Economic & Business Review

Opting for ethanol mixed fuel

COULD a project that failed earlier succeed now

with the government institutions deeply embedded
in a culture of patronage?

The switch-over to E10 petrol is easier said than

done. This is possible, however, if the government
sticks to its guns with a strong political will.

The economic coordination committee of the

cabinet on May 19, 2009 took a decision to
discourage export of raw molasses by clamping 25
per cent duty and approved a proposal to change
the fuel composition by mixing ten per cent
ethanol.

The decision is said to have been taken to follow

the trend in international energy market, curtail
dependence on fossil fuel and improve the
environmental standards. Ethanol mixed oil is
considered to be environment-friendly. It reduces
the carbon content in fuel. High carbon content
leads to emission of pollutants when oil is burnt.

It looks logical to opt for alternative energy oil as

imports have proved to be a major drain on
foreign exchange reserves. The average oil import
is $8-9 billion per annum. Last year, at one point
oil was selling at $147 per barrel and Pakistan
spent huge $11 billion on oil imports.

About $1.1 billion could have been saved by using

E10. Brazil uses E90 and India, Thailand,
Philippines and a number of oil-deficient
environment-friendly countries are at different
stages of the switch over. Many nations import
raw material (molasses) or the finished product
(ethanol) for using it as an alternative fuel.

Pakistan enjoys natural advantage to move

towards more sustainable energy options, with a
good potential to produce both raw material and
the finished product. We have a sizeable
sugarcane production. There are about 80 sugar
mills of which about 19 have distillery units.

According to industry sources, these distilleries

are sufficient to meet the local demand of
providing ethanol in required quantity. In case of
scarcity, more mills can install dehydration units
at marginal cost. It would increase the demand of
molasses that is currently exported raw to
countries in Europe that charge very high duty on
import of value-added ethanol from the same
origin.

“I see it as a failure of the commercial policy that

the government was unable to avert duty imposed
by EU on ethanol imports. These countries import
Pakistani molasses cheap and process them
there”, said an MD of a big sugar mill.

Export earnings from molasses almost doubled

from $44 million in 2007-08 to $88 million during
the first 11 months of last fiscal.

Many key players in the oil sector have not yet

been informed of the decision taken five weeks
back.

Secretary Cabinet, Zafar Mehmud told Dawn that

the decision was conveyed to the ministry
concerned. He was, however, not aware if any
official notification had been issued by the
ministry.
S N A Zaidi, Secretary General, Oil Advisory
Committee said that no notification had been
received by the organisation or any of its
members.

However, some higher-ups in refineries informed

this scribe privately that notification had been
received but they did not see its implementation
anytime soon.

“There are both quality and logistic issues

involved here. The government would need to
resolve many hitches before the decision is
implemented”, CEO of a private refinery
confided.

K Iqbal Talib, chairman Pakistan Ethanol

Manufacturers Association blamed oil sector and
the petroleum ministry, for lack of progress.

“They created hurdles because they felt the move

would end their monopoly over the energy sector.
Every time the government wants to introduce
alternative solutions to lessen dependence on fossil
fuel, they get activated. They spare no trick and
usually succeed in persuading the government to
refer the issue to some committee”, he said.
“It is incorrect to call the earlier experiment with
E10 a failure. It was a six month project that
generated data and a report was developed with
involvement of all stake holders and that was
submitted to the government last year”, an insider
told Dawn.

A decision to promote the use of E10 was taken

back in 2005. In August 2007, former prime
minister Shaukat Aziz inaugurated a PSO petrol
pump that installed dispenser to sell E10. Some
selected PSO petrol pumps in Karachi, Lahore
were also equipped.

Despite a favourable post-experiment report, the

distribution was subsequently stopped.

Shahid Hamid, ex-CEO Alternative Energy

Development Board, said that vested interests did
not allow a perfectly viable and sustainable energy
option.

“The oil sector is part of the energy problem.

Because of their immediate private interests they
are bent upon compromising the country’s long-
term interests”, said Shahid Hamid from
Islamabad over phone.
“Our sources in the sugar industry confirmed that
the country has capacity in place to meet the
demand of ethanol locally.”

The sources in the oil refineries who spoke to

Dawn on condition of anonymity, said it was
wrong to blame them for the incompetence of the
government.

“It is not a joke. A lot of logistic and legal

adjustments will have to be made to switch to E10.
The level of sulphur content in oil products will
have to be reduced before ethanol mixing is done.
To this end, oil refineries will be required to make
investment of roughly about Rs40-45 billion. The
current oil price structure does not allow them to
spare that kind of amount for modernisation”, a
spokesperson of the oil sector said.

“If there is political will everything else will fall in

place in due course and the transformation
towards greener energy source could be made.
The government must let the

ministry of industries handle the project this time

round as the petroleum ministry was not able to
deliver the last time”, a pro-E10 enthusiast
commented.
Experts agree that there is a need to work on a
price formula and to revise the legal framework
governing the industry. A gradual shift should
start forthwith accommodating genuine concerns
of all stakeholders.
Creating a vibrant domestic market
By Nasir Jamal
Monday, 06 Jul, 2009 | 01:20 AM PST |

The trade policy for 2009-10 is expected to spell

out a long-term vision for boosting domestic
commerce to create new opportunities for
investment and push sustainable and pro-poor
economic growth.

The role of exports as “the driver” of economic

growth is exaggerated, many economists and
businessmen argue. It is always a vibrant domestic
market that drives economic growth and exports,
they insist. Both internal and external trade, they
note, should get equal treatment as they represent
two sides of the same coin.

“There is no use formulating export-centric trade

policy each year. Other areas of the economy
should also be targeted for sustainable growth,”
says an economics teacher at a university.

He considered the government policies subsidising

the industry and exports as flawed and
imbalanced. It is high time that the government
shifted its focus from the industry and exports and
gave equal importance to the promotion of
domestic commerce, he said.

Former Pakistan Institute of Development

Economics (PIDE) director Dr Nadeemul Haq,
who has done extensive work on domestic
commerce, told Dawn last week that the
forthcoming trade policy could prove to be a new
beginning, a departure from the previous ones.
But, he warned, the policy makers would have to
give up their obsession with export promotion.

“The new trade policy should focus on outlining a

long-term vision as to what the government wants
to or intends to do over a period of 15 to 20 years
to promote domestic commerce and internal trade
along with foreign trade,” he said.

The trade policy, he said, must also elaborate the

provisions of the import policy besides explaining
as to what the various export promoting bodies,
including the Trade Development Authority of
Pakistan (TDAP), had achieved so far after
spending so much of the taxpayers money. The
people have a right to know it, he observed.
“Domestic commerce which is half of our economy
and the largest employer outside agriculture, has
remained neglected in our economic and trade
policies for far too long,” Dr Haq argued.
“Domestic commerce -- retail/wholesale,
transport, construction, leisure/hospitality
industry -- is severely constrained – excess
demand for office space in every city, excess
demand for retail space is visible in all
marketplaces, our freight transport is in a poor
condition. There is no room in our cities for large
showrooms or space for warehouses or well
stocked department stores,” he said.

The commerce ministry says, the new trade policy,

expected in the middle of this month, will contain
several measures for the promotion of domestic
commerce. But a few believe.

The ministry under Humanyun Akhtar Khan had

produced a detailed study on the state of domestic
commerce in 2005. “The study had highlighted
numerous regulatory, tax and other issues
stunting the growth of domestic commerce,
particularly retail/wholesale sector, transport,
construction, warehousing, etc. But it was put in
the cold storage and no policy measures were
taken on the basis of its recommendations,,” said a
leading Lahore businessman.

“Where are the cold chains and warehouses that

the successive governments promised to create
during the last one decade?,” asked the
businessman. The infrastructure that is required
for boosting internal trade is also crucial for
increasing exports. “You cannot de-link external
trade from internal trade,” he added.

Dr Haq said the products that were not tested in

the domestic market could not develop brand-
names or fetch much value in the international
markets.

“McDonald’s first became popular in Chicago

before expanding into Illinois and other states of
the United States. It was long after McDonald’s
had created a goodwill for its brand-name in the
home market that the company thought of
expanding into the rest of the world,” he noted.
But, he said, Pakistani manufacturers had never
thought of producing for the domestic market
because they have become used to living off the
government subsidies.

According to Dr Haq, the bureaucratic controls

on the economy skewed import policies aimed at
protecting inefficient and uncompetitive industries
like car assemblers and an anti-commerce bias
were also responsible for the stunted growth of
domestic trade. For example, he said, the
protection given to the car industry had blocked
the way of import of trucks, cranes, and other
machinery needed for the development of cargo
transportation. The obsolete city zoning, which
protected the large residential estates of
bureaucrats and their polo and gymkhana clubs in
the heart of major cities like Lahore, had not only
left no space for shopping malls, warehouses,
offices etc but also driven the poorer people to the
peripheries of the city.

He is of the view that the change in the zoning

laws and lifting of government controls that
helped it subsidise and protect incompetent
industries could help a lot in promoting domestic
commerce.

The shifting of focus on domestic commerce, said

Dr Haq, would lead to pro-poor inclusive growth.
But the first step towards this end, according to
him, lay in promoting domestic commerce and
reforming civil bureaucracy by monetising its
perks.
Issues in rice export
By Mohiuddin Aazim
Monday, 06 Jul, 2009 | 01:20 AM PST |

RICE exports exceeded $2 billion in fiscal year

2009 (despite a fall in international prices) against
$1.8 billion a year ago. Exporters hope to meet the
export target of $2.5 billion for FY10 if rice
production remains stable.

Rahim Janoo, who heads Rice Exporters

Association of Pakistan (REAP), said that the
average price of Basmati hovered around $1500-
$1550 per tonne in FY08 but fell dramatically in
FY09.

A former REAP vice -chairman Abdul Baseer said

that the average price of various varieties of
Basmati ranged between $1000-1250 per tonne in
FY09. The Food and Agriculture Organisation
also reports that export price of rice from all
exporting countries including Pakistan began
sliding from June 2008 after peaking in May.

Market observers believe that rice exports would

touch $2.5 billion if production does not decline
below 5.7-5.9 million tonnes and if global prices
remain stable or show some growth.

According to official estimates, rice production

totalled 6.9 million tonnes in FY09 up from 5.5
million tonnes in FY08. But the accuracy of data is
under question. “Many a times, the government
presents a higher estimate of production but then
we hear that rice is not available,” laments H. A.
Majid, ex-chairman of REAP. “Our agencies need
to revamp their data collection system.”

Commodity experts say rice exports can grow

faster if Geographical Indication of Basmati is
established. Unlike India that has registered GI of
Basmati in its name, Pakistan is yet to do it. “The
President can do this by issuing an ordinance or
the parliament can pass it into law,” explains Haji
Azhar, a former REAP chairman . The absence of
GI constrains exports of rice to EU member
countries.

Comparatively Basmati is expensive compared to

non-Basmati varieties. So a significant increase in
its share in total rice exports could earn far higher
foreign exchange.
Rice exporters say, they are lobbying with the
government for reduction in withholding tax on
export of rice in retail packing. They are critical
of the government for not doing so in the budget
for FY10. “We hope that it would be announced in
the trade policy,” Rahim Janoo said adding that
REAP has recommended reducing of withholding
tax on retail packing to half per cent against one
per cent on bulk packing. “The cost of exporting
rice in retail packing is higher than exporting it in
bulk,” he explained to justify the exporters’
demand.

Lately, Pakistan started selling rice in retail

packing to some non-traditional markets like
South Africa, Singapore, and Dubai. A minimum
withholding tax on rice in retail packing would
encourage exporters to sell larger quantities of
rice directly to big trading houses and chains of
retail outlets in non-traditional markets. And as
rice in retail packing is costlier than in the bulk,
an increase in its export would translate into a
higher per unit price.

Pakistan has lately focused on export of rice

products like rice cakes and crackers and rice
vermicelli etc. Exporters say export of rice oil can
also fetch some foreign exchange but oil-
extracting machinery is expensive. Japan being
the only major user of rice oil has sold oil-
extracting machinery to Indian businessmen with
the arrangement to buy back rice oil. Pakistan can
also try this arrangement.

As for FY10, most rice exporters feel confident

about growth in exports but some of them fear a
decline in the crop size due to water shortage—
and if that happens exports target of $2.5 billion
might slip by.

Boosting rice exports in the medium-term

requires development of new varieties of rice,
particularly those of Basmati.

“Pakistan has so far introduced two varieties of

Basmati namely Basmati-385 in 1988 and Super
Basmati in 1996,” notes the State Bank’s annual
report for FY08. On the other hand “India has
introduced various varieties namely Dehra Dun &
41, HBC-19 & 41m Basmati 217 and Pusa
Basmati.”

