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DAWN WIRE SERVICE
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Week Ending : 2 June 2001 Issue : 07/22
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Contents | National News | Business & Economy | Editorials & Features | Sports
The DAWN Wire Service (DWS) is a free weekly news-service from
Pakistan's largest English language newspaper, the daily DAWN. DWS
offers news, analysis and features of particular interest to the
Pakistani Community on the Internet.
Extracts, not exceeding 50 lines, can be used provided that this
entire header is included at the beginning of each extract.
We encourage comments & suggestions. We can be reached at:
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mail DAWN Group of Newspapers
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Please send all Editorials and Letters to the Editor at
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(c) Pakistan Herald Publications (Pvt.) Ltd., Pakistan - 2001
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CONTENTS
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NATIONAL NEWS
+ Investors assured of maximum facilities
+ Nawabshah farmers given state land
+ 16 killed as coach rams into oil-tanker
+ Interim PFC award for district govts likely
+ CE okays budget guidelines
+ Tax survey impact limited on revenue
+ Directive to prepare energy plans: 3 and 10-year strategy
+ 80% IT exemptions may be withdrawn: Selected people and areas
+ Pakistan cautiously optimistic: Musharraf-Vajpayee talks
+ IMF okays raise for government employees
+ Police top 'dirty dozen' chart
+ Chinese firm to give Rs 116 million loan for lab
+ Cyclone to hit coastal belt today; Villages inundated
+ One killed, 350 arrested on eve of Sunni Tehrik strike
+ New oil refinery being set up at Hub
+ Proportional Representation system being considered
+ Deep-sea fishing allowed
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BUSINESS & ECONOMY
+ Pre-budget leaks warm up financial market
+ State Bank says drought to cost $927 million
+ Oil, gas attracts $ 911 million investment
+ SBP's third quarterly report on economy
+ $ breaks through new barriers: Rupee loses 2.2% in 10 days
+ ADB concerned at delay in $80 million KESC project
+ World Bank to give $350 million credit on June 13
+ Money laundering hits Pakistan
+ Budget deficit to miss 5.3% target
+ IMF letter for third tranche received: Board meeting in July
+ Banks reluctant to give gas firms long-term loans
+ Rules relaxed for currency export: FAP team meets Shaukat
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EDITORIALS & FEATURES
+ The systems Ardeshir Cowasjee
+ Fog and illusions on the road to peace Ayaz Amir
+ Let's take the high road Irfan Husain
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SPORTS
+ Thorpe, Vaughan make Pakistan bowlers toil
+ Pakistan, India set on peace path, says Advani
+ Political uproar puts BCCI in a spin
+ Weak opposition saddens Waqar
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NATIONAL NEWS
20010602
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Investors assured of maximum facilities
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By Qurban Ali Khushi
DADU, June 1: Chief Executive Gen Pervez Musharraf on Friday said
that the economic revival plan announced in 1999 placed prime
importance on the rapid development of indigenous energy resources
"as we believe this sector has the potential of reviving the
economic fortunes of Pakistan."
Inaugurating the Zamzama EWT plant gas-field near Dadu, he said the
government was making all-out efforts to revive the economy with a
view to making Pakistan self-sufficient in various sectors,
particularly agriculture, industry, oil and gas.
He said the government had launched various schemes under a joint
venture programme and an atmosphere of cooperation, confidence,
security and protection would be ensured which, he hoped, would
enhance the size of investment in the country. Underlining the need
for encouraging foreign investment in the country, he said a
comprehensive policy had been formulated to provide maximum
facilities to investors.
The CE welcomed the investment from Australian entrepreneurs,
particularly in the fields of oil and gas, and appreciated the
efforts of M/s Broken Hill Proprietary Petroleum (BHPP) which had
established and commissioned the Zamzama oilfield project within
two years.
He emphasized the need for a better utilization of resources,
particularly coal, claiming that Pakistan had the biggest coal
reserves in the world. Gen Musharraf invited the BHPP to also
concentrate on exploration of coal. Emphasizing the need for
execution of the exploration policy, the CE disclosed that the
government would shortly be announcing a "more relaxed" petroleum
policy.
Since the government aimed at self-reliance, efforts would be made
to minimize the amount of foreign exchange being paid on the import
of furnace oil, he said, adding that Pakistan was paying foreign
exchange of $900 million annually. He said there was a remarkable
change in the global trend as natural gases were emerging as an
important factor in the earth's reserves, and added that about 5 to
7 million cubic gas had been discovered in Pakistan.
The CE said that the energy demand of the country was increasing
day by day, adding that natural gas would prove to be an
alternative for fuel. He was confident that foreign investors,
particularly the Australian firms, would be cooperating with the
government. Petroleum Minister Usman Aminuddin also spoke.
APP adds: The CE said this was his vision and goal to increase the
proportion of gas usage in the economy to over 50 per cent of the
total energy supplies by 2010. "It is my understanding that the
production from the Zamzama Gas will bring us closer to realizing
this goal by adding almost 20pc to the current supplies of gas in
the country apart from further investment in exploration."
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20010602
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Nawabshah farmers given state land
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By Zulfiqar Memon
NAWABSHAH, June 1: Chief Executive Gen Pervez Musharraf visited
the agricultural exhibition at Deh Sukhpur, Daulatpur Taluka, here
on Friday. After visiting the exhibition, the Chief Executive also
addressed Nazims , Naib Nazims, male and female councillors, and
peasants at a ceremony in Dadlo Pir village, some 52 kms from
Nawabshah, where ownership certificates of state land were handed
over to landless peasants.
He said: "Pakistan is like our family and we will not allow anyone
to destroy it. We have to remove poverty from the country and for
that purpose the economy has to be made stronger. "If the economy
is improved the country would be stronger and that could be done if
every Pakistani joins hands for the cause."
He said that he was here to award certificates of ownership to
peasants who had been deprived of their rights for many years, and
added that state land situated in the riverine area throughout the
country would be distributed among the peasants.
Gen Musharraf said: "I have taken the start of distribution of
agriculture land from Deh Sukhpur of Nawabshah." He said that soft-
term loans would be provided for installation of tubewells,
purchase of fertilizers, seeds and implements to boost crops. He
said that today he was distributing certificates of ownership of
3,056 acres of agriculture land to 262 peasants, while earlier the
governor had distributed 21,000 acres to 1,900 peasants.
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20010602
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16 killed as coach rams into oil-tanker
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By Aziz Malik
HYDERABAD, June 1: Sixteen people died and 41 others were injured
when a coach rammed into a stationary oil-tanker about 80km from
here on the Super Highway on Friday.
The Karachi-bound Jalbani coach, which was coming from Larkana,
collided with the tanker near the Dada Bhoy cement factory in
Nooriabad. The collision was so severe that both the coach (P0099-
Kyc) and the tanker (9634) fell into a ditch. The front portion of
the coach had to be prised to extricate the bodies from the seats.
Twelve bodies and 25 injured were taken to the Abbasi Shaheed
Hospital in Karachi, and four bodies and 16 injured were brought to
the Liaquat Medical College Hospital, Jamshoro, by the highway
police and the Edhi ambulances. Emergency was declared in the
Abbasi Shaheed Hospital.
Thirteen of the dead were identified as coach driver Badshah Brohi,
Ghulam Qadir, 5-year-old Mala, daughter of Khamiso; Nazimuddin,
Shamshad, Fida Hussain, Constable Qurban Ali of the Dadu police,
Huzoor Bukhsh, and five members of the same family - Shahida
Parveen, Sajjada Parveen, Murad Ali, eight-year-old Ahmad Ali and
four-year-old Mohammad Mithan.
The injured under treatment in the LMC Hospital were identified as
Hamala, wife of Mohammad Malook; Nawab Khatoon, wife of Abdur
Razzaq; Mohammad Rajab, son of Mohammad Murad; Mashooq Ali, son of
Fateh Ali Dokri; Ghulam Qadir, son of Qaiser; Sanaullah, son of
Illahi Bukhsh; Hazir Ali, son of Dhani Bukhsh; Khamiso, son of
Wazir Dokri; Maya, daughter of Ghulam Nabi; Gulshad, wife of Ghulam
Nabi Kambar; Zahid Hussain, son of Ghulam Nabi Kambar; Haji Mehar
Ali, son of Amir Bukhsh; Mohammad Yousuf Shah, son of Mohammad
Hussain Shah; Khalil Ahmed, son of Hazir Ali; Hakim and Abdullah.
Ten of those taken to the Abbasi Shaheed Hospital were identified
as Hayat Khatoon, Rukhsana, Pervez, Noman Ahmed, Imdad Ahmed,
Sajjad Haider, Ghulam Asghar, Hajiyani, Noor Mohammad and Ayub. Our
Dadu correspondent adds: The Nooriabad police registered an FIR
(18/2001) on the complaint of oil-tanker driver Khan Badshah
against the coach driver. The police impounded both the vehicles.
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20010602
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Interim PFC award for district govts likely
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By Jawaid Bokhari
KARACHI, June 1: Provincial Finance Commission may deviate from its
original mandate and give an interim Award on sharing of fiscal
resources between the provincial and (planned) district
governments.
Sources said a decision was awaited on a number of key issues of
fiscal devolution, taxation powers of district governments and
provincial responsibilities, without which no medium to long-term
Award, as originally anticipated, could be formulated or announced.
The complex issues relating to the Annual Development Plan are
still unresolved.
Sources said that federally-run institutions which would fall in
the jurisdiction of district governments, were expected to be
transferred in mid-August to the provinces to be handed over to the
district governments which would be in place by then.
The Sindh provincial budget and the district budgets have to be
finalized and announced immediately after the national budget on
June 16.
For the transitional period, sources said, only an ad hoc or
interim arrangement was feasible.
The fiscal devolution plan has been hit by a lack of consensus on
key issues. A meeting, presided over by Chief Executive Gen Pervez
Musharraf about two weeks ago, revealed sharp diversion of views on
fiscal devolution between the National Reconstruction Bureau and
the federal ministry of finance.
The reconciliation of conflicting views cannot be achieved within
the span of two weeks before the national budget is unveiled. As
the current developments indicate, the stalemate may last for at
least six months or more of next fiscal.
Sources said that Sindh Finance Minister Dr Abdul Hafeez Sheikh had
directed his department to submit district profiles at the second
meeting of the PFC expected next week.
District budgets are being finalized, ensuring horizontal equity
between various districts, says a source in the provincial
government.
Besides, development programmes have been rationalized. The
province inherited a portfolio of projects, many of which were
prepared more on political considerations than for economic
benefits. Often projects were dropped or funds were denied. The
outcome is that project execution often takes four-fold time
because of political changes, weak monitoring and resources being
spread too thin.
Sources said the province was also facing a problem in respect of
incomplete projects and in relation to diversion of provincial
programmes. The issue is how to deal with them in absence of clear-
cut directives and scarcity of funds. To sort out these, more time
is needed.
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20010601
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CE okays budget guidelines
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By Our Staff Reporter
ISLAMABAD, May 31: A high-level meeting on Wednesday approved broad
guidelines of budget for 2001-2002 with "minimum taxation".
According to informed sources the meeting which was chaired by the
Chief Executive, Gen Pervez Musharraf discussed a number of new
budgetary proposals aimed at undertaking comprehensive structural
reforms in the Central Board of Revenue (CBR).
The meeting was told that the number of existing taxes were further
being reduced and that the main tax will be the general sales tax
(GST), to be effectively recovered from the next financial year.
Also, the thrust of the budget will be to broaden the tax base but
without further burdening the common man.
The Chief Executive advised the policy-makers to take special care
while formulating future policies to protect the interests of the
common man. Presiding over a briefing on macro-economic framework
and emerging challenges by the ministry of finance, he said,
measures should be taken to encourage the agriculture sector since
it forms the backbone of the economy. IT sector and the
construction industry also needed encouragement, he added.
Economic Advisor of the Ministry of Finance, Dr Ashfaque Hasan
Khan, in his presentation stated that the medium-term framework had
been prepared with a view to improving the country's macro-economic
environment which was essential to promoting investment and growth.
He identified five key elements namely; low inflation, low budget
deficit, appropriate exchange rate, real interest rate and
consistency in policy which form the macro-economic environment.
Dr Khan also explained this year's developments including the
impact of drought on agriculture. He said that the industrial
sector had performed well by registering a growth of 7.8 per cent
during the first nine months of 2000-2001. This growth was not only
high but is also broad-based, he added. He further informed the
meeting that inflation has been below the target while the
country's exports had picked up. And there had been an improvement
in the trade and current account balance, he added.
