Pakistan Economy: News & Discussion

[Indx TechStyle]

Work on 128MW hydropower project yet to begin

LAHORE: The Water and Power Development Authority (Wapda) has so far failed to get civil work initiated on the 128MW Keyal Khwar hydropower project (KKHP) despite paying 50 per cent of the mobilisation advance to the contractor about two years ago.

The project, scheduled for completion next year as per the original plan, got attention of the authority after the Prime Minister’s Office sought report on delayed hydropower projects, forcing senior officials to quickly issue commencement order to the contractor last month to mobilise machinery, equipment, labour, etc, on the site.

The project is now expected to be completed in January 2020 and its cost has increased more than four times the original PC-1 cost. The project — a concrete gravity dam — is located along Keyal Khwar, a right bank tributary of the Indus in Kohistan district of Khyber Pakhtunkhwa. M/S Lahmeyer International — the lead partner of a joint venture — has been appointed as consultant of the project.

A senior Wapda official, however, claimed that the project was delayed because local people had stopped Chinese engineers from entering the site till the construction of a grid station for smooth supply of electricity to them.

“The project was delayed due to locals and not us as they wanted work on installation of a 132kV grid station to go ahead simultaneously with the construction of KKHP,” Wapda’s member (water) Eng Mohammad Shoaib Iqbal told Dawn.

But an official source blames incompetence and negligence on the part of senior officials for the delay, questioning why they had failed when everything (land acquisition, mobilisation advance, preparatory works, etc) had been completed two years ago.

“The project’s detailed design was ready in 2010 while the process for prequalification of contractors and tendering commenced in 2011. Similarly, construction of a staff colony and camp offices was launched and simultaneously completed about three years earlier,” says an official.

He said the contractors — M/s Sinohydro-Hajvairy JV (civil works) and M/s Sarwar & Company Private Limited (powerhouse ventilation tunnel exploratory audit) — were selected through a bidding process in 2012. However, agreements for the project between the government and the contractors were signed in 2014 after Kreditanstalt für Wiederaufbau Bank (Germany) and the European Investment Bank pledged to fund the project in association with the federal government.

The official said the process of land acquisition for the project’s power house had been completed in 2011, but the failure to start civil work was a question mark on those entrusted with the task of completing power projects on a fast track.

He feared that the delay might provide an opportunity to the contractor to charge escalation cost, besides revision of the project cost. “The contractor may demand payment of escalation cost worth millions of rupees on the pretext of completing the preparatory arrangements related to deployment of labour, manpower, vehicles, etc,” the official said, adding that appeared to be a win-win situation for the contractor.

Wapda member Shoaib Iqbal admitted that it was true that the mobilisation advance to the contractor had been paid two years ago. “But it is also true that the problem doesn’t exist on our part. Actually it was difficult to fulfil the locals’ demand for constructing the grid station since it doesn’t come under our purview,” he said. “Therefore, we requested Pesco to fulfil the public demand, but it couldn’t do so. And finally, the cost of the grid station was also included in the revised cost estimate for the KKHP.”

He said Wapda had taken up the issue with the federal government and informed it that a local MNA was behind the protests in Pattan and Bisham. On the other hand, he added, the lead partner of joint venture, Sinohydro-Hajvairy, had some problem with its JB partner — Ms Hajvairy. But this issue has also been resolved.

 

[Indx TechStyle]

Pakistan’s trade with Brazil exposes country’s weaknesses

KARACHI: Despite having the capacity to export over $1.63 billion worth of goods to Brazil, Pakistan’s exports to the world’s seventh largest economy are embarrassingly low at just $71 million, according to a latest research report.

The research report is published by the Pakistan Business Council (PBC), a not-for-profit business advocacy forum that represents the country’s 55 largest businesses.

Its findings show miserable performance of not only exporters, but also government institutions that are responsible for promoting the country’s exports.

Like many other countries, Pakistan’s exports to Brazil have remained range-bound (from $71 million to $93 million) for the last five years. In fact, exports in 2015 ($71 million) remained lowest since 2011 when the country exported goods worth $80 million.

Pakistan and Brazil have cordial bilateral relations – the country is the first business partner of Pakistan among South American nations – but the volume of trade between the two countries was just $369 million in 2015. It remained heavily in Brazil’s favour with $298 million exports to Pakistan last year.

The worst part of the statistics is that Pakistan’s top exported good to Brazil has been cotton, which cannot be considered a finished product. Furthermore, even cotton exports have been plummeting from $23 million in 2011 to just $9 million in 2015, down by a massive 61%. Other mentionable export products are textile made-ups, leather products, sport goods, surgical items and cutlery.

However, Brazil’s exports to Pakistan have jumped significantly from $177 million in 2011 to $298 million in 2015. Interestingly, the South American nation’s cotton exports to Pakistan jumped from $56 million to $81 million in the last five years. Brazil’s exports to Pakistan mainly consist of cotton, animal or vegetable fats and oils, oil seeds and oleaginous fruits, machinery and iron and steel.

Failing policies

The pro-business PML-N government has failed to arrest the fall of exports, even failing to maintain them at the same level as that in 2013, prior to the transfer of power. Part of it could be attributed to a global recession that has plagued nearly all markets.

Pakistan’s exports fell to an eight-year low of $20.8 billion despite getting the Generalised System of Preferences (GSP) Plus trade benefits in the 28-nation strong economic bloc of the European Union (EU).

Even the IMF has shown concerns on Pakistan’s declining exports. IMF resident representative for Pakistan, Tokhir Mirzoev, in August said that the “decline in exports is a major source of concern”.

Soon after taking charge, Commerce Minister Khurram Dastgir Khan vowed to do everything in his power to increase exports, including monitoring commercial attachés’ performance in different embassies of Pakistan. But exporters still question the competence of many commercial attachés and blame lack of support from most Pakistani embassies in exploring new markets as the key hurdle to branching out.

Now that the government is in its fourth year, Dastgir’s performance is definitely questionable. His dream of having more liberal trade with neighbours, especially India, was dashed in the very first year.

It is not just about Brazil or any South American country; Pakistan’s exports to almost every other country are under pressure. Apart from security problems and power crisis, there is something wrong with the policies of prominent ministries of this government because of which exports are continuously declining. One simply cannot blame the global economic slowdown for the continuous fall in exports.

With just more than a year in hand before the next general elections, the government needs to find out what it can do to give a boost to exports. The government cannot, in good conscience, justify faltering performance by blaming external factors.

The government’s promises of enhancing industrial capacity and resolving the energy crisis remain unfulfilled. High tariffs, despite low oil prices, and stuck refunds with the tax machinery are just the final nails in the coffin. Maybe, this is where the government can start, instead of simply blaming the economic slowdown and sidestepping one of its key responsibilities.

 

[Indx TechStyle]

Analysing the trade relationship between Pakistan and India

KARACHI: The South Asian Association for Regional Cooperation (SAARC) consists of eight South Asian nations, namely Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. Founded in 1985, the major goal of SAARC has been to promote economic and regional integration of the member states.

