May 12 - 18, 2008

LAHORE: Continuous rise in oil prices in the international market has not only posed manifold challenges to the new democratic government in Pakistan, but also left negative vibes on different sectors of the economy mainly due to increase in production cost.

Economic experts urged the government to encourage the use of compressed natural gas (CNG) fitted vehicles, particularly for public transport, so that negative impact linked with the hike in oil prices could be minimised.

"The network of CNG transport needs to be expanded countrywide to contain the increase in transport fares," they added. They floated the proposal that every car should have factory-fitted CNG kit as a lot of quality difference was found in the CNG kit that was fitted later. Apart from promoting the use of CNG, the government must also ensure the maximum supply of gas to avert any demand and supply gap.

It may be mentioned that the Electrical Fuel Injection (EFI) engines are the established technology for cars and the engines used for most of the car models produced in Pakistan are EFI engines. According to Standing Committee Convener of the Lahore Chamber of Commerce and Industry (LCCI)'s on Women Entrepreneurs Ms Shamim Akhter high oil prices in the international market were posing a big challenge for the new government, hence it should take the phenomenon seriously. She called for taking immediate measures to exploit indigenous alternate energy resources to decrease dependence on petroleum products.

"Pakistan has the third largest coal reserves in the world, it has a brighter sun and windy coastal areas, but unfortunately we have failed to exploit these resources because of our short sightedness," she said. Had the government been able to introduce solar energy after taking appropriate measures, the situation would have been altogether different, she insisted.

She further said that the government kept on spending a huge amount on the import of petroleum products for electricity generation, while it could produce electricity by using huge coal reserves.

She said that neighbouring India was producing 64 per cent of its total energy through coal, whereas in Pakistan only one per cent of the electricity was being produced through coal. Although the government was well on way for introducing ethanol as an alternate to petrol, the work on this project should be expedited, she argued.

In the coming years, only those economies would survive that would have less dependence on petroleum products as its prices would never come down. Citing the example of New Delhi where all the public transport was running on CNG, she said the government should introduce CNG buses in all the major cities of the country. Initially, it would be a costly project, but within one year these buses would recover their total cost, she argued.

On the other hand, exporters foresee 10-percent decline in the country's export of value-added products to European Union and United States on account of soaring oil prices and lacking compact textile policies.

""Cost of production is on the rise and the newly elected government is yet to form new policies because the previous ones have done nothing, as a result achievement of the fiscal export target is firmly seen impossible," they opined.

Production of value-added is still high, whereas the foreign buyers are on constant demand of cut in the prices of products on strict supply schedules, they said, adding that 80 percent of the business is being carried out under-cost by at least 10 percent.

They demanded of the newly elected government to chalk out policies on emergency basis so that the country's declining trend of exports could be scaled down.

A spokesman of Pakistan Readymade Garment Manufacturers and Exporters Association (Prgmea) said that the government should set forth its plans so that manufacturers could also become able to draw future line of action. Petrol prices increase is casting a negative impact on all manufacturing sector of the country.

He called for lowering down the interest rate to help the exporters who are already facing difficult situation due to high cost of production.