Finance Secretary, Yunis Khan in his presentation gave an overview
of the economy and the confidence building measures that had been
initiated by the government. He also gave a brief review of the
medium and short-term development scenario. In this context, he
outlined a wide range of measures that had already been taken by
the government which included abolition of wealth tax, reduction in
number of taxes, promulgation of anti-dumping law; removal of
restrictions on export of agricultural products, enactment of
privatization law and strengthening of regulatory role of State
Bank of Pakistan. The meeting was attended by federal ministers and
senior officials.
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20010601
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Tax survey impact limited on revenue
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By Our Staff Reporter
KARACHI, May 31: The Central Board of Revenue (CBR) needs to
collect about Rs140.5 billion between April-June 2001 to meet the
revised tax collection target of Rs417 billion.
The State Bank's third quarterly report released on Thursday says
this would imply an average collection of about Rs47.5 billion
every month till the end of the fiscal year. But the fact remains
that this level of collection has been achieved only in one month
in the last six years. (In June 1999 CBR had collected Rs48.2
billion.)
Tax collection in the first nine month of this fiscal year stood at
Rs276.6 billion, according to the report. (CBR says it has
collected Rs308 billion in the first ten months i.e. between July
2000-April 2001). Commenting on the tax survey being carried out by
CBR the State Bank report says that "the contribution of the survey
to this year revenue collection has been somewhat limited." The
survey had initially targetted to contribute Rs100 billion to the
government exchequer. Without disclosing how much the survey has
yielded so far the report remarks rather sarcastically that "CBR is
of the view that surveys have generated an enormous amount of data
which will allow it to increase collections in future."
BUDGET DEFICIT: The report says that the realized deficit in the
first half of the current fiscal year and tax collection in the
third quarter provide sufficient evidence that the government will
be able to meet its budget deficit target of 5.3 per cent of GDP.
"However, quantitative targets for total expenditure outlay and
revenues may differ from those envisaged in the federal budget."
Needless to say that broadening the tax net along with strict
expenditures control will remain the thrust of the government's
fiscal initiatives in the current and next fiscal years.
GOVERNMENT EXPENDITURES: Despite an advance payment of salaries in
December 2000 on account of Eid, total government expenditures were
8.4 per cent lower than projected under the IMF programme targets.
But the decline in total outlays was due to lower development
expenditures. "In addition to this 2.3 per cent lower than
projected interest payments also contributed to the saving on
government expenditures," says the SBP report.
Consequently the budget deficit amounted to Rs77.9 billion which is
Rs26 billion below the IMF target for first half of this fiscal
year. The report says that of the targetted Rs71.5 billion for
external financing only Rs43.6 billion was realized due to lower
than projected inflows from the World Bank and Islamic Development
Bank. And as the government continued to retire its debt to
commercial banks, non-bank borrowing contributed the bulk of
deficit financing. The government financed nearly 60 per cent of
its deficit from non-bank sources i.e. borrowing through national
saving schemes as well as newly launched Pakistan Investment Bonds.
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20010531
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Directive to prepare energy plans: 3 and 10-year strategy
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By Khaleeq Kiani
ISLAMABAD, May 30: The government has directed energy related
federal divisions and attached department to prepare three-year and
10-year perspective plans on energy sector to have a clear picture
of the future demands and policies in the country.
Official sources told Dawn that Energy Wing of the planning and
development division has been declared a focal point to coordinate
efforts of various federal government institutions towards
preparing the perspective plans.
The three-year plan 2004 would set priorities of the next three
years and 10-year plan to be completed by 2012 would take into
account a long term strategy to meet national energy requirements.
These sources said that gas sector is going to be the main player
of the energy sector mainly in power generation and fuel
consumption in view of rising oil prices in the international
market and being environment-friendly.
The plans would set a clear cut road map for future composite
energy initiatives involving power generation, transportation and
other related needs. Primary commercial energy supplies in the
country has touched over 43 million tons of oil equivalent. While
the natural gas production has increased by around 10 percent
during the last year, hydro-electricity generation has declined by
over 14 percent.
The overall share of various sources of energy supply mix is like
43.5 per cent oil, 40.5 per cent natural gas, 0.5 per cent LPG, 4.7
per cent coal, 10.7 per cent hydro electricity and 0.2 per cent
nuclear power.
Despite increase in gas production at home, import of petroleum
products increased by over 8.7 per cent last year with a major 16
per cent share of furnace oil imports (over 6.5 million tons)
mainly for the power generation, causing around $3.5 billion
foreign exchange outflow in this sector.
Due to inconsistent and self contradictory policies and unrealistic
projections in the energy sector in the past have been causing
crisis in power generation, oil and gas needs and supplies and
foreign exchange erosion at the same time creating imbalance in the
system itself.
National demand for electricity has been growing but one sided
policies resulted in hydel: thermal mix of 28:72 which is almost
reverse of an ideal situation which Pakistan had maintained till
end 1980's. Official sources said that the military government
wanted to set the directions right in the energy sector for a
longer period so as to avoid future crisis and imbalances that may
occur in the form of surplus or shortages.
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20010531
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80% IT exemptions may be withdrawn: Selected people and areas
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By A Reporter
ISLAMABAD, May 30: The federal government is considering to
withdraw about 80 per cent income tax exemptions from the next
financial year. Sources in the Central Board of Revenue (CBR) told
Dawn on Wednesday that Saeed Ahmad Qureshi committee, formed to
recommend amendments in the 1979 Income Tax Ordinance, has proposed
to the government to withdraw maximum exemptions on income offered
by the successive governments to selected people and areas.
The International Monetary Fund (IMF) mission, which visited
Pakistan in September 2000, was not happy with these unlimited tax
exemptions on various sources of income, and reportedly proposed to
the government to abolish these exemptions, the sources said.
It was recommended that any allowance or facility which is paid
outside Pakistan by the government to a citizen of Pakistan for
rendering service outside Pakistan will be grossed up to include
tax component, while salary of expatriate employees of Shoukat
Khanum Hospital (existing beneficiaries may not be affected) will
also be brought into tax net.
The committee proposed to withdraw exemption on pensions of
employees being citizens of Pakistan by virtue of employment with
United Nations, Pakistani citizen over 60 years, government and
armed forces employees. Any sum representing encashment of leave
preparatory to retirement received by an employee of armed forces,
federal and provincial government would be taxed, they said.
Interest received by a non-resident for a loan to be utilized on a
project in Pakistan, approved by the government will be taxed while
any interest payable to a loan in foreign exchange against export
letter of credit, which is used exclusively for export of goods
manufactured or processed for exports in Pakistan will be brought
into tax net, they said.
The sources said interest on money borrowed from a foreign country
by an industrialist undertaking in Pakistan for pursuing plant and
machinery, if the government approves such a loan, will be taxed.
While, any profit derived by a non-resident in respect of the
Islamic mode of financing e.g. Morabaha, Musharika to be taxed.
It was also proposed that income received on national saving
certificates, national deposit certificates, defence saving
certificates, post office saving bank account, and deposits in
national saving centres under the national saving schemes and
monthly income saving schemes where instalment is less than Rs.
1,000 (w.e.f 30.06.2001) will be brought into tax net.
The committee recommended withdrawing exemptions on business income
earned by the textbook boards and sports board of all the provinces
and brought it into tax net.
Any income derived by mutual fund or an investment company
registered under the Investment Companies and Advisers Rules 1971
or a unit trust scheme and the income of modaraba will be
considered to be taxed, they said.
They said any amount paid by an individual by way of personal
expenditure on medical services and federal education fee expended
under FEF scheme will be taxed.
The committee proposed that the income from the commercial
activities of institute of engineers will be taxed while the income
of private powers projects set up after July 01, 1998 (existing
beneficiaries will not be affected) will be brought into tax net.
It was also proposed that the amount withheld by civil Aviation
Authority up to 31.12.1998 on account of security changes are
redundant, they said.
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20010531
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Pakistan cautiously optimistic: Musharraf-Vajpayee talks
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By Syed Talat Hussain
ISLAMABAD, May 30: Pakistan sees the Musharraf-Vajpayee summit an
opportunity to set the agenda of future talks with India but does
not expect breakthroughs on significant issues, including Kashmir,
diplomatic and military sources told Dawn.
A day after Pakistani High Commissioner to India, Ashraf Jehangir
Qazi, delivered in New Delhi General Pervez Musharraf's letter
formally accepting Indian prime minister's invitation to talks - to
the Indian foreign secretary Ms Chokila, Pakistani officials were
cautioning the need for realism.
"Pakistan is realistic about what can be gained from the meeting
and does not have high expectations," a source said. "We are
cautiously optimistic, as one meeting cannot yield much."
"The outcome of the meeting of the two leaders will be significant
for providing the framework for future interaction," a highly-
placed military source said. Pakistan's approach towards the
summit, according to the diplomatic sources involved in the
preparations for the agenda of the meeting, was to find a meeting
ground where the two countries could talk to each other on a more
sustained basis.
"It is not a one-off thing," a foreign office source said. "We want
the dialogue process to be restarted". "Our effort will be to get a
formal agreement (between the two leaders) on institutionalizing
this dialogue. If that happens it will be a big achievement," he
said.
Asked what would be Pakistan's approach towards Kashmir, which is
the most delicate and emotive subject for both countries, the
sources said: "Our stand is and will be that Kashmir is a
tripartite issue: Pakistan, India and the Kashmiris."
He said that no solution could be imposed upon Kashmiri people.
"The Kashmiris eventually have to be part of the dialogue for
peace." Asked why the date of the summit was being wrapped in
secrecy, the sources said that the dates had to be worked around a
knee operation the Indian prime minister has to undergo in mid-
June.
"That will keep him away in the hospital for around 10 days," he
said. "The meeting is possible only after that." On the signals
emanating from India that Delhi would like to engage Pakistan in a
more comprehensive dialogue, on the region's problems and common
issues of poverty, the prospects of economic growth, trade and
battling disturbing social trends like extremism, the Pakistani
officials acknowledged that the "two sides need to broaden their
vision". However, they said that "all sources of tensions and
instability must be addressed, specially Kashmir".
The sources also said that the Musharraf government was taking all
Kashmiri groups into confidence on the upcoming visit to Delhi. "We
do not want to give the Kashmiri mujahids the impression that they
are being abandoned," a government source said. "They will be fully
in the picture on what needs to be done on Kashmir."
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20010531
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IMF okays raise for government employees
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By Our Staff Reporter
ISLAMABAD, May 30: The IMF has allowed the government to increase
the salaries and pension of its employees, which will cost an
additional Rs35 to Rs40 billion to the exchequer in 2001-02.
Sources in the multilateral agencies said that good governance
could not be expected without paying "sufficient and market-based"
salaries to the civil servants. The IMF officials expect that the
government would expedite civil service reform to achieve the
objective of good governance.
The chief executive, Gen Pervez Musharraf, was briefed by Finance
Secretary-General Moeen Afzal on May 26 about the pay and pension
committee's report. Mr Afzal, who also heads the pay and pension
committee, was told to make the report more acceptable as it still
needed "fine tuning".
A senior official of the finance ministry, Mr Bilal has been
assigned to finalize the pay structure by next week in accordance
with the 15 to 20 per cent proposed raise to be formally announced
in the budget speech of the finance minister on June 16.
"A sizable increase in the pay and pension of the government
employees and those who have retired, has been okayed by the IMF,"
said a source in a multilateral agency. Wherever possible, he said,
the government should provide relief to people, including the
government employees. The top structure of salaries was totally
misplaced and needed to be improved to expect better performance
from the government employees.
A source in the finance ministry claimed that the IMF had also
asked for increasing the income tax ceiling from Rs40,000 to
Rs60,000 in the coming budget. The Saeed Qureshi Committee has
reportedly gone further ahead by proposing this exemption to
Rs80,000.
At the same time, the government has been asked by the IMF to
adhere to other conditionalities to avoid distortion in the
economy. For example, they said, the government should increase
petroleum prices in early June. Though the IMF officials believed
that the government was generally adhering to the road map laid
down earlier to revive the economy, they said the reform process
needed to be accelerated.
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20010531
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Police top 'dirty dozen' chart
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By Sabihuddin Ghausi
KARACHI, May 30: Out of 12 selected government agencies in
Pakistan, a survey has found police to be the most corrupt followed
by lower courts, WAPDA, Income Tax, land revenue, customs, passport
and identity card.
Municipal corporations and development authorities, sales tax,
PTCL, government-run hospitals and schools were also found to be
nests of corruption but relatively at a lesser degree than police
and other departments.
Corruption ratings of these "dirty dozen" agencies was done by the
Special Task Force on Reform of Tax Administration which made a
detailed presentation of its report to the Chief Executive Gen
Pervez Mushrraf in Islamabad early last week.
