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Oct 25, 1999

  1. International
  2. Finance
  3. Industry
  4. Policy
  5. Trade
  6. Gulf

LC opening slows down on cash margins

The pace of opening letters of credit (LCs) by commodity traders and commercial importers has slowed down and trade bodies claim a 50% drop in the number of the LCs opened after the imposition of cash margins.

Commodity traders and commercial importers say they find it difficult to open LCs after paying the required 10-35% cash margins due to cash flow problems.

Bankers also confirm a significant fall in the number of LCs being opened by importers but they say the drop is not to that extent as importers claim.

'We cannot quantify the drop in the opening of LCs but a fall has definitely occurred,' they say.

A senior official at the Karachi Customs appraisement said the customs had no official figures of the LCs opened after the cash margins were imposed on October 14. But customs sources said the pace of opening of LCs had nosedived.

Chairman Pakistan Commodity Traders Association (PCTA), Raees Ashraf Tarmohmohammad said his members have complained that they had been facing problems from foreign suppliers over nonacceptance of LCs (usually called document of acceptance).

He, however, said there has been no increase in prices of commodities yet but this is a temporary phase as rise in cost of imports and shortage of commodities look eminent in coming weeks.

'Confusion still looms large among both foreign suppliers and local importers over LCs cash margin requirements,' Raees said.

According to PCTA chief, more than 90% of major imports of pulses, plastic, tea, milk powder, spices and dyes and chemicals are being managed from Karachi's Jodia Bazar.

Chairman Pakistan Chemical Dyes Merchants Association (PCDMA), Mohammed Jehangir Magoon shared the same views regarding 50% drop over LCs and added importers are currently confused.

Chemical and dyes traders are also facing problems over the rate of cash margin. He said banks demand 35% cash margin saying it is commercial imports while the Association says it is an industrial raw material therefore the cash margin comes to 10%.

Internet commerce

International Data Corp. (IDC) reports the amount of commerce conducted over the Web will top one trillion by 2003.

According to IDC, the number of users who make purchases over the Web will jump from 31m in 1998 to more than 183m in 2003, representing 3% of all Web users.

Fall in gold price

The plunging international gold prices have led to further fall in domestic market by Rsl45 per 10 grams, settling at Rs5,170 per 10 grams on Thursday compared to Rs5,315 per 10 grams on Tuesday.

The gold prices have been on the declining trend since last one week following downward drive in international prices. On Friday, the yellow metal was quoted at Rs5,565 per 10 grams.

'Marcon 99'

Marcon 99, a major marketing event, will be held in Karachi from November 11-13 in which more than 400 delegates are expected to attend.

The theme of the event, which is being organized by Marketing Association of Pakistan (MAP), will be: 'Marketing Challenges in the New Millennium: What it takes to be a Winner'.

Metropolitan buys two Kenya Bank branches

Metropolitan Bank Limited - one of the private commercial banks has bought over the two branches of the Kenya incorporated "Trust Bank Limited" located in Karachi, paying around 175 thousand US dollars in the net.

Banking circles disclosed that the "Trust Bank Limited" had launched operations from its two branches in Karachi — one at Sasi Arcade in Clifton and the other at Al-Falah Court on I.I.Chundrigar Road, Karachi. But the operations had later been brought to almost a complete halt and the foreigners had decided to spin off the Pakistan business.

Foreign suppliers' cautious approach

Foreign suppliers of goods to Pakistani importers have started checking on with their banks on the payment of the value of the established letters of credits before making shipment of the cargo to Pakistan.

Many of these suppliers who were in doubt on getting payment of the amounts of established letters of credits are reported to have either stopped the shipment or diverted ships in mid seas to other ports carrying cargo for Pakistan.

Sardar Ashraf Khan, a member of the Managing Committee and Chairman of the Import Sub Committee of the apex trade body the Federation of Pakistan Chambers of Commerce and Industry told that he has received such complaints from many importers. "I am now collecting the facts and will discuss this issue in the FPCCI Managing Committee extra-ordinary meeting being held on Monday", he said.

TCP asked to resume cotton purchase

On getting a go ahead signal from Islamabad to continue with direct purchase of cotton from ginners at Rs 1,936 a maund, the Trading Corporation of Pakistan (TCP)) resumed its operations on Saturday and concluded contracts for 16,000 more bales on Saturday.

The TCP suspended its procurement operations since Wednesday after the major political change in the country set up on Tuesday afternoon. It sought guidance from Islamabad on whether to continue with the cotton procurement operations or stop it.

PS to use local Manganese ore

Pakistan Steel will use indigenous manganese ore in the iron steel making process with the arrival of first consignment of more than 103 tons of manganese from Choora Gali deposits, Mansehra, at Bin Qasim by train on October 19.

This consignment was a part of a contract signed with local miners for the supply of 5,000 tons of manganese to Pakistan Steel, said a press release.

Pakistan Steel imports 30,000 tons of manganese ore at a cost of above $1 million and the substitution with indigenous ore would help save foreign exchange amounting to $0.17 million apart from the development of mining industry.