled deregulation” of liquefied petroleum gas (LPG) prices in an attempt to force the market to behave responsibly and rein in excessive profit-making. “The government is assessing a mechanism for fixing LPG prices. The state will not set the prices itself, rather LPG producers and marketing companies will fix gas rates in line with the given formula,” a senior government official said.
At present, LPG prices are set by market forces but they do not follow any set formula.
The market of petroleum products, except for kerosene oil, is also deregulated. But the government plays its role in finalising the prices by fixing freight charges and petroleum levy.
“Petroleum product prices are set taking cue from the international crude oil market and after adjusting sales tax and petroleum levy; a similar pattern will be followed in the case of LPG prices too,” the official said.
In this regard, talks were being held with the stakeholders to arrive at an understanding on the price formula. As part of this plan, LPG producers, marketing companies and dealers will receive fixed margins. Under the deregulated market, Ogra was authorised to intervene and set reasonable prices in case it considered the rates to be at higher levels. However, Ogra and the federal government locked in a tug of war as the regulator expressed its inability to notify the prices proposed by the Petroleum Division. The LPG market faced scores of challenges in the deregulated mechanism including demand-supply gap, cartel formation, court litigation and price distortion. LPG was considered a poor man’s fuel but it was priced 20 times more than the price of natural gas for domestic consumers, the cabinet was told in a meeting. The cabinet approved the constitution of a committee comprising top officials of the Petroleum Division and state-run LPG producing companies to determine gas prices. It decided that the committee would calculate LPG prices and the Petroleum Division would intimate Ogra, which would, in turn, notify the new rates. The official pointed out that the pricing committee had been constituted to implement the LPG policy approved by the Council of Common Interests (CCI) in a bid to regulate the market. Based on recommendations of the committee, the Ministry of Energy (Petroleum Division) will revise LPG prices from time to time. Opposing the deregulation policy, the Petroleum Division arrived at the conclusion that the policy had failed to achieve intended objectives including fuel availability at affordable prices. The situation warranted immediate intervention and the Petroleum Division considered it expedient to put in place a framework to regulate LPG prices both at producer and consumer levels.
In this mechanism approved by the cabinet, the Petroleum Division and the LPG pricing committee have got all the powers whereas Ogra will only notify the prices.
Earlier in March 2002, the government had promulgated Ogra Ordinance 2002 for setting up an independent regulator. A year after that, all regulatory functions, along with powers under the LPG (Production and Distribution) Rules 2001, were transferred to Ogra and role of the Ministry of Petroleum was confined to just policy formulation.
CHINESE-DELEGATION EXPRESS INTEREST IN JOINT AUTO-PART MANUFACTURING VENTURES
A Chinese delegation has expressed its interest in pursuing joint ventures with Pakistan in the auto parts and accessories sector, notwithstanding that the current market in the country is already flooded with cheap imports from the northern neighbour.
An eight-member delegation from Sichuan province Hebei Chamber of Commerce arrived in Pakistan on the invitation of SM Naveed, president of the Pak-China Joint Chamber of Commerce and Industry (PCJCCI), to review joint venture opportunities in the fields of automobiles innovative accessories, town planning and vertical buildings infrastructure.
The delegation comprised of Chinese officials Gaoqiang, Xu Yingliang, Cao Wei, Yang Yongang and Cao Zaiqiang.
Naveed and vice president Rana Mehmood Iqbal briefed the delegation regarding the demand of innovative energy efficient automobiles, car accessories and vertical buildings in Pakistan. “The automotive industry in Pakistan is one of the fastest growing industries of the country, accounting for 4% of GDP and employing a workforce of over 1,800,000 people. With the growing demand for automobiles, demand for the car accessories has also increased,” he said.
Gaoqiang, who was heading the delegation, said that China wants to venture with Pakistan in mechanical parts and accessories, electric motor parts, and electronic parts.
“China has extensive manufacturing facilities that could be relocated to Pakistan based on the demand for accessories.”
He said that China is eager to make massive investments in the Pakistani auto sector where the vehicle’s quality and the price will boost competitiveness in the market. The process of putting the plant together is expected to be completed in 2 to 3 years.Naveed informed the delegates about the automotive policy 2016-2021, according to which, new investors under the category ‘A’ shall be eligible for duty-free import of plant and machinery on a one-time basis, concessional rate of custom duty on non- localised and localised parts.
Chinese delegates further shared their plan for an exclusive ‘China Town’ in Lahore meant for residential purposes.