Headed by Syed Shahid Hussain, a former executive of the World
Bank, the Task Force includes ten other members drawn from various
disciplines and professions. It has recommended sweeping changes in
the country's tax administration and, as expected, has earned the
wrath of the "status quoist" tax administrators and bureaucrats.
The Task Force solicited views from a selected group of persons who
included taxpayers, tax administrators and those who represented
civil society. A five-point scale was drawn up in which one point
represented "very little corruption" and five points "extremely
widespread corruption".
None of the "dirty dozen" qualified for the lowest or the highest,
either one point or five points, but police earned 4.20 points
followed by lower courts which secured 3.30 points. Wapda obtained
3.21 points in corruption, Income Tax department 3.21, Land Revenue
3.15, Customs 3.04, passport and identity card 3.04.
The panel of respondents gave 2.80 points in corruption to
municipal corporations and development authorities, 2.75 points to
sales tax, 2.61 to PTCL, 2.46 to government hospitals and 1.96
points to government-run schools.
"These ratings are important in two ways," the Task Force report
says and adds "first, they are an indicator for government of
Pakistan about its priorities, if it launches a department to
department anti-corruption campaign". "Second, these can be used as
baseline data to measure any change, trends in corruption, or
impacts of any anti-corruption campaigns," the report said.
An overwhelming majority of the respondents (80 per cent) whom the
Task Force approached to seek their views considered all previous
corruption reduction measures as "complete failures". The reasons
given for this failure are the lack of sincerity of policy-makers,
selective application of laws, enforcers themselves being corrupt
and lack of understanding of the complexity of corruption.
Respondents were also asked by the Task Force to comment on the
effectiveness of some initiatives to reduce corruption in the
public sector, such as outright dismissal of bureaucrats by Ayub,
Yahya and Bhutto regimes, institutions of checks and balances
within the organisations like Ombudsman, Ethesab cell by previous
governments. Many felt these initiatives were politically
motivated, insincere and focussed too much on punishment.
There was a unanimous view that various tax amnesty schemes had
helped in spreading corruption rather than curbing it. The 272-page
report carries a whole chapter on corruption, spread over 26 pages
and divided into six sub-chapters.
Specific instances of corruption at policy level have been given in
the report. One of such methods is the overnight changes in import
duty structure by the CBR by issuing an SRO. These were linked to
import of BMW cars, steel items, sugar export to India on which a
rebate of Rs 4,500 per ton was given.
An interesting example is cited of a retired tax administrator who
visited CBR twice in his whole career for official work. "Both the
times I had to pay Rs10,000 for my work", is how this tax
administrator relates his experience, which speaks volumes about
what's going on behind the high walls of CBR.
The Survey found corruption more endemic in Income Tax department
where 78 per cent employees are rated as corrupt and Customs where
76 per cent of employees are seen as corrupt. Sales tax is seen
relatively less corrupt by both the taxpayers and tax
administrators. The explanation is "it is a new tax and nobody
fully understands it".
In an hypothetical exercise, the survey found that for each hundred
rupees of genuine income tax payments of a Pakistani business
enterprise, the government can collect only Rs36. The assessor,
assessee and the middleman tax practitioner share Rs64 among
themselves and obviously the assessee gets the highest share to
justify his deal.
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20010530
-------------------------------------------------------------------
Chinese firm to give Rs 116 million loan for lab
-------------------------------------------------------------------
By Our Reporter
ISLAMABAD, May 29: A Chinese company will extend Rs 116.5 million
interest-free loan for the construction and expansion of Quarantine
Laboratory of the Department of Plant Protection at Karachi.
An agreement to this effect was signed here on Tuesday between the
ministry of food, agriculture and livestock and China Guangdong
International Co-operation Companies, the Chinese company.
According to an official statement, the project is to be started
soon and completed in fifteen months. The laboratory will test the
plants and crops for agriculture-related diseases before being
exported.
Federal Minister for Food, Agriculture and Livestock Mr Khair
Muhammad Junejo said at the agreement-signing ceremony that the
expansion of Quarantine Laboratory of the DPP would diversify and
increase the export of agricultural commodities from Pakistan.
Expressing his gratitude, the minister said the project would have
significant impact on increasing the competitiveness of the exports
of Pakistani agricultural goods to the world market.
Mr Junejo said that MINFAL would extend all facilities to the
Chinese company for the completion of project within the stipulated
time. "We wish this project to be completed on time and also to be
followed by many other projects for expansion of agriculture in
Pakistan," he added.
The head of Chinese five-member delegation Mr Qui Meixing said that
Pakistan was the first country to whom China had extended this
facility. He said the project would be completed on time to the
satisfaction of both the countries and with mutual efforts. He said
the project, once completed, would give the agriculture business
and production in Pakistan a big boost. He said China was also
looking for establishing model agriculture farms in Pakistan for
which paperwork had already begun.
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20010529
-------------------------------------------------------------------
Cyclone to hit coastal belt today; Villages inundated
-------------------------------------------------------------------
Dawn Report
KARACHI, May 28: The tropical cyclone (01A) would hit the coastal
areas lying between the Indian border and Keti Bander sometime on
Tuesday, the director-general of the Pakistan Meteorological
Department told Dawn on Monday.
People living in the low-lying coastal areas should move to safer
places, PMD chief Dr Qamruzzaman Chaudhry spoke by phone from
Islamabad. According to Dawn correspondent in Thatta, 12 villages
and 20 dehs of coastal talukas of Shah Bandar, Jati, Kharochhan and
Keti Bandar had been submerged by the sea water on Monday morning.
Leaves of government employees in the Thatta district were
cancelled.
A PMD website updated at 10pm said the cyclone in the Arabian Sea
had moved north-eastwards. Positioned at 21 degree N and 68.5
degree E, the cyclone was spiralling 430km south south-east of
Karachi and 310km south of Keti Bander.
The PMD chief said the landfall of the cyclone would be prefaced by
rains and strong winds, adding that soon after the landfall the
cyclone would lose its intensity rapidly. Karachi faced no major
threat, he added.
The submerged villages in Thatta included Raboo Malah, Faqirano
Jati, Gul Mohammad Uplano, Umer Patel, Ismail Uplano, and Tako
Kanehar. Dehs concerned included Deh Uplanki, Deh Nabi Bux, Deh
Jaleho, Deh Vari, Deh Datori and Deh Allano.
The Mukhtiarkar of Shah Bandar told Dawn that the majority of
people were being shifted to the rural health centre at Jungo
Jalbani and the primary school building. The Thatta district
administration has established 25 relief camps in Chuhar Jamali,
Sujawal, Chuch Jahan Khan, Ladaon, Jati, Mirpur Sakro, Garho,
Ghorabari, Jungo Jalbani and other towns.
A spokesman for the Fishermen's Cooperative Society in Karachi told
Dawn that currently 500 boats, with around 7,000 fishermen aboard,
were in the coastal areas. An official announcement issued from the
Commissioner House Karachi said that some 10,000 residents of Baba
Bhit Island had been shifted to safer places. People were also
being evacuated from the Manora Island.
A spokesman for the Pakistan Navy said that choppers and trucks
loaded with emergency relief goods, were ready. He added that other
relief agencies had also been put on standby.
The spokesman said that as soon as the civil administration asked
for help, the navy would come into operation. After a meeting,
presided over by Karachi Commissioner Shafiqur Rehman Paracha, the
deputy commissioners of Malir and West had visited various areas of
their districts, the announcement said.
APP adds: The directors of schools in Hyderabad region announced
vacations in schools of the coastal areas of Thatta and Badin
districts. In a press release, they said the decision was taken to
facilitate the parents to shift to safer places with their
children.
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20010528
-------------------------------------------------------------------
One killed, 350 arrested on eve of Sunni Tehrik strike
-------------------------------------------------------------------
By Our Staff Reporter
KARACHI, May 27: Law enforcement agencies have arrested hundreds of
religious parties' activists in connection with a strike call given
by the Sunni Tehrik for Monday.
A man was shot dead and another wounded when three armed men riding
a motorcycle opened fire at a sweet shop in North Karachi Sector 5-
C-4, according to police. The dead was identified as Tahir, 30, and
the wounded as Naeem, 28.
Official sources confirmed that 350 Sunni Tehrik and Sipah-i-Sahaba
Pakistan workers had been arrested since a crackdown was launched
on Sunday.
However, the Sunni Tehrik and the Sipah-i-Sahaba claimed that
thousands of their workers had so far been picked up by law
enforcement agencies.
Three people were wounded in firing and four vehicles were set
ablaze at different places on Sunday.
Interior Minister Moinuddin Haider, at a function, and the home
secretary, at a press conference, on Sunday, reiterated
government's resolve not to allow any individual or group to take
law into their own hands.
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20010527
-------------------------------------------------------------------
New oil refinery being set up at Hub
-------------------------------------------------------------------
By Our Staff Reporter
KARACHI, May 26: A new oil refinery in the private sector is being
set up at Hub, Balochistan, at a cost of $50 million. The refinery
will produce six petroleum products.
The plant, being set up by Bosicor Pakistan Limited (BPL), has the
refining capacity of 30,500 barrels per day, but in first six
months it will have the capacity of 28,000-30,000 bpd, said
director BPL, Amir A. Abbassciy at a press conference on Saturday.
The cold commissioning of the refinery will take place from the
first week of October this year while the full-fledged commercial
operation will start by the end of this year, he said.
The refinery has the capacity to produce 700 barrels per day (bpd)
of liquefied petroleum gas (LPG), followed by 2,177 bpd motor
spirit, 5,500 bpd high octane blending component, 4,350 bpd
kerosene/jet fuel, 6,973 bpd high speed diesel, and 10,800 bpd
furnace oil.
Arrangements have already been made through a French company to
import Qatar Marine Crude Oil ranging between 1.3 and 1.5 million
tons per annum to produce various petroleum products. The plant
will have new storage tank for its crude oil and refined petroleum
products.
On pattern of shareholding, he said, there is a 60 per cent equity
participation and 40 per cent debt equity.
He said the refinery, purchased and refitted by BPL, was set up by
Tesoro Petroleum Inc, a US based oil refining and marketing
company. That refinery has been operational since 1977. It was
mothballed in 1993. The plant, which is approximately 23 years old
has been completely refitted in order to achieve a service life of
at least 20 years from the date of commercial production.
He said that approximately 180 employees in four shifts (one
standby) including office staff will be employed at the plant. The
saving expected by import substitution is around $25-30 million per
annum.
An agreement has also been signed with Pakistan State Oil (PSO) for
procurement of refinery's products. The entire civil, mechanical,
electrical and cold commissioning works have been awarded to
Siemens Pakistan Engineering Limited, Amir said.
For the operation and maintenance of the plant, the company is at
very advance stage of awarding the contract to Marubeni Corporation
of Japan. Further, a letter of intent (LoI) has also been signed
with Marubeni for the export of naphta, being used in making of
polypropylene in Japan. The new refinery is expected to produce
50,000-70,000 tons of naphta every year.
Bosicor has taken out advance loss of profit insurance with Adamjee
Insurance Company Limited and re-insured in the international
market. The sum insured is Rs586 million for the period November
30, 2000 to April 4, 2,002. The insurance period includes four
weeks of testing. The insurance coverage, under construction all
risk (CAR) and erection all risks (EAR) provided by Adamjee, is for
Rs2.2 billion.
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20010527
-------------------------------------------------------------------
Proportional Representation system being considered: National
Reconstruction Bureau making detailed study
-------------------------------------------------------------------
By Rafaqat Ali
ISLAMABAD, May 26: The government is considering introducing the
system of proportional representation (PR) in the country, allowing
political parties with relatively smaller vote bank to enter
parliament, Dawn learnt from official sources.
The think-tanks of the government, working in the National
Reconstruction Bureau (NRB), are making a detailed study of the
system which is working efficiently in many countries of Europe
like France and Germany.
The government, the sources said, would have no problem in
introducing the proportional representation system as the Supreme
Court in its decision validating the military takeover, had held
that parliamentary form of the government should not be disturbed.
'Proportional Representation is a form of parliamentary system,"
they pointed out.
The think-tanks expect that quality of representatives would
improve, as persons with ability to handle macro-level matters
would have better prospectus for introduction in assemblies as
listed candidates of parties in multi-member constituencies.
The supporters of the PR system argue that not only it would help
bring more middle-income groups to the parliament, but it would
also minimize the possibility of military intervention in future.
The military adventurists would not be invited by the politicians
as they would have a stake in the system.
The government's think-tanks believe that the adoption of
proportional representation system as an alternative to the
existing majority system, would suit Pakistan's fractious society,
divided on linguistic and ethnic lines.
