Neo

Wow! I didn't know you were in to economics or following my thread!
I'll update the parameters as soon as I have some time.

Thanks for putting the thread back on course, I appreciate it!

__________________
Administrator @ Defence.pk

Julie

It reads, "The inflation rate was controlled at under 3 percent." I take that to mean the yearly increase did not exceed 3%.

Well, right now, Pakistan is more interesting to follow than my country.

Neo

Fourth successive year of sustained high growth in economy: SBP

ARTICLE (October 30 2007): Reproduced alongside is the executive summary of State Bank of Pakistan Annual Report 2006-07 released by SBP Governor Dr Shamshad Akhtar on Monday. Pakistan's economy witnessed a moderate recovery during FY07 with real GDP growth reaching the 7.0 percent target, as compared with 6.6 percent growth seen in FY06.

This is the fourth successive year of sustained high growth in the economy, with the average annual growth accelerated to 7.0 percent during FY03-07 period. The continued strong performance of the services sector made the major contribution to the FY07 outcome. Growth in agriculture and industry also witnessed improvement over the previous year.

The disaggregation of the aggregate demand presents an encouraging scenario. Firstly, the growth in real private consumption remained stable, inching up from 3.3 percent during FY06 to 4.1 percent. Secondly (and more importantly) real gross fixed capital formation registered a double digit growth for the third consecutive year, accelerating to 20.6 percent in FY07, due to higher FDI inflows and an acceleration in public investment on the back of a higher PSDP. As a result of the increase in public and private investment, the investment to GDP ratio rose to a record 23.0 percent in FY07.

AGRICULTURE:

Agricultural growth witnessed a recovery in FY07. This was primarily due to a considerably improved performance by the cropping sub-sector that overshadowed the impact of a moderation in the growth of the livestock sub-sector. The contribution of the remaining sub-sectors to overall agricultural growth was not material.

A sharp rise in value addition by crops, in turn, centered essentially around three major crops, ie, wheat, sugarcane and gram, all of which recorded exceptionally strong growth during FY07, comfortably offsetting the disappointing growth in two other cash crops (cotton and rice).

The growth of the livestock sub-sector in FY07 is one of the strongest in a decade (exceeded only by the exceptional FY06 growth). Moreover, consequent to robust demand, this sub-sector is attracting investment in the production, processing, transportation and storage of dairy products. This augurs well for future growth prospects.

In recent years, agriculture credit disbursement has increased substantially reflecting improvements in access (as banks have aggressively expanded activities in the sector), and sustained demand (as farmers were encouraged by strong commodity prices, supportive polices and reasonable weather). This was also seen in FY07, when the annual target was exceeded by 5.5 percentage points to reach Rs 168.8 billion against Rs 137.5 billion disbursed in FY06.

INDUSTRY:

The industrial sector witnessed a moderate recovery, with 6.8 percent growth during FY07 compared with 5.0 percent in FY06. This was the second consecutive fiscal year when growth targets for industrial sector remained unachieved. Within the industrial sector, the highest growth was observed in the construction sub-sector with value-addition rising by 17.2 percent in FY07, compared with only 5.7 percent in FY06. The FY07 growth is not only higher than the 7.0 percent target, it is also the second highest growth recorded by this sub-sector since FY76.

Mining & quarrying sector witnessed 5.6 percent YoY growth during FY07 which is not only higher than the 4.6 percent growth seen in FY06, but also well above the 3.2 percent growth target for FY07.

LSM growth remained a significant contributor to GDP growth during FY07 with value-addition rising by 8.8 percent, down from the 10.7 percent growth in the preceding year. This deceleration in LSM growth appears to reflect a broad moderation in external and domestic aggregate demand, as well as capacity and input constraints in some industries. The textile sector contributed almost a quarter of the increase in value-addition in LSM during FY07.

The electricity and gas distribution sub-sector continued to record losses in FY07, with the value addition by this sub-group falling by 15.2 percent in FY07 on top of the decline of 23.8 percent in the preceding year.

SERVICES;

For yet another year, the services sector growth remained well above target; the 8.0 percent increase in value-addition during FY07 was substantially above the 7.1 percent target. The FY07 target had been set lower than the 9.6 percent growth recorded in FY06 taking into account the anticipated deceleration in some of the larger sub-sectors of the services group, but the performance of two sub- sectors - finance & insurance, and social & community services - proved to be much better than forecast. The sustained strong growth by the services sector for the last six successive years has contributed to a structural shift in the economy, with services contributing over half of GDP in FY07.

NATIONAL SAVINGS:

During FY07, national savings rose sharply by 19.8 percent, raising its share in GDP to 18 percent, the highest in the last four years. It should be noted that the despite a rise in FY07, Pakistan's savings to GDP ratio remains quite low relative to other emerging economies. To maintain the growth momentum, there is a need of investment flows in the economy without putting pressures on external balances. This is only possible by a rise in savings in the economy. The main causes of low savings in Pakistan include low per capita income, lack of proper saving infrastructure (particularly in small towns and rural areas) and high dependency ratio.

