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FATF measures assist make bank operations clean

The tightening of the monitoring regime to combat terror financing and money laundering under the umbrella of the inter-governmental Financial Action Task Force (FATF) is a positive move for the banking industry and the economy at large.

“It (FATF move) is good for us (banks), the economy and from the perspective of tax payments,” JS Bank President and CEO Basir Shamsie said while talking with the media on Friday.

The measures are helping banks make their operations clean. “Banks are recording all the suspicious transactions, doesn’t matter how big or small they are and are reporting to the State Bank of Pakistan (SBP) on a regular basis,” he said.

It remained no more a difficult job to detect suspicious financial transactions through banks as “availability of modern technology and software have made the job of detectors easier”, he said.

He said FATF measures are also helping change banking customers’ mindset. “Customers’ mindset is changing in order to declare exact earnings and pay taxes,” he said.

He said the low interest rate regime in the country has convinced banks to shift their business strategy to aggressive financing for corporates and individuals from investing significantly in government securities like T-bills and Pakistan Investment Bonds.

“The (benchmark) interest rate is set to increase by 100-150 basis points this year, but it will not bounce back to historic highs,” he said. The central bank has increased interest rate by 175 basis points since January 2018 to 7.5% at present. It hit a historic high of 19.5% in October 1996.

“JS Bank has shifted its focus to aggressive mortgage financing and SMEs (small and medium-sized enterprises) financing in recent years,” he said. The bank’s mortgage financing portfolio stands at around Rs7-8 billion at present. “We are targeting to increase it to Rs10 billion in the next one year that remains a difficult task,” he said.

The bank is also preparing to participate in the SBP-introduced subscribed mortgage financing as the central bank has already introduced a policy paper for the purpose recently. “Our bank has become the fourth or fifth largest in terms of SME financing,” he added.

Besides, it was also actively involved in auto and agriculture financing. Its outstanding agri-financing has reached Rs10 billion, he said.

Government to amend accountability law to avoid harassment

The Pakistan Tehreek-e-Insaf (PTI) government has decided to amend the accountability law in an attempt to keep a suitable check on corruption cases in order to avoid unnecessary harassment.

The development comes in the backdrop of several multinational companies wrapping up operations in Pakistan and filing cases in international courts against corruption investigation initiated by the anti-corruption watchdog.

Several of these companies have won cases and have claimed billions of dollars in damages from Pakistan government.

Under the reforms, the National Accountability Bureau (NAB) would have to prove guilty an accused before arrest which will stop harassment of businessmen, politicians and bureaucrats.

During tenures of past governments, NAB had been used as a political tool to harass businessmen, politicians and multinational companies.

The new PTI government has constituted a task force with a mandate to reform the NAB law in order to turn the bureau into an institution that is more focused and effective in dealing with mega corruption scandals with suitable checks and balances.

Under the reforms, the government will also place certain checks and controls on NAB officials to prevent them from misusing their powers against businessmen, politicians, companies and bureaucrats.

The task force will work on improving the system to ensure fair practices, clear jurisdictions and scope as well as improvement in conviction rate.

NAB would be bound to focus on the recovery of public money and mega corruption cases.

According to the terms of reference of the task force, transparency and certainty in NAB’s decision-making, structuring or elimination of discretion and arrest only after being proven guilty will be ensured.

NAB will be bound not to take any unlawful action and all its actions should be against those involved in corruption and having assets beyond means.

The task force will also work on the conflict of multiple jurisdictions, money threshold of NAB cases which is applicable in mega corruption cases and capacity building of NAB to investigate white-collar crimes.

The task force comprises federal minister for law and justice as chairman, federal secretary law, parliamentary secretary for law, attorney general, chairman or deputy chairman of NAB and prosecutor general of NAB.

The chairman of the task force can invite any other person to become a member of the task force.

Shahzad Akbar, Special Assistant to the Prime Minister on Accountability, has also been made member of the task force.

Finance minister insists govt will not rise energy prices

Finance Minister Asad Umar gave a commitment to influential industrialists on Friday that the government would stick to the pre-election announcement of providing gas and electricity to five export-oriented sectors at regionally competitive rates.