Under the new system, political parties would enjoy greater
importance and non-political pressure groups, tribes, clans, and
families would have lesser political role. The "independents",
representing different tribes and clans, would not be in a position
to dictate their terms.
The position of political parties would be correctly reflected in
elections in the proportional system and the parties having
widespread support would not be over-represented and those with
thin support would not be under-represented.
Small parties would have better prospects of representation in the
parliament by winning seats in multi-member constituencies
irrespective of losing in single-member constituencies.
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20010527
-------------------------------------------------------------------
Deep-sea fishing allowed
-------------------------------------------------------------------
By Faraz Hashmi
ISLAMABAD, May 26: The federal government on Saturday decided to
allow deep-sea fishing but under strict vigilance and a tough
punitive regime to safeguard the interests of small fishermen and
to check incidence of poaching.
The decision was taken at a presentation given by Chairman National
Fisheries Development Board Shafi Niaz to Chief Executive General
Pervez Musharraf here at the Chief Executive Secretariat.
Federal Minister for Agriculture Khair Mohammad Junejo, Chief of
Naval Staff Admiral Abdul Aziz Mirza, Chief of Staff to the Chief
Executive General Ghulam Ahmed, ministers of agriculture and
fisheries of Balochistan and Sindh, director general Maritime
Security Agency and other concerned officials attended the
presentation.
Installation of Global Positioning Satellite (GPS) monitoring
system on-board every ship operating within the Exclusive Economic
Zone of Pakistan has been made mandatory to keep strict watch on
the vessels, Mr Niaz later told newsmen.
He said an undertaking would be obtained from the vessel operators
categorically stating that no trans-shipment of catch at high sea,
no under-invoicing of fish catch and no discard of by-catch in the
sea would be done under any circumstances, failing which license
would be cancelled and renewal would be put on hold for three
years.
The meeting also approved a proposal of the Fisheries Development
Board to revise the standard agreement to be signed between the
vessel operators and the government.
The changes proposed in the agreement and approved by the chief
executive included enhancement of annual license fee of Rs. 500,000
to one million and revision of royalties.
A sum of $5,000 was charged as royalty from a trawler on
undertaking a trip of 60-days. The royalty fee has been now
increased to $10,000 and the duration of the trip has been reduced
to 45 days. However the medium sized vessels from 100 to 250
registered tonnage would have to pay $2,000 for a trip of 30 days
and operate from Korangi Fish Harbor.
The penalties on violation of different nature were also enhanced
at the meeting. On violation of fishing beyond the period of the
validity of license has been increased from Rs.200,000 to Rs.1
million.
On fishing beyond the specified zone the penalty has also been
revised from Rs.200,000 to Rs.1 million. The penalty of Rs.500,000
for fishing without license has been increased to Rs.2 million.
The meeting also approved a proposal of Fisheries Development Board
that a stock assessment survey should be carried out to determine
marine resources of Pakistan.
The National Institute of Oceanography in collaboration with the
Marine Fisheries Department would undertake a fresh stock
assessment survey to ascertain a realistic stock position of the
marine resources.
It will require financial assistance of some international donor
agency like FAO, NORAD and JICA. The last such survey was done in
1985.
Mr Niaz also said at the presentation that the governments of
Balochistan and Sindh had issued licenses to two deep-sea fishing
trawlers each, in violation of the federal fisheries law.
He also apprised the participants about the reasons for canceling
licenses of 10 Chinese, 10 South Korean and nine Taiwanese trawlers
registered in Pakistan. The main reason, he said, was violations of
conditions laid down in their agreement. He said that their
respective governments had launched strong protest.
He pointed out that at present there were 18,000 registered boats
but exact figures about the operational ones were not available
with the government.
He stressed that the existing boats of small fishermen would be
upgraded with better gears, latest navigational facilities,
improved storage and ice facilities and proper training to the
fishermen so that they could operate between 12 to 35 nautical
miles.
He said Korangi Fish Harbour would also be made operational and all
necessary facilities would be provided by the federal and
provincial governments.
On a question he said the licenses would be issued for a period of
one year on test basis and during this period strict watch would be
kept on vessels operating in Pakistani waters.
According to another important decision Sindh Minister for
Fisheries would now head the board of directors of Fishermen
Cooperative Society.
BUSINESS & ECONOMY
20010602
-------------------------------------------------------------------
Pre-budget leaks warm up financial market
-------------------------------------------------------------------
By Our Staff Reporter
KARACHI, June 1: Stocks on Friday generally tended further higher
under the lead of blue chips on active follow-up support, triggered
apparently by some pre-budget leaks. The KSE 100-share index gained
another 4.22 points at 1,381.84 points.
Although, the quarterly report of central bank paints a bearish
economic outlook, as the ongoing drought could have negative impact
on farm sector performance. There are positive signs of economic
recovery on long-term basis after the irrigation water crisis is
over. However, all was not bad with the broader indicators. The
market sentiment was, however, not influenced by the central bank
analysis and responded to its own positive basic fundamentals.
The opening was fairly promising as plus signs were witnessed
across the board but late profit-selling at the inflated levels
allowed the broader market with trimmed gains. The KSE 100-share
index early was up about 10 points, as all the leading base shares
came in for active short-covering. However, towards the closing
jobbers and short-term dealers moved in and sold at the early rise.
It finally posted a fresh rise of 4.22 points at 1,381.84 as
compared to 1,377.62 after the leading base shares came in for
strong covering purchases at the lower levels. All seems set now,
for the index to breach through the 1,400-point barrier possibly by
the next week as strong selective buying is re-emerging from all
the quarters.
"We don't call it the advent of the pre-budget buying but those who
have links in Islamabad are buying on selected counters in line
with the budgetary leaks", stock analysts at the Finex authorities
say. Information leaking from Islamabad about the incentives to be
given to investors to boost stock trading has lured back a
formidable section of leading operators, who are making extensive
buying in sectors where chances of capital gains are pretty sure.
Positive news from the foreign aid front including the release of
the second tranche of $133m by the IMF, and drought aid from some
other lending agencies have raised hopes that there may not be
resource gap for the next fiscal.
An idea of the market's firm stance may well be had from the fact
that it discounted the reports that the KSE will complete the full
circle of the T+3 trading system by Sept 3. Earlier, brokers and
members have opposed the addition of three companies in the list.
"Though bitter pill, we have to accept it as a reality", says one
broker" but as the system needs heavy cash amounts almost daily, we
have to tailor our operations according to our financial
limitations". Although plus signs again dominated the list, price
changes were mostly fractional and reflected weekend fears.
However, some second-liners came in for active support and rose
appreciably under the lead of Orient Insurance, Shadman Cotton,
Ismail Industries, and Pakistan Telephones, which posted gains
ranging from Rs1.35 to 4.45, the largest rise being in Pakistan
Telephones. Others which ascended included Babri Cotton, National
Refinery, Al-Ghazi Tractors, Lever Brothers and PIC, rising by Re1
to Rs20.
Fazal Textiles, Shell Pakistan, Cyanamid Pakistan and UDL
Industries were prominent among the losers, off by Rs2.00 to 5.25,
followed by Adamjee Insurance, EFU Life, Data Textiles, and Regent
Textiles, off Re1 to Rs1.80.
Trading volume rose to 83m shares from the previous 73m shares, as
gainers maintained a strong lead over the losers at 121 to 73, with
65 shares holding on to the last levels.
ICI Pakistan topped the list of most actives, up 25 paisa at Rs9.65
on 14m shares; followed by PTCL, firm by five paisa at Rs18.25 on
8m shares; Worldcall Payphones, higher 95 paisa at Rs18.15 on 6m
shares; Hub-Power lower 10 paisa at Rs20.20 on 6.260m shares; and
PSO, firm five paisa at Rs142.50 on 6m shares.
DEFAULTER COMPANIES: Kohinoor Gujar Khan came in for active support
and was quoted higher by 10 paisa at Rs4 on 46,000 shares; followed
by Colony Textiles, also up by the same amount at Rs7.80 on 5,000
shares; and Service Fabrics, easy five paisa at Rs0.55 on 1,000
shares.
20010601
-------------------------------------------------------------------
State Bank says drought to cost $927 million
-------------------------------------------------------------------
By Mohiuddin Aazim
KARACHI, May 31: The State Bank says Pakistan is set to lose $927
million in the next fiscal year as a result of the drought and its
GDP is to grow below 3 per cent against targeted 4.5 per cent.
"Therefore the per capita income is likely to remain stagnant,"
says the central bank in its third quarterly report on the state of
the economy.
In carefully-chosen words, the report states that the IMF programme
has so far not helped Pakistan in reviving investment nor has it
facilitated the economy in picking up. The report, covering
economic developments of the first three quarters of this fiscal
year, was released here on Thursday.
The report estimates the impact of the drought on the balance of
payments in detail, examining the possible loss of foreign exchange
in terms of lower exportable surplus of major crops and additional
fuel oil imports. It estimates a total loss of $747 million due to
availability of lower export surplus coupled with an additional oil
import of $180 million as a result of the drought. Fuel oil import
goes up in drought as it reduces hydel power generation thereby
increasing the country's reliance on thermal power generation that
requires additional import of crude oil.
The report says: "The good standing with IFIs (international
financial institutions) has not yet helped revive widespread
investment nor has the economic activity picked up to meet the
expectations of the public at large." But it adds that medium- term
financial assistance from IFIs is crucial for the country. And the
authors of the report hope that if end-June targets are
successfully met chances of converting the IMF standby credit into
a longer-term facility by September 2001 are quite strong.
The report confirms that GDP (gross domestic product) would grow
below 3 per cent in the current fiscal year against the original
target of 4.5 per cent mainly due to the drought and water
shortage. The report frankly admits that Pakistan has missed the
revenue target for both end-December 2000 and end-March 2001 set by
the IMF despite the fact that tax collection as such has gone up.
Naturally, the country "will have to request a waiver for end- June
target."
The report says though the State Bank easily met in end-March the
revised target of net domestic assets set by the IMF it had to made
heavy buying of foreign exchange from open market to meet the
target of net foreign assets. The SBP purchased $1.56 billion from
the open market in the first nine months of this fiscal year
against $1.37 billion in the year-ago period.
The central bank says exports have not done well in the first three
quarters of this fiscal year adding that if the trend persists
export earnings in full fiscal year would reach $9.2-$9.3 billion.
The original target was $10 billion.
The report says oil imports exceeded $2.5 billion in the first nine
months of the current fiscal year but since the growth in total
import bill remained below the growth in exports, the trade deficit
narrowed down to 1.7 per cent of GDP from 2.3 per cent a year ago.
And that helped the country post a current account surplus in the
third quarter and narrowed the balance of payments gap to $575
million between July 2000-March 2001 from $1.03 billion in the
corresponding period of last fiscal year. But this did not ease
pressure on the rupee as it depreciated in the third quarter when
SBP reduced its support to the inter-bank market.
The report says during the first nine months of this fiscal year a
higher average annual rate of inflation was recorded in all three
price indices when compared with the corresponding period last
year. Inflation based on consumer price index rose by 4.8 per cent
in the first nine months of the current fiscal year as against 3.4
per cent in the year-ago period: wholesale price index and
sensitive price index rose by 6.7 and 5.4 per cent respectively
against 1.4 and 1.6 per cent.
AGRICULTURE: The report says that drought and water shortage may
result in a minus 5.4 per cent growth in the production of major
crops during this fiscal year against the target of 3.2 per cent.
And this, in turn, may pull down overall agricultural growth to 0.2
per cent against the target of 3.9 per cent. Major crops are
cotton, wheat, rice and sugarcane. The report warns that if the
existing drought also impacts minor crops and livestock and
fisheries the overall agricultural growth might fall even below 0.2
per cent.
LARGE-SCALE MANUFACTURING: In the first nine months of this fiscal
year, large manufacturing sector grew by 8.8 per cent compared to
3.5 per cent in the same period a year earlier.
The report says this growth was driven by a sharp recovery in the
production of refined sugar and value addition in petroleum
refining. Since the cotton crop this year is 4.5 per cent less than
the previous year the textile sector grew by only 4.6 per cent in
the first nine months of this fiscal year against 13.5 per cent
last year.
EXTERNAL SECTOR: Trade deficit in the first three quarters of this
fiscal year stood at $1.32 billion, only marginally above the
deficit in the corresponding period of the last fiscal year. The
report cites three main reasons for the trade deficit: (i) weak
international prices for Pakistan's main textile exports (ii)
higher imports of machinery on account of the textile sector's BMR
drive (iii) import of sugar and pulses to compensate for low
domestic production and more importantly (iv) the ballooning oil
import bill. But what helped the country narrow down its current
account deficit to $575 in July 2000-March 2001 from $1.03 billion
in July 1999-March 2000 was heavy foreign exchange buying by SBP
from the open market coupled with higher inflow of remittances.