To increase the savings rate, it is necessary to expand the network of banks, microfinance institutions, and postal savings to the far flung areas with simple procedure and friendly atmosphere for small depositors. In addition, savings schemes for school/college students could also help inculcate savings behaviour from an early age.

INVESTMENT:

The sustained high pace of growth in the economy is also reflected in a record level of investment during FY07. The total investment to GDP ratio rose to a record level of 23 percent in FY07, significantly higher than 21.7 percent seen in the preceding year as well as the annual target of 21.5 percent.

This impressive performance is a result of continued strength of domestic demand, a sharp rise in foreign direct investment (FDI) as well as a healthy increase in the public sector development program (PSDP).

In real terms, total investment witnessed a growth of 20.6 percent, the highest-ever growth recorded for Pakistan. The sustained double-digit growth in real investment for three years in a row is also an unprecedented phenomenon for Pakistan. The persistent increase in real investment reinforces the view that the current economic growth momentum would continue for a longer period. However, there is a need for effective implementation of second generation reforms, focusing on institution-building, improvement in governance, etc so that the cost of doing business can be reduced substantially in years ahead.

PRICES:

Inflationary pressures visibly declined in the domestic economy during the initial months of FY07, helping pull down the inflation numbers for the period below that in the preceding fiscal year. This evident deceleration in inflation, shown by all of the price indices, mainly reflects the impact of weaker growth in the prices of non-food components. The latter indicates a significant contribution by policies to contain excessive growth in aggregate demand.

Despite these gains, the eventual FY07 inflation outcome was disappointing, given that the average annual CPI inflation of 7.8 percent was considerably higher than the 6.5 percent target for the year.

The inability to achieve the inflation objective was principally due to the unexpected strength of food price inflation during the year, which considerably offset the gains from (1) the demand management policies and (2) the government subsidies that partially cushioned the domestic economy from high international oil prices.

PUBLIC FINANCE:

A surge was observed in direct tax collections and in non-tax revenues during FY07 but the fiscal deficit for the year rose to 4.3 percent of GDP a little higher than the target of 4.2 percent. The relatively higher fiscal deficit during FY06 and FY07 is mainly attributed to the exceptional expenditure on account of relief and rehabilitation of earthquake affected areas. In FY07 it is also supported by strong growth in current expenditure.

The large increase in current expenditure, driven by a sharp rise in debt servicing costs, overshadowed the impact of a substantial increase in revenues. The above-target 22.9 percent increase in CBR tax collection pushed up the tax-to-GDP ratio to 10.2 percent in FY07, up from 9.9 percent in the previous year. The strong growth in CBR taxes was caused by an extraordinary growth of 48.2 in direct tax collection during FY07. However, the weak performance in indirect taxes partially offset the impact of this rise. The exceptional tax collection was equally supported by 26.2 percent YoY growth in non-tax revenue.

Reliance to finance the fiscal deficit of Rs 377.5 billion was almost on external and domestic resources during FY07. The major sources of external financing during FY07 were program loans/commodity aid, project aid and borrowings from international capital market through the issuance of various bonds. Domestically, the government obtained an amount of Rs 177.8 billion that was on almost same level in FY06. But a compositional shift in financing was observed in domestic sources as in FY06 government used a large amount of Rs 97 billion from privatisation proceeds to finance the deficit that remained at Rs 19 billion in FY07.

The total provincial revenue receipts stood at Rs 483.4 billion during FY07 with tax revenue contributing Rs 400.1 billion. All the provinces recorded revenue surpluses accompanied with a substantial rise in development expenditure. The provincial share in federal tax receipts increased from 89.1 percent in FY06 to 91.6 percent in FY07.

MONEY AND BANKING:

SBP continued to maintain a tight monetary policy during FY07. This was desirable to further moderate aggregate demand pressures in the economy which were still present despite continued monetary tightening since September 2004. The presence of excessive demand pressures was already obvious in terms of high inflation through most of FY06.

The inflation target for FY07 was set 6.5 percent compared to a high inflation of 7.9 percent in FY06. However, the monetary management during FY07 was complicated by the dual mandate of maintaining price stability and economic growth that required SBP to avoid significant slippage in targeted real GDP growth for FY07 that could have occurred due to excessive tightening.

In this backdrop, the monetary policy framework for FY07 envisaged a further slowdown in monetary expansion (M2) to 13.5 percent from 15.1 percent growth realised in FY06. Simultaneously, as export growth continued to weaken, SBP took measures to partially shelter strategic sectors (textiles, and exports).

In order to achieve the broad money target, SBP first raised the reserve requirements for banks and then increased its policy rate by 50 basis points to 9.5 percent. At the same time, SBP also continued to drain excess liquidity from the interbank market and maintained the overnight rates persistently close to the discount rate through most of FY07. In addition, the SBP provided support to the exporters in the form of reducing rates on export finance scheme (EFS), and a debt-swap facility for strategic sector of the economy that substantially reduced the cost of fixed investment loans acquired in recent years.