The minister agreed that the government would not increase electricity and gas prices for the industries, said Gohar Ijaz, Patron-in-chief of the All Pakistan Textile Mills Association (Aptma) – the body working to protect the interests of millers, while talking to source.

Ijaz said Umar assured a delegation that the government would honour its commitment given in the Pakistan Tehreek-e-Insaf’s (PTI) textile policy.

The policy promises to provide gas to the industries at 6.5 US cents per mmbtu and electricity at 7.5 US cents per unit.

Ijaz claimed that the minister assured them that in order to keep prices at the promised level, the government would find a way by either giving a subsidy from the budget or cross-subsidising the industries.

Although the finance minister has made the commitment, the government has not yet given its policy on new electricity and gas prices. The National Electric Power Regulatory Authority (Nepra) has indicated in a meeting of the Economic Coordination Committee (ECC) that electricity prices may be increased by over 33% to Rs15 per unit.

To keep prices at the current level for the export-oriented sector, the government will have to either take a major hit on the budget or it will have to shift the burden on to other consumers.

Electricity and gas prices are significantly higher than regional or international prices in the industrial sector. Electricity is cheaper by about Rs3 in India and by Rs5 in Bangladesh.

The Oil and Gas Regulatory Authority (Ogra) has suggested up to 186% increase in gas prices. Gas utility companies have been complaining about a significantly higher purchase price than their average sale price, leading to a massive shortfall in their revenues.

The minister asked the Aptma delegation to sort out other sector-related issues in a meeting with Adviser to the Prime Minister on Textile and Industry Abdul Razak Dawood.

An official handout of the finance ministry stated that Umar told the Aptma delegation that it was his foremost priority to support in any way possible the export-oriented sectors and in that regard all possible cooperation would be made by the government.

It added the Aptma delegation discussed various issues regarding gas and electricity pricing, proposed withdrawal of customs duty and sales tax on import of raw material, sales tax refund, extension of duty drawback scheme for five years and maintaining a market-based exchange rate.

The finance minister assured the delegation of his government’s full support to uplift the export-oriented sector on the condition that the sector met its obligations for increasing exports, bringing much-needed foreign exchange and would not in any case be helpful to anyone involved in tax evasion.

The minister said the news relating to increase in gas and electricity tariffs had been misreported in the media as so far no such decision had been taken by the government, stated the finance ministry.

The minister stated that the Ministry of Finance would fully support the recommendations of the adviser on textile and commerce in all industry-related matters.

 

SPI rises 0.18pc

The Sensitive Price Indicator (SPI) for the week ended September 6, 2018 registered an increase of 0.18% for the combined income group, going up from 227.17 points in the prior week to 227.57 in the week under review. However, the SPI for the combined income group rose 2.18% compared to the corresponding week of previous year. The SPI for the lowest income group increased 0.3% compared to the previous week. The index for the group stood at 215.84 points against 215.29 in the previous week, according to provisional figures released by the Pakistan Bureau of Statistics. During the week, average prices of 16 items rose in a selected basket of goods, prices of eight items fell and rates of remaining 29 goods recorded no change.

Government seeks to reset CPEC priorities

Amid uneven progress under the China-Pakistan Economic Corridor (CPEC), the PTI government has decided to give a push to neglected areas and declared development of Gwadar as its top priority, rekindling hopes of developing the country’s hinterlands.

“The authorities concerned will urge the visiting high-level Chinese delegation to actively pursue Gwadar `projects,” said sources in the Ministry of Planning and Development.

The Chinese foreign minister and Vice Chairman of the National Development Reforms Commission (NDRC) on Friday began his three-day visit to Pakistan.

“During meetings with the Chinese delegation, the planning minister will urge China to fast track work on the New Gwadar International Airport, Gwadar Free Zone and Port and Gwadar Eastbay Expressway project,” according to the Ministry of Planning officials.

Work on CPEC remained slow during the past eight months because of political transition in the country. Now both the Pakistani and Chinese sides have decided to hold meetings of respective working groups that will be followed by a meeting of bilateral Joint Cooperation Committee (JCC), tentatively scheduled for November in China.