However, political tensions between two of the largest members, Pakistan and India, have plagued SAARC ever since its inception. Recent events on the Pakistan-India border have forced the cancellation of the 19th SAARC Summit scheduled to be held in Islamabad in November. With recently imposed restrictions on cross-border exchange of artists, exhibition of movies and participation in cultural activities, other economic activities such as import and export of goods between the two countries risk being curtailed as well. Political tensions and uncertainties have economic consequences.

The article will investigate what trade relations the two countries have enjoyed thus far to gain an insight into what possible effects derailment of their relations will have. Going back to 2004, when political tensions had receded, Pakistan and India embarked upon initiatives to increase trade and consequently improve regional integration. The following analysis is conducted using data from Trademap.org and COMTRADE.

Before 2004, there was minimal movement of goods between Pakistan and India. Although, India had awarded Pakistan the Most-Favoured Nation (MFN) status in 1996, the exports from Pakistan to India remained almost negligible for a number of years.

Pakistan’s exports to India were $84 million in 2003 and even at their peak in 2013, managed a modest $403 million, after which they receded to $312 million in 2015. On the other hand, the imports increased rapidly in absolute terms as trade relations moved towards normalisation. It increased from $184 million in 2003 to $2.18 billion in 2013. It was at $1.96 billion in 2015.

The trade deficit for Pakistan – the difference between the imports from India and exports to India – was more than five times the value of the exports from Pakistan to India in 2015.

Informal trade

Furthermore, researchers at ICRIER (Indian Council for Research on International Economic Relations) estimate the value of informal trade between Pakistan and India via third countries at $4.71 billion, which is twice the amount of formal trade between the two countries. The informal exports from Pakistan to India are mainly in textiles and dry fruits, whereas informal exports comprise of jewellery, textiles and machinery parts. Pakistan maintains a negative list of 1,209 items, which cannot be legally imported from India. Both countries maintain a sensitive list (as is common with other SAARC member countries), which limits the provision of trade concessions on the enlisted products. Informal trade circumvents such restrictions on trade.

Trade composition

India exported $263 million worth of vegetable products, $340 million worth of chemical products, and $837 million worth of textile products to Pakistan in 2015 through formal channels. On the other hand, Pakistan exported $77 million worth of vegetable products, $62 million worth of mineral products, $61 million worth of textile products, $20 million of base metals and $14 million worth of medical instruments in 2015.

In terms of total value of goods exported from India, Pakistan ranked in the top five destinations for several products such as powdered milk, tomatoes, peas, coconuts, polypropylene, raw cotton, polyester staple yarn, synthetic woven fabric and imitation jewellery. Similarly, India is an important destination for Pakistani exports of fresh and dried dates, gypsum, portland cement, tanned leather, raw cotton, woven denim fabric, waste and scrap of different metals, and medical and surgical instruments.

More than 80% of the goods traded in both directions are either raw materials or intermediate goods. The share of consumer goods is minimal. Therefore, bulk of the goods traded between the two countries are primary goods and unfinished goods which require further conversion into finished goods within the trading partner before being sold as finished goods.

Barriers to trade

The analysis of tariff data from World Integrated Trade Solution (WITS) suggests that Pakistan imposes lower import-weighted average tariff rates on the imports of Indian products than the import-weighted average tariff rates imposed by India on the imports of Pakistani products.

The analysis of data on non-tariff measures from UNCTAD and World Bank suggests that India imposes higher technical barriers to trade on the imports of textiles and agricultural goods amongst other goods. Additionally, India has multiple certifying agencies involved in the process of implementing the non-tariff measures. It is likely that procedural obstacles and administrative delays related to the implementation of non-tariff measures result in impeding the imports into India from Pakistan.

Pakistan has an expanding consumer market and multiple free-trade agreements are expected to be negotiated. According to the State Bank of Pakistan, the Consumer Confidence Index is at one of its highest levels. The private consumer spending is expected to increase by 7% in FY16 compared to growth of 3.2% in FY15.

Planned infrastructure investments in Pakistan, too, are likely to promote industrial growth and will consequently lead to greater demand for raw materials and intermediate goods.

LOL, at green part.
Factual fallacies by designer economists aka day dreamers.:biggrin2:

However, temporary restrictions on economic activities between Pakistan and India can have a long-term impact on the trading pattern between Pakistan and India as firms and businesses involved in trade between the two countries seek alternative options due to the escalating hostilities.

 

[Indx TechStyle]

Pakistan’s trade deficit widens 27.3%

Exports continue to fall amid concerns of tougher challenges ahead for the country. PHOTO: ADB

ISLAMABAD: External trade figures continued to present a dismal state of affairs, deepening apprehensions about the challenges ahead for the country.

Pakistan posted a trade deficit of $4.8 billion in first two months of the fiscal year – higher by $1.1 billion over the same period of the last fiscal year, after a steep decline in exports and double-digit growth in imports, reported the Pakistan Bureau of Statistics (PBS) Friday.

Pakistan’s trade balance negative with 84 nations

Worker remittances also contracted 3.1% in the July-August period to just $3.1 billion, reported the State Bank of Pakistan on Friday, but figures for August remained higher year-on-year.

However, the dip in the two leading sources of external accounts could be a worrying sign for the country’s economic managers. This will deepen dependence on external borrowings to balance the books.

Receipts from exports slipped to $3.13 billion in July-August period – as much as 8.2% or $280 million less than the receipts in the comparative period of the last fiscal year, according to figures released by the PBS.

In contrast to contraction in exports, imports saw a growth of 10.3% as payments against goods increased to $7.9 billion – $738 million more than the payments made in July-August of last year.

Resultantly, the trade deficit in the first two months of the new fiscal year 2016-17 widened 27.3% to $4.8 billion – $1.1 billion more than the one posted in the comparative period of the previous fiscal year.

The government’s response to the deepening crisis, as usual, was constitution of yet another committee to give a package to the exporters.

Open Wagah or lose transit route, Ghani warns Pakistan

Prime Minister Nawaz Sharif on Thursday constituted a committee headed by Finance Minister Ishaq Dar and leading exporters to work out final recommendations to increase exports, according to a hand-out of the Prime Minister’s Office.

The prime minister said that the government would give short-, medium- and long-term relief to exporters so that no segment is left behind in achieving growth targets, added the hand-out. The prime minister directed the Ministry of Commerce to make arrangements for duty free import of five million bales of cotton in the wake of low cotton exports of the country. He further directed that a proposal in this regard be immediately presented to the Cabinet for approval.

The decisions taken by the premier during his last visit to Karachi showed inconsistencies in the government’s policies. In June this year, the government had imposed 4% duties on import of cotton despite its low production.

Hardly a year ago the government gave what the finance minister called a comprehensive package to the textile industry for increasing exports. The last package did not work and the country ended the previous fiscal year at an eight-year low level of exports.