The report says the remittances rose to $803.9 million in the first
nine months of this fiscal year from $678.1 million in the same
period the year before, mainly due to Hajj receipts and
compensation for Kuwait war affectees.
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20010601
-------------------------------------------------------------------
Oil, gas attracts $ 911 million investment
-------------------------------------------------------------------
By Our Staff Reporter
KARACHI, May 31: Minister for Petroleum and Natural Resources,
Usman Aminuddin has said that Pakistan has attracted $911 million
foreign investment in the oil and gas sector in the last 18 months
while more investment is in the pipeline.
Speaking after performing the ground breaking ceremony of White
Oil Pipeline Project of Pak Arab Pipeline Company (PAPCO) at the
Port Qasim, he said the main thrust of the government was to
promote foreign investment to develop the oil and gas sector. He
said the government also wants to improve the existing
infrastructure for movement of petroleum products. Usman said his
ministry is concerned at the inadequacy of the existing
transportation infrastructure against the backdrop of the growing
oil demands of the upcountry areas.
On white oil pipeline project, he said that China has accepted
National Bank's guarantees in place of government of Pakistan
required for the foreign currency credit of $120 million, which is
being extended to the contractors of CPECC by China Exim Bank. He
said with the completion of this pipeline, targeted for December 2,
2002, up to 12 million tons per year of additional petroleum
supplies would become available to the upcountry areas which
account for approximately 70 per cent of the country's total oil
consumption.
He said the new pipeline would not only improve oil transportation
logistics but will also bring about savings in transportation cost.
The 817 km and 26 diameter underground pipeline commences from the
FOTCO Oil Jetty, terminating at Mahmoodkot, District Muzaffargarh.
The cost of the project is $480 million. On gas sector, he said
the Chief Executive is inaugurating the Zamzama Gas Field in Dadu
on June 1. The field has already started pumping 60 million cubic
feet of gas a day in the Sui Southern Gas Company's system. He
avoided a direct reply when the waiting newsmen asked him whether
the oil prices are being increased next month, but said that oil
prices have gone up in international market.
He said that the price fixation on June 15 will be the last
exercise on the part of the government and from July 1 oil
marketing companies (OMCs) will determine the prices in line with
global price trends after incorporating relevant costs and
government levies. He ruled out the possibility of any price
increase in the wake of this move of giving responsibilities to the
OMCs to fix the prices of petroleum products.
He said the government has also decided to revise gas prices after
every six months. On problems being faced by the government in
drilling oil and gas wells in Balochistan, he said talks were under
way with the Sardars of the areas to settle the issues amicably.
Managing Director, Pak Arab Refinery Limited (Parco), Dr Shahid K.
Hak said out of $480 million project cost of white oil pipeline,
Parco's equity participation is 51 per cent followed by Shell 26
per cent, PSO 12 per cent and Caltex 11 per cent.
The local currency financing amounts to Rs 14 billion and is
arranged by a consortium of local banks. Mr Wilson, director Shell
Pakistan, SAQ Razvi, deputy managing director, PSO and Mohammad
Zubair, director, Caltex also spoke on the occasion.
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20010601
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SBP's third quarterly report on economy
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KARACHI, May 31: Following is the summary of third quarterly report
(July 2000-March 2001) of the State Bank of Pakistan 1 released on
Thursday:
Overview
The continuing drought and water shortages have taken a heavy toll
on Pakistan's economy. Most recent estimates indicate that overall
GDP growth in FY01 will decline to below 3 percent. Therefore, per
capita income is likely to remain stagnant. Despite a falling share
of agriculture in Pakistan's economy, production of major crops has
a very direct impact on the manufacturing sector and purchasing
power in rural areas.2 On a positive note, the country was able to
post a current account surplus in its balance of payments in the
third quarter of this year.
Returning to the drought, a shortfall in the production of major
crops (cotton, sugarcane, wheat and rice) also requires import of
primary products. Adding to this burdens, the water shortage has
impaired the country's ability to generate hydel power, which has
fuelled Pakistan's huge oil import bill in the first three quarters
of this fiscal year.
Against a provisional growth rate of 9.6 percent for major crops in
FY00 (which increased aggregate growth to 4.5 percent last year),
the revised estimate this year could be as low as negative 5.4
percent. Despite this exogenous development, Pakistan's cotton crop
this year will not be impacted. An early sowing season and the fact
that this is a less water intensive crop (compared to the other
major crops), have been its saving grace.
Large-scale manufacturing (LSM) recorded strong growth of 8.8
percent compared to 3.5 percent last year. LSM growth was driven by
a sharp reversal in the production of refined sugar and high value
addition in petroleum refining.
Since this year's cotton crop is 4.5 percent less than the previous
year, the textile sector was only able to post 4.6 percent growth
against an impressive 13.5 percent in the first three quarters of
last year. Assisted by an increase in the production of automobiles
(cars, motorcycles and light commercial vehicles) and certain
consumer durables (air-conditioners and refrigerators), this was
able to compensate for textiles.
In terms of Pakistan's fundamental imbalance, tax collection has
been able to show an improvement in the tax/GDP ratio for the
second consecutive year with an increase of 14.9 percent this year.
Nevertheless, there have been slippages vis-a-vis IMF revenue
targets for two consecutive quarters (end-December and end-March).
Given the cumulative nature of revenue collection, Pakistan will
have to request a waiver for the end-June target.
The fiscal deficit on the other hand, is expected to remain
unchanged from the original target of 5.3 percent of GDP. Most of
the fiscal adjustment is likely to be made by curtailing
expenditures.
IMF targets
Looking at the other targets that are part of the IMF's
stabilization programme, the ceiling on SBP's net domestic assets
(NDA) was easily met in end-March 2001. A much-needed relaxation on
this target (given the problems faced in end-December) was
negotiated in mid-February, with the result that banks helped SBP
shift GOP debt to their books. However, the need to increase
Pakistan's liquid reserves to meet the end-March target for SBP's
net foreign assets (NFA), did result in heavy purchases of foreign
exchange from the kerb market. Against US$1.37 billion in the first
three quarters of FY00, SBP managed to buy US$1.56 billion from the
kerb market this year. In terms of worker remittances, the larger
inflows this year was largely because of exceptional inflows on
account of compensation from Kuwait (for Gulf war affected
Pakistanis) and the Haj sponsorship scheme.
External sector
The performance of Pakistan's external sector has been lacklustre.
Exports have not done as well as targeted, and if the trend
witnessed in first three quarters of this year persists (an 8.4
percent increase), exports are likely to reach US$ 9.2 - 9.3
billion for the full year. Export revenues continued to suffer from
low international prices despite increased volumes for the second
consecutive year. The most disappointing results have been in the
textile sector; given its share in total exports, textiles have
adversely affected the country's export performance.
Oil imports have already exceeded US$ 2.5 billion during the period
under review. Nevertheless, the growth in Pakistan's import bill
has been below export growth, resulting in the second consecutive
improvement in the trade deficit from 2.3 percent to 1.7 percent
(of GDP) this year.
The upshot of this is that Pakistan was able to post a current
account surplus in the third quarter of FY01. This is largely
because Pakistan's non-oil import bill is almost stagnant in the
first three quarters of this year compared to FY00. However, this
did not ease pressure on the rupee, as the third quarter witnessed
continuous depreciation as SBP support to the interbank market (in
terms of supplying hard currency) was gradually reduced. Helped by
lower economic growth this year, the ratios of the external
imbalances (trade and current account deficits as a percentage of
GDP) have narrowed.
In terms of the financial sector, despite the fact that the third
quarter witnesses an increase in bank liquidity, SBP could not ease
its monetary policy by lowering T-bill rates. With strict
stabilization targets (especially government borrowing from the
central bank) and a stagnant Rupee deposit base, lowering T-bill
rates would have made it harder to meet these targets. Despite
tight liquidity conditions during the course of this year, private
sector credit posted a sharp increase on account of the textile
sector (which no longer had to resort to self-finance as it had
last year)3, sugar and automobiles. The rise in production of
consumer durables can also be traced to the increasing popularity
of leasing facilities. This in turn explains the active role of
leasing companies in mobilizing long- term funds from the bond
market to sustain their operations.4
Looking ahead, the fact that Pakistan has successfully met the
IMF's quarterly targets has enhanced the country's credibility with
the International Finance Institutions (IFIs). Pakistan's
performance in the last six months has been greeted by pledges of
further assistance from the World Bank and the Asian Development
Bank. Still, adverse external developments may put pressure this
quarter in building up liquid reserves. If end-June targets are
successfully met, the chances of converting the stabilization
programme (SBA) into a longer-term structural adjustment programme
(PRGF) by September 2001 are quite strong. This will provide the
breathing space to implement sector-specific reforms in the banking
system, capital markets, the energy sector, restructuring of public
sector enterprises, and allow a revival of the privatization drive.
The good standing with the IFIs has not yet helped revive
widespread investment, nor has the pace of economic activity picked
up to meet the expectations of the public at large. This situation
has been further exacerbated by the drought, low international
prices for Pakistan's exports, depressed demand in the
industrialized world and inadequate capital flows. Unless Pakistan
receives medium-term assistance on soft terms to offset these
adverse effects, the external payment position will remain under
severe strain. The balancing act between keeping the debt burden
under control and achieving a healthy balance of payments will
remain the biggest challenge facing the country in the next few
years.
2. Executive Summary Real Sector
Developments in the third quarter of FY01 were dominated by the
acute water shortage in the country. Since agriculture has strong
spillovers on the rest of the economy, the downward revision in the
size of Pakistan's major crops will not only tone down economic
growth projections, but will also require urgent actions to reduce
the degree of vulnerability of the agricultural sector to weather
conditions. Declining levels of rainfall for the third consecutive
year, which resulted in the drawing down of water reservoirs last
year (to support bumper crops in wheat and rice), does not bode
well for the future. Given the country's dependency on irrigated
farming, water management will become a critical aspect of economic
policymaking.
The adverse impact of the drought on Pakistan's major crops may
result in negative 5.4 percent growth this year, compared to a
target of 3.2 percent set at the beginning of the year. If this
were to happen, overall agricultural growth will be almost stagnant
this year (growth of only 0.2 percent), compared to 3.9 percent
last year5. This significant decline will have serious consequences
for poverty and living standards in rural areas.
Cotton is the only major crop that should be able to meet the
target set at the beginning of the year. Two factors are
responsible: first, as a Kharif crop that is sown at the end of the
fiscal year, the water shortage did not impact cotton as strongly
as it has others; and second, cotton is not a water intensive crop.
On the other hand, water intensive crops like sugarcane and rice
have had to bear the brunt of the water shortage - against full
year targets for this year, actual production is expected to show a
shortfall of 15.3 percent (for sugarcane) and 5.9 percent (for
rice).
To add to this problem, impact of the water shortage has not been
even in the two main agriculture provinces of Pakistan (Sindh &
Punjab). Other than endowment differences in terms of the flow of
irrigated water and the larger proportion of brackish groundwater
in Sindh, Punjab was able to cope with this crisis more
effectively. The results speak for themselves; area under
cultivation for wheat and rice in Sindh fell by 29.5 and 20.9
percent, respectively, while the national average declines were
only 1.7 and 5.5 percent. A sustainable longer term solution
requires a more consistent strategy across provinces to build small
dams / bunds, and to allocate existing canal water more
strategically.
Manufacturing sector
Fortunately, the performance of the manufacturing sector has been
much better for the first three quarters of this year. Large-scale
Manufacturing (LSM) was up by 8.8 percent compared to 3.5 percent
for the corresponding period last year. The source of this reversal
is the sharp increase in value addition by food, beverages and
tobacco. More specifically, positive value addition by sugar,
strong growth in the production of vegetable ghee & cooking oil,
and a very sharp reversal in the production of cigarettes, allowed
this sub-sector to grow by 10.0 percent in the first three
quarters, against negative growth of 17.1 percent in the
corresponding period last year. After textiles, this is the largest
sub-sector of value addition in LSM.
The food sub-sector was able to overshadow the lower growth posted
by textiles, as production of ginned cotton and yarn were lower
this year. The refining of petroleum products (which is the third
largest source of value addition in LSM) showed strong growth
compared to FY00, which was supported by higher imports of crude
petroleum. These two sectors were clearly the swing factors in the
high growth shown by LSM.