SBP monetary policy proved effective in considerably moderating aggregate demand pressures in some sectors of the economy as reflected in a visible slowdown in import demand and private sector credit during FY07. The reduction in aggregate demand was also reflected in the continued downtrend in core inflation (NFNE). More importantly, the monetary tightening was clearly not excessive, given that the real GDP growth during FY07 comfortably achieved its target. Moreover, tight liquidity conditions in the interbank market probably helped in reducing speculative and unproductive demand for credit. In this perspective, it is encouraging to see that the demand for fixed investment loans during FY07 has remained intact, even a part of the slowdown visible in working capital loans appears short-lived (as a few structural factors limited the demand and supply of these loans during the year).

Unfortunately, the impact of the slowdown in aggregate demand pressures in the economy did not translate into a decline in overall CPI inflation during FY07. Average CPI inflation for the year was 1.3 percentage points higher than the annual target, mainly because the gains from a deceleration in aggregate demand growth in some sectors of the economy were largely offset by an unexpected strength in food inflation, particularly during H2-FY07. To put this in perspective, had food inflation in FY07 remained at the average level observed in FY06 (ie, 6.9 percent), CPI inflation would have remained below the 6.5 percent target for the year.

Another problem for monetary policy was the abrupt rise in monetary aggregates during the last month of FY07, entirely caused by a surge in external receipts. As a result, M2 growth exceeded the annual target by 5.8 percentage points to reach 19.3 percent. Since the acceleration in the growth of monetary aggregates was concentrated in the last month of FY07, it probably had only a weak contribution to inflation in FY07, but is more likely to impact FY08 inflation. For that reason, the central bank undertook corrective monetary policy measures in July 2007.

A large part of the slippage in M2 target during FY07 stemmed from government borrowings. In particular, the sharp rise in net foreign assets (NFA) of the banking system during June 20075 principally reflected external financing needs for budgetary expenses of the government (such as receipts from Eurobond and GDR issues, US Aid inflows, multilateral loans, receipts against logistics support etc).

To put this in perspective, M2 growth during Jul-May FY07 was 14.1 percent which was slightly less than the nominal GDP growth of 14.7 percent for the year. This also suggests that the magnitude of slippage in M2 growth from its target would have been substantially lower had the budgetary finance from the external sector been incorporated more accurately in the monetary policy framework for FY07.

While the overall monetary indicators raised a few concerns from inflationary perspectives, financial soundness continued to exhibit improvement during FY07. More importantly, though the rise in interest rates did create some impact on the quality of loans, the stringent provisioning requirements as well as increased capital requirements did not allow the impact of loan quality on financial stability of the banking institutions. Not only did banks remain adequately capitalised, but the overall asset quality measured in terms of NPLs to loan ratio (net of provisioning) continued to decline.

DOMESTIC & EXTERNAL DEBT:

Country's total stock of debt and liabilities (TDL) rose by 10 percent YoY in FY07 to reach Rs 5,023.6 billion. The major causative factors for this increase in TDL were the rising level of country's current account deficit and a large fiscal deficit that raised the financing needs of the country. Encouragingly, despite this increase in the TDL stock, the ratio of total debt & liabilities to GDP continued to decline which shows country's improved debt servicing potential. The TDL to GDP ratio for FY07 remained significantly below the target of 60 percent set for the country in the "Fiscal Responsibility and Debt Limitation Act 2005" to be achieved in FY13.

Pakistan's domestic debt stock increased sharply during FY07, registering a growth of 11.9 percent - much higher than the average growth of 7.7 percent during the preceding four year. This rise in stock is driven by the growth in the floating debt category which accounted for nearly two-thirds of the rise in domestic debt in FY07. The share of short term debt continued to rise and reached 43 percent during FY07.

This rising share of short term domestic debt means increased vulnerability to adverse short-term interest rate movements, potentially rendering future debt management more difficult. An important feature for FY07 is the sharp rise of 57.1 percent in interest payments on domestic debt. The strongest contribution to the increase is probably from maturing high-cost, zero coupon instruments (DSCs) issued in late 1990s.

Pakistan's external debt and liabilities (EDL) rose to US $40.1 billion during FY07, representing a US $2.9 billion increase over the stock in FY06. The rise in the EDL stock constituted inflows from IDA, ADB, and the issuance of a new Eurobond. Private loan inflows also had a sizeable contribution in the increase of the debt stock. Encouragingly despite this rise in the stock of EDL, Pakistan's EDL to GDP ratio continued to improve, reflecting country's improved debt servicing ability. This improvement in debt ratios was probably an important factor that led to improvement in sovereign rating; Moody's up-graded country's foreign and local currency bond ratings to B1 from B2 in FY07.

