Pak in a weak position in FTA with China
Although China calls Pakistan and itself iron brothers, when it comes to trade, Pakistan stands at a weaker position in comparison to India, which is Beijing’s adversary in regional politics but has a better free trade agreement (FTA).
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) held a nationwide online roundtable conference on Pak-China FTA in an effort to prepare itself for a meeting with Asad Umar, the man tipped to be next finance minister.
The conference was attended by representatives of the business community, academia and government departments.
It was briefed that Pakistani exporters had been struggling to make their presence felt in China because their competitors were enjoying zero-rated tax, which left Pakistani goods uncompetitive.
The exporters of Pakistan mainly lose competitive edge in the case of Association of Southeast Asian Nations (Asean) which has a very strong FTA with China and its products are taxed at a lower rate than Pakistan’s.
Therefore, a huge chunk of Pakistan’s textile exporters has been forced to export raw material to Asean member countries like Vietnam, which exports finished goods to China. Exports through this channel are less costly and competitive in Chinese markets.
The exporters, who export raw material in the form of cotton and yarn, have been criticised for their inability to export finished and value-added goods.
FPCCI Director Research Dr Bilal Ahmed said Pakistan ranked 16th on the list of China’s export partners while it stood at 61st position in its import partners. According to Ahmed, even countries like Kenya are ahead of Pakistan in the exporters’ list.
FPCCI’s Standing Committee on Banking Chairman Mirza Ikhtiar Baig, who led the roundtable talk, told that the business community had great reservations about Pakistan’s FTA with China.
“It seems that the FTA was struck in haste and we believe that there’s immense need to revisit it,” said Baig. “We will prepare recommendations after the roundtable talk, which we will discuss with Asad Umar.”
The FPCCI expects to meet Umar after August 15.
He highlighted that Pakistan’s imports from China stood at a whopping $18 billion while exports were a meagre $2 billion, which tilted the balance highly in favour of China by a massive $16 billion.
The moot was told that even India had a better FTA with China under an agreement called Bangkok Agreement, which had now evolved into the Asia-Pacific Trade Agreement. Bangladesh, China, India, Laos, Mongolia, South Korea and Sri Lanka are part of this agreement.
There was a consensus during the conference that if Pakistan was unable to strike a revised FTA with China similar to that of Asean, then the country should avoid doing free trade with Beijing altogether. It would save domestic industries.
Department of management sciences–ssuet inks MoU with m/s integrated management services
A Memorandum of Understanding (MoU) was signed between the Sir Syed University of Engineering & Technology (SSUET) & M/S Integrated Management Services at SSUET Karachi. The Vice Chancellor, Prof. Dr. M. Afzal Haque, SSUET presided over the signing ceremony. Chairman Dr. A.R. Zaki, Department of Management Sciences, said the MOU envisages the collaboration between SSUET & IMS under the active supervision of Management Sciences Department for enhancing competency and productivity of Business & Industry enabling to identify and capitalize the opportunities of CPEC, particularly. Dr. Zaki also explained the contributions of the late Sir Syed for the cause of formal and technical education before and after the creation of Pakistan respectively. He also emphasized the importance of blending Technical and Managerial skills for national and individual growth, and the critical relevance of the “Human resource” for the emerging corporate and business environment in Pakistan. He further said, management science department has started admissions in MPhil, MBA and BBA morning also evening programs various disciplines.
IMF dismisses talk of denying Pak bailout
The International Monetary Fund (IMF), in a meeting with brokerage houses, has ruled out the possibility that it would deny Pakistan a bailout package under US influence.
“The IMF said it is ready to enter into discussion with Pakistan for a [possible] bailout package,” an economist of a leading securities brokerage house said after attending the meeting with IMF Resident Representative Teresa Daban Sanchez on Friday.
Another brokerage house economist said the meeting highlighted the limited voting power of the US (16.7%) for approving or disapproving Pakistan’s potential request to the IMF Executive Board for a new programme.
Replying to a question, Sanchez said the objective of establishing the IMF was to help nations come out of financial crisis so that the global economy kept on advancing.
“This is not possible, a patient is dying and doctors will not make efforts to save him,” a meeting participant quoted Sanchez as saying.
“The US may, however, influence the conditions on which loan may be given and the two sides [Pakistan and the IMF] may disagree on the conditions,” he said.
According to a news report, 16 US senators have urged the Trump administration to block the IMF from bailing out countries that have acquired loans from China under its global infrastructure development programme called the Belt and Road Initiative (BRI). Such countries lacked the capacity to return the loan, they said.
Pakistan is one of the countries developing infrastructure in association with China under the BRI.
Pakistan has yet to make a formal request to the IMF for an estimated $12 billion in loan to fix the faltering economy. Asad Umar, who is likely to be the next finance minister, has said the decision to go to the IMF should be made by September this year.On the other hand, a brokerage house has anticipated a likely delay in submitting a formal request by Pakistan for the bailout package till November or December 2018.
“Pakistan appears to have made little official progress on the request for a new IMF programme. We believe the timing of entry into the programme may likely fall in November-December 2018 versus our previous view of October 2018,” a representative of the brokerage house said in the meeting.
Besides, the US influence to block the bailout or provide loan under tight conditions may also cause the IMF to take longer than usual to decide on Pakistan’s upcoming loan request, he said.