Free Trade Agreements with China and Malaysia, over Rs300 billion stuck refunds, high-energy costs and slowdown in global growth are among the reasons for the constant decline in exports. The private sector has also failed in modernising machinery and bringing efficiencies to compete with the regional countries in the global markets.

The government would do whatever possible to come out of negative exports growth trajectory, said Board of Investment Chairman Miftah Ismail, who is also a member of the newly constituted committee on exports.

The negative growth in exports highlights the difficulties that the country may have to face in balancing external accounts in the longer run. Although in the short-term there is no threat to the external sector, long-term projections are bleak due to decline in both exports and increase in imports due to the China-Pakistan Economic Corridor.

Trade deficit widens 4.22% to $15.1 billion

The government closed the last fiscal year 2015-16 at an eight-year low, with exports falling to $20.8 billion despite preferential access to European markets. The exports have been declining since the current government took over, falling from $24.5 billion in 2012-13.

For fiscal year 2016-17, the government has projected the exports to grow to $24.75 billion and has estimated that the imports will surge to $45.2 billion by the end of this fiscal year.

Shortfall in exports and growing imports will cause problems in financing current account deficit. The government has started facing problems in sustaining high pace of growth in remittances -a major source of balancing the foreign payments, due to slowdown in Gulf economies.

Yearly statistics

The yearly trade statistics are also worrisome. The trade deficit in August widened 35.5% over the same month of last year due to expansion in imports and a dip in exports. The exports fell 9.4% in August over the last year, while imports increased 13.9%, data from PBS showed.

Now, for my Pakistani friends who will say that consumption is increasing and so imports. So, suging imports reflect increasing consumption in countries only with high per capita income growth like Bhutan, India and Bangladesh.

Pakistani per capita income growth rate is nearly half of India/BD and one third of Bhutan. It's not consumption driven but the failure of industrial complex.
Can't say if CPEC could surge or dump Pakistani economy but it will cause de appreciation of Pakistani ruppee for sure.

 

[Indx TechStyle]

Pakistan fails to adopt simple solutions to complex issues

ISLAMABAD: Of course, managing the economy and preparing the budget are the most complex issues for a country. Modern states are looking for simpler solutions and trying to get rid of traditional quick fixes.

Pakistan’s economy and budget plans have also drawn the attention of outsiders. This is reflected in remarks made by the International Monetary Fund managing director last week about the reluctance of Pakistan to mend its ways in running the state and the economy.

Pakistan’s trade with Brazil exposes country’s weaknesses

This article will focus on how Pakistan falters on the path of restructuring the economy and addressing the challenges coming in the way. The difficulties that need to be dealt with include inequitable application of tax laws, ignoring misdeeds of a certain political class, bureaucratic attitude and inability to deal with waywardness in the handling of state and economy.

When Pakistan faced the question in the 1970s of whether to embrace a socialist or a capitalist style of economy, the system imposed on the country led to failure of the state-economy relationship.

Not much has changed in the socio-economic orientation over the past five years, though a military operation has been conducted against the terrorists.

Does a meaningful change in the orientation in the offing? If you hold a national referendum on this question and hopes for the future, the people’s view will be that nothing concrete is being done to this end.

CAREC offers Pakistan avenues for deeper economic links

Why? Because Pakistan does not go for simple solutions. The defeatist and wayward style of those handling the state and the economy is obvious to the common man. It does not take extraordinary political sense to judge that.

Now the question is: what are the simple solutions and why Pakistan is reluctant to opt for them?

The solutions include more funds for development and less for running the state apparatus; more taxes from the high-income group and less burden on the middle and low-income groups; removing frictions between the arms of state and political forces; priority to support the social sector; seeking economic support from all countries and suspension of hostilities; and restructuring the laws, the apparatus and the procedures.

Prerequisites

The change for the better has three prerequisites for all nations facing the issues of disorientation and waywardness. These are national resolve, capable political forces and suitability of regional and international environment. The regional and international forces complain that Pakistan is not abandoning dangerous policies. Capable political forces are nowhere on the horizon and the civil society continues to fail to generate the national resolve to beat the cycle of failure.

That is why Pakistan is reluctant to go for the simple solutions. Is this a government policy to prevent such a resolve and avoid taking advantage of the suitable regional and international environment?

I don’t think so. Political forces, the establishment and the civil society are too antiquated to steer the country out of troubles. There is little chance that they will develop the capacity, despite apparent intent to take Pakistan away from the traditional waywardness.

Karachi port: PTEA concerned by seizure of containers

How can such a capacity be developed? This is a big question but who will answer? Who will respond meaningfully and come up with a plausible answer?

The handling of the state and the economy is a complex issue. Nations take decades and even centuries in coming to terms with simple solutions. Pakistan is no exception. But how many more decades and centuries this country will take to find a path out of this quagmire?

 

[Indx TechStyle]

FBR misses four-month tax target by Rs82 billion

ISLAMABAD: The government’s fiscal woes further worsened, as it missed the first four-month revenue collection target by Rs82 billion after the Federal Board of Revenue could pool only Rs860 billion, underscoring the need to revamp the tax machinery.

It also had to extend the last date for filing income tax returns by 15 days after only 317,000 people filed their returns for tax year 2016. In tax year 2015, as many as 1.074 million people had filed returns after government gave half a dozen extensions.

The original date for filing returns is September 30 every year, which the government has been extending due to multiple reasons including technological hiccups and delay in finalising the return forms.

The FBR provisionally collected Rs860 billion during the July-October period of this fiscal year, registering just 4.4% growth over the collection of the same period of the previous fiscal year, according to FBR officials. In absolute terms, the collection was a mere Rs36 billion higher than the comparative period.

The FBR needed 14% growth rate over its last year’s collection of Rs824 billion to hit the four-month target.

Against the target of Rs942 billion, the FBR ended up collecting just Rs860 billion. The gap in the first three months was Rs60 billion, which has now further widened, indicating that the FBR will not be able to achieve its annual target until drastic steps are taken.

For the current fiscal year, the parliament has approved a Rs3.621-trillion annual target and the FBR was aiming to collect about 26% of it in the first four months.

Despite measures

The shortfall has widened despite the government’s claim that the FBR would collect an extra Rs100 billion during the current fiscal year due to recent changes in property valuation rates. The Rs100 billion was not part of the budget estimates.

The government’s decision to keep the petroleum products prices unchanged affected the FBR’s revenue collection, said Finance Minister Ishaq Dar on Monday. He said since March petroleum prices in international markets increased over 24% which the government did not pass on to the end consumers.

The FBR officials said that the government’s decision to grant zero-rating regime to five export oriented sectors also affected revenue collection. This is also tantamount to admitting that collection in the past was inflated by blocking genuine refunds of taxpayers.