Both growers and exporters of rice say the Trade

Policy for FY10 must address the issue. They say
Pakistan also needs to ensure that the seeds of new
varieties, when developed, are not smuggled into
India. “Because India has in the past used our
seeds to develop a new variety of rice and then
brand-marketing it,” reveals Abdul Baseer.

Basically, the government and the private sector

need to join hands and identify the obstacles in
developing rice export sector in the medium-
term.

More importantly, REAP requires a new, pro-

active and transparent role in addressing the
issues facing rice exports. Differences among rice
exporters and rice traders take a toll on the
country’s ability to earn foreign exchange. In the
last fiscal year, for example, Saudi Arabia wanted
to import 400,000 tonnes of Pakistani Basmati but
Pakistan could not meet this export order “as
rival groups of exporters and REAP office-bearers
fought over on how to handle it,” an insider
confided.

A Quality Review Committee of REAP certifies

the variety of the export consignments and that
creates room for REAP officials to manipulate
things—and for their rivals to politicise it.

It is also important for growth of rice exports to

take rice growers into confidence in decision-
making and ensure that they get a fair price of
their produce. A Sindh-based rice grower said
despite an increase in the support price of rice,
small farmers are forced to sell their crop at lower
rates because they don’t have the storage facility
and lack access to institutional loans for raising
crops. Periodical under-invoicing of rice exports
and smuggling of rice to Kabul under the garb of
Afghan Transit Trade are also hurting this sector.
So serious is the issue of under-invoicing that a
former REAP chairman Haji Azhar goes on
record saying that the official data of $1.8 billion
rice exports in FY08 covers only two thirds of
actual exports.

“If you take into consideration the heavy under-

invoicing done between June 2007-April 2008,
actual export earnings should be somewhere
around $3 billion.”

Rahim Janoo says under-invoicing is not a big

issue now. But he and other REAP officials do
admit that export data compiled by them and the
one released by official agencies do differ. For
example, he says that REAP records show $2.2
billion exports in FY08 and not $1.8 billion as
reported in SBP reports and in the Economic
Survey.
Water scarcity and disputes
By Zulfiqar Halepoto
Monday, 06 Jul, 2009 | 01:19 AM PST |

WITH unprecedented challenges of water scarcity

facing the world, some new approaches have
surfaced to tackle this problem.

The terms like ‘river diplomacy’ and

‘environmental peacekeeping’ are commonly used
in non-traditional human security studies as
tension between riparian states mount on water
sharing, environmental degradation, irrigation
and drinking water shortage and decline in food
security.

Recent research studies on water related bodies

warn that the world may be very close to its first
water war due to the adverse climate change,
energy and food supplies and prices, and troubled
financial markets. Water scarcity is leading to
political insecurity and inter and intra-state
conflicts.

Glacier melting, global warming, water reservoir

and dams affect shared ecological resources,
upsetting political relationships between riparian
states. Building of Kishanganga and Baghliar
dams on river Chunab and Jhelum is an example
of trans-boundary water dispute between two
hostile neighbours: Pakistan and India. The future
of peace and economic stability in South Asia also
depends on the flow of water from Indian held
Kashmir to the downstream Kotri, Pakistan.

The two states have also been locked in a dispute

over the project for years. The Kishanganga or
the Neelam River is the largest tributary of
Jhelum. Pakistan believes that this project will not
only impact its hydropower potential, but will also
adversely affect the agriculture in the Neelam
valley and the Muzaffarabad district. Experts on
strategic studies and diplomacy are now terming
water as oil of 21st century. Water is going to
determine the foreign policy discourses of nation-
states with their neighbouring countries that are
sharing water resources. The future of political
relationships of lower and upper riparian may be
shaped by the water flows, both in terms of
quantity and quality.

Pakistan and India are no exception to this. Per

capita water availability is fast approaching the
threshold of 1000 cubic meters of water per
person per year in both countries. Pakistan at
1200 cubic meters per capita is slightly above this
water stress threshold.

The Indus River Basin comprises of almost 1.2

million square km in Tibet, India, Pakistan and
Afghanistan. In the Indus Water Treaty (IWT) of
1960, three eastern rivers, Ravi, Beas and Sutlej
were handed over to India.

In the IWT, India has also been allowed to

develop 13, 43,477 acres of irrigated cropped land
on the western rivers without any restriction on
the quantum of water to be utilised. India has
already developed 7, 85,789, acres for which 6.75
MAF has been used. Thus, for the remaining area
of 5, 75,678 acres, 4.79 MAF would be required on
pro rata basis.

Whereas three western rivers, Indus, Jhelum and

Sutlaj were given for the exclusive use of Pakistan
which irrigate 20 million hectares land out of total
69.6 million hectares land; four million hectares of
land is rain-fed.

The source of water for these two nuclear rivals is

Kashmir, which is a ‘jugular vein’ for Pakistan
and for India “an integral part”. In the
Himalayan mountains of Kashmir high altitude
glaciers are melting an at unprecedented rate.This
phenomenon threatens the security of water
supply of hundreds of millions of people.

The local environment of Kashmir and Himalayan

range is suffering from the decades of military
presence--habitats of snow leopards, brown bears,
ibex are also under threat and garbage is being
dumped into mountain crevasses. Conservationists
and ecologists suggest that Siachan Glacier
mountains be declared as ‘peace camp’. This
would not only ensure protection of the landscape,
but would offer the possibility of political
peacemaking as well.

Kashmir’s strategic position is turning into a non-

traditional human security protection zone in
terms of water and environment. Pakistan is a
rain scarce country and most of its water depends
on melting Siachen Glacier in the Himalayan
mountains in Kashmir.

In 1990, General (rtd) Pervez Musharraf, then a

brigadier under training at the Royal College of
Defence Studies in London, in a presentation,
argued that the issue of Indus waters had the
“germs of future conflict”.

On June 18, 2002, Syed Salahuddin, chairman of

the United Jihad Council and the leader of Hizbul
Mujahideen, said “Kashmir is the source from
where Pakistan’s water resources originate. If
Pakistan loses its battle against India, it will
become a desert.”

Few months back in Srinagar the chief of the

People’s Democratic Party (PDP) Mehbooba
Mufti asked New Delhi to compensate Jammu and
Kashmir on account of the Indus Water Treaty.
She described the treaty as “discriminatory” and
blocking the progress and economic development.
She also came down heavily on the New Delhi-
owned NHPC for its “arbitrary” exploitation of
the state’s water resources. She said the NHPC
was producing 1,500-MW of power from its
projects in Jammu and Kashmir, but it was
sharing just 180-MW with the state.

Pakistan realised this very late that except for

Indus main and Kabul rivers, all the five vital
tributaries of Indus river system (Jhelum,
Chenab, Ravi, Beas and Sutlej), originate in
Kashmir. Perhaps India knew all along, the
importance of Kashmir and therefore it lied to the
United Nations that it was prepared to hold a
plebiscite in the valley. This realisation has given a
new and a dangerous, twist to the Kashmir
dispute.

India is also in the process of building the 330

MW Kishanganga dam on river Jhelum and the
450 MW Baglihar dam on river Chenab for hydro
power generation, beside Tulbul (Wollar) barrage
on Jhelum for navigational purposes.

Apart from these, Uri II hydro-electric project on

Jhelum, and Pakul Dul and the huge, 1020 MW
Burser hydro dam, both on Marusunder, a
tributary of river Chenab, are in various stages of
planning and execution.

According to the Indus Water Treaty, the country

which completes the project first, will have the
first rights on the river water. Pakistan has
recently awarded a $1.5-billion contract to a
consortium of China’s Gezhouba Water and
Power Company and China National Machinery
and Equipment Import and Export Corporation
to build the 960-MW project in eight years.
Against the estimated Rs13.36 billion cost, the
NHPC received the lowest bid is of Rs29.60
billion. Officials said they are still negotiating with
the lowest bidder.

On the other hand, the water availability in our

rivers is highly unreliable. The highest annual
water availability in the recorded history 1922 to
date was 186.79 MAF (million acre feet) in the
year 1959-60 as against the minimum of 95.99
MAF in the year 2001-2002. This includes the
Kabul river which contributes a maximum of
34.24 MAF and a minimum of 12.32 MAF with an
annual average of about 20.42 MAF to Indus
main.

The conflict for controlling Indus river basin be

tween Pakistan and India is increasing. In future,

water is going to be a crucial issue in relations
between the two countries, perhaps at par with the
Kashmir question.

President Asif Ali Zardari has warned: “The

water crisis in Pakistan is directly linked to
relations with India.”
Establishing right to water
By Nasir Ali Panhwar
Monday, 06 Jul, 2009 | 01:19 AM PST |

AVAILBILITY of water in Pakistan has

alarmingly declined from 5,000 cubic metres per
capita in 1950s to nearly 1,000 cubic metres in
2008, because of increase in population, inefficient
irrigation, mismanagement and unequal water
rights.

The quality of environment for the majority of the

population remains poor. Only 36 per cent of
households had tap water supply in 2006-7. The
differences between urban and rural areas are
stark as 62 per cent of urban households have
access to tap water, compared to only 22 per cent
of rural households.

Nearly 75 per cent of the population or some 125

million people have no access to clean drinking
water. The situation is worse in rural areas. Water
crisis has several serious health, social, and
political implications. Water-borne diseases such
as cholera, gastro, diarrhoea and typhoid cost the
national exchequer 1.8 per cent of GDP (Rs120bn)
annually because of poor access to safe drinking
water and better sanitation. The situation is
becoming precarious with the passage of time.

Budget allocation for water supply and sanitation

amounts to less than 0.2 per cent of GDP. Over 60
per cent of the population gets their drinking
water from hand or motor pumps, with the figure
in rural areas being over 70 per cent. This figure
is lower in Sindh, where the groundwater quality
is generally saline and an estimated 24 per cent of
the rural population gets water from surface
water or dug wells.

The links between water quality and health risks

are well established. According to Unicef 20 to 40
per cent of hospital beds in Pakistan are occupied
by patients suffering from water-borne diseases,
such as typhoid, cholera, dysentery and hepatitis,
which are responsible for one-third of all deaths.
Access to improved drinking water was not only a
basic need but also a basic human right and must
be respected.

Poor water and sanitation is a major public health

concern in the country. Water-borne diseases are
responsible for substantial human and economic
losses. These include loss of millions of working
hours of productivity annually, and associated
costs for healthcare. Sickness of the main bread-
earner can have a severe economic impact on a
poor household, and in case of contagious diseases,
may even affect the whole community.

Water crisis is essentially a crisis of governance.

Lack of adequate water institutions, fragmented
institutional structures and excessive diversion of
public resources for private gain has impeded the
effective management of water supplies. The
protection of the right to water is an essential
prerequisite to the fulfillment of many other
human rights. Therefore, without guaranteeing
access to a sufficient quantity of safe water, other
human rights may be jeopardised.

This serves to demonstrate that the issue of water

and human rights is not a radical or revolutionary
suggestion, but merely a new way of thinking
about well established concepts. Formal
recognition of such a right would mean
acknowledging the environmental dimension,
more specifically the water dependent dimension
of existing human rights. Moreover, a formally
recognised right to water would make it
increasingly difficult to disregard international
environmental provisions that relate to the
protection and management of water.

The explicit recognition of water as a human right

could represent a usable tool for civil society to
hold governments accountable for guaranteeing
access to water of sufficient quality and quantity
and assist governments to establish effective
policies and strategies.

To ensure access to drinking water without

discrimination and to allow the individual right to
water to be fully exercised, public authorities need
to take measures aimed at improving the quality
of water, reducing losses and establishing better
and more equitable pricing of water supplies.

Active legal measures under the auspices of

human rights protection can be taken to benefit
disadvantaged groups, especially people living in
poverty. State would need to ensure that the poor
receive a minimum supply of drinking water and
sanitation.

Water must be considered as a social and

environmental resource. The term ‘right to water’
does not only refer to the rights of people but also
to the needs of the environment with regard to
river basins, lakes, aquifers, oceans and
ecosystems surrounding watercourses. Therefore,
a right to water cannot be secured without this
broader respect. A failure to recognise water as an
environmental resource may jeopardise the rights
based approach, which views water pri marily as a
social resource.

If we consider the maintenance of adequate access

to and supply of good quality water, we need to
look at how this is to be achieved beyond the
provision of safe drinking water and sanitation.
Maintaining a safe water supply means that
overall river basin management, agricultural
practices, and other works are important.

If we want to mean ingfully strengthen and

uphold any right to water, we need to make
certain that river basins and ground waters are
managed in their entirety. Steps need to be taken
to make provision for environmental flows for
healthy river systems, which means to maintain
downstream ecosystems and their benefits.