For the second consecutive year, production of automobiles and
chemicals has shown rising growth rates. The production of cars,
motorcycles and light commercial vehicles (LCVs), has been strong
enough to compensate for the shortfall in the production of trucks
and tractors. On the supply side, the introduction of new brands of
compact cars played a large role, while the increasing use of
leasing enhanced demand for such products. In the chemicals group,
the largest increases were shown in paints, varnishes / polishes
and the production of chlorine gas. As complementary goods, these
products are used by the automobile sector, while chlorine gas is
used in the preparation of vegetable ghee.
Excluding outliers, the trimmed growth during the first three
quarters of this year was 9.5 per cent against 6.6 per cent in the
corresponding period last year. In fact, the sharp negative growth
in food, beverages & tobacco last year that has been reversed this
year, has played a pivotal role in narrowing the difference between
overall and trimmed growths in the two years.
To summarize, low growth in agriculture has been compensated by
strong growth in manufacturing, which is spearheaded by the food
group (especially sugar). Despite indications that the country will
meet the cotton target this year, the fact that this crop is 4.4
per cent lower than last year, has pulled down growth in the
textile sector. On the upside, the increasing popularity of leasing
consumer durables has boosted demand for cars, motorcycles and
airconditioners / refrigerators.
Fiscal developments
Tax collection in the first three quarters of this fiscal year is
up 14.9 per cent over last year. Keeping in mind the impact of the
drought on Pakistan's GDP, growth of tax revenues should exceed
nominal growth, which means the tax to GDP ratio will improve this
year. However, even with this impressive growth in revenues, the
IMF's quarterly targets for end-December and March were not met. As
a consequence, the end-June 2001 targets stands revised at Rs417.3
billion, from an original target of Rs430.2 billion. Tax collected
so far represents 98.3 per cent of the third quarter target, and
66.3 per cent of the full year revised target. It should be noted
that ambitious targets set at the onset of the fiscal year (IMF
programme year), paints a bleaker picture than is actually the
case, which undermines the perceived improvement in revenue
collection. In terms of the fiscal deficit, driven by higher than
projected non-tax revenue and stricter expenditure controls, the
budget deficit for 1H-FY01 was 0.7 percent (of GDP) lower than
targeted under the IMF programme.
Monetary Developments
Unlike developments in Q2-FY01, the financial sector was reasonably
calm last quarter. The sharp retirement of commodity financing to
banks, the on-going maturity of government securities held by
banks, and the seasonal plateau of private sector credit during Q3-
FY01, allowed commercial banks to be more comfortable in terms of
liquidity. Nevertheless, following the events in end-December,
banks were hesitant about locking in funds and were not forthcoming
in the fortnightly primary auctions6. It was only after the IMF
relaxed its end-March net domestic asset (NDA) target, did banks
place more funds in government securities7. Given the self-
fulfilling nature of expectations, once banks were less panicky
about this target and more forthcoming in the auctions, it allowed
SBP to meet the NDA target almost effortlessly8.
Money supply actually fell during Q3-FY01, but is to be expected
for this period of the year. In aggregate terms, money supply
increased by Rs66.1 billion in the first three quarters against a
full year target of Rs147.0 billion. In the remaining part of this
year, except for commodity financing in end-May and June 2001,
there is likely to be a fall in net domestic assets of the banking
system in the last quarter. However, with an ambitious net foreign
asset (NFA) target for end-June, monetary growth for the full FY01
will increase from the end-March level, but should not exceed last
year's increase in M2 (which was Rs 120.1 billion). In effect,
although inflationary pressures will remain, this is primarily on
account of cost-push factors and not because of excessive
purchasing power in the economy.
In terms of sectoral distribution, working capital loans to the
textile sector increased sharply. Two inter-related factors are
responsible: first, the textile sector relied more on self-
financing last year; and second, the increase in lint cotton prices
raised demand for bank financing. The sugar sector also increased
borrowing from the banking system on account of an increase in the
market price of sugarcane and a sharp reversal in the production of
refined sugar. The bulk of the increase in term financing, on the
other hand, was driven by the textile and automobile sectors.
Despite an increase in market liquidity compared to Q2-FY01, T-bill
rates were stable with a mild increase of 50 to 60 basis points in
March. SBP could not afford to reduce interest rates for two
distinct reasons: (1) this would have made it difficult to meet the
NDA target for end-March, and (2) although the third quarter
witnessed a gradual depreciation of the rupee, SBP feared that if
its monetary policy was eased, this could unhinge the foreign
exchange market. The unfortunate consequence of this monetary
stance was the increase in export refinance rates (in both early
January and early April) and the expected increase in early FY02.
Prices
Annualized average inflation rates have been 4.8 and 6.7 per cent
for CPI and WPI, respectively (for end-March 2001), but price
increases in the third quarter have been subdued compared to the
first two quarters. Although the inflationary impetus once again
comes from non-food items, the overall impact of this category was
contained; while retail gas prices increased by an average 20 per
cent on March 17th, retail petrol prices were reduced by 7.0 per
cent while diesel prices dropped by 15.7 per cent on March 15th, on
account of the fall in international oil prices.
In terms of food items, 70 out of 163 posted a price increase
during the third quarter of FY01. Although only 47 items showed a
decline, the sensitive nature of these items (e.g. sugar, rice,
milk and edible oil) appeased the public view on prices.
Capital Markets
The Karachi Stock Exchange (KSE) displayed bearish sentiments in
the third quarter of this fiscal year. Other than expected
movements in the KSE index following the announced results of
heavyweight companies9, the real damage followed a report from
Merrill Lynch that was published on February 19th. Selling
pressures following the decision of a large foreign fund to close
its position in Pakistan resulted in a fall in the KSE index from
1,511.6 on Feb 19th to 1,324.4 by the end of March. Corresponding
to this sell-off, the country's foreign exchange reserves were
depleted by US$64 million during the course of the quarter.
In terms of the dispute between KSE and SECP that surfaced in end-
December, a mutually satisfactory solution was achieved. In spite
of this, the market's resentment did not disappear. In early May
2001, issues relating to capital market reforms advocated by SECP
(specifically the movement towards the T+3 regime) has become
contentious.
Looking at the bond market, the issuing of corporate bonds (Term
Finance Certificates) by leasing companies continued last quarter.
Although only one company entered the market during Q3-FY01, out of
the 18 new issues since FY96, six have been issued this year. The
growing interest in issuing long-tern bonds by leasing companies,
which account for five of the six bonds issued this year, is
directly related to the increasing popularity of leasing consumer
durables.
External Sector
Pakistan's external sector was able to show a current account
surplus in the third quarter of this year. Although this narrowed
the gap in the balance of payments (BOP) for the first three
quarters (frown US$1.03 billion last year to US$ 575 million), the
need to build up liquid reserves during the course of Q3- FY01,
meant the authorities had to monitor the foreign exchange market
very closely. In fact, the urgency to increase liquid reserves
during the quarter resulted in record levels of outright purchases
from the kerb market; SBP's purchases are already US$1.56 billion
during the first three quarters. This, coupled with lumpy inflows
of remittances on account of Haj receipts and compensation for
Kuwait war affectees, allowed the country to narrow its current
account deficit.
Looking at detailed trade numbers using custom records, the US$1.32
billion trade deficit during the first three quarters of FY01, was
marginally above the deficit in the corresponding period last year.
The main reasons for this are: (1) weak international prices for
Pakistan's main textile exports, (2) higher imports of machinery on
account of the textile sector's BMR drive, (3) import of sugarcane
and pulses to compensate for low domestic production, and most
importantly, (4) the ballooning oil bill that has already exceeded
US$2.5 billion in the first three quarters of this year.
For the second year in a row, growth in export revenues came on the
back of substantial quantitative increases. The total quantity
effect during the period July-March 2001 was positive US$759.4
million, which was undermined by a negative US$432.9 million price
effect. It should be noted that the bulk of these effects are
driven by textile exports.
The water shortage has also impacted Pakistan's trade deficit.
Other than higher imports of sugar and pulses, low water reservoir
levels have impaired the generation of hydel power. To make up for
this shortfall, reliance on thermal power generation has increased,
with the resulting import of more crude petroleum. Looking ahead,
this issue will continue to pressure the external sector. To
finalize this summary, given the free-float of the exchange rate
and the fact that the underlying fundamentals are still weak, the
rupee continues to witness a gradual depreciation.
1. Date of commencement: May 7th 2001. Date of completion: May
21st 2001.
2. In terms of its impact on manufacturing, textiles and food,
beverages and tobacco are the two largest sectors of value addition
in large-scale manufacturing. On the other hand, the crop size of
cotton and wheat is critical in determining the volume of
purchasing power in the rural sector.
3. In terms of working capital loans, against Rs8.9 billion
disbursed in the first three quarters of FY00, this year witnessed
net lending of Rs25 billion.
4. Out of 6 new corporate bonds issued this fiscal year, 5 were by
leasing companies with a combined mobilization of Rs1.6 billion.
5. If the wheat crop in FY00 is revised upward to 21.2 million
tonnes (which is not the case in the 9.6 per cent growth shown by
major crops last year), the agriculture sector will shrink by 1.3
per cent during FY01.
6. This is the main avenue of bank lending to the government.
7. In broad terms, this target tries to limit government borrowing
from SBP, commercial banks and non-bank financial institutions
(NBFIs).
8. If banks had remained hesitant, this would have either forced
SBP to sharply tighten monetary policy or resort to other methods
to meet the target.
9. In a nutshell, we had negative results for PTCL on January
25th; positive for Engro Chemicals on January 31st; negative for
Shell and positive for PSO in mid-February.
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20010530
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$ breaks through new barriers: Rupee loses 2.2% in 10 days
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By Mohiuddin Aazim
KARACHI, May 29: The US dollar on Tuesday flew past Rs63 in inter-
bank market and crossed the barrier of Rs65 in kerb thus forcing
the rupee down to an all time low.
Bankers said the dollar closed at Rs 63.10/Rs 63.15 in inter -bank
market as higher than normal outflows pushed up the demand for
greenbacks amidst relatively low supply.
Bankers said the dollar had shot up to Rs 63.20 in early trade but
later on it registered a modest fall as panic buying ended at the
close of the day. On Monday the dollar had closed at Rs 62.75/ Rs
62.80 in inter-bank market. Thus it gained 35 paisa overnight.
Bankers said the central bank watched the fall of the rupee rather
calmly and made no intervention in the inter-bank market.
In kerb the US dollar closed at Rs 65.40/ Rs 65.50 on Tuesday up
from Rs 64.85/ Rs 64.95 on Monday thus forcing the rupee to shed 55
paisa or a little less than one per cent of its value in a single
session.
Currency dealers said the fall of the rupee in inter-bank market
mirrored in open market transactions. They said as the rupee nose-
dived in inter-bank market dealings and the gap between inter-bank
and open market exchange rates narrowed down, speculators started
hoarding dollars from kerb. Hence the fall of the rupee.
The RUPEE SLIDE IN INTER-BANK MARKET: In the past ten days the
rupee has lost Rs 1.40 or 2.2 per cent of its value against the
dollar in inter-bank market. What is weakening the rupee so fast is
a big question. The economic managers have so far not come out with
a convincing answer leaving general public and professionals in an
utter state of confusion. Bankers say a major reason for the fall
of the rupee is that the State Bank has started allowing banks to
foot oil import bills on their own. Previously SBP was providing a
major chunk of the required foreign exchange to pay oil bills.
Bankers said more than $25 million flew out of the system only on
Tuesday-thanks to oil import payments but no SBP official was ready
to confirm it. Bankers said corporate demand for the dollar was
also up. Bankers also say that lately SBP has been buying dollars
from inter-bank market to make debt payments.
The central bank is supposed to have liquid foreign exchange
reserves worth about $1.2 billion at end-June under the terms of
the $596 million IMF standby programme.
Bankers say this also limits the SBP ability to intervene in the
market but sources close to the central bank say this is not the
case. "You cannot have a stable unless your current account deficit
comes down," remarked one of the sources. "Making futile attempts
to intervene in the market is worse than no intervention at all."
But he said it was naive to presume that SBP had not been
intervening in the market at all. "Lately the State Bank has been
buying dollars from the banks on one day only to sell them the
other day." But bankers say buyings are much larger than the
sellings and leave no positive impact on exchange rates.
DEFENDING THE RUPEE THROUGH INTEREST RATES: Then the question
arises why the central bank is not defending the local currency by
increasing interest rates. Sources in SBP say eventually SBP may do
this though there are no official indications for such a move. The
problem is that if SBP tightens its monetary policy to defend
exchange rates it will not only invite criticism from the trade and
industry but will actually limit the prospects of economic growth.