Taking over Rs250 billion advances in the last fiscal year to claim achieving previous year’s Rs3.104 trillion target was the main reason behind continuous shortfall in collection, according to sources.

Refund payments

Dar also announced that Rs25 billion sales tax refunds would be paid next week. The decision was taken after Prime Minister Nawaz Sharif announced that refunds would be cleared in cases where Refund Payment Orders (RPOs) were issued up to June 30, 2016, said Dar.

He said that payments of these refunds will be made to the recipients within the next seven days. Dar said that, for the first time, these refunds shall be paid directly into the accounts of the refund recipients, in order to save them from the inconvenience of depositing and clearing cheques.

The minister said that State Bank of Pakistan was making the necessary arrangements in this regard. Finance Minister said that all complaints in delays or difficulty in obtaining these sales tax refunds can be addressed to FBR focal person [email protected].

To a question, the Minister said that he decided on Sunday that the government would not use the Special Purpose Vehicle (SPV) to pay sales tax refunds. The Rs25 billion refunds will be paid out of Federal Divisible Pool, he added.

The minister said that the government would not dissolve the SPV, as it was just a paper company.

Earlier, the government had decided to borrow money from banks to pay over Rs200 billion tax refunds. However, its plan met opposition from the International Monetary Fund and other stakeholders who opposed the idea to retire funds by borrowing money.

 

[LordOfTheUnderworlds]

S&P raises Pakistan rating, says outlook stable
http://www.dawn.com/news/1293499/sp-raises-pakistan-rating-says-outlook-stable

Standard and Poor’s revised Pakistan long-term credit rating from B- to B Monday, saying better policymaking had improved the economy’s performance and raised the country’s growth prospects.

The agency said Pakistan continued to benefit under its democratically elected government and that a reform programme had helped to restore economic stability.

It affirmed the ‘B’ short-term rating and said the outlook on the long-term rating was stable.

However it warned that many of Pakistan’s structural weaknesses remained, including a narrow tax base and security risks, that weakened the government’s effectiveness and weighed on the business climate.

“Notwithstanding the recent terrorist attacks in Quetta, however, we see even these structural weaknesses as having improved over the past few years.

Combined, these factors motivated the upgrade,” it said in a statement.

 

[LordOfTheUnderworlds]

http://www.dawn.com/news/1293604/what-they-never-tell-us-about-ayub-khans-regime

What they never tell us about Ayub Khan's regime

What they never tell us about Ayub Khan's regime
MURTAZA HAIDER — UPDATED about 3 hours ago

Pakistanis are a forgiving lot. They are even more forgiving of the dead. Civil and military dictators, fascists, hate-spewing clerics, and vigilantes end up with disciples, and at times, even with a shrine.

Military dictators are slightly more fortunate. An army of repute defenders, in uniform and civvies, continues singing the praise of the golden era when the ‘General Sahib’ once ruled.

They reminisce about the days when honey and milk flowed in ravines and open drains, and when the economic growth rivalled that of South Korea or some other Asian tiger or cat.

October 27 marked the 58th anniversary of the Martial Law imposed by General Ayub Khan.

Given that we have the advantage of hindsight, we can revisit the 'golden days' to test the veracity of the claims of bounty and harmony that are usually retailed, yet seldom verified.

Political leaders of all stripes and tenor must envy the good repute General Ayub Khan continues to enjoy almost 50 years after he reluctantly relinquished power.

The popular discourse about the Ayub era (1958 - 1969) is that of economic growth, prosperity, and the growing stature of Pakistan on the world stage.

However, the economic realities of the time are much less glamorous, if not dismal.

An objective review of General Ayub Khan’s policies and actions suggests that his primary motive was to sustain and prolong his rule as his regime sowed the seed, and generously watered the plant, for Bangladesh's separation that came years later.

He empowered the religious fundamentalists as he sought their support against Fatima Jinnah.

The economic growth, which many cite as his singular achievement, promoted the income inequalities resulting in the rise of the 20 influential families who controlled the nation's resources and amassed ill-gotten wealth, leaving the rest poor, hungry, and resentful.

Also read: Exit stage left: the movement against Ayub Khan

A Chief Martial Law Administrator is born

General Ayub's dramatic ascent to power in 1958 came after a decade of political turmoil.

From 1947 to 1958, Pakistan was governed by four heads of state and seven prime ministers.

The political jostling for power incapacitated the then president, General Iskander Mirza, who suspended the parliament and appointed a new cabinet with General Ayub Khan as the new prime minister.

However, within days, Ayub Khan turned the tables on General Mirza forcing him into a pensioned exile in London.

General Ayub Khan declared himself the president of Pakistan on October 27 while he simultaneously held the office of the Chief Martial Law Administrator. In the General's words:

"Major General Iskander Mirza, lately President of Pakistan, has relinquished his office of President and has handed over all powers to me. Therefore, I have this night assumed the office of President and have taken upon myself the exercise of the said powers and all other powers appertaining thereto."

Too illiterate to vote, but literate enough to create a homeland
From the time he assumed control, General Ayub resented the public and the democratic process.

For him, the public was too illiterate and poor to be trusted with adult franchise.

So he created an electorate ("basic democracy") of a few thousand of whom 95% elected the General as their leader.

That the same illiterate and poor people of Pakistan were wise enough to have voted earlier with their hearts, minds, and feet to create a new country that elevated the same General to the office of the army chief was not sufficient for them to have earned the General's trust for adult franchise.

General Ayub Khan held the politicians squarely responsible for the "chaotic internal situation" and accused them of being willing to barter the country "for personal gains".

He was keen to imprison leading politicians in East and West Pakistan.

The military dictators that came after him have held a similar contempt for politicians.

The economics of inequality
Shahid Javed Burki, a former World Bank economist, rightly identified the fundamental disconnect between the public and the Ayub Junta that celebrated 10-years of being in power by highlighting GDP growth and other inflated macroeconomic indicators.

The general public, however, cared less of the aggregate statistics as they struggled without much success against price inflation and spatial income disparities.

Burki points out that the so-called economic growth was rooted in income inequality, which worsened over time between regions and among people with the growth in the macroeconomy.

The result was evident: half of the industrial wealth accrued to Chinioties in Punjab and the immigrant Memons, Bohras, and Khojas.

At the same time, General Ayub opened the door to foreign experts who were ignorant of, and alien to, the political economy of Pakistan.

Yet they came armed with policies that might have worked elsewhere but were ill-suited for Pakistan's challenges.

General Ayub's economic prowess need not be discounted entirely. His penchant for central planning is evident in the second five-year plan.

The inflow of foreign capital, at twice the rate of that of India, sparked growth in industries that supported consumer goods.

One must also review what drove the growth and what industrial sectors blossomed as a result.

A close look at what transpired reveals that there was nothing organic about the growth.

It was primarily driven by foreign aid, the same way General Musharraf's rule was buttressed by American aid after 9/11.