The global environmental instruments that

incorporate a right to water point to wider
environmental resource management as
important to respecting such a right. Practically,
what should be assessed is whether adequate
supplies of water of good quality are maintained
for the entire population of this planet, and if not,
how this can be achieved. If we accept that there is
a right to water, guaranteeing this right in the face
of increasing populations and increasing
environmental stresses, becomes increasingly
challenging.

Ensuring this right for present and future

generations requires that a long term view be
taken. A greater integration of environmental
principles and human rights principles
particularly the ecosystem approach will be
required.

Water, as an environmental resource, needs to be

further promoted and managed within the
framework of a river basin and ecosystem
approach. The rights based approach is based on
an essentially human centered view as it promotes
water as a social resource.
However, a human right to water would not only
mean the expansion of existing human rights and
duties in the context of achieving access to water
by all, but also an acknowledgement that healthy
functioning of river systems and ground waters
are essential for people, plants and animals.
Dip in the textile export
By Humair Ishtiaq
Monday, 06 Jul, 2009 | 01:19 AM PST |

FIGURES for the last month of the 2008-09 fiscal

are yet to be collated, but there is no ambiguity
about the fact that export targets have been
missed.

These include not just the ones that were set at the
start of the year, but also the revised and
provisional ones that were configured during the
year on the basis of monthly and quarterly
performance of various sectors.

Being the longstanding mainstay of the national

export profile, textiles represent a relevant case
study to make sense of where we might be headed
and what it shall take to reverse the trend. From
around 60 per cent of overall exports in 2007-08,
cotton and its various categories are expected to
display a 7-8 per cent dip in share this year once
the data for June has been added up.

Another worrying factor in this context is that

within the textile sector itself, raw material
accounts for as much as 70 per cent of the exports,
while the rest of the 30 per cent includes garments
and made-ups; an indication that value-addition is
not our forte yet.

According to people in the field, there is not much

hope for improvement because, one, the cost of
doing business is higher; two, goods needed for
value-addition – machinery, buttons, zippers etc. –
have to be imported as opposed to giants like
China which have these of their own; and, three,
because international trade system offers
preferential categories to countries like
Bangladesh which falls under GPS+ that gives it
zero-rated access to European markets.

As one goes around there are two divergent

opinions that one hears on the issue of exporting
raw material instead of making the most of it
ourselves. One group insists on cutting down the
export of raw material and, instead, bringing the
cost down, suggesting that the market of textile
made-ups should be taken to the grassroots by
converting it into a sort of cottage industry. This
can happen through sub-contracting in which
quality control in managed. It would bring the
cost down enough to target the international
market of finished textile products.

The rival point of view is that by doing so, the

quality factor would come into play and may well
negate the very purpose. Besides, regardless of
what one might do, China will ahead in terms of
both quality, quantity and per-piece pricing
mechanism. But there are a few things that we can
do to counter the threat posed by Bangladesh,
which in the first half of the last fiscal was the
leading importer of raw cotton from Pakistan and,
together with yarn and fabric, imported raw
material worth about $210 million and used it to
encroach upon Pakistan’s share in the global
market of finished products.

Mujeeb Ahmed Khan, who heads the WTO Cell at

the Trade Development Authority of Pakistan
(TDAP), thinks it is “absolutely pointless” to even
make an attempt to cut the local cost factor. There
are two things that he says must be kept in mind
while working out a method of dealing with the
Bangladesh threat.

Labour in Bangladesh is cheaper. If we stop

exporting raw material to them, somebody else
will fill the gap which will work negatively
towards Pakistan’s own prospects.
What we need to do is to keep working on
improving our own market access, but, more than
that, we need to strategise our approach towards
the issue. Locally, we shall go for adopting the
Best Business Practice module at the industry
level, while on the international stage the
government machinery should raise issues that
are of concern to the West; like, for instance,
labour laws and environmental violations.

“If we can do that properly and consistently, the

pressure will be on Bangladesh and its cost factor
will experience a spike that will work to our
advantage,” says Mujeeb Khan.

What he, and, indeed, others of his ilk, is saying

does make sense because it is close to what the
world did to Pakistan in terms of its sports goods
manufacturing sector. It all started in 1995 when
an American news channel attacked a leading
sports brand for making footballs with the help of
child labour in Sialkot. At the time, Pakistan was
producing as much as 90 per cent of world’s
footballs. It was all a home-based activity in which
entire households were involved. Women did it at
their own convenience after taking care of
household chores, men did it as part-time activity
after being through with their main commercial
engagements, and children did it mostly on return
from

school.

What happened after the intervention turned it

upside down. Afraid of bad press, the brand
managers sitting in the headquarters forced the
local partners to formalise the football stitching
activity by investing money in erecting centralised
units for the purpose. This in a way masculinised
the trade, with children not allowed inside and
women not willing to work outside their homes
because of traditional preferences.

The cost of this implanted corporate structure –

massive infrastructure in line with the standards
set by the global brands, internal monitoring and
ILO registration – was borne by the locals in the
hope that the business will survive.

However, when the cost went up – from Rs20-25

per ball to Rs50-55 – the assurances by the
international buyers turned out to be nothing
more than mere verbal commitments.

They shifted their buying elsewhere. It will take a

huge and coordinated effort by local
manufacturers and various ministries to evolve
and execute the right strategy to boost the textile
exports.
Empowering farmers
By Tahir Ali
Monday, 06 Jul, 2009 | 01:19 AM PST |

TO improve farm productivity, the federal

government has started a phased crop
maximisation project-II (CMP).

NWFP project director Allahdad Khan told this

scribe that Rs1bn would be spent in NWFP under
the programme over next five years. He said
Rs151.25 million had been disbursed to the
project management and Rs16.2 million to 50
village organisations as a revolving fund..

The CMP project was formally launched in 2007

but initially it started its work this year in five
districts of the province —Peshawar, Charsadda,
Swabi, Bannu and Dera Ismail Khan.

“The project aims at improving and expanding

agriculture including livestock and horticulture. If
quality inputs are easily and timely made
available at reasonable rates to farmers, and
proper marketing of produce is ensured, it will
raise their income. Crop-maximisation will be of
two kinds. One, more crops will be grown in areas
(apart from existing ones) suitable to them. Two,
efforts will be made to increase per hectare yield
of existing crops,” said Khan.

The project will target 32 villages, in each of the

selected districts. So far, 71 village organisations
(VOs) of the 160 targets have been registered. The
organisations are being formed with the help of
Sarhad Rural Support Programme (SRSP). Its
membership is open to small farmers owning less
than 15 acres.

“VO is formed with member-farmers giving Rs50

as registration fee and Rs250 as share money per
acre on yearly basis for five years. The
government adds a matching grant to this fund
which will be used for buying inputs and giving
credit facilities to member farmers. Farmers will
also be provided training, guidance and credit
facility to start businesses locally to earn more
money for their families. Empowerment of
farmers is our motive,” said Khan.

The project aims at opening agriculture

inputs/marketing centres for every 5-20 villages
which will be owned by VOs. This will, it is hoped,
decrease the role and impact of middlemen. The
money earned through transactions and services
would be put at the disposal of the VOs.

The project has conducted a baseline survey (BS)

in five selected districts. This BS will serve as
yardstick for appraisal of the CMP’s performance
after its completion.

NWFP has comparative advantage in per hectare

yield (PHY) of fruits and vegetables. In onion,
tobacco, peach and apple, the province performed
well with positive growth of 28.4, 23.7, 90 and 65.7
per cent as compared to rest of the country.

According to the BS, the per hectare yield (PHY)

for wheat crop in Peshawar, Charsadda, Swabi,
Bannu and DI K in 2006-07 was recorded at 2218,
434, 1882, 1877 and 1479kg respectively. For
maize, the PHY stood at 1,817; 2,290; 2,067; 1,817
and 1830 in that order.

When Khan was asked why areas where the PHY

was much lower were neglected and instead the
robust districts were selected, he said the
government wanted to attend to the high growth
potential areas first to increase food grain. He
hoped the PHY would be increased by about five
per cent each year and within the five years, it
would be jacked up by 40 per cent.

Normally project funds are wasted on non-

developmental expenditures, but Khan said in his
project 80 per cent fund would be utilised for
bringing positive changes in the lives of farmers.

The project is part of the public sector

development programme (PSDP) and is
dependent on yearly allocation. “If the project is
not dropped with the change in government and
funds are made available, it may prove fruitful,
said a farmer Zawar Husain from Peshawar.

“The orange produced in Mansehra, Manki

Sharif, Rutam, Palay, Swabi, Dir and Ghazi, to
name a few, is of best quality. Swat peaches are
also world’s best but marketing and
transportation are the main problems. We need
air-conditioned vehicles and storage facility.
Similarly, the guava grown in Kohat, Bannu,
Haripur and Dargai are of high quality which can
earn precious foreign exchange,” said Niamat
Shah, vice-president of the Tillers Association,
NWFP.
He lamented that old orchards were chopped
province-wide and new ones were not grown.

Soil and climate of the Frontier province are

appropriate for year-round agriculture. But its
real potential is yet to be tapped. He said NWFP
could have three to four crops of potato in a year.
“One crop could be grown from September to
January, the other from February to July and the
next in May to September in Kalam and the other
in Bahrain from April to July.”

The province produced 300 tons of tomato, 350

tons of onions and 250 tons of potato in 2007.
Yield of all these crops could be doubled easily by
meeting the resource needs of the farmers.

“The problem is that of the 1.36 million farms

province-wide, 1065 or 85 per cent of them are
below five acres owned by small farmers who have
no money to buy inputs and modernise farming.
The inputs are costly and hardly affordable these
days - a bag of DAP is available at Rs3,000 and
seeds are also costly. Water tax in the province is
double that of Punjab. These problems will have
to be solved if we want to see the dream of
agriculture growth realised,” said Hussain.
Diversifying the financial sector
By Rauf Nizamani
Monday, 06 Jul, 2009 | 01:19 AM PST |

THE financial system has grown rapidly in recent

years but it is relatively small when compared to
the size of economy and many other countries.

The small size or lack of depth of the financial

sector implies that financial needs of the economy
cannot be fully met and that much of the
country’s potential remains unrealised. Another
drawback is that more than 72 per cent of the
total assets of the financial sector is concentrated
in the banks.

The ratio of financial assets to GDP is commonly

used as a measure of development of a country’s
financial system. In June 2008, total financial
sector assets amounted to Rs7.6 trillion. On a net
basis the amount of financial assets is substantially
smaller, as debt securities and debt are included
as assets of other financial institutions and thus
double counted.
The stock of net financial assets has been
relatively stagnant if the bubble in stock market
capitalisation is excluded. This means that
although financial assets have grown rapidly in
nominal terms, they have not expanded that much
in relation to the real economy as measured by
GDP, especially in the last few years.

The financial sector expressed as a percentage of

GDP, is roughly half the size of financial sector of
India or average of all emerging market countries
(EMCs) and represents an even smaller fraction
when compared with China.

The financial sector needs to be almost doubled in

size( in nominal terms) from the present ratio of
112 per cent of GDP to to the level implied by the
ratios for India (202 per cent) or the average for
all EMCs world wide (216 per cent). Such a
doubling would imply a massive increase in
financial intermediation i.e. financial savings and
credit flows in the economy.

If the financial sector is to reach its potential, it

will require broad-based growth not only of the
banking sector but also of other financial
institutions and markets such as government debt,
private debt, and equity markets etc. Banking
sector and stock markets are the most important
financial intermediaries, in case of Pakistan. The
financial sector mainly distinguishes itself from
the other EMCs in that the private debt market is
almost non-existent while the size of the
government debt market is similar to that in other
EMCs.

There is a need to shift banks’ focus from large

companies to smaller companies, farmers and the
household sector. Bulk of credit goes to the
manufacturing sector, especially textiles which
receive a disproportionately large share of bank
credit (40 per cent) compared with the sector’s
contribution to GDP (20 per cent). Aggregate data
for all credit by borrower size shows an extremely
skewed distribution. Some 22,000 or 0.4 per cent
of all 5.2 million bank borrowers account for 65
per cent of all bank advances while the remaining
more than five million borrowers one-third get
rest. . At the very top, there is even more
concentration. The largest 50 borrowers account
for 37 per cent of all outstanding credit.

Larger companies have access to different

financial markets and should further diversify
their financing away from the banks. Most large
companies have access to bond and stock markets
and some even have access to foreign capital
markets.

The level of financial exclusion from the real

sector is dramatic, especially in rural areas. While
two-third of population resides in rural areas only
25 per cent bank depositors and 17 per cent of
bank borrowers are served by banks. In value
terms, the share of rural customers are even
smaller i.e. only 10 and seven per cent of total
deposits and advances respectively. There is a
very low level of branch penetration in rural areas
where there are less than 2500 branches for a
population of 105 million or an average 42000
inhabitants per branch. This has held back the
growth of savings and access to credit.