Pakistan economy is set to grow only 2.6 per cent during this
fiscal year ending in June against the original target of 4.5 per
cent. But on the other hand if the exchange rate is not defended at
a certain level and the rupee is allowed to depreciate further
against the dollar it will only speed up the dollarization of the
economy and the capital flight besides making servicing of $33
billion external loans very expensive. But senior bankers close to
SBP believe that the central bank would be forced to tighten its
monetary policy before the end of June if it has to keep the
exchange rate at a manageable level.
And what makes their statement sound logical is that there is room
for increasing interest rates keeping in view that the inter-bank
market has been very liquid for some weeks: Call rates have been
oscillating between 4-5 per cent on an average against the SBP repo
rate of 13 per cent. Central bankers admit that this high level of
liquidity in the market is one of the reasons for the ongoing
decline of the rupee.
STABILITY IN KERB RATES: In the past 10 days the rupee has shed 95
paisa or 1.4 per cent of its value against the US dollar in the
open market. But in the mean time the spread between the inter-bank
and open market exchange rates has narrowed down from Rs 2.80 per
dollar to Rs 2.35. Bankers say this contraction in the spread is
luring speculators to hoard dollars in anticipation that the spread
would eventually expand forcing the rupee down- and allowing them
to make big money.
Historically there has been a much larger spread between inter-
bank and open market exchange rates providing incentives to
speculators. But as Pakistan entered into the IMF standby credit
programme the Fund started insisting that the spread must be
contained. The Fund took the position that one solid reason for the
spread being very large was that the central bank has been a net
buyer of foreign exchange in the open market. That is why SBP
sometime does not defend the exchange rate in inter-bank market
expecting that it would narrow down the differential between inter-
bank and open exchange rates.
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20010530
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ADB concerned at delay in $80 million KESC project
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By Khaleeq Kiani
ISLAMABAD, May 29: The Asian Development Bank (ADB) has expressed
serious concern over a 30-month delay over a $80 million power
project of Karachi Electric Supply Corporation (KESC) even as
Karachiite's continue to face repeated power breakdowns.
Official sources told Dawn that an ADB mission which visited
Pakistan early this month had already declared KWSC 6th Power
(Sector) Project as "problematic" after assessing its progress as
"unsatisfactory and partially satisfactory". In view of ADB's
adverse comments, the federal government has sought a detailed
report on the subject.
The $40 million loan agreement on 220KV transmission line ring
around Karachi city was signed in 1994. The implementation on the
project has been termed as 'unsatisfactory' in view of the fact
that it was 30 months behind schedule.
The project scope was also declared unsatisfactory as only one of
the four sub-projects had been implemented as the other four were
cancelled in spring cleaning of 1998. However, project costs have
been highly satisfactory as there were no cost overruns. So far, an
amount of $68.5 million has been released by the ADB.
On the counterpart funding side, the government performance has
been unsatisfactory that resulted in delay of contract and
cancellation of other sub-projects while implementation covenants
were also classified as unsatisfactory.
Audited financial statement was found satisfactory though
submission of statements were delayed by around three months.
The main cause of delay, the sources said, was disagreement with
local councils and military authorities on right-of-way access and
due to the need to take existing lines out of service. Another
reason was that the remaining packages including conventional grid
stations and underground cables under the ADB-financed transmission
system reinforcement and expansion, the bids had been evaluated in
the first half of 1997. However, KESC's liquidity problem at the
time impeded further firm commitment and the contracts could not be
awarded.
The closing date of December 31, 1998 has been extended by 18
months, up to June 30, 2001. The KESC's request for utilisation and
reallocation of loan savings and a further extension of loan
closing date to June 30, 2001 has also been approved.
The bank mission early this month has given guidelines on
procurement of 220KV cables, cable sheaths along with
reconciliation and outstanding disbursement accounts besides a set
of instructions on how to prepare the executing agency's project
completion report (EAPCR).
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20010530
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World Bank to give $350 million credit on June 13
-------------------------------------------------------------------
By Our Staff Reporter
ISLAMABAD, May 29: The World Bank will disburse a $350 million
Structural Adjustment Credit on June 13, a senior Finance Ministry
official said on Tuesday. Talking to Dawn, the additional secretary
and spokesman for the ministry, Dr Waqar Masood Khan, said the
World Bank's executive board was meeting on June 12 to formally
approve the credit. "This will be an upfront single tranche to be
disbursed the very next day," he added.
SAC, said Dr Masood, was a highly concessional assistance for
Pakistan to help improve its balance-of-payments position.
The credit, he claimed, would be offered as the government was
ensuring good governance and an equitable use of public resources.
The credit would support reforms in various sectors. In reply to a
question, the spokesman said that initial talks had been held with
the IMF for securing the Poverty Reduction Growth Facility which
would replace the $596 million Standby Arrangement expiring on Sept
30.
In this regard, he stated, detailed talks were expected in July.
The PRGF, he added, would be a medium-term facility for three
years. In reply to another question, Dr Masood said that the tax-
to-GDP ratio was being increased from the present 10 per cent to
14% in the next three years.
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20010529
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Money laundering hits Pakistan
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By Jawaid Bokhari
KARACHI, May 28: The United States has placed India and Pakistan in
the "primary concern list" of countries hit by money laundering
that accounts for an estimated annual global capital flows of
$1,000 billion, handled by the world's leading banks.
The US State Department's announcement coincides with the recent
IMF decision of adding "money laundering" as conditionality for
providing balance-of-payments support to an aid recipient country.
Official sources here, however, say that the IMF conditionality is
country specific and there is no move to apply "money laundering"
conditionality to Pakistan.
Pakistan's foreign trade is at $20 billion, and official and non-
official remittances estimated at $5-6 billion. Considering the
size of foreign trade and forex operations, the scope for money
laundering is very limited when compared to global volume. The IMF
estimates that the amount of tainted money being cleaned through
the world's financial system is massive between $500 billion and
$1.5 trillion a year.
On May 15, the State Department said that 175 countries had been
put on three categories of "concern" list. Pakistan is on the list
of "primary concern."
Yet, in another interesting development, the French are
investigating the charge of "money laundering" against a major
Pakistani bank and have detained a senior banker.
Over the past 18 months, the military government has launched a
vigorous campaign against tax evasion and loan defaulters that has
resulted in the flight of capital, entrepreneurs and professionals.
In the past two years, an estimated 5,000-6,000 Pakistanis have
spent about $1 billion in getting immigration visas to the US,
Canada and Australia. The flight of capital is estimated officially
at $1 billion per annum.
Studies carried out in developed countries show that money
laundering has grown simultaneously with globalization and
specially, with the lifting of capital control and the development
of international payment system. Bank of America sees nearly $1
trillion pass through its internal wires every day, according to a
foreign press report.
Globalization is also encouraging capital flows from the periphery
countries to world financial centres, from the poor to the rich
states, and from the developing to the developed states, says a
leading economist. The developing states have also been hit by
brain drain at a time when human resource is seen as the key to
economic progress.
Islamabad is now making a major bid to divert home remittances from
unofficial channels to official channel. No questions would be
asked if remittances are sent through inter-bank market. Incentives
would be offered in the next budget to lure investment by non-
resident Pakistanis.
Board of Investment officials expect that local businessmen who
have investments in foreign countries, would respond to the
opportunity offered by the State Bank decision to allow local
companies to invest abroad, to move from the informal to the formal
sector.
The US has pointed out that money laundering distorts business
decisions, increases the risk of bank failures and takes control of
the economy away from the government. Politicians in the UK and the
US have expressed dissatisfaction over their countries' efforts to
tackle money laundering, says London Economist.
A British parliamentary committee said in March that "the
government should take coordinated, coherent and properly resourced
action to fight money laundering if the United Kingdom, through the
City of London, is to maintain its reputation as one of the most
important international financial centres."
In USA, says the Economist, a report on money laundering by Senate
Democrats criticized some of the America's biggest bank, including
Citigroup's J.P. Morgan Chase, Bank of America and Bank of New
York. In February, Citigroup was involved in investigations against
Joseph Estrada, the ousted President of the Philippines.
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20010529
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Budget deficit to miss 5.3% target
-------------------------------------------------------------------
By Ihtashamul Haque
ISLAMABAD, May 28: The government is unlikely to achieve 5.3 per
cent GDP budget deficit as prescribed by the International Monetary
Fund (IMF) during the current financial year.
"Perhaps we will end up having 5.4 per cent fiscal deficit instead
of 5.3 per cent for a variety of reasons," said Secretary General
Ministry of Finance Mr Moeen Afzal.
Speaking at a one-day conference on Debt Committee's report here on
Monday, he said the present government had decided to achieve
economic stability by bringing about discipline in all the
ministries and other government departments.
"Every small and big development project now has to be approved by
the Executive Committee of the National Economic Council (ECNEC)
and the Central Development Working Party (CDWP) and nobody can
bypass these organisations," the secretary general said.
The government had invited politicians at the conference to brief
them about the country's debt problem with special reference to the
report of the Debt Reduction and Management Committee headed by Dr
Pervez Hasan.
Talking about reduction in foreign debt, Moeen Afzal said the debt
committee had proposed viable recommendations to reduce the
country's huge foreign and domestic debt. He said he agreed that it
could take three to five years to achieve the desired results. He
said Pakistan was likely to hit $9.1 billion exports at the end of
the current fiscal. Likewise, he said the rate of inflation will be
4 to 5 per cent.
Former Finance Minister and PML leader Sartaj Aziz said the targets
set by the Debt Committee to reduce debt were very high. He said
exports position was not competitive and the cost of production was
very high. "Utility charges are very high and due to Pakistan's
image abroad, our exports are not increasing," he said.
He said political uncertainty was adding to various problems. The
target of raising three billion dollars through privatisation and
to eventually retire the country's debt was too ambitious, he said.
"In 1990 Pakistan secured hard loans to pay off its soft loans," he
said, disagreeing with the government that 5.5 per cent growth rate
could be achieved in the coming years.
Mr Wasim Sajjad said that purchasing power of a common man had
weakened greatly due to the deteriorating economic situation over
the years. "Rulers should change their lifestyle and set an example
for others to follow," he added.
"Nothing could be achieved through halfhearted attempts," Wasim
Sajjad observed.
Secretary General of the PML like-minded group Gohar Ayub Khan said
there was no dedication seen in the governments to reduce the
country's debt. He was of the view that there was a real need that
the rulers practised austerity.
He said the use of expensive cars by the rulers should be stopped
in order to reduce the nation's expenditure. The suspended Speaker
of the National Assembly Illahi Bux Soomro said it was not fair to
expect the common man to continue offering sacrifices to reduce
foreign debt. "The government is not providing any relief to 80 per
cent of the population," he said, adding only those should be taxed
who could pay.
Nawabzada Mohsin Ali Khan, former finance minister of NWFP and a
leader of Tehrik i Insaf, said he did not know where had all the
foreign loans taken by the successive governments gone.
He said former prime minister Nawaz Sharif broke the law to build
motorway by taking away the powers of ECNEC and giving unnecessary
powers to National Highway Authority (NHA) to execute the project.
Mr Mohsin said that Chief Executive Gen Pervez Musharraf could not
tolerate 270 members of the National Assembly so how would he
tolerate 22,000 elected people coming in the wake of local bodies
elections.
Former Commerce Minister Zubair Khan claimed that a joint
commission of the World bank and the ADB had observed that military
government's reform agenda was over-extended. "That commission had
concluded that it was difficult to have a real impact of the
reforms and also from where the government will finance this reform
programme", he added.
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20010528
-------------------------------------------------------------------
IMF letter for third tranche received: Board meeting in July
-------------------------------------------------------------------
By Our Staff Reporter
ISLAMABAD, May 27: The government has received the draft letter of
intent (LOI) from the International Monetary Fund for the release
of third tranche amounting to $133 million under the Stand-By
Agreement, an official spokesman said.
The IMF board will meet in July to consider the LOI on the basis of
government's performance in the third quarter (Jan-March) of the
current financial year, the spokesman said at a hurriedly-called
press conference here on Sunday.
He said the government had sought a waiver from the IMF on the
revenue collection target for the current year under the SBA as
against the 9-month target of Rs279.3 billion it could collect only
Rs276.7 billion, registering a shortfall of about Rs3 billion.
The spokesman claimed the government had achieved all the
performance targets and met other criteria set in the SBA for the
third quarter.
The government's performance with regard to net domestic assets was
quite satisfactory as against the target of Rs8 billion the actual
achievement was Rs16.1 billion, he said.
The target for fiscal deficit for the whole year was Rs152.8
billion and the actual fiscal deficit in the third quarter remained
at Rs145 billion, lower by only a little over Rs7 billion than the
target set in the performance criteria with three months still to
go.
