Incentives worth $1.6bn approved for new coastal refinery in Balochistan
Despite opposition by different ministries, former prime minister Shahid Khaqan Abbasi approved $1.6 billion worth of incentives for UAE-based Abu Dhabi Petroleum Investment Company to encourage it to establish an oil refinery along the coast in Hub with annual production capacity of 100,000 barrels per day (bpd).
The incentives were given on a planned investment of $5 billion in the refinery – a project of Pak Arab Refinery Company (Parco). Such incentives had also been offered to all new state-of-the-art projects.
Earlier, the United Arab Emirates (UAE) government had abandoned the project during the 2008-13 tenure of Pakistan Peoples Party (PPP) government because of a dispute over change of top management at Parco, which is jointly owned by governments of Pakistan and the UAE.
The former premier took the decision at the end of April 2018, just a month ahead of completion of Pakistan Muslim League-Nawaz (PML-N) government’s tenure.
However, it surprised members of the Economic Coordination Committee (ECC), chaired by Abbasi, as concessions proposed for the new refinery in a summary prepared by the Petroleum Division were more than those approved for the Khalifa refinery project in Hub in 2007.
In the ECC meeting, Parco executives pointed out that cumulative impact of the incentives sought for the new coastal refinery was estimated at $1.6 billion over 20-year life of the project.
They claimed that the $5-billion investment would give monetary benefits of $84 billion in the shape of foreign currency savings on imports, share in profit for the government of Pakistan and contribution of sales tax and petroleum levy.
Rupee appreciates against us $ in open- and inter-bank markets
In an interesting and surprising development, the currency has appreciated on Friday to Rs127.86 against the US dollar in the inter-bank market, according to the State Bank of Pakistan (SBP).
It has recovered around 0.5% in the last three days, strengthening from Rs128.50 to the greenback on Monday.
The development comes after the rupee shed around 22% since December 2017 as the country’s current account deficit widened to a historic high, taking down gross foreign currency reserves to the alarming level of $9.01 billion.
However, on Friday, the rupee appreciated, inviting panic selling and nominal buying in the open market as well. The currency recovered 1.5% to hover around the Rs127-mark to the US dollar, currency dealers said.
“There are strong rumours that the inter-bank market would further strengthen rupee by (another) Rs1.5 to Rs2 on Monday,” a dealer at Habib Qatar International Exchange Pakistan told.
“Dollar (trade) closed at Rs127 against Rs129 (on Thursday),” he added.
The downward movement in rupee comes in contrast to widespread talks that the rupee could weaken further even after losing 22%.
Pakistan Forex Association President Malik Bostan said the drop should be seen in the backdrop of SBP’s move to halt the inter-city physical movement of dollars.
The SBP notification, issued several days ago, binds dealers to transfer dollars only through proper banking channels with effect from Tuesday (July 24). It also says that if it finds physical movement of the foreign currency it would seize it, Bostan added.
Many dealers move dollars via air and/or roads traveling from head offices to branch offices nationwide or vice-versa.
“The ruling has broken the backbone of illegal dollar traders,” Bostan said, elaborating this has massively increased supply of dollars to the legal dealers and helped them appreciate the rupee.
Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha said the rupee has recovered in the open market after currency smuggling came to a complete halt in the last few days.
He said the caretaker government adopted a stricter stance in the movement of people on borders with Afghanistan and Iran to avoid any untoward law and order situation during the general elections held on Wednesday (July 25). Only those people with complete travelling documents were allowed to pass through the borders.
Pakistan needs $1.2bn yearly to feed job market
Businessmen of Punjab have suggested that the upcoming government should set up the National Business Climate Reform Group, chaired by the prime minister, in an effort to introduce and monitor much-needed reforms as Pakistan needs around $1.2 billion in investment per annum to feed the growing job market.
Once the group was established, they said, the premier should chair its meetings every week to determine the goals for ministries and other departments and ensure good governance in the country.
According to a white paper issued by a former senior vice president of the Lahore Chamber of Commerce and Industry (LCCI) on Friday, the upcoming government will have to take some tough political decisions that the previous governments had avoided.
“We have to regain our lost market share by enforcing Customs laws across Pakistan to control the flow of smuggled goods, an issue that plagues the local industry,” the paper said.
The misuse of import schemes like personal baggage should be monitored in that regard, it emphasised.
According to the paper, rules and regulations should be amended to improve Pakistan’s ranking on the Ease of Doing Business index. Also, in an attempt to jack up the country’s standing on the Global Competitiveness Index, the process of budgetary allocation needs to be changed by placing competent persons at key posts regardless of party affiliation.
“Expanding infrastructure beyond roads and dams, improving the macroeconomic environment, more allocation for skills development, developing financial markets and supporting the environment for innovation, research and development are also important to improve the country’s ranking on the GCI,” it added.
The paper pointed out that Pakistan needed to generate 3.6 million jobs every year for new entrants to the market.
“If we target 40% to be absorbed by the industry, we still need to provide 1.4 million jobs, assuming 90% will be absorbed by micro, cottage and small industries. We will need at least 144,000 start-ups or expansions every year.”
China accepts to give $2bn loan to Pakistan
In a major development, China has agreed to immediately give a $2 billion loan to Pakistan, a move meant to arrest the sliding official foreign currency reserves and provide much-needed breathing space to the new government.