There is an enormous pool of companies to be

included in the formal financial sector. There are
an estimated three million companies of which
only some 50000 are registered with the SECP
including 650 that are listed in stock exchanges.
Some 80000 companies borrow from the formal
financial sector mainly banks. This implies that
there is a huge pool of potential company
customers to be tapped by the banking sector.

These are only some of the underserved areas of

the economy which need the attention of the
financial sector and there is a huge potential for
the expansion of the financial sector.
World commodities

Oil

Oil prices fell more than $2 on July 2 in the

London market to below $67 a barrel. London
Brent crude dropped to $66.76. Rising gasoline
stocks and a far bigger than expected rise in US
unemployment drove oil markets down.

Some analysts are still relatively bullish, however,

and say the Organisation of the Petroleum
Exporting Countries has been very successful in
stabilising the market.

Oil has rallied from a low of $32.40 in December

last year to highs above $70 a barrel in June,
although it is only around half last July’s record
of more than $147. Over the second quarter of this
year it gained around 40 per cent — the strongest
quarterly gain since 1990.

The International Energy Agency, an adviser to

oil-consuming nations, cut five-year forecasts for
global crude demand because of the economic
slump, predicting consumption won’t regain last
year’s levels until 2012.

The IEA cut its oil demand estimates for every

year through 2013 by about three million barrels
a day, it said in its Medium-Term Oil Market
Report. Consumption will average 86.76 million
barrels a day in 2012, the first year it will rise
above 2008’s level of 85.76 million barrels a day,
according to the Paris-based agency.

Oil demand in 2014 will rise to 88.99 million

barrels a day, according to the IEA. From 2009,
when oil demand will fall the fastest since the
early 1980s, that represents an average annual
increase of about 1.4 per cent, or 1.2 million
barrels a day. From 2008 levels it represents an
average increase of 0.6 per cent or 540,000 barrels
a day.

Consumption in developed economies will shrink

1.1 per cent a year to 44.4 million barrels a day in
2014, even under the higher GDP scenario,
according to the IEA estimates. According to the
lower economic growth estimate, OECD demand
may shrink as much as 1.5 per cent.

Demand in developing economics outside the

Organization for Economic Cooperation and
Development will rise through 2014. Oil use in
those countries will increase an average 2.6 per
cent a year to 44.6 million barrels a day, according
to the IEA.

While the economic slump tempers gold demand

growth, it my also cause supply to shrink as lower
exploration and production spending delays
projects and reduces spare capacity, according to
the IEA.

Supplies from outside Opec are forecast to decline

by 0.4 million barrels a day between 2008 and
2014, compared with six-year growth of 1.5
million barrels a day forecast in the last report,
the IEA said. The biggest revisions are in the
former Soviet Union and North America, where
projects to develop Canada’s oil sands are being
delayed, the IEA said.

The group predicts that non-Opec supply will

peak at 51.12 million barrels a day in 2011 and
start declining thereafter, reaching 50.22 million
barrels a day by 2014.
Gold

GFMS Limited (formerly known as Gold Fields

Mineral Services, an independent consultancy
group, predicts that identifiable gold investment
will exceed 1500 tonnes by the end of this year.
This estimate would represent a significant 36 per
cent increase over identifiable gold investment
demand in 2008.

In dollar terms, GFMS expects gold investment

demand to increase 57 per cent over last year to
nearly $50 billion. As a result of this surge in
investment demand, GFMS expects gold prices to
break through the nominal high of $1,032 an
ounce, with was set back in Spring 2008. GFMS
reported that global gold demand will experience
a massive increase this year, particularly from net
investment and official coins components as a
result of rising fears over the long-term inflation
threat in western nations.

Investment demand has been one of the main

reason for the rally in gold that has taken the
precious metal from around $250 in early 2001 to
around $940 today.
Total identifiable gold investment during the first
quarter of this year totaled 595.9 tonnes, a
historical high and increase of 248 per cent
compared to the first quarter of 2008. In dollar
terms, this represented a net inflow of $17.4
billion, up from $5.1 billion (or 42 per cent) a year
earlier.

At the same time, silver prices are expected to

outperform gold for the same reason.

In the latest quarterly report, GFMS pointed out

that investment demand accounted for only 50
tonnes in 2008. However, silver investment
demand was quite strong in the first quarter as
investors mobbed the metal as a cheaper
alternative to gold.

Silver investment demand is anticipated to be such

that it could account for between one quarter and
one fifth of total consumption in 2009. Meanwhile,
silver supply is expected to decline this year, with
mine output, scrap and government sales all
softening.

On July 3, in the London market, gold fell below

$930 per ounce as the dollar rose against a basket
of six currencies after a larger than expected drop
in US non-farm payrolls, which prompted some
buying of the currency as a haven from risk.

The worse-than-expected data spurred safe-haven

flows into the dollar, making gold pricier for
holders of other currencies.

Riskier assets, such as equities and some

currencies, slipped in the wake of the numbers.
While gold is often seen as a safe haven asset,
moves in the dollar are taking precedence as the
metal’s main price driver.

US gold futures for August delivery fell to $930.10

an ounce, down more than one per cent from the
settlement on the COMEX division of the New
York Mercantile Exchange.

In the New York market, gold climbed above $940

an ounce, as news that China has asked to debate
proposals for a new global reserve currency sent
the dollar reeling, highlighting the status of gold
as a hedge against a falling US currency. Investors
have recently viewed the dollar as a safe haven.
Copper

In the London market, on July 2, copper fell, as

grim US and European data underlined concern
that global economic recovery could be a long way
off and as a firmer dollar added pressure. Copper
for three month delivery on the London Metal
Exchange closed at $5035 a tonne from $5090 a
day earlier.

Copper earlier fell as much as 2.4 per cent to a

session low of $4,966.50. But the metal pared
earlier losses to close about one per cent lower,
with sentiment helped by data that showed new
orders for US manufactured goods jumped 1.2 per
cent in May, their largest increase in nearly a
year. But analysts warn economic recovery is not
yet within reach.

A slew of mixed data has provoked erratic trading

trends in recent weeks as investors have struggled
to gauge the economic climate. By and large,
however, sentiment is improving.

Euro zone economic sentiment improved more

than expected in June, data showed on June 29,
while Japanese industry output rose for the third
month in a row. But policy makers and analysts
stress that a potential recovery would be
complicated and protracted. There are also
worries that Chinese imports will not sustain the
market.

Chinese buying has helped copper rally some 65

per cent in 2009, but this restocking drive is
slowing, and markets are now entering the quieter
summer period. China imported 1.4-million
tonnes of copper in the first five months of this
year.

China had stopped buying metal for government

stockpiles after prices surged and middlemen
cashed in on an initiative meant to support the
domestic industry. China’s State Reserve’s
Bureau amassed a lower than expected 235,000
tonnes of copper in recent months.

Copper still has surged 52 per cent this year,

making it the second-best performer in the
Reuters/Jefferies CRB Index of 19 raw materials.
Only gasoline futures outperformed copper on the
CRB index. Record refined-copper imports by
China, the world’s largest user of the metal, drove
much of the increase.
The world’s most-populous nation imported
337,230 metric tones of refined copper in May, six
per cent more than in April and a record monthly
total, government data show. Stockpiles
monitored by the Shanghai Futures Exchange
soared 13 per cent mid June to 68,536 tonnes as of
June 18, the highest since August 2007, exchange
data show. The jump in inventories may signal
that demand is declining, analysts said.
KESC projects on the back burner
By Engr Hussain Ahmad Siddiqui
Monday, 06 Jul, 2009 | 01:19 AM PST |

KARACHI experienced the worst-ever power

breakdown for almost 36 hours, on June 17-18, as
electricity generation, transmission and
distribution systems came to a standstill.

Civic life, trade, industry and transport etc were

paralysed. Millions braced daily 6-8 hours load-
shedding and frequent power outages.

The KESC blamed the thunderstorm that hit

PEPCO’s Jamshoro-Dadu and Jamshoro-Hub
500kv transmission lines, for the blackout.
However, PEPCO in turn, criticised the utility for
the absence of any reliable back-up system. The
reality is that the existing electricity transmission
and distribution systems are outdated and
inefficient.

Basically the power crisis is an outcome of the

utility firm’s inaction to improve its infrastructure
that, once again, highlights the non-transparent
KESC privatisation. The ownership and
management have changed hands a number of
times unauthorisedly to the disadvantage of the
consumers. The government is not effectively
monitoring the KESC’s performance and ignoring
agreements it had signed with the private sector
owners on divestment and transfer of
management.

According to the Implementation Agreement, the

KESC was committed to invest more than $800
million in three years-from July 2006 to June
2009, which would have resulted in the
turnaround of the company too. The capital
investment programme had three major
components:

* Rehabilitation, augmentation and expansion of

the existing transmission and distribution
infrastructure;

* Rehabilitation, revamping and up-gradation of

the existing power generation capacity at Bin
Qasim power plant, and;

*Creating an additional power generation

capacity of 795 MW, by installing gas-fired
combined cycle power plants at Korangi (220
MW) and at Bin Qasim (575 MW).

The KESC had announced its plans in July 2006

to undertake overhaul of the entire power
transmission and distribution system and service
lines network and to set up new power plants. The
company has not been able to achieve any
significant milestone by the end of programme
period ending June 2009.

In the first phase, 11kv cables were to be replaced

and 13 new grid stations to be set up and existing
grid stations were to be improved. The system
improvement plan was initiated by the
government in 2004, having allocated Rs22 billion.
The government however had agreed, as per
provisions of the Implementation Agreement, to
provide to the KESC an amount of Rs10 billion as
first installment of 2006-07. The new owners of the
KESC were required to contribute additional Rs3
billion towards implementation of this component
of the development plan.

Only two new grid stations have been completed,

whereas work on another two is in hand. Even
land for the remaining new grid stations have not
be purchased. Again, only partial replacement of
11kv cables and distribution transformers and
installation of new capacitors in limited areas has
been carried out. The company announced in July
2008 that agreements were being signed with
contractors to upgrade existing transmission and
distribution systems. There has been no further
progress in spite of the Asian Development Bank
(ADB) extending $150 million loan in June 2007
for the purpose.

Likewise, rehabilitation and upgradation of the

existing power generation capacity at Bin Qasim
power plant could not be undertaken properly.
The maintenance of various units of Bin Qasim
has deteriorated, resulting in frequent tripping,
and sometimes shut down of the units. A few units
were retired, creating substantial shortfall in
power generation capacity. A sum of Rs12 billion
was to be invested by the KESC management in
financial year 2006-07 for creating additional
power generation capacity as per plan.

There was no progress on the construction of 220-

MW new power plant at the existing Korangi
facilities for long for which the EPC contract was
signed with a Greek company in January 2007.
The International Finance Corporation had
offered $125 million loan to the KESC for its
construction. The plant was rescheduled to be
operational by March 2008 but yet not fully
commissioned. The combined cycle project,
consisting of General Electric’s four gas turbines
of 48-MW capacity each and one steam turbine of
28 MW, has been further delayed. Currently, the
plant is operating partially, in simple-cycle mode,
generating 144 MW of electricity.

Tendering process for the gas-fired combined

cycle power plant at Bin Qasim (575 MW) was
initiated as late as in May 2007. It was announced
that contract would be finalised in October 2007.
The new plant would be operational by 2010.
Nothing was heard of this project, until July 2008
when the company announced that agreement was
being signed with the contractor. Though there is
no physical progress on the project, the contract
has been signed for $378 million. Three gas
turbines of 129 MW each will be installed during
May-July 2011, whereas with the installation of a
steam turbine of 185-MW capacity-- the combined
cycle power plant-- will be fully operational in
January 2012.

Aiming to minimise power shortage, the KESC

decided to install a new barge-mounted power
plant of 45-MW capacity, which was scheduled to
be operational by September 2006. This plant,
said to be imported from Kenya, was never placed
on high seas. Instead, the management later
promised that a 75-MW capacity stationary power
plant would be installed on fast track basis in
Karachi, to come on stream by December 2007.
This did not happen either. Thus there was not a
single megawatt power generation added to the
system by September 2008.

Since all the new power projects were inordinately

delayed, the government directed the KESC, in
March 2008, to add 200 MW to power generation
capacity on rental basis, within six months.
However, the company could establish a rental
power plant of 50-MW (2x25 MW) capacity that
commenced its partial operations in November
2008 and full operation in March 2009.

