INFLATION SCARING INVESTORS AWAY

AMANULLAH BASHAR (feedback@pgeconomist.com)
Feb 15 - 21, 2010

Pakistan offers the highest rate of return and attractive incentives to the foreign investors. However, the precarious law and order situation, untamed energy deficit, high cost of funds, highest interest rate, and resurgent inflation are considered major risks by the overseas investors. The instability of the business environment is a key risk to the investors in Pakistan.

A delegation of Dutch investors during a visit to Overseas Investors Chamber of Commerce & Industry (OICCI) expressed their interest to invest in Pakistan as they consider the country an emerging market. Yet, unstable conditions are hampering the FDI in the country.

The business delegation was headed by the Ambassador Joost Reintjes, Embassy of the Kingdom of the Netherlands. The visit to OICCI is aimed at to review issues hampering FDI in Pakistan. The deteriorating law and order situation and the negative perception of the country act as a major deterrent for further investment.

While giving a brief presentation on the role of the Chamber, Farrukh H. Khan, President OICCI pointed out that a large number of Netherlands based companies are currently operating in Pakistan, of which 15 are members of OICCI.

Khan said that the chamber had raised the issue on various occasion as well as in the OICCI Budget Proposals 2009 of having a quantitative ceiling for imports required for Afghanistan, rather with all other landlocked countries. The Proposals also stressed on the need for strict exchange control mechanisms to help curb ATT.

While addressing the delegation Khan said, "the Chamber, which is the premier body of top multinationals in the country, is keen on providing all possible assistance in this regard to make the country an investment friendly destination". He further added that success stories of members of the Chamber should be shared with the business community at large so that businessmen can see that foreign investors in the region have been operating successfully in the region for decades.

The delegation included Ahmed Dadou Deputy Head Economic Affairs, Ms. Nabeela Ahmed Press & Culture Officer, Tarek M. Khan Consul General, and Peter Felix Commercial Counselor Consulate General of the Netherlands.

Established about 150 years ago, OICCI is the oldest investment chamber in the country. Its primary function is to foster a conducive, open and equitable business environment in Pakistan while facilitating transfer of best global practices in the country.

Diverse both in terms of sector and geography, the 183 members of the OICCI collectively contribute more than 29 percent of Pakistan's total GNP and 22 percent of total tax receipts.

POSITIVE IMPACT OF DEPRECIATING EXCHANGE RATE

Though the rupee showed a slight improvement against dollar during last couple of days, yet the overall upward movement of dollar currently at Rs84.90 buying and Rs 84.94 selling in Libor while Rs86.30 buying and Rs86.50 selling in the open market shows an upward trend in dollar parity against rupee which is enough incentive for investors to speculate on dollar touching the level of Rs 90 if the trend persists going forward.

On the other hand unabated increase in petroleum and electricity prices is attributed as the prime factor of high inflation which is eroding purchasing power of the common man while it is feared that rise in dollar parity may added to the inflationary pressures.

The servicing of domestic debt coupled with external debt swelled up to $55 billion should be the cause of serious concern for the economic managers as its fallout would further add to the burden of the common man.

The economy in general is presenting a depressed look. The overseas Pakistanis have emerged the largest contributor of the foreign exchange to the economy, which is evident from over $5 billion remittances received in seven months of the current financial year 2010 by the country. However, the factor behind growing remittances is the lucrative conversion rate of dollar against rupee.

Remittances sent home by overseas Pakistanis continued to show a rising trend as an amount of $5,198.13 million was received in the first seven months (July-January) of the current fiscal year 2009-10, showing an increase of $920.82 million or 21.53 percent over the same period of the last fiscal year. The amount of $5,198.13 million included $0.99 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).

In January 2010, an amount of $667.90 million was sent home by overseas Pakistanis, up 4.80 percent or $30.60 million, when compared with $637.30 million received in the same month last year.

The inflow of remittances in the July-January 2010 from UAE, USA, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $1,180.29 million, $1,061.89 million, $999.41 million, $737.72 million, $550.35 million, and $157.93 million respectively as compared to $868.93 million, $1,029.03 million, $838.66 million, $690.30 million, $289.96 million, and $131.74 million respectively in the July-January 2009.

Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first seven months of the current fiscal year amounted to $509.52 million as against $428.30 million in the same period last year.

The monthly average remittances for the July-January 2010 turned out to be $742.59 million as compared to $611.04 million during the same corresponding period of the last fiscal year, registering an increase of 21.53 percent.

During January 2010 remittances from UAE, Saudi Arabia, USA, GCC countries, UK and EU amounted to $158.33 million, $153.50 million, $123.49 million, $95.27 million, $67.56 million and $15.14 million respectively as compared to $169.50 million, $123.76 million, $125.54 million, $93.76 million, $50.14 million and $20.33 million in January 2009. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during January 2010 amounted to $54.62 million compared with $54.25 million in the same month last year.

It is mentioned again that the State bank, ministry of finance, and ministry of overseas Pakistanis had undertaken a joint initiative called 'Pakistan Remittance Initiative (PRI)' with a view to facilitating the flow of remittances through formal channels. This initiative has started to materialize and remittances through formal channels are showing considerable growth.

NEW MD OF SSGC

PAGE REPORT (feedback@pgeconomist.com)

Dr. Faizullah Abbasi is the new Managing Director, SSGC. He assumed the office on January 27, 2010. Piror to this new assignment, Dr. Abbasi was Vice President of Metal Manufacturing Company, Arizona, USA.

In the mid 1990s, Dr. Abbasi enjoyed a prolific stint as SSGC's Deputy Managing Director (DMD). As DMD, he was in charge of HR / Administration, Measurement / Meter Plant, HSE and Distribution Operations Divisions. As the HR head, he carried out an extensive organizational re-structuring of the Company. As a focal person for UFG (Un-Accounted for Gas), Dr. Abbasi devised a three-pronged strategy of rehabilitation, system maintenance and pressure profiling which saw a noticeable decline in UFG for the first time in a decade.

Dr. Abbasi is a PhD in Metallurgical Engineering from Sheffield, United Kingdom and Masters in Production Management from Strathclyde University, Glasgow. He is also a graduate of Mechanical Engineering from Mehran University, Sindh where he has also taught.


PAKISTAN'S LIQUID FOREIGN RESERVES POSITION

The total liquid foreign reserves held by the country stood at $ 14,483.4 million on 6th February, 2010.

The break-up of the foreign reserves position is as under: -

i) Foreign reserves held by the State Bank of Pakistan: $ 10,703.2 million
ii) Net foreign reserves held by banks (other than SBP): $ 3,780.2 million
iii) Total liquid foreign reserves: $ 14,483.4 million