By December 1961, foreign aid was more than twice the size of foreign loans. With the second five-year plan in 1964, foreign aid was responsible for 40% of the total investment.

And that's not all. Foreign aid covered 66% of the cost of imports. One must give credit where it's due, and it's mainly foreign aid.

Read next: Religious orthodoxy during Ayub regime

Despite the foreign investment as aid and credit, and the aggressive public works programme pursued by the regime to generate new jobs, unemployment persisted, and even worsened during the second five year plan from 5.5 million man-years in 1960-1 to 5.8 million man-years in 1964-5 in East Pakistan.

The regime allocated twice as much for atomic energy than it did for technical training.

What about the rapid industrialisation undertook by the Ayub regime using foreign aid? As soon as the industries started generating revenue, the regime disposed of them to private investors.

During 1964-65, the loans and advances by the government to the private sector were twice the size of the direct investments by the industry.

However, profit-making units that should have been set up by the industry in the first place should have not been handed over to the industrialists as an unearned reward.

Those who defend General Ayub Khan’s reign also hold false memories of peace and harmony. Do such claims withstand empirical scrutiny?

Raunaq Jahangir, quoted by Burki, demonstrated that violence, especially in Bangladesh (East Pakistan), increased tremendously during the Ayub era.

If there was peace and tranquility in the sixties, why did the unrest in 1968-69 reach such a feverish pitch?

It was not the economic growth, but the increasing concentration of wealth and power in the hands of a few that irked the have-nots and fuelled violence.

A critical report by none other than Dr Mehboobul Haq, the then Deputy Chairman of the Planning Commission, revealed that a coterie of just 20 families controlled two-thirds of the industry and three-fourth of the banking.

Pakistan's poet laureate, Habib Jalib, could not ignore the injustice. His poetry galvanised the public as he recited poems at gatherings where tens-of-thousands heard him denounce the 20 nouveau riche, who became even richer at the cost of keeping millions poor. Jalib wrote:

Biis gharanay hein abaad / Or karorron hein nashaad / Sadar Ayub Zindabad.

Related: Land reforms in Pakistan

General Ayub’s global fan base
There was no shortage of the high-profile admirers. From de Gaulle of France to President Johnson of the United States, Western leaders were singing praise for the economic growth in Pakistan.

Even Robert McNamara, the then World Bank president, proclaimed that Pakistan under General Ayub was “one of the greatest successes of development in the world”.

However, experts were quick to point out that de Gaulle, Johnson, McNamara and others focused solely on growth and ignored the distribution of wealth resulting in income inequalities that sowed the seeds of discontent, violence, and ultimately caused the splitting of East and West Pakistan.

The Bangladesh debacle
An oft-cited criticism of the former Prime Minister Zulfiqar Ali Bhutto (1971 - 77) is that he engineered Bangladesh's succession to avoid sharing with, or worse losing power to, the demographically dominant East Pakistan.

However, it was General Ayub's years of preferred treatment of West Pakistan that irked East Pakistanis, who couldn't ignore the sustained rebukes when General Ayub placed three of the largest legacy projects, i.e., the construction of the new capital (Islamabad) and the two large hydel projects (Mangla and Tarbela) in West Pakistan.

Furthermore, General Ayub never kept a confidante from East Pakistan as all the King’s men belonged to West Pakistan.

The government of best intentions and worst implementation
Land reforms were one of the cornerstones of General Ayub's socio-political reengineering that restricted the maximum size of land holdings to encourage a more equitable distribution of land and resources among the landless peasantry.

The land reforms, however, achieved little in limiting the size of land holdings and limiting the political clout of the landed gentry. Instead, power and wealth concentrated further in the hands of the notorious 20 families.

The Ayub regime decided to limit land holdings to 500 acres of cultivated land, 1,000 acres of dry land, and 150 acres of orchards. Over 6,000 landowners exceeded the newly defined ceilings, owning 7.5 million acres of land.

The landowners though outsmarted the regime by transferring the land in advance to relatives so that ownership remained with the landed gentry. Thus, not much land was transferred to landless peasants.

Ayub Khan and Islam
Unlike General Ziaul Haq (1977-1988), who spent 11 years of his dictatorial rule to revert Pakistan back to a 7th-century medieval utopia, General Ayub was more of a modernist who was wary of the attempts to convert Pakistan into a desert kingdom of a bygone era.

While addressing a seminary he articulated his views:

"This I consider a great disservice to Islam, that such a noble religion should be represented as inimical to progress … In fact, it is great injustice to both life and religion to impose on twentieth century man the condition that he must go back several centuries in order to prove his bonafides as a true Muslim."

General Ayub's most significant and long lasting contribution is the promulgation of Muslim Family Laws Ordinance in 1961 that empowered women, especially in the matters of marriage and divorce.

Though the commission that drafted the recommendations was constituted in 1954, the Ayub regime took steps to implement the laws empowering women.

Before the family laws were enacted, neither marriages or divorces were required to be registered with the state.

This created severe hardships for divorced women, some of whom eventually remarried.

Their former husbands could, and some even did out of malice, accuse them of adultery since the women lacked proof of divorce from the first husband.

The new laws also required men who desired a second wife to seek formal consent from the first wife.

In summary, the acts and ordinances introduced by the Ayub regime discouraged polygyny, “protected the rights of wives and granted the rights of inheritance to grandchildren.”

On the same topic: A secular man?

Despite his belief and the desire to modernise the society, General Ayub was quick to give into religious orthodoxy as long as the policy about-turns prolonged his control over power.

Sarfraz Husain Ansari documented the policy flip-flops as the General reinstated the restrictive clauses of the Objective Resolution in 1963, which had been expunged from the Constitution earlier.

Furthermore, while the 1962 Constitution used “Pakistan” as the official name, the General yielded to the religious forces and changed the country's name to “Islamic Republic of Pakistan” in December 1963.

Finally, the Advisory Council of Islamic Ideology, which does not miss an opportunity to embarrass Pakistanis by its archaic, and frequently misogynist, interpretations of Islam, is also a gift from General Ayub that keeps on giving.

Ab raaj karey gi khalq-i-khuda
Regardless of how efficient a military regime becomes, in the end, the protagonist has to surrender to the political process in the theatre of governance.

General Ayub was no exception.

Despite his misgivings about politicians and the political process, he joined a political party, the Conventional Muslim League, a version of which has always been available to Pakistan's military rulers as they struggle to transition out of the uniform.

General Ayub knew that joining the political party was no win for him. He explained the reason he acceded to a party was because he had “failed to play this game in accordance with my rules and so I have to play in accordance with their rules — and the rules demand that I belong to somebody, otherwise who is going to belong to me. So it is simple. It is an admission of defeat on my part anyway.”

One wonders if Generals Zia and Musharraf, who followed in General Ayub's footsteps, ever knew or understood his words.

At the end of the day, the right to rule belongs to the people, and it reverts to them regardless, for eternal victory belongs to them, and not to civilian or military dictators.