As a result of strong pressure from the consumers

and civic bodies, the management of the KESC
had announced in November 2008 to add at least
400 MW to its total installed capacity by June
2009. This did not materialise. As on November
18, 2002, KESC had an installed capacity of 1,801
MW, with de-rated capacity/actual capability of
1,412 MW. With the recent commissioning of a
220-MW combined cycle power plant at Korangi
next month, the total installed capacity would be
2,021 MW or de-rated capacity of 1,625 MW,
according to the recent revisions made in the
generation license granted to the KESC by the
Nepra. The KESC planned to replace old gas
turbines installed at Korangi and SITE power
plants, of cumulative capacity of 180 MW, by July
2009, but there are no indications of its
implementation.

Another major cause for power shortfall is that of

heavy line losses due to technical reasons and
power theft. The line losses of over 34 per cent of
revenue in 2005 were targeted by the management
to be reduced to 20 per cent by 2008, but the losses
have instead gone up to over 40 per cent by early
2009. The utility company somehow failed to plan
proper load management, to improve distribution
network and upgrade the grid system using
underground cables, as envisaged, which could
have lowered losses.

As monsoon approaches, the KESC consumers

should expect the worst power outages in the
coming weeks, while continuing to suffer
persistent load-shedding. The irony is that the
government remains indifferent to the alarming
situation, except forming a few committees and
issuing political statements. The federal
government had appointed in May a special
committee headed by the financial advisor
Shaukat Tarin to evaluate KESC’s performance.
It has not concluded its proceedings even after a
lapse of two months.

The reported government’s intention to take over

the KESC control again, does not seem probable,
given its special favours, concessions and generous
subsidies to the utility in the garb of ensuring
uninterrupted power supply to the consumers.

It is shocking that the government is privatising

PEPCO’s Jamshoro and Photo by Arsalan

Kotri power plant, learning nothing from the

experience of the KESC privatisation.
Budget to initiate next phase of reforms
By Anand Kumar
Monday, 06 Jul, 2009 | 01:18 AM PST |

THE economic policies of the United Progressive

Alliance (UPA) government (version 2.0) will be
unveiled today by veteran Congressman and
finance minister Pranab Mukherjee, when he
presents the union budget in parliament.

Mukherjee, who handled the key finance portfolio

between 1982 and 1984 – when Euromoney
magazine rated him as the world’s best finance
minister – was ironically Manmohan Singh’s boss
at that time.

The current prime minister was the governor of

the Reserve Bank of India (RBI), the country’s
central bank in the early 1980s, and would report
to Mukherjee. Singh was picked up as finance
minister by P.V. Narasimha Rao after he became
prime minister in 1991, at a time when the
country was facing enormous problems on the
economic front. Rao then made Mukherjee the
deputy chairman of the Planning Commission,
before elevating him to the cabinet as the external
affairs minister.

Mukherjee’s supporters claim that he was the

original reformer in India, initiating the reforms
process way back in the early 1980s, when the
country was firmly in the grip of the licence-raj
era. The73-year-old politician, who was re-elected
from the Jangipur parliamentary constituency in
West Bengal in May, has been a Congress trouble-
shooter for the past decade, heading innumerable
committees and panels set up to tackle contentious
issues.

Analysts expect Mukherjee’s maiden budget in his

second-term as the finance minister to be
pragmatic, ensuring a proper balance between the
demands of Indian industry and big business (and
reformers), and the pro-poor commitments of the
Congress. Party president Sonia Gandhi has been
emphasising the need for an all-inclusive
approach while tackling the current economic
crisis.

The UPA in its first term (2004 to 2009) initiated

several left-of-centre policy changes including
launching a massive National Rural Employment
Guarantee scheme (NREGS) and waiving off farm
loans. Mukherjee is expected to substantially step
up allocations for the UPA’s flagship programmes
in his budget speech on Monday, even at the cost
of widening the fiscal deficit.

Importantly, the government is also expected to

allocate huge sums for a new food security
legislation that would ensure the supply of 25 kg
of rice or wheat every month at Rs3 a kg to every
below-the-poverty-line (BPL) family in India.
Likewise, the government plans to expand its
NREGS programme and also offer incentives to
farmers who have been prompt in repaying their
loans.

Many see Mukherjee as the most appropriate

candidate in the finance minister’s post, at a time
when global economic crisis has started hurting
growth in India. The minister has his task cut out
for him: accelerating economic reforms,
expanding the allocations for the social sector,
balancing the budget and ensuring rapid
economic growth.

* * * * *

THE annual economic survey that Mukherjee

presented to parliament last week reflects the
dilemma facing the government. The survey
presents the overall economic scenario in the
country, comes out with suggestions
recommending further deepening of the reforms
process, and also warns about the dangers of
pursuing populist policies.

“The speed at which the Indian economy returns

to high-growth path in the short term depends on
the revival of the global economy, particularly the
US economy and the government’s capacity to
push some critical policy reforms in the coming
months,” notes the survey. “If the US economy
bottoms out by September, there could be a good
possibility for the Indian economy repeating last
financial year’s performance.”

For the year ending March 31, 2009, India’s GDP

expanded by 6.7 per cent, remarkable considering
the contraction being witnessed by most developed
economies, but a set-back for an economy that had
been chugging along at over nine per cent over the
previous four years.

The survey notes that there are positive signs that

“Indian industry may have weathered the most
severe part of the shock and is moving toward a
recovery.” The survey forecasts the economy
could grow by seven per cent, with a margin of
error of plus/minus 0.75 per cent. But it all
depends on the monsoon. The south-west
monsoon, which sets in over the country in June,
has been disastrous in the first month. The
government hopes there would be good rainfall
over the next two to three months to make up for
June’s deficit.

Mukherjee is cautiously hopeful that the monsoon

would be normal, ensuring a seven-plus per cent
growth in the current fiscal.

But the economic survey does not mince words

when it seeks a further deepening of the reforms
process. “India should be back on the new trend
growth path of 8.5 to 9 per cent per annum
(economic growth) provided the critical policy and
institutional bottlenecks are removed,” points out
the survey. “It is, therefore, imperative that the
government revisit the agenda for pending
economic reforms in the first instance.”

Successive governments in India have realised

that economic reforms can be pursued vigorously
only during the first two or three years of its
tenure. The last two years of the five-year term
are spent on wooing the electorate by rolling out
concessions and rolling back some of the reforms
measures.

* * * * *

LAST week saw the Manmohan Singh

government revert to a much-criticised practice of
raising the price of government-controlled
commodities such as petrol and diesel, days before
the presentation of the budget.

Raising petrol and diesel prices is always a nasty

job for any government in India. When the BJP-
led National Democratic Alliance government was
in power between 1998 and 2004, it faced a similar
dilemma: how to jack up petroleum product
prices to ensure that the state-owned refiners did
not go bankrupt. The Congress, which was in the
opposition, would stoutly oppose any such moves.

Now that the Congress-led UPA is in power, the

BJP and other opposition parties are equally
vehement in their opposition to price hikes –
though both petrol and diesel are largely
consumed by affluent Indians. (Most Mercedes
Benz cars, Volvo buses and other high-powered
vehicles in India run on diesel).

The government last week went in for a stealthy

price increase, raising the price of petrol by Rs4 a
litre and diesel by Rs2. Petroleum product prices
were reduced sharply just before the elections,
with the government citing the sharp fall in the
price of international crude oil over the previous
few months. Last week, it again cited the spurt in
crude oil prices for the increase.

But the economic survey lashed out at the

government for its ‘imperfect’ handling of oil
pricing. It called on the government to decontrol
petrol and diesel prices, even suggesting that the
price of LPG (liquefied petroleum gas, used for
cooking purposes) should not be subsidised.

Several committees have over the years urged the

government to withdraw all subsidies on petrol,
diesel and LPG. Most of the BPL families cannot
afford vehicles, nor do they buy LPG. Public
transport, including railways, is heavily subsidised
anyway, so it is only the affluent who benefit
because of the subsidy in petroleum products.

The survey also urged the government to maintain

financial discipline by sticking to the fiscal deficit
target of three per cent. Last fiscal, the deficit shot
up to 6.2 per cent as the government went on a
spending spree, investing in social sector projects,
writing off farm loans and wooing the electorate
just before the elections.

It also urged the government to withdraw

subsidies on a host of other commodities and
goods including sugar and fertiliser and even
decontrol drug prices. Prodding the government
to move ahead on the reforms path, it sought for a
significant hike in foreign direct investment (FDI)
levels in the insurance sector – from the current
26 per cent to 49 per cent, and even 100 per cent
in the case of health and weather insurance.

The survey also reminded the government about

the need to push pending legislation relating to
pensions, insurance and forward contracts. Will
Mukherjee, in his second avatar as finance
minister, bite the bullet and accelerate reforms?
His budget will reveal his plans for the next stage
of reforms.
Managing growth with full employment
By Mahmud Ahmed
Monday, 06 Jul, 2009 | 01:18 AM PST |

THE common man is badly hit by high prices and

rising unemployment following a dramatic drop in
economic growth.

Inflation and joblessness directly impact on his

livelihood.If prices go up, his purchasing power
falls. He is most vulnerable to price hikes.

If he is unemployed, there is no source of income

or independent livelihood. Things become worse
when an educated youth cannot find a job The
investment made on his education becomes
unproductive.

High employment and low wages are squeezing

the consumers’ purse and also the size of the
domestic market. Unemployment for the poor is
worse than low incomes eroded by high prices

Even in normal times, business houses tend to

shed labour while upgrading technology and skills
under the prevalent flexible labour policy or when
shedding their fat.

They do not offer life- time career. The

government focuses on physical and social
infrastructure projects that provide temporary
jobs. There is no growth strategy to provide full
employment. There is no concept of common good
in government policies formulated under deep
external influences apart from offering doles to
the most vulnerable. It is time to provide the
common man an enabling environment to fend for
himself.

If millions remain unemployed, their labour

cannot be put into productive use, national wealth
cannot be multiplied quickly and the national
economy suffers. Labour, an asset, turns into a
liability. under present economic model. Economic
strategies that do not envisage full employment,
particularly in developing countries with scarce
capital and surplus labour, cannot achieve
sustainable growth.

In the current global crisis of capital, it is the

human skills that have a key role to play, with
ideas and creativity in all spheres and at all levels
of economic activity. With full employment and
better income distribution, Pakistan could be a big
prosperous market for goods and services
produced within the country. It means focusing on
labour-intensive projects and producing primarily
for domestic market. Poverty offers economic
agents a massive potential for economic
development.

The current policy package links interest and

exchange rates to the inflation rate. High inflation
rate translated into higher interest and lower
exchange rates discourages investment and
production. Depreciation of rupee encourages
cheaper exports for foreign buyers and costlier
imports for local consumers. It depresses domestic
demand in order to create more surplus for
exports at the cost of domestic consumption. It
makes the market shrink for domestic production.

While with right policies, increased production

that provides full employment, should increase
supply and stabilise prices. There is no system
better than full employment to distribute incomes.

While there can be no two opinions about the

importance of macroeconomic stability, views can
differ on how to go about it. The recourse to IMF
credit helps fire – fighting and its programme
gives a semblance of stability for a while, only to
be eroded by economic recovery. Only stability
generated from increased production can be
durable as evident in case of China.

No doubt imbalances occur in the process of

economic growth but they become chronic when
they remain unattended and not corrected
promptly. In the recent years, fiscal trade and
current account deficits were allowed to fester in
the pursuit of consumerism, mercantilism and
casino games.

This benefited a renter class. It was a deliberate

attempt to put the country back under the IMF
programme.

The outcome was: high interest rates, huge

depreciation of rupee, sharp decline in investment,
under-utilisation of industrial capacity and
dramatic fall in growth rate. If a country is under
the IMF programme, the message sent across the
world is that it is in trouble. It scares away foreign
investors.

Instead of raising domestic resources , policy

makers borrow from the IMF. This reduces the
space for sovereign decision-making and genuine
reforms to shore up the economy.

As a lender, the fund prescriptions are aimed at

improving balance of payment. The macro-
economic stability is achieved at the cost of
economic growth. Other issues are of no
consequence to the fund. And the price is paid by
the common man.

Not too long ago, economists used to say that

rising production increases supply of goods and
services and helps bring price stability. Now
consumers are told that growth breeds a high rate
of inflation. This is the outcome of the Anglo-
Saxon financial model that has dominated the
global financial market for the past few decades
and is now crumbling under its own weight. It is a
hurdle in turning money into productive capital
and misdirects cash towards speculative activity.

Moreover, the growth under this model spurs

imports, widens trade and current account deficits
and creates an unfavourable balance of payments.
This growth has not come about by boosting
domestic savings, investment, production and
exports. Rather, it is artificially stimulated by
external capital and financial inflows.