The $2 billion loan will be categorised as an “official bilateral inflow”, said sources in the Ministry of Finance and the State Bank of Pakistan (SBP). They said that over $1 billion has already been transferred to the SBP accounts this week, and would reflect in the reserves’ data to be released on August 2. The amount will push SBP-held foreign currency reserves past $10 billion.
Earlier this week, the SBP reported that official foreign currency reserves had fallen to $9 billion for the period ending July 20.
SBP chief spokesperson Abid Qamar did not respond to the question of whether Pakistan had already received $1 billion of the $2 billion official bilateral inflow.
The Ministry of Finance also did not officially comment on the development. But a senior official confirmed on condition of anonymity that one friendly country has agreed to provide $2 billion as an official bilateral inflow. He said that it will be a concessional deposit.
The $2 billion loan is likely to ease pressure on official foreign currency reserves and the rupee-dollar parity. The rupee strengthened by 64 paisas against the US dollar in the inter-bank market, closing at Rs127.86 on Friday.
The financial assistance would also provide room to the Pakistan Tehreek-e-Insaf government-to-be in analysing the precise situation of the external sector and formalise its strategy to deal with the crisis. The deposit will also make sure Pakistan’s official foreign currency reserves are sufficient for two months of imports. The monthly bill currently ranges between $5.6 billion and $5.8 billion.
Improved reserves may also strengthen Pakistan’s position at the time of talks with the International Monetary Fund (IMF) in case the government formally decides to avail the programme.
Asad Umar, the man tipped to lead the finance ministry, told that the economic crisis was so severe and required measures so urgent that no option, including the IMF programme, could be ruled out.
However, the $2 billion assistance will not be enough and the country will have to put its house in order by enhancing exports and attracting sufficient foreign direct investment.
FO rules out Pak’s inclusion on FATF blacklist
The Foreign Office on Thursday ruled out chances of Pakistan being placed on the Financial Action Task Force (FATF) blacklist.
Foreign Office Spokesperson Dr Muhammad Faisal, in his weekly press briefing, stated that the negotiated action plan with FATF will be implemented to address the international community’s concerns.
He further regretted the European Union’s approach of ignoring mass human rights violations in Indian Occupied Kashmir and urged them to support it.
While responding to a question, FO spokesperson relayed that a stable and peaceful Afghanistan is in the interest of Pakistan and for the region.
“Pakistan has always supported an Afghan-owned peace process,” he said.
Land proposed in Faisalabad for technology park
Twelve acres have been proposed to be allocated for a technology park in M3 Industrial Estate in Faisalabad to showcase new inventions and technologies, said an official, adding that it would meet needs of the industrial sector.
The park is to be developed by the National Institute of Biotechnology and Genetics Engineering (NIBGE) and other research institutes for the commercialisation and establishment of high-tech industries.
Speaking at the Faisalabad Chamber of Commerce and Industry (FCCI), NIBGE Director Dr Shahid Mansoor said the mandate of research institutions is to innovate and develop new technologies in accordance with needs of the industrial sector, but the commercialisation depends on the private sector.
He said despite concerted efforts, Pakistan has failed to bridge the missing linkage and hence, the industrial sector is left with obsolete and redundant technologies.
Mansoor underlined the need for a major industrial breakthrough and said that almost all developed countries have made progress by gradually switching to high-tech industries. The US, Europe, Japan and even Bangladesh have established technology parks to showcase technologies developed by their scientists, which were adopted by their private sectors for commercialisation in the later phase.
He mentioned his previous visit to FCCI and said the issue of treating the industrial effluent was discussed in that meeting.
The NIBGE director claimed that the National Engineering Institute has helped in earning direct benefits of more than billions, while NIAB (National Institute of Agriculture and Biology) has also helped reap similar advantages.
He said NIBGE will offer investors to personally witness scientific technological innovations and adopt them in accordance with their own entrepreneurial skills and market needs.
Mansoor further said that the livestock and poultry is yet another major sector, which could be developed to enhance exports.
Mansoor said NIBGE can also provide trained manpower in the field of biotechnology and genetic engineering as 150 PhD scholars are enrolled in this institute.
Smuggled goods account for 59pc demand across major sectors
A study by the customs department on smuggling has revealed alarming statistics for Pakistan.
It estimated that 59% of the total demand for products of over half a dozen sectors of the formal economy, including petroleum, tea, mobile phones and auto parts industry, is met through illicit trade of smuggled goods. The development is in part an explanation as to why Pakistan continues to suffer from low tax revenue, a difficult growth path, and failure to attract investment across various formal sectors.
The Model Customs Collectorate (MCC) Preventive, Karachi investigated 13 commodities prone to smuggling in Pakistan, for fiscal year 2014 and came to the conclusion that 11 of them were severely impacted due to illegal trade.
The MCC Preventive, Karachi report, which was last updated in May 2015, stated, “Approximately 59% of the demand for tyres was satisfied through illegal channels and may have been met through smuggling.”
The customs official said this was the latest report on smuggling in Pakistan, as the concerned department updates the report once in two to three years.
“Around 47% of the demand for tea was satisfied through illegal channels,” it stated and added the share of smuggled mobile phones in the total demand stood at 59%, while the rest was met through formal imports, as the country does not domestically produce cellular phones.
The report stated, “The share of smuggled televisions stood at 57%, while the rest of the demand was met through domestic production (37%) and imports (6%).”