Pakistan also witnessed an improvement in the maturity profile of its external debt stock in FY07. A significant share of the inflows received during FY07 had a long term maturity ranging from 15 - 40 years. The improved maturity structure of loan inflows to some extent offsets the effects of the floating interest rate structure of these loans.

During FY07, 62.5 percent share of the new inflows was on floating interest rates, including US $750 million 10-year Eurobond issued by the country and a substantial portion of inflows from ADB. The rising share of such inflows in the total debt stock calls for the need of greater prudence in the future management of country's debt burden. A higher share of flexible rate loans might translate into increasing debt servicing burden for the country in case of adverse movements in these variable lending rates.

It is worth mentioning that in the coming years, country is likely to face higher burden of debt servicing as (1) repayments of the rescheduled non-ODA Paris club debt stock will resume from FY08, and (2) the maturities of the Eurobond issued in FY04 and Sukuk issued in FY05 will become due in FY09 and FY10 respectively. In addition, interest payments on various Eurobonds issued recently are likely to add to debt servicing burden in coming years. Therefore in order to maintain the same debt servicing capacity, the country's foreign exchange earnings, and particularly export earnings need to grow faster.

EXTERNAL SECTOR BALANCE OF PAYMENTS:

As a result of a relative slowdown in the growth of the current account deficit and a record increase in investment inflows, Pakistan's external account surplus improved substantially to US $3.7 billion during FY07 as compared to US $1.3 billion in FY06. The FY07 moderation in the growth of current account deficit is attributable mainly to a sharp fall in the growth of imports (that compensated for an unexpected deceleration in exports) and strong increase in remittances (that partially offset the rise in investment income outflows).

The deceleration in the imports growth was expected in the wake of falling oil prices, improved domestic production of some key food items and overall slowdown in capacity expansion. However, the impact of lower import growth (8.1 percent) in FY07 on the trade deficit was lost due to the unanticipated weakness in exports.

Export growth fell from 14.3 percent in FY06 to only 3.2 percent in FY07. The slowdown in textiles exports was the major contributor to the decline in the overall exports growth, but the accompanying fall in exports of non-textile manufacturers and commodity producing sector made matters worse.

Nevertheless, an impressive rise in the foreign private investment continued to moderate the impact of growing current account deficit in FY07.

Specifically, financial account surplus increased substantially from US $5.8 billion in FY06 to a record surplus of US $10.1 billion during FY07. This improvement in the financial account was largely contributed by equity flows rather than debt.

Benefiting from the substantial surplus in the external account, Pakistan's overall reserves increased by US $2.5 billion in FY07 compared to US $524 million rise in FY06. During FY07, Pak Rupee exhibited a mixed trend vis-à-vis benchmark currency US Dollar; depreciating by 1.14 percent in the first half and then appreciating by 0.81% in the second half of FY07. In the first half, the widening trade deficit drove the Rupee depreciation while in the second half, improved market related inflows helped Rupee to regain most of its lost ground, consequently the Rupee saw a net depreciation of 0.31 percent during FY07.

TRADE ACCOUNT:

After persistent widening during last four years, the difference between import and export growth seems to be converging during FY07 on the back of substantial slowdown in import growth, from 38.7 percent in FY06 to 6.9 percent in FY07. However, this welcome slowdown in import growth could not help in reducing the trade deficit due to a concurrent slowdown in export growth from an average 15.9 percent during last four years to 3.4 percent during FY07.

As a consequent, the trade deficit reached an all time high of US $13.5 billion during the period under review. Nonetheless, the trade deficit as compared to size of economy slightly declined from record high level of 9.46 percent during FY06 to 9.31 percent during FY07.

The broad based slowdown in import growth is mainly attributed to (1) decline in global oil prices, (2) the reduction in excess demand, (3) gradual absorption of one-off impact of liberalising of automobile & telecommunication sectors, and (4) improved domestic production of food items such as sugar and wheat.

On the other hand, the sudden decline in export growth is little confusing given the support to this sector in policy formulation. The poor performance of exports becomes even more worrisome when analysed in the perspective of better environment in the form of robust economic growth in the domestic and key global markets. The slowdown in export growth was also broad based as the textile exports growth declined from last four years average of 14.4 percent to only 4.9 percent during FY07, whereas non-textile export growth declined from last four years' average of 19.2 percent to only 0.6 percent during FY07.

Poor rice, fruit and cotton crops together with EU ban on fish & fish preparations imports from Pakistan and industry specific issues are considered as the main contributory factors behind the sluggish growth in non-textile exports during FY07. On the other hand, slowdown in the textiles exports can be attributed to: (1) low quality of the textile products on account of contaminated cotton and unskilled labour, (2) concentration of exports in the low and middle value added textile items, (3) frequent power failures in the country, and (4) EU market specific issues such as the antidumping duty on the bedwear exports and only partial restoration of GSP facility.