A major drawback in foreign debt-driven

economic growth is that it stalls the need for basic
reforms that could help remove structural
imbalances, holding back sustainable economic
and social progress.

Foreign money protects the status quo by being an

alternative option. So, there is no need to tax farm
incomes even when the government’s policies have
resulted this year in transferring an extra Rs294
billion to the rural economy. Speculative
investment enjoys a tax holiday while
manufacturing, an engine of economic growth,
provides over 60 per cent of the tax revenue. The
government needs revenue badly to undertake a
massive development programme to shore up
economy and provide jobs.

But the tax- to- GDP ratio is constantly declining

and tax revenue is down to nine per cent of the
GDP. Even when the economic growth was high in
recent years, the tax-to-GDP ratio was on the
decline. The efficiency of the tax administration is
at the lowest ebb. Tax collection is over-
centralised with two tiers of the government at the
provincial and district levels dependent on the
federal government for 90-100 per cent of their
revenues.
In an environment of poor governance, the
federating units and the districts are accountable
to an inefficient administrative set-up at the
federal level rather than to the tax payers for
whose benefit they are supposed to work and to
whom they should be accountable.

Officials in Islamabad accuse the provincial

governments of being inefficient and incompetent
while they themselves fail to deliver. The
centralisation of tax collection and distribution is
politically motivated and cannot resolve issues in a
complex and diversified economy.

The unitary system of tax collection and

distribution needs to be abolished.

The over-centralised system denies fiscal

autonomy to provinces and the districts. The
system is not accountable to taxpayers, nor to the
beneficiaries whom it claims to serve from the
revenues raised from taxes .

Over 80 per cent of tax revenue comes from

indirect taxes if withholding tax, passed on to the
consumers as an expense, is included. But the axe
falls on development programme, particularly in
the social sector, in case of financial constraints,
that too in an age where human resource
development, rather than capital, is the first pre-
requisite to modernise the economy. The
regressive taxation system works against the
common citizen.
Setting priorities for industrialisation
By Shahid Javed Burki
Monday, 06 Jul, 2009 | 01:18 AM PST |

THIS may be a good time to reflect on some of the

basic assumptions that have governed the making
of public policy with respect to industrialisation.

It is now recognised by economists and policy

analysts that industrialisation – its pace, scope and
content – responds to public policy.

This is one reason why Islamabad, working closely

with the private sector, should carefully define the
content of public policy in order to determine the
direction the country should take. The focus
should be on three aspects of structural change in
the sector of industry. As industrialisation gathers
pace, what should industries produce?

Where should industries be located; should

industrialisation be used to lift the more backward
regions of the country as was attempted during
the period of President Ayub Khan (1958-69) or
should the question of location be left to the
private sector?

And, where should the products of

industrialisation be sold? The last question leads
to another issue: how much emphasis should be
placed on export promotion as an objective of
industrialiation?

Economists have also begun to recognise that since

countries have different histories and different
structural characteristics, appropriate policies will
differ and evolve differently. There is no one-side-
fits all public policy approach to industrialisation.

In Pakistan’s case, the initial direction of

industrialisation was influenced by the trade war
with India that broke out in 1949 over the issue of
the rate of exchange between the currencies of the
two countries. For legitimate reasons, Pakistan
had refused to devalue its currency with respect to
the dollar, a step that was taken by all countries of
the British Commonwealth.

That changed the rate of exchange between the

two currencies from parity to 144 Indian rupees
for 100 Pakistani rupees. This was not acceptable
to India. When trade with India stopped, Pakistan
was forced to industrialise quickly by emphasising
the production of basic manufactures.

Since the Pakistani state at that time was weak

and was short of funds, it relied on private
initiative to lead the industrialisation drive. This
had a profound consequence for the development
of the structure of the industrial sector. Unlike
India, Pakistan focused on consumer industries
and on private initiative while India put the public
sector on the commanding heights of the economy
and invested heavily in heavy industries.

The other significant historical influence on the

industrial development was the decision by the
administration of President Ayub Khan to spread
the ownership of industrial assets by using the
government’s licensing mechanism for inviting
new comers and by encouraging them to locate the
sanctioned units in the underdeveloped areas. This
approach checked the growth of Karachi as the
country’s industrial hub.

This policy also had a profound consequence for

the structure of industry, particularly of textiles.
By sanctioning new units of no more than 12,500
spindles, the country developed an industry that
did not have the scale to become competitive. It
also restricted most weaving activities to cottage
industries.

The structural consequences of Prime Minister

Zulfikar Ali Bhutto’s nationalisation of large-scale
industries are another historical fact that needs to
be factored into the understanding of the
character of the Pakistani industrial structure.

With this as the background, we will begin to find

answers to the questions posed above. Analytical
work done at the UNIDO has established a strong
relationship between industrial sophistication,
structural change and growth.

According to the institution’s latest World

Industrial Report, “research findings confirm that
diversifying and moving up the production
sophistication ladder in industry are important
drivers of development.”

But sophistication need not imply the production

of a large number of final products in a number of
different sub-sectors. With the changes in the
international industrial structure that have
resulted from the remarkable development of
information and communication technologies, the
production process has been decomposed into a
series of tasks which can be apportioned
according to the comparative advantage of
various production centres.

For countries such as Pakistan that have missed

out in the initial phase of industrialisation that
produced a number of economic miracles,
particularly in Asia, it may be more appropriate
to concentrate on building a task based industrial
economy.

Researchers who have studied the development of

this approach to industrialisation and compared
them to structures that produce total products,
the conclusion reached is that the concentration
on tasks is no less sophisticated than the one
where industries concentrate on start-to-finish
production.

That is said even when an entire product is

produced in one location – men’s shirts in
Bangladesh for instance – there is still some
reliance on imports. The garment producers, for
instance, buy buttons from China which are most
probably produced in Qiaotou, often called the
button capital of the world. The world is moving
rapidly towards greater integration of industrial
processes.
The next issue is of location. Manufacturing
industries and service activities tend to
concentrate in geographic areas, often in or close
to major cities. According to UNIDO, “the
economic literature on high and middle income
countries provides persuasive evidence of the
existence of agglomeration economies…industrial
agglomeration is also important for developing
countries. Productivity is higher if manufacturing
firms cluster together.”

Cluster economics has become an important

subject of study ever since the pioneering work
done by Michael Porter of Harvard University.
Pakistan has some examples of clusters whose
development was not induced by public policy but
by organic growth. Sialkot, the home of sports
goods and surgical industries, is one example of a
cluster. Gujranwala (electric motors and electric
fans), Gujarat (furniture), Peshawar (fruit
processing) and Kasur (leather) are some other.
Qiaotao, China’s (and the world’s) button capital
is the most intensively analysed case of a cluster.

As indicated, the development of clusters in

Pakistan was not the outcome of public policy
directed at them. It happened naturally. For the
government to help the industries located in the
clusters, it will need to provide help to upgrade
technology, provide market information, and also
introduce them to new sources of finance such as
private equity and venture capital funds. The
most important contribution the state could make
is in the area of knowledge development.

Some of the more successful clusters in the

developed world are located in close proximity to
the institutions of higher learning. It was the close-
at-hand presence of Stanford University and the
Berkeley Campus of the University of California
that resulted in the development of the software
industry in the Silicon Valley. Given the close
proximity of Sialkot, Gujranawala and Gujrat,
the government could work with the private sector
to locate a school of engineering somewhere in the
area.

The third question concerns the link between

export and industrial development. Both macro
evidence as well as the evidence gathered from
individual case studies suggest a strong association
between the two. Trade in manufactures has
continued to grow much more rapidly than
manufacturing output. And the share of
developing countries has increased. Their
manufacture exports increased from $1.4 trillion
in 2000 to $2.5 trillion in 2005.

The growth in the trade in tasks was even more

impressive. In the period 1986-1990, imported
intermediary products accounted for 12 per cent
of the world’ manufacturing output and 26 per
cent of total intermediate imports. By 2000, these
figures had risen to 18 and 44 per cent
respectively. By 2009, more than one-half of the
intermediate products going into final production
are imported. The proportion is much larger for
East Asia. The conclusion is clear. Pakistan by
focusing on tasks rather than the production of
final products will not lose out on the rewards of
industrialisation even if it has been delayed.

The need for sophistication brings together the

three factors we have discussed above. There is
plenty of evidence to show that the countries that
have done well economically have left behind low-
sophistication export sectors and entered into
more sophisticated ones. Slow growers either
stayed in the same place or have moved in the
opposite direction. The challenge faced by the
policy makers is clear: they need to move the
industrial sector towards sophistication. In
Pakistan’s case the sophistication will be in
developing tasks rather than final products.
Recession not to disappear any time soon
By M. Ziauddin
Monday, 06 Jul, 2009 | 01:17 AM PST |

THE latest data released by the Office for the

National Statistics (ONS) has confirmed that the
gloom hovering over the recession beleagured
economy of the UK is not going to disappear any
time soon.

According to this data, the recession facing

Britain is even deeper than had been thought and
started more than a year ago.

Revising its initial estimate of drop in the national

income for the first quarter of this year from the
earlier 1.9 to 2.4 per cent the ONA has sent
shivers across UK’s economic landscape.

This is said to be the biggest drop in the national

income since 1958.

Much worse than expected, these figures must

have come as a shock for the Brown government
whose political and economic credibility is already
in tatters.

Extended to the whole year, the drop in output in

the January to March period is now equal to 4.9
per cent – the worst since records began in 1948.

The expectations that the recovery would come as

soon as possible seems to have been overly
optimistic. It is being realised that the current
recession has been longer and deeper than
officially thought.

This also means that in the future unemployment

will be higher and Labour government’s debt
crisis will be even worse.

Recalling that the GDP fell 2.4 per cent in the

third quarter of 1979 and first quarter of 1974,
statisticians said these were rounded from 2.36 or
2.37 per cent whereas the figure for this year was
exactly 2.4 per cent.

The reasons for the overestimation of projected

figures were said to be highly optimistic projection
in the growth of construction and services sectors
which gave a positive but false picture of the
things to come.
The ONS has also revised down its figure for drop
for the second quarter of last year to -0.1 per cent
from zero, meaning the recession started earlier
than previously thought .as the fourth quarter of
2008 figure was revised down to a fall of 1.8 per
cent.

Some independent economists equate the current

recession to the early 1980s vintage because it
appears that the onset of the current recession
began in the second quarter of 2008 and not in its
third quarter.

The recession, therefore, is now being dated to

have begun in the second quarter of 2008 rather
than the third.

It seems that the Monetary Policy Committee of

the Bank of England had also misread the
ominous signs and kept the interest rates on hold
in the first half of last year arguing that there was
little likelihood of a recession occurring implying
that rate cuts were not being contemplated. It
seems the economy had entered recession last
spring.The Trades Union Congress commenting
on the ONS figures said that while there were
signs of “green shoots” in the economy, this was
more to do with an easing of the pace of the fall in
output rather than that a big recovery was under
way.

“This recession is already worse than the 1990s

one and is likely to be worse than that of the
1980s,” said Richard Excel, TUC labour market
expert. “It has been very severe and we are
probably only half way through. It will be quite
some time until employment and growth return to
pre-recession levels.”

Paul Gregg, labour market expert from Bristol

University meanwhile noted that unemployment
had started rising earlier in this recession than in
previous ones and was “encouraged” that monthly
rises in the claimant count appeared to be slowing
down.

All this emphasised that the economic recovery as

reported in May-June is built on extremely fragile
foundations.

Of course, the first quarter numbers are historic

and it is known that the economy contracted by
far less – and possibly even expanded – in the
second quarter. Still, the figures clearly leave an
even weaker platform for growth this year, with
average GDP growth in 2009 now looking likely to
be -4 per cent or even weaker rather than the -3.5
per cent previously expected. This obviously has
implications for the degree of spare capacity likely
to open up in the economy.

What’s more, some of the details in the ONS

release do not provide much encouragement in
terms of the likely strength of the economic
recovery ahead. In particular, the renewed fall in
the household saving ratio from 4-3 per cent
underlined the fact that the necessary adjustment
in household sector balance sheets has a long way
yet to go. Meanwhile, the weakness of company
profits (-6.2 per cent y/y) also bodes poorly for
investment prospects.

Elsewhere, the balance of payments figures also

made for rather uncomfortable reading, with the
current account deficit coming in at £8.5 billion in
the first quarter after an upwardly revised £8.8
billion in the fourth quarter. Although the trade in
goods and service deficit has narrowed over recent
quarters, UK earnings on overseas investment
have slumped.