PM LIKELY TO INAUGURATE 2ND LNG TERMINAL ON NOVEMBER 20
Prime Minister Shahid Khaqan Abbasi is expected to inaugurate the second liquefied natural gas (LNG) processing terminal at Port Qasim on November 20 – a significant development that will increase Pakistan’s imported gas handling capacity.
With the start of the second terminal, the country’s LNG imports will jump to 1.2 billion cubic feet per day (bcfd).
First LNG terminal, which began operations at the end of March 2015, is already handling and processing 600 million cubic feet of gas per day (mmcfd).
Pakistan produces 4 bcfd of natural gas, far short of its consumption demand for over 6 bcfd. “The second terminal will supply 600 mmcfd to 3,600-megawatt LNG-based power plants in Punjab which will help overcome energy shortages,” a senior government official said.
This terminal, set up by the Associated Group, has been completed without acquiring any bank loan. The group has planned to build another LNG terminal and has sought required approvals in this regard. Separately, Engro Corporation, which is running the first LNG terminal, also plans to set up one more terminal in partnership with the Fatima Group.
A consortium comprising Qatargas, France’s Total and Japan’s Mitsubishi is also working on building an LNG terminal. These projects will turn Pakistan into a prominent consumer on the world’s LNG map. They will also prove to be a win-win situation for both private investors and consumers of gas. The government plans to provide all locally produced natural gas to domestic consumers whereas industries, commercial consumers and new housing societies will receive imported gas.
At present, LNG is being supplied to compressed natural gas (CNG) filling stations, fertiliser plants and industrial consumers. “Gas imports have helped revive industries like fertiliser plants and CNG outlets, which had earlier no alternative fuel available,” the official said.
For building the second LNG terminal, the government had floated a tender, which was won by Pakistan GasPort Limited, a subsidiary of the Associated Group.
The BW Group, global provider of floating production services to the oil and gas industry, is also willing to pour $300 million into Pakistan for 25 years.
The government has been striving for the past four years to end power load-shedding in the country and the new LNG terminal will play a significant role as it will be supplying gas to the new LNG-based power plants in Punjab.
The first terminal is running at 100% capacity to handle 4.5 million tons of LNG per annum and the second terminal will also have the same 4.5-million-ton handling capacity.
The government has framed a policy to encourage private sector to set up LNG terminals. It also desires to replace furnace oil in power production with imported gas by 2020 for having cheaper and clean energy.
WHEN NO ONE, COUNTING THE FINANCE MINISTER, IS WILLING TO FIX THE ECONOMY
Pakistan is once again facing a frightening balance of payment (BOP) crisis that needs to be carefully tackled to avoid a default-like situation.
There is a growing consensus that the much-needed macroeconomic stability could not be achieved during the last four years during which economic woes exacerbated as no home grown or any international financial institution-prescribed short- or long-term programme could be fully implemented to achieve desired results.
The issue compounded when the economic team, led by Finance Minister Ishaq, remained clueless to urgently find out the solution of the serious BOP problem except to claim that there is no default like situation and that the government will manage to pull through 2017-18 financial year.
This is perhaps the first time that some government officials and independent economists are on the same page to conclude that the country needs a minimum of $20 billion in 2017-18 to escape default on the repayment of debt. They agreed that decrease in exports, home remittances and Foreign Direct Investment (FDI), coupled with declining foreign inflows, has resulted in the BOP position turning serious.
Since no strategy has been devised to deal with the issue, the government seems unprepared to look for new ways. It is only banking on floating $2-3 billion Sukuk and Euro bonds to survive till March next year.
But by that time, foreign exchange reserves will come down close to $8 billion, which are not considered sufficient for one-and-a-half months’ import cover.
The finance minister, who is facing new investigations and supposed to be appearing in the accountability court, believes that there is no need to go to the IMF for any emergency assistance. But those who are in the know of things maintain that Fund officials are reluctant to negotiate any new bailout package with the government which has to last only for four months.
They would not even talk to the caretaker government because it will not have any mandate to implement any proposed reforms that are feared to be full of strings and conditions. The IMF is believed to have decided to send its mission to Pakistan in December to gauge the current macroeconomic situation. Till then, there is no hope Pakistan can get the desired level of foreign inflows to manage its unwarranted financial affairs.
The current precarious reserves position speaks volumes about their vulnerabilities especially the way $4 billion were consumed by the government in just last 3-4 months.