Going forward, the rising cotton price which is main input for textile industry coupled with abolition of China specific textile and clothing safeguards in 2008 by EU and US, along with accession of Vietnam to WTO, are some factors that are likely to give tough time to Pakistan's textile industry. While, the rising cotton prices may not increase Pakistan's relative cost of production against its competitors as global cotton prices are also anticipated to rise, Pakistan's apparel exports to US and EU markets may weaken following the end of the US and EU safeguard measures imposed on China.

On the import side, uncertainly in the global oil prices, increasing commodity prices, anticipated increase in the import of telecom following China's investment in Pakistan's telecom sector and likely rise in power generating machinery may put upward pressure on the import bill. However, increase in hydro power generation on account of better water availability and capacity constrains in the thermal power generation may lead to slower growth of furnace oil import, thereby relieving some pressure from the overall oil import growth.

RECOMMENDATIONS BY INTER-MINISTERIAL COMMITTEE ON FOOD INFLATION:

The prices of food items in Pakistan rose sharply during FY07, leading the government to set up an Inter-Ministerial Committee to assess the causes of the increase and recommend corrective policy measures. The committee found that most of the rise in food inflation was caused by high prices of a small number of commodities.

The increase in the prices of some of these food commodities was found to be structural in nature reflecting diverse factors, such as, rising international prices, where government intervention has a very limited role to play, in the short run. The committee therefore recommended a mix of short-term measures to alleviate the impact of high prices in the short run, as well as, policies to address the structural factors. The key policy recommendations focused on wheat, pulses, sugar, and dairy product prices.

WHEAT:

-- The committee recommended that farmer profitability should be ensured so that the country should be self sufficient in wheat production. In order to achieve this, the committee has suggested that the government should provide support price and promote efficient farming practices resulting in cost reduction.

-- MINFAL has been assigned the task of formulating policies to increase productivity and cost reduction plans in collaboration with the provinces.

PULSES:

-- The committee suggested controlling of pulse prices by adopting a policy of procuring the surplus pulses at market price and later releasing them regularly to maintain the target price and minimise speculators edge.

-- Design a campaign to support farmers before planting. This may include ensuring availability of certified seed with incentives, and announcement of marketing support at support or market price.

-- In case of gram, an aim to procure at least 25% of consumption and a regular intervention is needed to keep gram price from unnecessarily rising throughout the year.

-- MINFAL has been asked to specially focus on the productivity of Mash and Masur and ensure marketability of production and sustain profitability of the farmers.

-- MINFAL has been delegated the task to develop a focused strategy and work with the provinces to predict supply/demand timing, special funding window and incentives for improving farming practices.

SUGAR:

-- Farmers should be able to get at least minimum guaranteed support price.

-- Provinces and Federal government should formulate sugarcane/sugar policy in consultation with stakeholders by September 15 every year.

-- Sugar may not be imported until the duration of sugar season is determined by end March. However in case of abnormally high prices of sugar this condition may not be applied.

-- Build up buffer stocks by importing or purchasing from the local mills and use these stocks to intervene to control sugar prices as and when needed.

LIVESTOCK:

-- A breakthrough can only be made by attracting expatriates and using them to bridge the yawning knowledge gap. The government should facilitate best research practices and provide alternatives to fodder which is very expensive.

Business Recorder [Pakistan's First Financial Daily]

Neo

$60bn income likely from mega projects

ISLAMABAD, Oct 26: Pakistan expects to earn $60 billion a year from transit trade after completion of the national trade corridor, a couple of shipyards and improvement of the North-South road network.

The estimate has been prepared by the Planning Commission that is seeking advisory services from international firms for establishment of two large shipyards at Port Qasim and Gwadar Port on a fast track basis. The appointment of an adviser for preparation of project structure would lead to international competitive bidding to develop the shipyards and related infrastructure at an estimated cost of $500 million, to be raised through an emerging public-private partnership facility.

Official sources said the government had already asked the Karachi Shipyard & Engineering Works Limited to coordinate with reputable international financial institutions, investment banks having direct or partnership with technical, legal and other consultants to assist in planning, development and implementation of the project. The private sector will be responsible for designing, financing, building, operating and maintaining the Shipyard.

The national trade corridor —of which Gwadar port is an integral part — is a major communication link for Central Asian states, China and the Gulf as 60 per cent trade of oil and gas is done through this route. The government expects it to play a major role in the region by reducing the transport time from and to China, the Middle East, Central Asian states, Europe and Africa.

The first project, Gwadar Shipyard will be set up at Gwadar East Bay (Shamba Ismail area), over approximately 500 acres. Starting with ship repairing, the facility will be converted into building Very Large Crude Carriers (VLCCs) and Ultra large Crude Carriers (ULCCs) and will have at least two dry docks of approximately 600,000 DWT.

The second project, Port Qasim Shipyard is planned to be developed adjacent to Korangi Fish Harbour (Port Qasim Area), covering an area of approximately 500 acres with at least two dry docks of 600,000 DWT. The main function of this shipyard will be to build large ships up to VLCC/ULCC size and offshore and onshore oil rigs. It will also have ship repair facilities.

