To everything there is a season, and a time to every purpose under the heaven. For the economy of Pakistan it is the sowing season, time is not far away to harvest a rich crop. InshaAllah!

The year 2002 has brought various positive movements in the spectrum of social, political and economic life in Pakistan.

The installation of an elected government as a result of general elections in October last is of course the event of the year which may pave the way for progress and prosperity of the country and the people respectively, provided the elected representatives dedicate their energy and time to protect the interest of the people and not the party interests.

So far the policies and the decisions taken by the economic managers have brought us an impressive growth of economic fundamentals. One can pin the hopes for a bright future of the country on the basis of handsome growth in our economic fundamentals.

Politically speaking, a democratic set up in the government has already come in accordance with democratic norms while on the international fronts Pakistan and succeeded in developing friendly ties among the comity of the nations. The only area perturbing the minds was the border tension between Pakistan and India which has also started subsiding and showing improved signs. On the Afghanistan front, although the dust has settled down, yet the situation needs more concerted efforts to bring peace and stability where the entire civic and economic structure has caved in as a result of attack by the US-allied forces. A sound and stable Afghanistan is imperative for the social, political and economic well being of the region.

CAPITAL MARKET

As far as the economic stability was concern, an all time growth in the capital market speaks loudly about the economic health of the country, if the share market is taken as the real barometer of an economy.

Market experts while analyzing the outstanding performance of the stock market said that beside enhanced liquidity position of the market, declaration of better dividends and pay outs by the listed companies and highly improved inflow of home remittances, marked shift in investment trend of polarization helped producing impressive results.

Karachi Stock Exchange made history during last week of the year when volume of trading touched to its peak the highest ever besides the index also reaching a new peak over 2600 points at the end of the year. The volume recorded as the highest ever in the history of the stock exchange as 617.647 million shares surpassing the previous best of 536 million shares recorded in may 2000.

Commenting on the phenomenal growth of the capital market, the financial experts attributed the development to the enhanced liquidity in the market and the strong economic fundamentals and result oriented policies of the Security and Exchange Commission of Pakistan.

RESERVES

It may be recalled that the current position of foreign exchange reserves has improved from an alarming position of $995 million in October 2000 to current status of over $9 billion. Total foreign exchange reserves in exact terms in the last week of the year were at $9.104 billion giving an idea about the vibrant economic conditions in the country.

PRIVATIZATION

The privatization of UBL at a price of Rs12.3 billion with a major chunk in foreign exchange was the most outstanding event in the financial sector of the country. Another noticeable transaction was the sale of Bank Al Falah Limited. The Commission had received the highest bid of Rs27.56 per share against the floor price of Rs26.6 per share for the remaining 28 per shares (21 million) from Abu Dhabi Group. They had acquired bank Al Falah formerly known as Habib Credit & Exchange Bank in 1997 through an open bidding remaining 2 per cent shares were reserved for employees and in case they do not take up, the new buyer would have pick the remaining shares. Total sale proceeds for this transaction are Rs620.1 million. During the year over subscription for 10 per shares of National Bank of Pakistan was yet another noticeable event revealing the depth of the market.

WORLD BANK

Ratifying the economic policies of the country, the World Bank has acknowledge that Pakistan's economic revival program has started to produce good results, while it needs to follow its course to reach its long-standing goals. The improvements in governance of public entities, the improved creditworthiness, reduced tariff, the competitiveness and new stability of the exchange rate, the fall in the interest rates and the expectation of the continuation of the improvement in the business climate have begun to show up in increased foreign investments, particularly in the textile and oil and gas sectors.

Increased domestic investment has to follow if the growth in income and employment is to flourish. The "country Update" released by the World Bank on Pakistan appreciated the government reforms of the last few years. The public's perception of the state of governance has improved markedly in the past few years. The long standing goals include more and better income and employment for all, and sustained poverty reduction, reaching these goals requires faster economic growth, improved governance and building human capacity to develop each citizen's potential.

Structural reforms need to be continued and implementation accelerated to build upon the recent successes. This is the only way to enable Pakistan to increase pro-poor growth, reduce poverty, and maintain macro-economic stability and to make faster progress towards development goals.

PRO-POOR ECONOMIC GROWTH: Faster economic growth requires an attractive investment climate. This is needed both to increase the low investment rates of the past and to yield better returns and faster growth of employment from the existing investment. This in turn requires a stable macroeconomic environment, good governance and a low cost business-operating environment provided by adequate and efficient government provided business services and infrastructure.

Pakistan has turned around a deteriorating macro situation of a few years ago to a rapidly improving one. The budget deficit has fallen and a surplus before paying interest, inflation has remained below 5 per cent. The current account deficit in the balance of payments has turned into a surplus; Exports have begun to grow again after years of stagnation.

Remittances from abroad jumped to double and possible triple the level of 2000-01.

The foreign exchange market strengthened and the rupee appreciated against the currencies of its main trading partners, most rapidly against the dollar. Pakistan's Debt Reduction Strategy is ahead of schedule, with falls in both external and domestic pubic debt as a percent of GDP. Combining the increased exports with the increased workers' remittances, the increased aid disbursements and the substantial debt reduction received post September 11. Pakistan's external creditworthiness standing has also improved sharply, said the World Bank Report.