Meanwhile, June’s rise in the purchasing

managers’ index of the CIPS/Markit report on
manufacturing (released on Wednesday last from
45.4 to 47 in June was the fourth increase in a row
and left the index at its highest level for a year.
Most strikingly, the output index actually moved
above the 50 “boom/bust line” (to 52.1) for the
first time since last March, apparently signalled a
return to positive growth.

However, The Capital Economics Limited, a

London based economic research firm in its latest
report said that there are a couple of reasons not
to get too excited. For a start, historically, an
output balance of about 54 has normally been
needed to be consistent with actual increases in
the official output data.

Accordingly, the average reading of 48.1 in Q2

still points to a quarterly fall in manufacturing
output of around two per cent, better than Q1’s
5.5 per cent but still very weak. And second, the
new orders balance edged up only a touch in June
and remains below 50. Accordingly, the bigger
rise in the output balance may have partly
reflected the temporary effects of a shift in the
inventory cycle. Until orders are rising again, a
sustained return to positive output growth is
unlikely.

Combined with the services index for April, which

showed output slipping by just 0.1 per cent
compared to March, the figures provide further
evidence that the economy contracted far less
sharply in Q2 than the 2.4 per cent drop seen in
Q1.
Capital flight from developing states
By Ashfak Bokhari
Monday, 06 Jul, 2009 | 01:17 AM PST |

ILLICIT money flowing from the developing

countries to tax havens before the current global
crisis far exceeded the net legal inflows and, in
fact, was equal to roughly ten times the
development assistance given to these countries.

This was revealed by a study carried out by the

government in Norway, titled, ‘Tax haves and
development’. However, the financial crisis has
led to decline in capital flight over the past year.

While the total registered capital inflows into

developing countries in 2006 were estimated by
World Bank at $571 billion, the illegal money
outflows totalled $641-979 billion. Not all the
illegal money flows, however, go to tax havens, but
the placements in these jurisdictions are very
large and that a substantial proportion of the
capital placed there is not declared for tax.

The Tax Justice Network estimated in 2005 that

placements by high net-worth individuals in tax
havens totalled $11-12,000 billion in 2004. Official
statistics suggest that the scale of such placements
increased sharply in subsequent years.

The classic tax havens are not alone in creating

systems that cause loss and harm to public and
private interests in other states. Many countries
possess elements of damaging structures, but they
often do not have the full range of structures such
as those found in full-fledged tax havens. Of
particular significance are various pass-through
arrangements.

When President Obama submitted proposals on

new tax regulations and measures against tax
havens on May 4 this year, the official press
release noted that almost a third of all profit
earned abroad by US companies came from
“three small low-tax countries: Bermuda, the
Netherlands and Ireland”.

The Netherlands is probably the largest and most

popular pass-through state. It is regarded a tax
haven because it has regulations which allow
companies to reduce their tax in other countries
by establishing shell companies there.

Then, creating companies under false names is

easier to do in countries such as the US and the
UK than in countries regarded as tax havens.
Generally speaking, a number of countries not
considered to be tax havens have regulations and
practices which are well suited to committing
various types of economic crime.

Richard K. Gordon, in a study titled “Laundering

the proceeds of Public Sector Corruption”
published in March, 2009, has reviewed 21 cases
involving economic crime committed by
“politically exposed persons.” Many of these
involve the creation of shell companies in order to
conceal the criminal activity and its proceeds. In
half of the cases, the companies were established
in countries which Gordon does not regard as tax
havens. The cases include those of ex-president of
Nicaragua Arnoldo Aleman, former Russian
Minister of Atomic Energy Yevgeny Adamov,
Raul Salinas, brother of President of Mexico,
Carlos Salinas, BCCI, Bofors case of India, Joseph
Estrada, ex-president of the Philippines, etc.

The Norwegian study shows how tax havens

increase opportunities for tax evasion. A common
feature of many developing countries is that they
often lack resources, expertise and capacity for
building up an efficient tax collection system
which, therefore, remains weaker than that in
richer nations. As a result, these countries also
have limited opportunities to pursue cross-border
investigations.

It is a hard fact that the tax havens weaken the

state institutions and the political system in
developing countries by helping politicians there
to develop a self-interest in the weakening of these
institutions. A case in point is the presence of
extensive rain forests in the Philippines, Indonesia
and Malaysia which have led to the destruction of
state institutions by politicians.

The rain forest assets provided many politicians

big opportunities to enrich themselves but, in
order to do so, they had first to undermine the
state institutions which, incidentally, were there to
check misuse and excessive exploitation by
persons like them. There are also big kick-backs
and commissions for politicians, civil and military
officials and businessmen in big commercial
contracts including defence purchases.

Similarly, countries with large oil deposits tend to

become less democratic because democracy
prevents them from using large government
revenues as they like.
It was because of these factors that President
Suharto of Indonesia and his family, it is
estimated, misappropriated $15-35 billion from
the national exchequer. The legal inquiry has
largely focused on Suharto’s family and
particularly his son Tommy. Suharto is suspected
of having misappropriated more money than
anyone else.

Capital flight from Africa varies from year to year

and between countries. Accumulated over the
1970-2004 period, it is estimated at $420 billion.
With calculated interest accumulation, capital
flight is assumed to total $600 billion over the
period. This corresponds to almost three times the
total foreign debt of the countries concerned.

Capital flight increased by about 150 per cent in

the developing countries from 2002 to 2006. The
growth was fairly steady, but particularly strong
in 2002-03 and 2005-06. China and Saudi Arabia
top the list for capital flight. From China it is
about four times larger than the figure for Saudi
Arabia. The G-20 declaration in April this year
had stated that proposals will be developed by the
end of 2009 “to make it easier for developing
countries to secure the benefits of a new
cooperative tax environment”. While it is
important that developing country requirements
are taken into account, it is to be seen whether
practical measures are taken to ensure
information access.

According to a study titled “Why are tax havens

more harmful to developing countries than to
other countries?” by Ragnar Torvil published on
May 15, 2009, public sector funds of the
developing countries, too, are concealed in tax
havens, to enrich corrupt bureaucrats and
politicians. Mobutu Sese Seko of Congo who held
power from 1965 to 1997, is a well-known
example. Tax havens helped Mobutu conceal the
great wealth his political position enabled him to
steal.

Tax havens provide the political elite in

developing countries instruments for concealing
the wealth they plunder.

There is a view that countries with rich natural

resources end up at a lower income level. This
phenomenon is often called ‘the resource curse’ or
‘the paradox of plenty’. And it is relevant to
democracies with presidential rule but not for
those with parliamentary system.
South of the Sahara in Africa, there were four
times as many countries with parliamentary
constitutions as with presidential rule on the eve
of independence. Gradually, constitutions were
changed and today only three of the 21 countries
retain parliamentary systems. None of the
countries that began with presidential rule has
changed to a parliamentary system.

Mobutu became president from prime minister in

Zaire in 1967, Mugabe in Zimbabwe in 1987,
Stevens in Sierra Leone in 1978, Banda in Malawi
in 1966 and Nkrumah in Ghana in 1960.
Presidential rule with its concentration of power
goes hand in hand with tax havens. The political
system is determined by the interests of its
political power elite.

The tax havens create possibilities for personal

enrichment through a political career, and make it
tempting for opportunist politicians to distort
institutions and political systems.

In many countries, particularly in Latin America,

capital flight is accompanied by increased foreign
borrowing. This borrowing is not used to finance
investment or consumption, but to finance the
capital flight itself.
Banks need more than macro-prudential
regulation
By A.B. Shahid
Monday, 06 Jul, 2009 | 01:17 AM PST |

AS time passes, more startling revelations about

indiscretions of the players in the financial
services sector strengthen the view that something
is seriously wrong with the way this sector is
regulated.

Hopes about risk mapping, its management

focused on containing it within an institution’s
managerial capacity, as well as self-regulation by
the financial sector, were overoptimistic. The view
now gaining momentum in the developed
economies – the worst suffers of the current
financial crisis – is that the state must take on the
role of risk mapping, and constantly enforce safe
risk-taking limits on financial institutions.

It may sound harsh to the defenders of free

markets but, right now, they have a weak case. In
Pakistan, where banks have so far survived their
mounting losses, things can get worse because they
still don’t feel the need for an organised set-up to
forecast future profile of market risk. Essentially,
banks rely on borrowers’ financial analysis;
management of market risk is largely assumed to
be the borrowers’ responsibility.

During 2004-08, when trade deficit multiplied

each year, bankers should have guessed its
outcome – rising current account deficit, chances
of default on external payments, capital flight
leading to depreciation of the rupee, and (given
progressively worsening risk profile) eventually
bending before the IMF with a begging bowl and
bartering away the state’s fiscal authority to the
disadvantage of every citizen.

Obviously none in the banking sector watched the

burgeoning trade deficit and the multiple risks it
posed to the economy. Banks went on establishing
LCs for everything, including items that steadily
eroded the already low competitiveness import-
substitution industries. This was hardly an
expression of national responsibility or business
vision because national savings are now tied up in
ever increasing non-performing loans (NPLs).

Remaining glued to profit-making without

visualising the consequences of risky lending and
weak institutional support services (asset
valuation, customs clearance, transportation,
custody and litigation) for containing risk, was
compounded by weak risk assessment and facility
structuring skills in banks’ frontlines. To cap it all
was the virtual absence of market risk monitoring
although high market volatility was visible from
end-2006 onwards.

All these oversights and weaknesses need to be

addressed instead of following the global example
of greater focus just on macro risk management.
The well-organised developed countries can afford
to limit their focus to macro risk; to limit systemic
risk, besides macro-risk management we need to
address structural weaknesses in banks as well as
those in the support services. Put together, this is a
tall order but not impossible to serve.

The constitution of the European Systemic Risk

Board is the latest development that marks
European concern for creating an institution that
would sound alarm over dangers to regional
financial stability and suggest ways of averting it.
This board will become functional by the end of
2009 so that from there on, banks are guided and
forced to guard against escalation in systemic risk
caused by changes in macro risks.
We need urgent serious thinking along the same
lines without any loss of time. True, banks are
struggling with the recovery of NPLs, but focusing
all energies thereon amounts to adopting a short-
term approach. The former World Bank chief
economist Joseph Stiglitz believes that market
volatility would become more intense; to confront
risks arising there from more confidently, SBP
and the banks must prepare a strategy now.

How the SBP responds to the global re-think

about macro risk monitoring remains to be seen,
but there is no doubt that banks’ perception of
this vital function doesn’t appear very responsible
and realistic. Rising NPLs manifest banks’ weak
risk assessment and lax monitoring of the health
of risk assets. That being the case, SBP must
strengthen its own risk monitoring capability and
regulate banks strictly in light thereof.

So far, the focus of SBP’s economic research has

been to collate data and conclude “what
happened”. But the SBP may now be required
(provided the government mandates the SBP to do
so) to predict with a reasonable degree of
certainty “what could happen”, and how banks
must prepare themselves for it by adopting SBP-
suggested risk containment guidelines. This will be
a radically changed regulatory requirement.

For banks, it is important that weaknesses of their

support services are remedied by revamping
licensing pre-conditions including minimum
certified skills, standardised organisational set-
ups, and mechanisms for timely checking and
rectifying activity malfunction. This implies
setting up of independent and competent licensing
authorities that are also equipped with adequate
numbers of qualified service quality inspectors.

Banks must overhaul their hiring and

remuneration policies to eliminate the chances of
taking on under- or inappropriately-skilled
individuals, or rewarding and promoting
undeserving employees. At the same time, banks
must institute on-and-off-job skill development
practices i.e. tougher accountability of supervisors
for their failure to develop skills of the employees
reporting to them, and training linked to
employees’ future role.

While the global thinking now is that central

banks should accept the responsibility for
tracking and mapping macro risks, there is no
reason why banks should continue to ignore this
critically important function. After all, it is banks
that accept risks, not central banks. Their recent
track record strongly suggests that banks must
create in-house market research units, by all
means limited to the banks’ areas of market risk
acceptance.

The big advantage thereof would be to present to

the SBP a solid research-based view when there is
difference of opinion between banks and the SBP
view of one or several connected macro risks. But
if banks don’t set up their own market research
units, they will have no credible basis for differing
with SBP view of macro risks, and would have to
follow SBP instructions about cutting risk
exposures – a tough proposition at times.

The EU has also formed the European System of

Financial Supervisors to push for convergence in
regulation, exert more influence over national
supervisors, and resolve difference between them.
Saarc member countries that also share a common
currency called the Asian Currency Unit (ACU)
need a similar body to improve trade and related
intermediation between member country banks.

This is imperative because one of the factors

limiting trade between Saarc member countries is
the hugely time-consuming mode of settlement of
transactions denominated in the ACU. Talk to any
trading house dealing with counter-parties in
Saarc countries, and you will hear harrowing tales
of how long it takes to pay or receive from a Saarc
member country the funds denominated in the
ACU.
Bank borrowings decline

According to the Statement of Affairs of the State

Bank of Pakistan, for the week ended June 27,
2009, both notes in circulation and those issued
decreased in the week.