In the performance criteria, the whole year target for bank
borrowing was set at Rs19.9 billion and in the nine months the
government borrowed about Rs13 billion. In the remaining three
months it has to restrict additional borrowing to about Rs6.9
billion to meet the full-year target.
To a question about foreign exchange reserves, the spokesman said
it was not included in the performance criteria of the Fund. The
spokesman said the IMF mission during its just concluded visit
carried out a preliminary review of the third quarter and held
meetings with different ministries.
He said preliminary discussions on Poverty Reduction Growth
Facility (PRGF) were held with the IMF mission but the substantive
talks would be held after the end of the SBA. Poverty Reduction
Growth Facility is a multi-billion dollar highly concessional
medium-term facility, which spans over a period of three years.
The mission will visit Pakistan in the second week of August to
review the fourth quarter performance, he added.
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20010528
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Banks reluctant to give gas firms long-term loans
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By Khaleeq Kiani
ISLAMABAD, May 27: The commercial banks are reluctant to provide
long-term financing to the gas utilities SNGPL and SSGCL unless
they pledge their assets and receivables, says a World Bank report.
The report, made available to Dawn, was finalized by the bank in
consultation with the chief executives of the two utilities and
submitted to the ministry of petroleum and natural resources on
April 20.
The bank says the main reason for commercial banks' reluctance is
the poor financial performance of the utilities and the result is
that size of short-term financing is too low to commensurate with
their expansion requirements.
The bank, now spearheading reforms in Pakistan's gas industry, is
of the view that distorted tariff regime and bad distribution and
transmission system coupled with fixed and low return on investment
to gas companies has put the country in a paradox.
The financial performance of the two gas utilities is guaranteed by
the government through gas development surcharge, calculated on the
basis of difference between wellhead price and end-consumer price,
and does not provide for incentives to improve efficiency.
The allowed rate of return on assets of 17 to 17.5 per cent is
determined on historical basis: the corresponding return on equity
is of the order of 10 per cent, which is incommensurate with the
requirements of investors in Pakistan.
Given the fact that much of the debt is expressed in foreign
currency, the utilities have incurred significant foreign exchange
losses. Their liquidity ratio and debt service coverage ratio is
close to or below one.
In this situation, the companies have not paid cash dividend to
shareholders for many years now. They have also been unable to
contribute towards their investment programme and build the
extensions necessitated by the growth in demand.
The bank is of the view that distorted tariff structure in which
industrial, commercial and power consumers subsidize the household
and fertilizer sector are equalized throughout the country and do
not reflect the increasing share of gas produced to the south of
Sui and shipped to the north.
The report says no seasonal tariffs are maintained so that
customers do not get signals as to the necessity of saving gas in
winter, and given the considerable winter shortages there are no
incentives to build gas storage's in depleted gas fields to improve
service to the consumers.
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20010527
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Rules relaxed for currency export: FAP team meets Shaukat
-------------------------------------------------------------------
By Our Staff Reporter
KARACHI, May 26: Money changers can now take out five foreign
currencies out of Pakistan instead of selling them to state-run
National Bank. But they can exercise this liberty only if they
bring in advance the equivalent amount of these currencies in US
dollars.
This was decided at a meeting between a 16-member delegation of
money changers and Finance Minister Shaukat Aziz in Islamabad on
Friday, said a press release. President of Forex Association of
Pakistan Malik Bostan who led the delegation told Dawn that the new
system would be effective from Monday. He said State Bank Governor
Dr. Ishrat Husain who was also present at the meeting agreed that
the new system would work.
Dawn inquiries show that under the new system money changers would
bring in advance through telegraphic transfers (TTs) the dollar
equivalent of the foreign currencies they wish to export. Then
National Bank would send the foreign currencies to Dubai to be
handed over to the representatives of the money changers. The list
of the foreign currencies that money changers can export under this
system include (i) Pound Sterling (ii) Deutsche Mark (iii) Saudi
Riyal (iv) UAE Dirham and (v) Kuwaiti Dinar. Thus two things become
clear: (i) Money changers would continue to sell the US dollars and
all other foreign currencies minus the above- listed five
currencies to NBP, and (ii) they will not be allowed even to take
out these foreign currencies on their own as was the practice in
case of all foreign currencies minus the US dollar before NBP
started buying these currencies from money changers in April.
Money changers started selling all foreign currencies to NBP late
last month under an SBP directive that stopped them from carrying
any foreign currency outside Pakistan on their own. SBP had to take
this decision to plug leakage's in the name of export of foreign
currencies that was telling heavily upon the health of the rupee.
Initially money changers were getting only the rupee equivalent of
the foreign currencies sold to NBP but later on it also started
giving them the US dollars against all foreign currencies.
Money changers say they have so far sold $100 million worth of
foreign currencies including the above-listed five currencies to
NBP.
"I hope with the permission given to us to export five foreign
currencies supply of US dollars will increase in open currency
market," said Malik Bostan. He said the supply of greenbacks had
fallen sharply in the market pushing the rupee down during this
week because money changers were not getting enough dollars from
NBP in exchange of other foreign currencies. Now that the money
changers would bring in TTs in dollars against five major foreign
currencies to be exported by them it would naturally increase the
supply of dollars in the open market and stabilize the rupee as
well.
A press release issued by Forex Association of Pakistan said the
money changers would surrender all such TTs to SBP. Bankers say
this would help SBP buy dollars from money changers as and when
needed.
The rupee this week remained under immense pressure both in inter-
bank as well as open currency market: It lost 1.3pc of its value in
inter-bank market and 1.5pc in kerb as demand for dollar rose
amidst dwindling supply.
INCOME TAX: Bostan said the finance minister also promised to
resolve the income tax problems of the money changers. He said the
minister was informed by the delegation that the CBR had lately
sent notices to some money changers demanding income tax on the
deals they had struck in the past with foreign exchange houses
abroad to help boost supply of dollars in Pakistan.
He said the CBR had also started probing the source of income of
those who had transacted such business claiming that it was in
violation of Protection of Economic Reforms Act of 1992. He said
the minister had assured money changers that he would discuss the
issue with CBR chairman.
Back to the top
EDITORIALS & FEATURES
20010527
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The systems
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By Ardeshir Cowasjee
THERE is a world of difference between the Code Napoleon and the
Code Naqvi, which is soon to fall upon us. Whereas General Napoleon
Bonaparte did proclaim that his code was indestructible, he was not
so presumptuous as to maintain it was immutable, unchangeable. But
General Tanvir Naqvi and his co-generals insist that the laws they
intend to enforce will forever remain in the form in which they are
now presented to this country.
The Code Napoleon, officially known as the Code Civil des Francais,
became the law of France in 1804 and remains extant to this day,
with revisions. France is one of the great countries and has learnt
how to live with the world. It is pragmatic, able to smell out
rats, corrupt prime ministers and their corrupt spouses, and
crooked admirals of countries with which it does business. It
comfortably relieves the governments of such countries of much
money and where necessary bribes with kickbacks, sells its
submarines, and then decorates the admirals who were so friendly
and cooperative.
It is not so much the system or the laws which matter - it is the
men who administer the system and implement the laws. Our province
of Sindh can boast of having had a few competent men who have done
their best to effectively govern.
The oldest of such men to come to mind is Astad Gorwala, a Parsi of
Bombay, an officer of the Indian Civil Service, who spent most of
his career in Sindh administering the province prior to partition.
He was incorruptible, a man of the people, sought out by each
district. When he retired he went back to Bombay and became a
pamphleteer, constantly opposing the corrupt and the inefficient
administrators of the government.
I hold a copy of his pamphlet, 'Opinion', of August 28 1979. On top
of the front page I read, "Weekly Copy, Paisas 5, Annual
Subscription Rs.2." The page opens up, "Since independence,
presidents of India have been scholars, gentlemen and scholars,
politicians, even clowns arousing the laughter of Indians at least.
Now we have a trickster as president... Why all this trickery, oh
Trickster Nilam Sanjiva Reddy? You, from the exalted Rashtrapati
Bhawan, are not likely to make a reply, so we must make do with our
own humble speculations."
He wrote incessantly against Indira Gandhi and her emergency. But
when she closed down many a newspaper and arrested and jailed many
an editor, she gave special instructions that neither Gorwala nor
his pamphlet was to be touched. And, when Gorwala lay ill and
dying, Indira took the trouble to call on him at his Ridge Road
home, his publishing house.
Now to administrators of Sindh who people still remember. We start
with Kunwar Idris, district magistrate and collector of Karachi in
the late 1960s and early 1970s, starting his steady rise up the
hierarchy. When, at the end of 1988, Benazir Bhutto embarked upon
her democratic adventure, she appointed him chief secretary of
Sindh. He was of course given orders by husband Asif, which he
tended to ignore. This was not to the liking of Benazir, who called
him, told him very firmly that he had upset her husband, and that
"when my husband speaks you must take it that the prime minister
speaks."
He survived with the PPP government until the end of 1989 when he
had to decide between either taking action according to the
dictates of his conscience or "responding positively, without
question, to the party programme and its democratic principles,"
the party and its leader having swum through "rivers of blood" to
get where they were. His choice displeased Benazir and he was
shunted into a siding to head Bankers Equity.
Idris retired honorably, is now a member of the private sector, and
writes a weekly column which is printed besides mine each Sunday.
As can be judged from his writings, he is highly skeptical of the
Code Naqvi, with good reason, and its general might do well to have
a talk with him.
During the first half of the 1970s, ZAB's government found in
London, happily posted in our High Commission as economic
counselor, civil servant Abdul Karim Lodhi. His help was sought to
instigate Benazir Bhutto's election as president of the Oxford
Union, as had been ordered by her father. He refused to bend, or to
involve himself in the unorthodox action required of him, and, ZAB
following form, ordered his dismissal. He was reinstated by Zia and
was later selected by daughter Benazir to follow Idris as her chief
secretary in Sindh.
During Lodhi's tenure, Zubair Kidwai was secretary of the
provincial transport ministry. One fine day Zubair and the
managing-director of the Karachi Transport Corporation who had been
summoned to his office were physically threatened by their
minister, the PPP stalwart Manzoor Wassan. The minister, having
failed to gain his secretary's acquiescence in wrongdoing through
purely verbal means, thought he could do so at gunpoint, using his
armed guards.
The incident was obviously reported to the chief secretary who
wrote to his chief minister, Aftab Shahban Mirani, asking him to
immediately issue orders to his ministers and other party members
instructing them "that no one shall cause firearms or any other
weapons to be carried into the office rooms. If anybody does so,
from now onwards, Sir, with due respect, one will have to order the
physical removal from the secretariat of both the minister and his
companions bearing arms. The government has provided adequate
police security in the secretariat. If that is not considered
enough by anybody, it cannot be supplemented by ruffians ..... Now,
reverting to the ugly incident, Sir, it so happens that both the
affected officers have a known reputation for uprightness,
competence and integrity. One wonders if anything similar can be
used to describe the errant minister .... Mr Manzoor Wassan should
personally apologize to both officers, preferably in the presence
of his private secretary and the two guards (of course, minus their
weapons)....."
Lodhi survived Benazir. Then came Jam Sadiq Ali as chief minister
of the Jatoi caretaker government who one day swore that for as
long as he was CM of Sindh Lodhi would be his CS. Two days later,
Lodhi was removed and installed as head of State Life.
Another strong officer, Saeed Mehdi, was sent to Sindh as chief
secretary at the start of Nawaz Sharif's second round. He was
humane, he helped people. Firm, incorruptible, he stood up well to
the bullying tactics of his chief minister, the corrupt (now
absconding) Liaquat Jatoi. Jatoi did his best but could not manage
to get rid of him as Mehdi had gained the trust of his boss Nawaz.
To Mehdi's misfortune, he was so trusted by Nawaz that he took him
away from Sindh and posted him as his principal secretary in
Islamabad. He remained as such until October 12, 1999, when he was
arrested along with his boss from the prime ministerial mansion.
Nawaz has since hit the jackpot and languishes in Saudi Arabia, but
Mehdi remains in jail in Pakistan, a forgotten man. It is time
someone woke up to his existence. It is time for the chief
executive to pass judgment on his sins or crimes, give him bail,
and move him over to house arrest. No man who has served with or
under Mehdi speaks ill of him.
When Mehdi so unluckily left Karachi, his replacement was Zubair
Kidwai. He lasted with Liaquat Jatoi for eight months and was then
moved to federal government. When General Pervez Musharraf took
over, Kidwai was brought back as chief secretary and again managed
to last a mere eight months with the military government before
being again shifted to Islamabad and rewarded with the post of
secretary to the ministry of religious affairs from where he will
soon retire.
General Tanvir Naqvi should remember that the system he is setting
up must have checks and balances galore as it will be operated by
corrupt, venal,