If it were not for his health issues, would General Ayub still consider abdicating voluntarily? In January 1968, he caught a viral infection followed by pneumonia that developed into a pulmonary embolism.

By the fall of 1968, his health deteriorated even more.

At the same time, the opposition by Zulfiqar Ali Bhutto gained strength. On February 21, 1969, General Ayub threw in the towel declaring he would not seek re-election in 1970. By March, General Yahya Khan took control as the Chief Martial Law Administrator.

On the same theme: Objectives Resolution: the root of religious orthodoxy

The repeated failed experiments of military rule in Pakistan make it abundantly clear that unlike other developing countries in the Middle East and in Southeast Asia where military dictators have enjoyed tremendous longevity, Pakistanis love independence and will not tolerate for long attempts to curb their political freedoms.

At the very onset of General Ayub's Martial Law, Justice M. R. Kiyani, the then Chief Justice of the West Pakistan High Court, articulated the very aspirations of freedom and independence of the people as he addressed the Bar Association in Karachi:

"There are quite a few thousand men who'd rather have the freedom of speech than a new pair of clothes and it is these who form a nation, not the office hunters, the license hunters, even the tillers of soil and drawers of water."

Just two days later, the Chief Justice was forced to tender an apology for offending army officers.

Pakistan, despite its struggles with rule of law, violence, and crumbling infrastructure, is stronger today because no one can dare force a Chief Justice to apologise for upholding the Constitution and the principles of democracy.

 

[Neo]

How a small Pakistani city became a world-class manufacturing hub

PHOTOGRAPHY is fiercely restricted inside Khawaja Masood Akhtar’s factory in Sialkot, a small city in northern Pakistan. His products—top-of-the-range footballs—must be zealously guarded until the time comes for his customers, big international sports brands, to unveil their offerings for the new season. Until then the latest ball designs are subjected to a battery of tests in windowless laboratories. They must endure everything from hard poundings from mechanised boot studs to repeated dusting with fungus spores. The quality of the factory’s output is so high that Adidas chose it as one of only two in the world to manufacture the balls used in the World Cup in 2014.

Pakistan has precious few globally competitive exporters, but a good number of them are clustered in Sialkot, an out-of-the-way city of fewer than 1m people in north-eastern Punjab. It supplies the world with all sorts of sporting gear, from hockey sticks to judo suits, as well as leather goods and surgical instruments. Sialkoti Lederhosen are all the rage in Bavaria. The city’s 8,000-member chamber of commerce says Sialkot exported $2bn-worth of goods last year, or 9% of the country’s total exports of $22bn.

Sialkot’s success is especially surprising as it was cut off from its natural economic hinterland, the Kashmir Valley, when the subcontinent was split between India and Pakistan in 1947. Yet it is doing much better these days than the rest of the country. Its exports have remained reasonably steady for the past two years, even as those of the country as a whole have fallen by 12%. How are firms from such a backwater thriving, ask the exporters of Lahore and Karachi, while they struggle?

Pakistani businesses tend to blame the government for the country’s feeble export performance. Domestic and foreign investors alike are put off by the breakdown of law and order in Karachi, the commercial capital, and the storm of Islamic militancy across the rest of the country (a suicide attack on a police training college on the outskirts of the city of Quetta claimed over 60 lives this week). Manufacturers must endure crippling shortages of electricity in the summer and gas in the winter. Antiquated land administration and customs systems make buying property and exporting goods tiresome. It can take almost three years to settle a commercial dispute. Pakistan ranks a lowly 144th out of the 190 economies assessed in the World Bank’s latest “Doing Business” report.

Mr Akhtar, however, dismisses these “lame excuses”: any half-decent entrepreneurs, he insists, should be able to find their own solutions to such problems. That is what the businessmen of Sialkot have done, at any rate: instead of waiting for politicians to stump up for local infrastructure, they have built it themselves. The Chamber of Commerce set up the country’s first privately financed dry port, where goods can clear customs before being shipped to a conventional port. It later charged members a special fee to raise funds to contribute towards the resurfacing of the city’s once-appalling streets. Local businesses also funded the construction of the city’s airport, the only private one in the country. It boasts both the longest and hardiest runways in the region, and handles 53 flights a week. That helps bring in foreign buyers who do not fancy the wearisome drive from Lahore. Some of the investors in the airport are now on the verge of launching their own airline.

As well as determination, Sialkot’s businessmen have had their fair share of luck. The city happens to specialise in niche products, which are relatively insulated from competition from China. The nearby towns of Wazirabad and Gujrat, once known for their cutlery and electrical goods respectively, have struggled against a tide of cheap Chinese exports. But even Sialkot is not immune to competition. Local manufacturers lost their grip on the world market for badminton rackets when they failed to anticipate the switch from wood to aluminium and graphite. If anything, however, that has only made the Sialkotis more vigilant. The local business community is now trying to set up a technology university in the city.

http://www.economist.com/news/asia/...s-manufacturing-hub-if-you-want-it-done-right

 

[Neo]

Renault to start assembling cars in Pakistan by 2018, says Board of Investment
By Shahbaz Rana
Published: November 3, 2016

ISLAMABAD: French automobile manufacturer Renault will start assembling cars in Pakistan by 2018, the Board of Investment (BoI)revealed on Thursday.

“Renault has decided to invest in Pakistan. They will start assembling cars in Pakistan by 2018,” the BoI said in a statement, claiming the development was the outcome of the “hectic efforts and persuasion” by Finance Minister Ishaq Dar.

“During Eidul Azha holidays, Finance Minister Ishaq Dar and Dr Miftah Ismail, chairman BoI, visited France and met the top leadership of Renault,” the communiqué added.

Dar woos French automakers Renault and Peugeot to invest in Pakistan

“The company will invest $100 million to expand the capacity of Ghandara plant where it will assemble the vehicles”, said Miftah Ismail, Chairman BoI told The Express Tribune.

Pakistan has long been struggling to bring at least one foreign new brand to break the monopoly of the existing three dominant players.

The Duster could be available at a price of around Rs2.5 million, which is even lower than the prices of 1500cc Japanese made cars, said the Board’s officials. The company will also introduce up to 1200cc cars to cater the needs of the upper-middle class, the officials added.

The finance minister had in September met representatives of the two vehicle manufacturers in Paris and briefed them about the country’s automobile policy, which offered attractive incentives and concessions to foreign investors.

Pakistan wants to shake up its Japanese-dominated car market and loosen the grip of Toyota, Honda and Suzuki, whose locally assembled cars are sold at relatively high prices but lag behind imported vehicles in terms of quality and specifications.

Established in 1899, the automobile company produces a range of cars and vans, and has also manufactured trucks, tractors and tanks, among others vehicles in the past.

http://tribune.com.pk/story/1219792...ing-cars-pakistan-2018-says-board-investment/

 

[Indx TechStyle]

Renault to start assembling cars in Pakistan by 2018, says Board of Investment
By Shahbaz Rana
Published: November 3, 2016

ISLAMABAD: French automobile manufacturer Renault will start assembling cars in Pakistan by 2018, the Board of Investment (BoI)revealed on Thursday.