The central bank’s $12 billion reserves also contain close to $4 billion borrowed from the commercial banks. Ironically, both the State Bank of Pakistan (SBP) and commercial banks are showing these $4 billion in their separate accounts. Taking into account reduction in reserves, one would be shocked to know that foreign inflow remained minus one dollar during the first quarter of the current financial year compared to $800 million in the corresponding period of 2016-17.
FDI, which is one of the major components to measure GDP growth, has gone down drastically except that of China while foreign investors and bilateral creditors besides the International Financial Institutions (IFIs) led by IMF are not forthcoming to help the beleaguered PML-N government.
The United States is no more disbursing funds under the Coalition Support Fund (CSF) and in fact, has attached strings to offer such assistance which is otherwise reimbursement on account of Pakistani funds spent on restricting war on terror.
There are indications that the government would only be managing $10 billion from all external sources including those of the foreign commercial banks and that too, on high mark up. The rest of the $10 billion, out of $20 billion needed for 2017-18, are unlikely to be collected which would cause problems in making debt repayments.
The situation gets further worsened due to the flight of capital worth $200 million from the stock market during the first three months of the current financial year. The government’s financial difficulties further multiplied as the regulatory duty on imports of 731 items ranging from 5 to 80 percent is not expected to yield results in terms of collecting sizable taxes.
Since the bulk of the imports are being made from China, the Chinese government is believed to have refused to allow the imposition of regulatory duty because of the Free Trade Agreement (FTA) between the two countries. The government has reportedly been told that imposition of regulatory duty on imports from China will be a flagrant violation of the FTA and that it must be reviewed to avoid problems between the two countries.
GOVERNMENT MULLING REGULATORY CHECKS ON E-COMMERCE
The government is working on formulating licensing requirements for establishing and operating e-commerce businesses in the country, sources told.
The past few years have seen a rapid increase in e-commerce platforms for online shopping. In this regard, the ministries of commerce and information technology and telecommunication were formulating a national e-commerce policy framework for digital trade in the country, the sources said.
Parameters of a legal framework for regularisation of the sector include enactment of a national law on consumer protection specifying rights, obligations, liabilities, penalties for both sellers and consumers and enactment of privacy and data protection laws including provisions for e-transaction to enable e-contracts.
They also highlighted amendments in foreign exchange regulations of the State Bank of Pakistan (SBP) to facilitate cross-border electronic transactions, establishment of a dispute resolution mechanism for e-commerce and formulation of licensing requirements for establishing and operating e-commerce businesses, as possible steps the government might take.
When asked, the officials said steps were being taken for the promotion of e-commerce and online shopping in the country, adding two national workshops and several meetings of working groups had been held so far to sensitise relevant stakeholders about formulation of the framework.
Recommendations of the working groups would form the basis of the proposed national e-commerce policy framework. Moreover, the SBP has issued various regulations to provide protection and rules for payment system operators and payment service providers under the Electronic Fund Transfers Act 2007 have been framed.
The sources said currently, the mechanisms in place to provide protection to consumers included Prevention of Electronic Crimes Act 2016 while Electronic Transaction Ordinance 2002 provided for recognition and facilitation of documents, records, information, communications and transactions in electronic form and accreditation of certificates.
IT MINISTRY LOOKS TO BOOST EXPORTS
The Ministry of Information Technology and its departments are looking to provide an enabling environment for the industry and help boost exports of the country.
According to official data, it was revealed that Pakistan’s IT exports have almost doubled in the last four years.
The department working under the IT and telecom ministry, the Pakistan Software Export Board (PSEB), has selected 30 professionals and 28 companies and given certifications in Capability Maturity Model Integration (CMMI) platform.
Moreover, 134 companies got certifications in ISO 9001, ISO 20001 and ISO 27001, helping them generate IT exports for developed countries.
Managing director of PSEB told the directors in their previous meeting that the body has achieved significant milestones in IT promotion over the last four years.
The PSEB participated in 11 international trade fairs along with 65 IT companies. He told the board that Pakistani companies were able to generate more than 2,000 leads with the help of those events.
He said trade fairs and exhibitions have promoted Pakistan as a viable destination for outsourcing, and exports increased due to efforts of participation in international expos. The ministry official told that PSEB in partnership with the National ICT R&D Fund (IGNITE) has placed 1,700-plus IT graduates as interns in various IT companies and banks and more than 60 percent of interns had a job offer from their respective companies.