The meeting of the Joint Working Group on transport will also take place in the middle of October in China.

During the last five years, the major focus had remained on construction of two eastern route roads and establishing coal-based power generation plants under CPEC.

The last government neglected the western route of CPEC that can connect hinterlands of Balochistan and Khyber-Pakhtunkhwa. It also could not ensure progress on water and electricity supply projects in Gwadar, without which no industrialisation can take place in the port city.

While taking his first briefing on CPEC on Thursday, Prime Minister Imran Khan stated that the development of western route of CPEC would have developed Pakistan’s under-developed areas.

Contrary to a snail’s pace progress on the western route, the eastern route has been completed by over 60%.

“The PTI government has decided to actively pursue projects in Gwadar and industrialisation under CPEC, Main Line railway and Karachi Circular Railway projects,” said sources in the planning ministry.

“The robust development of Gwadar under CPEC is a top priority of the new government with a special focus on rapid industrialisation in the strategically located port city,” said Minister for Planning, Development & Reform Makhdoom Khusro Bakhtiar on Friday.

Bakhtiar presided over a steering committee meeting on the Gwadar Smart Port City Master Plan. The Gwadar Smart Port City Master Plan remains incomplete and work is now expected to be finished by the end of next month.

The minister said, “Pakistan cannot afford to wait any longer as our economy does not have the luxury of time. Industrialisation in this port city is a low hanging fruit, considering its prospect of international connectivity and suitable cost of transportation,” he added.

“We need to structure the Gwadar Industrial Zone with a kind of incentives that yield high rate of return,” he said while emphasising on the industrialisation model that should have an inclusive nature vis-a-vis the private sector.

However, work on the Gwadar Free Zone was also falling behind the schedule, as the authorities concerned have yet to transfer land to the Chinese authorities, which is currently under the control of the Navy and the Coast Guard.

Bakhtiar said Gwadar could be transformed into a transshipment hub to explore opportunities of the blue economy. “We need to have in place all prerequisites for that purpose which should include provision of water, energy, road and railway connectivity,” he added.

There has been criticism in the past on financing modalities of CPEC.

A few days ago, economist Dr Atif Mian had said there was a blanket ban on any objective assessment of CPEC. He said the media also feed the frenzy that CPEC was a “game changer”, which led to development of a big bubble in the port city (currently largely sand) of Gwadar.

Dr Mian said that Pakistani government funded large infrastructure projects through China’s Belt and Road Initiative, which became one of the reasons for external debt rise. The borrowing raised domestic demand “artificially”, making Pakistan more expensive and less competitive globally, according to one of his tweets.

600 Pakistani rice containers stuck at Kenyan ports

Almost 600 containers of Pakistani rice have been stopped at Kenyan ports by the customs authority, said Rice Exporters Association of Pakistan (REAP) Chairman Sameeullah Chaudhry.

The Kenya Bureau of Standards (KEBS) and Customs were examining the containers for security check and verification, which Chaudhry said was unfair considering that the certificates of conformity were in order. He lamented that despite having necessary approvals and a clean bill of health from the agencies recommended by KEBS, the containers were being inspected to check compliance with phytosanitary standards and their physical characteristics.

The delay in clearance of containers is resulting in heavy demurrage costs and increase in landing cost of Pakistani rice each day.

As per rules, rice is not allowed to enter Kenya based on 2-5% higher broken quantity. “It is a matter of great concern because in agriculture commodity 2% is considered insignificant variation,” he added. “This has jeopardised our rice exports. We want a level playing field.”

Despite the intervention of the Pakistan High Commission and commercial counsellor to resolve the crisis, the Kenyan inspection team was not cooperating, he pointed out.

The REAP chairman suggested that reciprocal steps may be taken in the case of Kenyan products destined to the Pakistani market.

“Our consumer health and protection is equally important and we must take reciprocal measures to protect our consumers from any inferior quality of Kenyan products being imported into Pakistan,” he said.

He warned that if the matter was not tackled, Pakistan risked losing its share of rice exports – 475,000 tons or 12% of total exports, which would enhance the country’s trade deficit and imbalance.

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