Domestic public debt services have also begun to improve, due to the reduced need for budget borrowing and the fall in interest rates on government debt. Public expenditure on development has begun to rise as percentage of GDP while spending on interest and defense has also fallen.

The World Bank however recommended that good governance requires clear accountability for the use of public resources, a civil administration serving the public interest, respect for the rule of law and a level playing field for private activities through the creation of a sound enabling and regulatory environment.

Pakistan is implementing thorough going reforms in public accounting and audit. These include the separation of audit and accounting, the modernization and automation of public accounting throughout the three tiers of government, a sharp improvement path for the quality, relevance and timeliness of audits and the revitalization of public accounts committees and follow-up with consequences where material irregularities are uncovered. The report has singled out some of the public entities like WAPDA, KESC, PIA, Pakistan Railways and Pakistan Steel for poor performance eaten up close to Rs200 billion of taxpayers' hard earned money during financial year 1999-03.

OIL

The ever increasing oil prices always prove unbearable burden for the developing economies like Pakistan. Due to disturbed conditions in Iraq which is a major supplier of the oil, prices always shot up when ever there is a threat of US attack on Iraq? During the year oil prices jumped even above $30 per barrel costing heavily on the import bill of Pakistan. It is said that the total impact on account of oil import is likely to cross $3.5 billion at the end of the current financial year. This is certainly beyond reach of our economic strength. In order to reduce the burden the government has taken various steps to avoid cost push effects on account of increase in oil prices. These remedial measures include increase use of coal as a source of energy in the industrial sector and switching over from oil to gas especially in the power generation and the transport sectors which the main consumers of the oil.

Pakistan also plans to double its strategic oil reserves to 2 million ton over next years from existing capacity of one million.

Major oil companies operating in Pakistan were directed to raise their reserves to 1.5 million tons, equivalent to 21 days of consumption to face the eventualities arising out of a possible US attack on Iraq.

WAPDA and KESC the two public sector power generating companies have also been asked to increase their storage capacity to 60-day consumption so that electricity rates did not go up unnecessarily in case of oil prices increase in the international market. The oil prices in the international market usually go up when supplies are curtailed by Iraq due to disturbances. Historically, country maintains 15 days of strategic reserves or one million tons but was warned last year by the relevant quarters that it should be raised up to 45 days requirement or three million tons before the privatization of Pakistan State Oil, it is learnt. The infrastructure development for increase of oil reserves could cost up to Rs4 billion.

The government has deregulated the oil pricing mechanism, which entails fixation of the rates by the oil marketing companies for the 29 central depots. As a result, prices in outlet level now vary by 10 to 40 paisa per liter in different areas on the basis of transportation cost. Pakistan current oil refining capacity is round 12 million tons white another 6.5 million tons are imported that annually costs $3.5 billion.

GAS PIPELINE PROJECTS

The proposed cross-border gas pipeline projects, each from Iran and Turkmenistan are no doubt the most significant moves of the year especially in the development and international energy market in Pakistan. While Pakistan and Turkmenistan have already signed an agreement for the $3 billion project, the President of Iran who visited Pakistan has also talked positively about the pipeline project from his country to India via Pakistan. These two projects when completed are likely to change the complexion of the energy sector in Pakistan.

In order to finalize the Framework Agreement of the project, leaders of Pakistan, Turkmenistan and Afghanistan including Prime Minister Zafarullah Khan Jamali of Pakistan, President Sapamurat Niyazov of Turkmenistan and Hamid Karazai, President of Afghanistan met in Ashkabad. They discussed regional situation and the ways and means to further improve relations among them.

It is significant to note that Iranian President Mohammad Khatami has assured that the proposed gas pipeline from Iran to India via Pakistan is not only economically viable but it is important to reduce tension between Pakistan and India for the project to go ahead.

Iranian leader said that there is no problem from the Iranian side or from Pakistan but the concern raised by India has to be addressed. He expressed the hope that in future we will be able to resolve the problems raised by India. It is important to reduce tension between Pakistan and India. The two sides in formal talks reviewed the pipeline issue and also discussed the security part of the project. The pipeline is proposed to be constructed through Pakistan to India from Iran's natural gas field. Pakistan has already given guarantee about the security of the pipeline, as Pakistan will also benefit in transit fee. Russian company Gazprom signed an agreement with Pakistan earlier this month to carry out the feasibility study of the pipeline but India has expressed concern that the pipeline may not be viable in view of tension with Pakistan. Pakistan and Iran have agreed to enhance bilateral relations including cooperation in economic trade, science and technology defense and agriculture.

GWADAR PORT

Construction of a third sea port at Gwadar which is a focal point in bridging the communication gap between Eastern European, Central Asian States and Pakistan. This most significant project moved successfully during the year and heading wards its completion.

The Chinese Export and Import bank has agreed to release the first installment of $58 million soon which is the part of its commitment to financially support the construction of Gwadar deep seaport.