An IMF representative was appreciative of the State Bank of Pakistan’s (SBP) performance and recent policy measures like letting the rupee depreciate and hike in policy rate.
As expected, the IMF representative refrained from commenting on the need for the bailout programme and the options available to Pakistan government, along with the size and type of the programme, he said.
Agri-credit disbursement rises 38pc to Rs972.6 billion
Credit disbursement by commercial and specialised banks to the agriculture sector increased 38% in the fiscal year ended June 30, 2018 despite tough challenges faced by farmers in producing key crops, the State Bank of Pakistan (SBP) said on Thursday.
Banks provided Rs972.6 billion in loans to farmers in fiscal year 2017-18 compared to Rs704.5 billion in FY17. “The achievement of agri-credit disbursement target was a challenging task in the backdrop of various real-side challenges like water shortage, low production of maize and wheat, volatility in prices of agricultural produce and a high cost of production,” the central bank said in a statement.
Similarly, the agricultural credit outreach expanded to 3.72 million farmers at the end of June 2018 from 3.27 million last year, a growth of 13.8%.
“SBP made concerted efforts to achieve the agri-credit disbursement target and implement various budgetary initiatives set by the government,” it said.
“These efforts included provision of an enabling regulatory environment for agri-lending institutions, sensitising banks to adopt agri-financing as a viable business proposition, exploring new avenues of financing, value chain financing, digitalisation of credit, warehouse receipt financing, implementation of a credit guarantee scheme for small and marginalised farmers, etc.”
Besides, the central bank said, it took various initiatives for promoting agri-credit which included allocation of regional targets, recruitment of agri-credit officers by organising job fairs in agricultural universities and continuous follow-up with banks for the achievement of targets.
Furthermore, farmers’ awareness programmes at grass roots level have also helped in improving agri-credit disbursement in underserved areas. Five major banks collectively disbursed Rs523.9 billion in agricultural credit. It was 101.5% of their annual target of Rs516 billion and 53% higher than the Rs342.6 billion disbursed last year.
Under the specialised banks category, Zarai Taraqiati Bank Limited (ZTBL) disbursed Rs83.2 billion or 66.6% of its annual target of Rs125 billion. Punjab Provincial Cooperative Bank Limited (PPCBL) disbursed Rs10.7 billion by achieving 71.5% of its target of Rs15 billion for the year. Fifteen domestic private banks collectively achieved 92.4% of the target of Rs200 billion and five Islamic banks achieved 82% of their target of Rs20 billion.
The performance of microfinance banks and microfinance institutions remained strong and these institutions surpassed their annual target by cumulatively disbursing Rs124.8 billion and Rs28.7 billion respectively to small farmers in FY18.
FBR’s reliance on With Holding Tax highlights need for policy revamp
In a span of five years, the reliance on withholding taxes has increased dramatically, underscoring the need for the revamp of tax policies that have failed to broaden the base and made the Federal Board of Revenue (FBR) more complacent.
Indonesia willing to assist Pak in palm oil production
Indonesia is willing to set up joint ventures in the production and processing of palm oil, along with manufacturing of high-value products from palm oil in Pakistan.
This was shared by Indonesian Embassy Islamabad Minister Counselor Wisnu Suryo Hutomo.
During a meeting with Faisalabad Chamber of Commerce and Industry (FCCI) Acting President Farooq Yousaf, Hutomo said that there are vast opportunities in exploiting untapped trade potential between the two countries. “Pakistan is exporting rice while there is a huge demand of Pakistani Kinnow and mangoes in Indonesia,” he said. “However, efforts are in process to encourage the production of palm oil in Pakistan in collaboration with Indonesian businessmen.
“A proposal is under consideration for a refinery to process crude oil in order to produce food-grade palm oil,” he said. “This will initiate the process for production of numerous high-value products including biscuits, chocolates, soaps and cosmetics.
Weekly: SPI remains stable
The Sensitive Price Indicator (SPI) for the week ended August 9, 2018 remained stable at 229.55 points for the combined income group compared with the same level in the previous week. However, the SPI for the combined income group rose 4.38% compared to the corresponding week of previous year. The SPI for the lowest income group increased 0.08% compared to the previous week. The index for the group stood at 217.55 points against 217.37 in the previous week, according to provisional figures released by the Pakistan Bureau of Statistics. During the week, average prices of 17 items rose in a selected basket of goods, prices of seven items fell and rates of remaining 29 goods recorded no change.
PKR stable against $
The rupee remained stable against the dollar at Rs124/124.2 in the inter-bank market on Friday compared with Thursday’s close of Rs124/124.2. Following reports that China had agreed to immediately lend $2 billion to Pakistan, the rupee had appreciated against the US dollar. Cumulatively, it has recovered 3.36% from Rs128.5 in recent days. Prior to this, it had lost 22% of value since December 2017 after the central bank reportedly abstained from intervening in response to the pressure due to a widening current account deficit. The State Bank of Pakistan has maintained that the slide in the rupee’s value is due to supply and demand dynamics of foreign exchange in the inter-bank market. While it has promised prompt intervention in case of speculative or momentary pressures, the central bank will sit on the fence and let “market-driven adjustment in the exchange rate to continue to contain the imbalance in the external account and sustain a higher growth trajectory”, according to a press statement.