Notes in circulation stood at Rs1,231.652bn

against earlier week’s figure of Rs1,248.112bn, a
fall of Rs16.46bn. When compared to the
corresponding week a year ago when it was
Rs1,050.148bn, the current week’s figure is higher
by Rs181.504bn.

Total notes issued also declined in the current

week over preceding week’s level. At
Rs1,231.781bn it was smaller by Rs16.504bn over
the figure of Rs1,248.285bn recorded a week
earlier. In the corresponding week last year it
amounted to Rs1,050.308bn, which shows current
week’s figure to be higher by Rs181.473bn over
last year’s corresponding figure.

Approved foreign exchange increased in the week

to Rs337.176bn higher by Rs9.067bn over
preceding week’s figure of Rs328.109bn. When
compared to the corresponding week a year ago,
when the figure was Rs454.139bn, the current
week’s figure is lower by Rs116.963bn.

Balances held outside Pakistan in approved

foreign exchange increased in the week under
review. It stood at Rs405.748bn over preceding
week’s figure of Rs404.635bn, a rise of Rs1.113bn.
Compared to last year’s corresponding figure of
Rs143.807bn, the current week’s figure is larger
by Rs261.941bn.

Loans and advances of scheduled banks to the

three sectors – agricultural, industrial and export
showed a mixed trend in the week under review.
The agricultural sector received Rs58.230bn,
similar to preceding week’s figure. The current
week’s figure is larger by Rs8.453bn over last
year’s corresponding figure of Rs49.777bn.

There was an inflow of Rs37.993bn to the

industrial sector during the week under review, a
rise of Rs0.129bn against preceding week’s figure
of Rs37.864bn. When compared to last year’s
corresponding figure of Rs39.465bn, the current
week’s figure is smaller by Rs1.472bn.

The export sector received Rs176.730bn against

previous week’s figure of Rs174.769bn, higher by
Rs1.961bn. Current week’s figure was larger by
Rs75.767bn over last year’s corresponding figure
of Rs100.963bn.

According to the weekly statement of position of

all scheduled banks for the week ended June 27,
2009, deposits and other accounts of the scheduled
banks decreased in the current week and stood at
Rs4,120.087bn, higher by Rs68.218bn over
preceding week’s figure of Rs4,051.869bn.
Compared with last year’s corresponding figure
of Rs3,832.454bn, the current week’s figure is
larger by Rs287.633bn. During the current week,
commercial banks deposits showed a rise of
Rs67.181bn over the week to Rs4,106.921bn,
against preceding week’s Rs4,039.740bn.
Specialized banks deposits stood at Rs13.166bn,
against preceding week’s Rs12.129bn, a rise of
Rs1.037bn.

Borrowings by all scheduled banks decreased in

the week. It fell to Rs485.299bn over preceding
week’s figure of Rs504.330bn, a fall of
Rs19.031bn. Compared to last year’s
corresponding figure of Rs389.585bn, current
week’s figure is lower by Rs75.714bn. Commercial
banks borrowings fell to Rs404.359bn against
previous week’s Rs423.475bn, or by Rs19.116bn.
Borrowings by specialized banks stood at
Rs80.940bn, higher by Rs0.085bn over preceding
week’s figure of Rs80.855bn.

Gross advances stood at Rs3,168.566bn in the

week under review, a fall of Rs0.368bn over
preceding week’s figure of Rs3,168.934bn.
Compared to last year’s corresponding figure of
Rs2,943.319bn, current week’s figure is larger by
Rs225.247bn. In the week under review, advances
by commercial banks fell to Rs3,063.578bn against
earlier week’s figure of Rs3,064.365bn, or by
Rs0.787bn. Advances of specialized banks stood at
Rs104.988bn, higher by Rs0.419bn over earlier
week’s figure of Rs104.569bn.

Investments of all scheduled banks increased in

the week by Rs2.266bn to Rs1,348.807bn against
preceding week’s figure of Rs1,346.541bn.
Compared to last year’s corresponding figure of
Rs1,007.529bn, current week’s figure is larger by
Rs341.278bn. In the current week, commercial
banks investment rose to Rs1,337.978bn, from
earlier week’s Rs1,336.209bn, or by Rs1.769bn.
Specialised banks investment stood at Rs10.829bn,
against preceding week’s Rs10.332bn larger by
Rs0.497bn.
Cash and balances with treasury banks of all
scheduled banks increased by Rs17.627bn during
the week to stand at Rs371.373bn against earlier
week’s Rs353.746bn. Current week’s figure is
smaller by Rs47.56bn compared to last year’s
corresponding figure of Rs418.933bn. In the
current week, the figure for commercial banks
stood at Rs367.551bn against preceding week’s
figure of Rs349.909bn, a rise of Rs17.642bn, while
of specialised banks it stood at Rs3.822bn over
previous week’s Rs3.837bn.

Total assets of scheduled banks stood at

Rs5,595.364bn, larger by Rs58.834bn, over
preceding week’s figure of Rs5,536.530bn.
Cut in profit rates on savings boosts stocks

THE stock market last week opened the new fiscal

year on a bullish note as some investors, it seemed,
had decided to go by basic market fundamentals
rather than the negative external factors and a
reported proxy war among big ones on some
issues.

The 0.5 to 1.6 per cent cut in profit rates on the

national saving schemes had already provided a
launching pad for a belated bull-run and both
local and foreign investors rode the bandwagon in
anticipation of money inflow from these quarters
into the liquidity-starved share market.

But the late week’s loud whispering of an

arrangement on bridge financing, pending the
official launch of new leverage product currently
passing through the process of scrutiny and
information-sharing in the relevant quarters, was
the real morale booster for investors, analysts
said.

After its launching by the SECP, it would ensure a

reliable source of financing for the share business
catering to the expanding market needs of
liquidity.

Official launching of the product is expected by

the end of this month and how it is greeted by
investors, would shape the future market trend.

An idea of the sustained bull-run may well be had

from the fact that in a single session the KSE 100-
share index breached through three consecutive
psychological barriers and showed signs of
continued run-up, analysts said.

Its drive to its pre-reaction level of above 15,000

points may not be that easy in the backdrop of
weak economy, war on terror, fears about law
order situation, but if there are investors to put
their money in stocks at the current attractively
lower levels, the target may not be that far off.

The benchmark finally finished sharply recovered

at 7,471.28, up 4.25 per cent or 308.24 points as
compared to 7,163.04 a week earlier on strong
short-covering by all and sundry.

Across the board increase in petroleum products,

boosted the share values of leading shares on the
oil counter as investors, both local and foreign,
made extensive covering purchases at attractively
lower levels ensuring higher capital gains, analyst
Faisal A. Rajabali said.

But what seems to have initiated a late bull run

was the report that few well-known market
players may have found cue to the salient features
of the new leverage product and flooded the
market with buy-stops on selected counters,
mainly oil, fertiliser, banking and some others,
analyst Hasnain Asghar Ali said.

He said the list of suspended members owing to

violation of various rules released by the SECP
appears to be the chief factor behind the initial
relative slowdown in the year-end covering
operations. “A sharp fall in the daily volume
below 100 million share mark and mostly
fractional price changes on all counters, reflect
that something very bad may be in the offing.”

Heavy buying in PTCL ahead of its board meeting

and market talk of a higher payout led the market
advance, actively followed by OGDC, MCB and
some leading shares in the oil sector.

The early scramble (prior to dividend) for the

PTCL share reflected that some leading investors
had picked up a loud whispering about the rate of
the expected dividend as was indicated by its close
around the session’s highest level. But an interim
dividend of 15 per cent fell below the market
expectations, although its share value maintained
its upward drive.

“The market may not have reached the stage of

saturation being still in oversold position but
investor played safe for more than one reasons
including the changing investors about the war on
terror, another analyst Ahsan Mehanti said.

Other analysts said the market had its own

technical problems, notably the new leverage
product and once it was in place it could witness a
lot of improvement both in the daily volumes and
the range of price changes at least on the blue chip
counters.

“But the new year opening allayed fears of

negative fallout of the previous year, and many
entertained the idea of boom-like conditions as
investors were back in the market under the lead
of state enterprise fund and foreign buying”, he
said.

A higher cash dividend of 50 per cent and per

share earning at Rs21.87 from the previous 15.35
by
the board of directors of Exide Pakistan for the
year ended March 31,2009, was well-received in
the market as its share value has showed a sharp
rise in the pre-dividend sessions for the last couple
of weeks.

Forward Counter: Leading banking, oil, fertiliser

and blue chips on other counters posted good
gains on speculative support amid market talk of
introduction of new leverage product and rose
sharply higher but without any transaction in any
one of them.— Muhammad Aslam
Arrivals stabilise prices

MIXED price trend was witnessed on the Karachi

wholesale commodity markets during the
preceding week as prices of some essential items
eased partly on profit-selling at higher rates and
partly to steady arrivals from upcountry trading
centres.

Bulk of the selling remained confined to the pulses

sector where imported stuff eased modestly under
the lead of masoor and masoor dal, which had
witnessed a virtual price flare-up owing to
pressure on ready supplies, dealers said.

They said importers who had been shaky about

the fiscal steps in the budget had resumed normal
market operations after having absorbed the
negative impact of withholding tax on imported
items including industrial and commercial raw
materials.

Apart from pulses, other essential items also

showed softening tendency partly because of
decline in ready demand as retailers kept to
sidelines anticipating fresh fall in prices and then
to cover positions, they said.

However, the notable feature was that wheat

prices showed a modest rise allaying dealers’ fear
that prices could rise after the government
allowed export of wheat products.

But fortunately it did not happen as prices

remained stable around previous levels despite the
fact that the government allowed export of wheat
flour, maida and suji to individual private sector
exporters.

Flour mill owners said prices should have

increased but the bumper wheat crop did not
allow speculators to manipulate prices. Moreover,
the quantity allowed for export was too small to
influence the local prices in presence of
comfortable ready position.

The rice sector, however, ruled firm amid reports

that exports of both IRRI and fine basmati
varieties could exceed previous year’s level.

Exporters said higher export of fine types of

basmati at a competitive rate contributed
significantly to the total out of a bumper crop of
six million tons plus.
Sugar prices showed a fresh fall of Rs50 per 40 kg
but the decline was too small as pressure on
supplies remained in absence of larger arrivals
from mills which regulated the market supplies,
some brokers said.

There was, however, no major change in prices of

industrial raw materials amid falling demand and
as a result, most of them maintained their
previous levels under the lead of barley and some
others.

Much of the activity remained confined to pulses

sector where prices managed to finish on mixed
note on late support after having fallen sharply
lower.

Gram whole, beetle and moong were leading

among gainers, which quoted higher by Rs100-200
per bag, while masoor, peas and urad, both
imported came in for profit-selling and ended
lower by Rs100-250 per bag respectively.

Wheat did not show much change after reports of

permission of export of its products and rose only
modestly by Rs15 per bag of 100 kg as supplies
matched the ready demand.
The rice sector showed firm trend followed by
reports of higher export and while prices of fine
varieties of basmati were firmly unchanged at
previous levels, IRRI-6 was quoted further higher
by Rs100 per bag.

After an early modest fall, white sugar held

unchanged but both gur and desi sugar were
quoted higher by Rs100 per 40 kg owing to short
supply.

Barring a sharp fall of Rs75-150 per bag in prices

of bajra on selling prompted by larger arrivals
from Sindh markets, other cereals including
maize, jowar and barley were traded at last levels.

The oilseed sector also remained dormant in the

absence of an appreciable demand both from
industrial users and retailers and as a result,
prices of major seeds including rapeseed, castor
seed, were held unchanged at previous levels.

Cotton, cottonseed and til were, however,

exceptions. While the former was firmly held
unchanged, latter fell and rose by Rs75- 50
respectively.

The oilcake sector, on the other hand, maintained

firm trend on active demand and prices of both
rapeseed and cottonseed cakes were marked up by
Rs20-50 per 40kg.—M.A.
UAE to give Pakistan another 300 MW plant

The 320 MW thermal power plant gifted by UAE

to Pakistan will reach in August while the UAE
government will give Pakistan another thermal
power plant of 300 MW. Chairman Abu Dhabi
Water and Electric Agency Shahzada Sheikh
Diyab Bin Nahyan stated this during a meeting
with Federal Minister for Water and Power Raja
Pervez Ashraf. He said the preparation for the
shipment of 320 MW plant to Pakistan will soon
completed and that another such plant of 300 MW
will also be presented to Pakistan.