Later in another meeting, Minister of IT Anusha Rehman approved the “DigiSkills” programme to provide training to 1 million youth to streamline excellence in technology, innovation, and professionalism, focusing on building a workforce for the future driven by 4th Industrial revolution.
WHY TRADE WITH INDIA IS NOT SUCH A BAD DEAL
Tomatoes brought India-Pakistan trade back to the limelight. In some markets of Islamabad and Rawalpindi, tomatoes were being sold at well over Rs200 per kg.
Despite this massive increase in price of the perishable commodity, Pakistan has decided not to import tomatoes from India due to strained bilateral ties. Usually a supply-demand gap of any vegetable in Pakistan is plugged through import from India.
While popular sentiments may be biased against any import from India, we need to ask ourselves whether trade with India can be worthwhile or not? For that matter, we must set aside our security-minded viewpoint of the economy. So let’s talk economics of India-Pakistan trade.
Despite presence of significant trade potential, Indo-Pak trade remains hostage to repeated politicisation on both sides of the border. Both economies have pursued an open trade policy regime with the rest of the world but that openness isn’t reflected when it comes to bilateral trade. Recent chill in the political situation between the two countries has dented prospects for further improvement in bilateral trade. Trade volumes have been decreasing over the last three years.
However, Indo-Pak trade has come a long way since the turn of the century. Official trade volumes have increased from a mere $309.8 million in 2003 to almost $2 billion by 2016. Trade through third countries like UAE, Singapore, & Iran or illegal channels is estimated to be around $2 billion. Bilateral trade has mostly favored India. Pakistan’s trade balance with India has worsened to $1.3 billion in 2016 from $142 million in 2003.
This may not be hard to digest since Pakistan’s trade deficit has increased with almost each of its trading partners because of overall sub-par export performance.
Pakistan’s deteriorating trade balance has also accorded an economic dimension to trade restrictions with India. There are fears among some Pakistani industries that more trade liberalisation with India may hurt their businesses as India is increasingly becoming a trading giant.
Let’s see an example of the cotton industry which is one of the major industries in Pakistan. On the request of cotton spinning industry, the federal government has increased regulatory duty on import of cotton yarn from India in order to protect the local spinning millers. Similarly, other industries are also concerned that better trade relations with India may result in Indian products flooding local Pakistani markets and hence wiping off profit margins.
Despite these concerns, which may seem valid in some business quarters of Pakistan, our economy can actually benefit from trade with India. There are some serious advantages in place for Pakistani economy.
One may be quick to conclude that if we pursue more trade liberalisation with India, Pakistan’s trade balance with India may worsen still more. This can be true since Pakistan doesn’t export many items which Indian economy imports. Our exports mainly rely on two items which are cotton and rice in which Indian economy has a comparative advantage over us.
On the other hand, Indian economy exports a lot of items which Pakistan imports. Pakistan can import items like tea, sugar, petroleum products, cotton not carded or combed, cyclic hydrocarbons, insecticides, new rubber types, electrical generating sets, electrical apparatus for telephony, motor vehicles, and parts of motor vehicles from India. As of 2016, Pakistan spends almost $6.5 billion on import of these products. The fact that India exports $21 billion worth of these items to the world clearly shows the opportunity available for Indian exports of these items to Pakistan.
If Pakistan imports these products from India instead of other countries, it can save itself a good deal of transport costs. Apart from China, Pakistan’s top import partners include countries like European Union, United Arab Emirates, Saudi Arabia, and United States. Transporting products from these countries cost more than it would if we imported them from India. Transport cost to import one container of goods for Pakistan has increased to more than $1000 during the last few years. Goods from India enter through border on trucks or train which is very cheap. So while our trade deficit with India may increase, our overall trade deficit can reduce due to cheap imports from India.
Even Pakistan can increase its exports of products like cement, woven fabrics of silk, wheat, dates, medicaments, polyesters, leather, surgical instruments, and articles of jewelry. India imports $5 billion worth of these products. If Pakistan can tap into the Indian market of these products, it can be a boon for our export performance.
For bilateral trade to flourish, both India and Pakistan should scale down barriers to trade. India operates a very discriminatory trade policy with Pakistan as compare to Pakistan’s. India’s score in trade restrictiveness index developed by the World Bank is higher than Pakistan’s. India should, in particular, reduce stringent non-tariff barriers for Pakistani exports.
More than its economic benefits for the two neighboring countries, trade can be the ultimate guarantor of peace.