“Renault has decided to invest in Pakistan. They will start assembling cars in Pakistan by 2018,” the BoI said in a statement, claiming the development was the outcome of the “hectic efforts and persuasion” by Finance Minister Ishaq Dar.

“During Eidul Azha holidays, Finance Minister Ishaq Dar and Dr Miftah Ismail, chairman BoI, visited France and met the top leadership of Renault,” the communiqué added.

Dar woos French automakers Renault and Peugeot to invest in Pakistan

“The company will invest $100 million to expand the capacity of Ghandara plant where it will assemble the vehicles”, said Miftah Ismail, Chairman BoI told The Express Tribune.

Pakistan has long been struggling to bring at least one foreign new brand to break the monopoly of the existing three dominant players.

The Duster could be available at a price of around Rs2.5 million, which is even lower than the prices of 1500cc Japanese made cars, said the Board’s officials. The company will also introduce up to 1200cc cars to cater the needs of the upper-middle class, the officials added.

The finance minister had in September met representatives of the two vehicle manufacturers in Paris and briefed them about the country’s automobile policy, which offered attractive incentives and concessions to foreign investors.

Pakistan wants to shake up its Japanese-dominated car market and loosen the grip of Toyota, Honda and Suzuki, whose locally assembled cars are sold at relatively high prices but lag behind imported vehicles in terms of quality and specifications.

Established in 1899, the automobile company produces a range of cars and vans, and has also manufactured trucks, tractors and tanks, among others vehicles in the past.

http://tribune.com.pk/story/1219792...ing-cars-pakistan-2018-says-board-investment/

Is there any Pakistani Automobile Company (or at least a governmental complex)? (I mean not foreign company manufacturing.)

 

[Indx TechStyle]

What Brand Pakistan can learn from Brand India

Let’s face it, Pakistan has an image problem.

Every year we seem to make a new ‘worst place in the world for’ list and as luck would have it, Pakistan is consistently in the top 10.

This year alone, we’ve been named the second worst country in the world for women; the eleventh most unsafe country in the world; the fourth worst for journalists and third for overall worst reputation.

I can add second worst favourable passport.:biggrin2:

Granted, the deciding markers and selection criteria for these rankings are often arbitrary and simplistic at best but they certainly accumulate to paint a picture of Pakistan and this picture is tinted to reflect the nation’s worst attributes.

Whether or not we acknowledge it at the national policy level, image matters. Perhaps more than most things because a country’s image is its leverage and Pakistan is desperately lacking in leverage at present.

Recent tensions with our neighbour India serve as a perfect example to illustrate this problem. While the Indian media has adopted the loosest possible definition of journalism in the past month covering the Uri incident and what followed — doing its utmost to push the two nuclear states deeper toward a clash — much of their success in garnering international support has been due to Pakistan’s deplorable reputation as South Asia’s perpetual problem child.

The militancy tag, which follows Pakistan around the globe cannot and will not be shed by denying we have a problem. Or by failing to arrest known militants and penalising critics instead.

There are obviously varied policy measures that need to be pursued by different government and civilian bodies in this regard, but overall Pakistan needs to start focusing on a soft policy approach that at the very least, complements if not counters its standard chest thumping and foot stomping about military might to anyone who will listen.

Yes, we have a bomb — we also have a starving, illiterate population.

Now, if we could only apply the same mental gymnastics we used to convince our population that our military might trumps their basic need for food, clothing and shelter — to convince the international community about our stability regarding the ‘use’ of that aforementioned bomb, we’d be all set.

The concept of soft power was originally penned by Harvard academic Joseph Nye in these words: “Power is the ability to get what you want from others and you can do it in three ways: you can do it with coercion; you can do it with payment or you can do it with attraction and persuasion. Coercion and payment I call hard power, the ability to get what you want through attraction and persuasion is soft power.”

Ironically, this soft power strategy is one that our neighbours have perfected over time. So much so that India’s international ‘feel good yoga, land of spices, dance numbers and IT experts’ image is often enough to detract from its current reality under Modi.

It takes the international community a while to wake up to Indian atrocities in Kashmir but there is little convincing needed to push the ‘militant Pakistan’ angle on a global level.

This is perhaps because Pakistan has desperately failed in cultivating its own cultural tools at a similar scale or acknowledging and appreciating its strongest diplomats and universal ambassadors: its artists.

Art and those who wield it are perhaps Pakistan’s greatest arsenal in countering its current image crisis. This doesn’t mean pretending our problems don’t exist or scapegoating people like Sharmeen Obaid Chinoy or Malala Yousufzai for shedding light on them, but recognising that Chinoy’s Oscar and Malala’s global campaign for girl’s education are a win for Pakistan and an acknowledgement of Pakistani citizens who still care about the challenges the country faces.

Chinoy’s so-called anti-nationalist film has probably done more for the cause of addressing honour crimes than most policy makers have managed over decades. It has precipitated three different types of legislation addressing gender issues in one short year.

The fact of the matter is that if one is to acknowledge artists, educationists and activists as ambassadors then that needs to be followed by the recognition that these people cannot be told how their work should manifest.

Hard places breed certain kinds of artists all over the world and their art is all the more powerful because it acknowledges the truth of its origins rather than shying away from it.

This is why India’s decision to deport our actors and its ban on screening films with Pakistani actors is particularly aggressive, unprecedented and tragic.

In times of conflict, art is supposed to serve as the final avenue for peace. Cultural exchanges are the only corridors to create understanding and foster friendships between fractured peoples. Closing these doors means closing oneself off to all possibilities.

It is almost as if our governments are propelled by the fear of people meeting across these achingly similar cultural traditions that centre around shared music, poetry, language, history and food.

As if Fawad Khan being appreciated for his role in Karan Johar’s latest film will somehow be an acknowledgement that he is not so utterly ‘alien’ in contrast to his Bollywood contemporaries.

For some, this contrived kinship might even translate into genuine friendship and wouldn’t that just fracture every story we have been telling ourselves about ourselves since our country's inception.

The stories we tell ourselves and the stories others tell about us matter. Pakistan needs to tell stories about itself that actively counter the one story the world knows it by.

This does not negate the fact that Pakistan suffers from militancy, terrorism, corruption and a host of other problems. It does. No one knows this more than Pakistanis themselves.

However, we also know that this is not all we are. In her talk, “The danger of a single story,” Chimamanda Ngozi Adichie says: “The single story creates stereotypes. And the problem with stereotypes is not that they are untrue but that they are incomplete. They make one story become the only story."

Our story is one marked and framed solely by aggression and our response to it. For some reason, for the past few decades the world seems to collectively have bought into the idea that the definition of a super power is quite literally just that: an overt, outdated and outmoded expression of 'masculine' aggression.