A recent meeting presided over by President General Pervez Musharraf decided to accord high priority to the shipbuilding industry to make Pakistan a leading shipbuilding player by taking advantage of its location and emerging opportunities in shipbuilding, including engine and equipment manufacturing.

The meeting also constituted a high-level policy board headed by the prime minister to provide policy initiatives for development of shipbuilding and marine industries in the country. The board was asked to facilitate the development of large shipyards at Port Qasim and Gwadar Port and to ensure acquisition of land and provision of related infrastructure. The board comprises governors of Sindh and Balochistan, ministers for ports & shipping, defence production and privatisation, adviser to the PM on finance, deputy chairman of the planning commission, chief of Naval Staff and secretaries of defence production and ports and shipping.

Currently, more than 80 per cent of Pakistani trade is carried by foreign ships as the state-run Pakistan National Shipping Corporation (PNSC) manages a fleet of only 14 ships. Last year 3,000 ships visited the Karachi Port and Port Qasim but none of these ships could be provided repair services as the two small docks currently available fall much short of even domestic requirement.

According to official data, the international order book for shipbuilding jumped from 115.5 million DWT to 300 million DWT between 2002 and 2006 and the demand for new ships will increase from around 30 million DWT a year at present to around 90 million DWT a year in 2055.

$60bn income likely from mega projects -DAWN - Top Stories; October 27, 2007

Neo

Pakistan's economy has grown at seven percent: Salman

WASHINGTON (October 23 2007): Advisor to the Prime Minister on Finance and Economic Affairs Dr Salman Shah has said that Pakistan's economy has grown at an average rate of almost seven percent per annum over the last four years and positioned as one of the fastest growing economies in the Asian region.

Speaking at the annual meeting of the boards of governors of the World Bank (WB) and International Monetary Fund (IMF), he said that the size of Pakistan's economy had more than doubled (from 58 billion dollars to 132 billion dollars) and per capita income almost doubled (from 438 dollars to 847 dollars) during the last seven years.

"Prudent macroeconomic policies and wide-ranging structural reforms underpinned Pakistan's economic turnaround and six/seven years of consistent and transparent economic policies along with economic reforms have transformed Pakistan into a stable and resurgent economy", he said.

"How to sustain the ongoing growth momentum within a stable macroeconomic environment is the biggest challenge going forward. Linked with this are the challenges of job creation, further reducing poverty and meeting the MDGs targets, strengthening the country's physical infrastructure to support seven to eight percent growth in the medium-term and, most importantly, how to reap the benefits of demographic transition that is currently taking place in Pakistan", he added.

Dr Salman Shah pointed out that Pakistan's economy continued to gain traction as it experienced the longest spell of its strongest growth in years, and added the outcomes of the recently concluded fiscal year indicated that Pakistan's upbeat economic momentum remained on track.

He said that economic growth accelerated to seven percent in the fiscal year, which concluded on June 30 at the back of robust growth in agriculture, manufacturing and services, and added Pakistan's economic growth had been notably stable and resilient.

The advisor to the Prime minister mentioned that Pakistan's real gross domestic product (GDP) had grown at an average rate of seven percent per annum during the last five years and over 7.5 percent in the last four years in running.

Compared with the other emerging economies in Asia, he said this had put Pakistan as one of the fastest growing economies in the region along with China, India and Vietnam. The good performance had resulted from a combination of generally sound macroeconomic policies, on-going structural reforms and maintaining consistency and continuity in policies, he added.

"Based on the performance of half-a decade of strong, stable, resilient and broad-based economic growth, we are confident that Pakistan will continue to be a high mean low variance economy over the medium term", he said, and referred to the following other important developments of the fiscal year, which ended on June 30:

-- A sharp pick up in overall investment, reaching at a new height of 23 percent of the GDP.

-- Overall budget deficit remained at the target of 4.3 percent of the GDP.

-- Across of all measures vulnerability to external shocks, Pakistan's debt profile had improved significantly - public debt declined from 56.9 percent to 53.4 percent of the GDP and the external debt and liabilities declined from 29.4 percent to 27.1 percent of the GDP.

-- Highest ever-foreign investment flows at 8.4 billion dollars, emerging as a single largest source of external finance after exports.

-- The expatriate Pakistanis remitted 5.5 billion dollars, the highest ever in the country's history.

-- Exchange rate continues to remain stable despite widening of trade and current account deficit.

-- Foreign exchange reserves continue to rise and are sufficient to provide import cover of almost six months; and most importantly we successfully launched a new 750 million-dollar 10-year 144 A Sovereign Bond in international debt capital market with seven times over-subscription.

These and other measures reflected a strong vote of confidence of global investors on Pakistan' current economic prospect and future economic outlook, he said.