President of the Exim Bank of China Yang Zilin and Pakistani Ambassador Riaz Mohammad Khan signed a related agreement in Beijing.

The Chinese government will offer preferential loan to support the building of Gwadar port.

According to the agreement, the $58.21 million of preferential loan will be used to support the first phase construction of the port. Total investment in the first phase of construction is $248 million which will come from China. The first phase construction will last three years, during which three multi-purpose berths will be developed. The Gwadar sea port has been among the priorities of President Pervez Musharraf who wants the country's third port to serve as a hub of international trade and a link between East Asia and Europe. The first phase is expected to complete by 2004, following which the government aims to start second phase with a cost of about $200 million dollars. The total cost of the project is about $480 million.

IRAN

President Seyed Mohammad Khatami is the first head of state to visit Pakistan after the installation of a civilian government in Pakistan. Iranian president and President Gen Pervez Musharraf held wide ranging talks and agreed to work together to forge unity in the Ummah.

The two leaders held talks on bilateral, regional and global issues. They underline the importance of relations for mutual security and progress as well as for regional peace and stability. They expressed resolve to strengthen ties and cooperation between the two countries. President Musharraf specially emphasized the need for enhanced bilateral economic cooperation.

President Khatami stated that peoples of Pakistan and Iran were united by history and geography and there was a need to strengthen relations between the two countries.

Briefing President Khatami on the India Pakistan relations, resident Musharraf reiterated Islamabad's desire to peacefully resolve all outstanding issues particularly the core dispute of Kashmir.

General Musharraf invited the visiting dignitary's attention to the massacre of Muslims in Indian state of Gujarat. The two leaders also discussed the situation in Afghanistan and hoped to work closely for restoration of the war-ravaged country and establishment of durable peace there.

Palestinian issue also figured in the talks with the two leaders reiterating their support for the struggle of the Palestinian people for their national rights.

The 110 member Iranian entourage includes ministers for foreign affairs, defense and road transportation.

President Khatami declared that Iran's borders with Pakistan are the borders of security, peace and friendship.

We are quite confident of the security of our eastern borders and Pakistan too is keen on ensuring the security of its common border with Iran, he said in his speech at a banquet hosted in his honor by President Pervez Musharraf.

In our neighborhood, nevertheless, there have existed various issues and problems that have left harmful impact on both of us. "To solve these problems we are in need of further cooperation".

Fortunately, he said both the governments were determined to solve all issues and difficulties that "linger in our mutual relations".

We consider our commercial and economic relations with Pakistan of top priority and we sincerely hope for the extension of these relations, both quantitatively.

Recent economic reforms in Iran, the valuable experience we have acquired in the industrial and economic fields and the new role we have afforded to the private sector in our economy have prepared the ground for enhancing of our cooperation these areas, Khatami said. Iran, he said, had been trying to encourage its private sector to do business with its neighboring countries. However, we still have to provide certain facilities to them, so that they find it economically beneficial, he said. Iran and Pakistan have, throughout history been very good friends and very good neighbors with least instances and causes for discord, President Khatami said. Our regional cooperation is manifold. We work in several regional organizations side by side. Our interests are the same and dangers threatening us are very much alike. The security of Pakistan has always been of great importance to us and we have therefore been quite preserved to further enhance our all-round strategic cooperation with Pakistan.

Fortunately, the mutual economic cooperation commission has prepared the ground for our economic activities. The thirteenth session of the Mutual economic cooperation commission has already completed its work with great success and we certainly hope that the agreements reached will be smoothly put into execution and followed up by the people in charge.

President Pervez Musharraf said Iran could pay a very important role in resolution of long standing Kashmir Issue. Iran enjoys good position in the region and can help resolve the Kashmir issue, President Musharraf said during his meeting with Iranian president Dr. Seyed Mohammad Khatami in Islamabad.

He was of the view that Iran enjoyed a very good position to help forge lasting peace in the region. The visit of President Khatami would help both sides to broaden spectrum of bilateral relations in all fields of mutual interest. President Khatami while talking to press said that Iran was endeavoring to help Pakistan and India to resolve their issues through peaceful means.

Pakistan and Iran have replaced trade agreement of 1982 with a new agreement to boost bilateral trade between the two countries. The agreement was signed by commerce minister Humayun Akhtar Khan and a visiting Iranian Minister on Tuesday in the foreign office.

In the new agreement the two counties would set up trade offices in their respective countries for close cooperation and consultations at the official level. Both countries have agreed to constitute committees to resolve trade related disputes. Pakistan and Iran would facilitate exchange of trade delegations to boost bilateral trade which was almost stagnant for the last several years.

Iranian Chamber of Commerce has proposed to establish joint chamber and joint venture companies in association with Pakistani businessmen. The visiting delegation of Iranian Chamber suggested this during its meeting with minister for commerce Humayun Akhtar Khan. The leader of delegation also sought help of Pakistan authorities for entry into WTO. We want to benefit from the experience of Pakistan as it has been member of the WTO.