He observed that the rapid and broad-based economic growth was essential for poverty reduction and improving income distribution. Strong economic growth, large inflows of workers' remittances and massive spending on social sector and poverty-related programmes in Pakistan in recent years resulted in sharp reduction in poverty, he said.

At the national level, headcount decreased from 34.46 percent in 2000-01 to 23.9 percent in 2004-05, depicting a substantial reduction of 10.5 percent over this period. Most importantly, rural poverty declined more that the urban poverty. The other indicators of living standards also exhibited significant improvement, he added.

"While Pakistan's economy continues to perform impressively and its economic fundamentals have gained further strength, there is no room for complacency", he said, and added that a relatively higher inflation, largely attributable to higher food prices and widening of current account deficit, owing mainly to slower growth in exports were key macroeconomic challenges confronting Pakistan today.

"The government has already taken various measures to address these two challenges and we believe that going forward, inflationary pressures is likely to ease further and the gap in external account is likely to narrow.

"Going by the trend of the last half a decade, Pakistan's economic outlook for the current fiscal year remains favourable even in the midst of global liquidity crunch and sub-prime mortgage issues. We have targeted a real GDP growth of 7.2 percent of the current year, ably supported by robust growth in agriculture, industry and services sector", he said.

"The current inflationary trend, largely attributable to higher food prices is likely to ease further during the current year. The process of fiscal consolidation along with improvement in quality of expenditure will continue as well as gap on external account will be narrowed further in the current fiscal year. Although the country's debt burden has declined substantially in recent years, effort to reduce it further is the key policy objective of the current fiscal year. Despite this growth performance, we are not complacent", he added.

Salman Shah said that Pakistan greatly valued its partnership and engagement with the Fund and WBG. "We look forward to continuing to work together to achieve our shared goal of reducing global poverty and promoting inclusive and sustainable development", he added.

"Global challenges are our shared responsibility and require global solutions, global resources and leadership and to meet the major challenges of our times, our international institutions have also to reform, improve their internal governance, adjust their business model and strategies to remain relevant and deliver effective results", he said, and added: "We fully support the strategic directions set out for the WBG by President Zoellick in his vision for an inclusive and sustainable globalisation".

The underlining principles and the framework clearly articulated the value proposition the WBG could offer to its diverse client segments through a more differentiated menu of products, services and support.

"We also welcome the reaffirmation to integrate group-wide services to bring synergy within all the institutions of WBG, improve internal governance, address issues of voice and under representation of the developing countries, and develop closer cooperation with other multilaterals to foster regional and global public goods in pursuance of its poverty reduction and development mandate.

"However, to be operationally successful and responsive to the differentiated and evolving demands across its membership, the strategy must retain flexibility and promote use of country ownership and the country systems, reduce non-financial costs of doing business with the Bank and, strengthen countries institutional capacities," he said.

He welcomed the initial progress made by the WBG in implementing its Clean Energy Investment Framework. While implementing this agenda, he urged the bank to strive for the right balance between access to modern energy services for the poor and the promotion of low carbon emission economy without in any way compromising its developmental and poverty reduction mission.


Business Recorder [Pakistan's First Financial Daily]

Neo

Pakistan eyes the $13.4bn Middle East IT market

Pakistan has launched a major drive to step up IT exports to the Gulf countries.

United Arab Emirates: Sunday, October 14 - 2007

The six Gulf Cooperation Council (GCC) countries offer huge potential for Pakistan IT industry, official of Pakistan Software Export Board said in a statement.

Pakistan's IT exports to the Gulf had been increasing over the years, but there is still considerable potential to expand IT exports to GCC countries. Several IT companies of Pakistan have succeeded in making inroads in the fast growing IT market of the Middle East.

Currently, it is the third fastest growing IT market in the world, after India and China.

Market Information Estimates show that the Middle East and North Africa (MENA) IT market is set to grow from $6.9bn in 2003 to $13.4bn in 2008. Between the GCC countries, UAE and Saudi Arabia alone account for 77% of the Gulf region's current annual IT spend of $4.94bn, which is projected to increase to $5bn this year.

Official stated that several Pakistani IT companies have developed successful business relations and have established their offices in Middle East.

Amongst those Pakistani IT companies, which have made inroads in the Saudi Arabian IT market, ZRG International is the prime example due to its selection by Smart Link Inc. (Saudi Arabia) to deliver flexible open standards based Intel CTI technology. Smart Link is a rapidly growing contact center outsourcing service provider, established as a joint venture by Saudi Arabia's two prestigious business groups, namely Al-Khaleej and Al-Alamia.

By winning the first phase of this multi-million dollar contact center expansion project, ZRG has clearly demonstrated its capability to successfully deliver the quality expected by the international IT customers.

Another credible name in the global IT market, TPS is serving 25 countries across the Middle East, Asia and Europe. The TPS technology solutions are helping banks in Bahrain, Qatar and Oman to develop EMV-compliant ATMs, thus assisting them in avoiding any likely penalties, which could be levied for non-compliance by end of the year. In the years to come, UAE is likely to be the next country to mandate EMV.

Software export activities by Pakistanis companies are not only enhancing Pakistan's image abroad, but are also having a positive impact on the IT export related earnings of the country.

PSEB official stated that Pakistan IT industry has experienced a tremendous growth of 60 percent in the last fiscal year, while the industry size is estimated to be at US$ 2.8 billion, according to BPM 6. At current rates of growth, it is expected that industry size will surpass eleven billion dollars by 2011.

Pakistan eyes the $13.4bn Middle East IT market | Pakistan Software Export Board

Neo

Pakistan, second best to do business in South Asia: WB

* Report points out South Asia as the second-fastest reforming region in the world
* Singapore remains best place for businesses

ISLAMABAD: South Asia has picked up the pace of regulatory reform over the past year to become the second-fastest reforming region in the world, on par with the speed of reform in the countries of the OECD, finds World Bank’s report ‘Doing Business 2008’.

The pickup in reform was led by India, which rose 12 places on the ease of doing business and made the reform of business regulation a policy objective. India was the top reformer worldwide in trading across borders. Bhutan and Sri Lanka are the other top reformers in South Asia this year. Bhutan introduced the country’s first fundamental labor protections. Sri Lanka made it easier to start a business and to trade across borders.

Singapore, for the second year running, tops the aggregate rankings on the ease of doing business. The top-ranking countries in South Asia are Maldives (60) and Pakistan (76). India improved its ranking to 120th this year—achieving a bigger gain than China, which rose by nine places to 83rd.

Worldwide, the top 10 reformers are, in order, Egypt, Croatia, Ghana, FYR Macedonia, Georgia, Colombia, Saudi Arabia, Kenya, China, and Bulgaria. Reformers made it simpler to start a business, strengthened property rights, enhanced investor protections, increased access to credit, eased tax burdens, and expedited trade while reducing costs. In all, 200 reforms—in 98 economies—were introduced between April 2006 and June 2007.

“The report finds that equity returns are highest in countries that are reforming the most,” said Michael Klein, World Bank/IFC Vice President for Financial and Private Sector Development.

Details on Pakistan suggest that it extended overtime limits for retail workers from 150 hours a year to 624 and made working hours more flexible. The private credit bureau has expanded the scope of information distributed to include positive as well as negative credit information. In addition to late payments and defaults information, the original and outstanding loan amounts are now distributed to lenders as well. Pakistan ‘s public credit registry eliminated its loan threshold of Rs 500,000 ($8,350), boosting coverage by 20 times. In July 2006, the Sindh (province) Finance Act was issued that caused the stamp duty to decrease from three percent to two percent of property value. However, the positive impact of the reform was overcome by the reinstatement of the capital value tax of two percent at the national level by the Finance Act 2006, causing a net increase of one percent property value in the total cost to transfer this year.

Afghanistan, through a change in format of the required “circular form”, now entrepreneurs are required to obtain fewer approvals from various government agencies and procedural steps to transfer property have decreased from 11 to 9. In addition, some district courts’ title deeds storages are being digitalised.

Bhutan made it easier for entrepreneurs to start limited liability trading companies by eliminating two procedures—name approval and location clearance—and increasing efficiency at the Registrar of Companies. The time to start operating a business in Thimphu dropped from 62 to 48 days. The time needed to transfer property, which takes place largely in the courts, has decreased by 30 days.

India introduced an electronic registry that covers the rights granted by companies. The registry can be searched by name of debtor, and is linked geographically to cover the whole country. The private credit bureau has incorporated firms to its database and now provides credit information on corporate entities. Through introduction of an Electronic Data Interchange (EDI) system, customs declarations are now carried out through the internet. This system has also allowed the operation of a Risk Management System (RMS), an e-manifest system, and an e-payment system which facilitated the decrease in import time by seven days.

Sri Lanka made the most progress in South Asia for starting a business. A new companies act eliminated burdensome approvals and introduced a flat registration fee. Company seals and notaries were made optional. Procedures were reduced from 8 to 5, and the time for start-up decreased from 50 days to 39. Sri Lanka introduced electronic submission of customs declarations, cutting time for trading by 7 days. Sri Lanka ‘s credit bureau restricted the availability of information on repaid defaults to only 1 year, while defaults settled through the courts are kept for 3 years. Elsewhere, Eastern Europe and Central Asia led world regions in reform, with Estonia, Georgia, and Latvia all among the top 25 on the ease of doing business. In Africa the pacesetters are Ghana and Kenya, but was uneven, with almost half the countries not reforming at all. Reform in the Middle East and North Africa is picking up speed, led by Egypt, Saudi Arabia, and Tunisia. Latin America and East Asia are at the bottom of the list of reformers this year.

Daily Times - Leading News Resource of Pakistan

The One

emergency imposed in pakistan will effect its economy ?

Neo

Too soon to tell, for sure it will slow down the ongoing reforms and economic growth.
I'll get back on this.