Perhaps this is why one of our go-to insults for everything ranging from border skirmishes to wife-beating is to taunt men with the phrase “choorhiyan pehen rakheen hein.”

This is not to say that military might is not a significant variable in the power matrix for a country like Pakistan; however we seldom stop to weigh its importance against poverty, education, healthcare or human rights. All these matrices collectively constitute identity which goes on to frame ‘power.’

Who is to say that America’s influence around the world is solely because of its military might and not also because of the sheer volume and velocity at which it exports its culture through Hollywood, fashion, fast food and its university education?

In this time of contrasts and boastful comparisons, the question arises: which identity markers does Pakistan grade itself by and how? Perhaps it is time for us to hedge our bets and work on self-improvement over whining about the hand we are being dealt.

A few years ago, when the United Kingdom was considering cutting funding for humanities education, hundreds of students took to the streets bearing the slogan “Give us back our Humanities”. Pakistan has never really cultivated its humanities and it is essential that we do so now.

In negotiating with narratives, so many problematic and intolerant elements can be countered by funding the arts. Languages, poetry, architecture, textile, and literature are our only real inroad to self-exploration beyond the status quo.

We need to invest in small businesses, embrace our artists and musicians, fund literature and art programmes to ensure that Pakistani students can represent parts of our identity that reflect our diversity, tolerance, innovation and beauty rather than the reactionary rubric of an isolated state that has no interest in being part of the world.

 

[Indx TechStyle]

Pakistan’s trade deficit widens 22%, stands at $9.3 billion

ISLAMABAD: Pakistan recorded a trade deficit of $9.3 billion in the first four months of the ongoing fiscal year, widening 22% year-on-year and far more than official estimates, as exports failed to recover while imports kept increasing during the July-October period.

The higher-than-anticipated trade deficit, gap between exports and imports, has not rung any alarm bells in official circles yet, as the government is mum over recommendations submitted to improve the situation of the external trade sector.

Exports plunged 6.3% to stand at $6.43 billion during the four-month period, reported the Pakistan Bureau of Statistics on Thursday. In contrast, the import bill increased 8.6% to $15.8 billion in the same period. Resultantly, Pakistan posted a $9.3-billion trade deficit – higher by $1.7 billion or 22% over the corresponding period, said the national data-collecting agency.

There was one positive aspect, as exports picked up slightly in October while pace of growth in imports reduced marginally as well. However, it was not sufficient to recoup losses in terms of contraction in exports during previous months. Exports increased to $1.8 billion during October.

Govt’s estimates

For fiscal year 2016-17, the government has projected exports would grow to $24.75 billion and imports may remain at $45.2 billion. It had projected a $20.5-billion trade deficit for the entire fiscal year but the first four-month deficit has already covered 45.4% of the annual target.

The government closed the last fiscal year 2015-16 at an eight-year low level of exports, which dropped to $20.8 billion despite preferential access to European markets. The exports have been declining since the current government took over, falling from $24.5 billion in 2012-13.

The continuous decline in exports is alarming when analysed in light of other developments taking place on the external accounts front. Remittances have started shrinking while foreign direct investment is also not picking up.

Due to drying up of these important non-debt creating sources, the government has been heavily borrowings to build foreign currency reserves and meet external account requirements. During the week ending November 4, central bank’s reserves further decreased to $19 billion. The reserves are largely built by borrowing from external sources and purchasing dollars from the spot markets.

The IMF’s last report on $6.4 billion bailout programme revealed that Pakistan’s gross external financing needs would reach $10.9 billion in this fiscal year. Since the trade deficit is more than official estimates, the gross financing requirements are also likely to go up. The $10.9 billion estimated financing requirements are already $4.4 billion higher than fiscal year 2015-16 requirements.

In September this year, Prime Minister Nawaz Sharif had constituted a committee to address the issues faced by the country’s exporters within one week. However, more than two months have lapsed and the government has yet to come up with a package that may address these issues.

The sources said that the Ministry of Finance was sitting on the recommendations, as these carried financial implications for the budget.

In its assessments, the IMF has said that appreciation of Real Effective Exchange Rate (REER), security and governance challenges and power outages were the reasons behind the fall in exports. The IMF has also projected a significant rise in imports due to the China-Pakistan Economic Corridor (CPEC). It has estimated CPEC imports at 11% of the total imports in the years ahead.

 

[Indx TechStyle]

Circular debt in power sector: Govt could not repay bank loans of Rs136.5b

Under the revised plan, the government wants to divest 10% to 20% shares in three power distribution companies at the Pakistan Stock Exchange and use the proceeds to retire the debt. PHOTO: FILE

ISLAMABAD: The government failed to return loans of Rs136.5 billion that it had obtained from banks to retire circular debt in the power sector, which forced the Economic Coordination Committee (ECC) of the cabinet to roll over the debt for two more years on Thursday.

The main reason for the failure to repay the loans was the postponement of privatisation process of power distribution companies, according to officials of the Ministry of Finance.

The government had promised the International Monetary Fund (IMF) that it would retire Rs335 billion worth of circular debt, parked in Power Holding (Private) Limited, by privatising Faisalabad, Lahore and Islamabad power distribution companies.

The government is already charging 43 paisa per unit as debt servicing surcharge from electricity consumers through monthly bills to service the circular debt. In fiscal year 2015-16, it collected Rs29.3 billion from the consumers under that head, according to an IMF report.

Headed by Finance Minister Ishaq Dar, the ECC decided to roll over the Rs136.5-billion debt for two more years including a grace period of one year, meaning the consumers would continue to pay the interest through their electricity bills.

The loan had been obtained in 2012 for two years. In October 2014, the ECC rolled over the debt for two years after the government could not make repayments, according to a press release of the finance ministry in that year.

Now, it is the second rollover, which suggests that plans to address fiscal woes of the private sector could not achieve the desired results.

Technically, it was not a default, as the government was regularly servicing the debt by collecting the amount from the electricity consumers, said officials of the Ministry of Water and Power.

The government is paying interest to a consortium of seven commercial banks, which is 1.25% above the Karachi Interbank Offered Rate (Kibor).

The ECC approved the issuance of sovereign guarantees by the government in respect of the syndicated term finance facility amounting to Rs136.5 billion for the power sector, according to a statement issued by the finance ministry on Thursday.

“The decision was taken on the request of the Ministry of Water and Power as Power Holding (Private) Limited is a public sector company and will be responsible for arranging the loan amounting to Rs136.5 billion for the power sector companies,” it added.

The circular debt was recorded at Rs321 billion at the end of June 2016 in addition to the Rs335 billion parked in the holding company, according to the IMF report. It means the total outstanding circular debt of the power sector is Rs656 billion.

Failed plans

Under a three-year $6.2 billion IMF loan programme, the government had assured the lender that the circular debt would be retired by privatising the power distribution companies. The plan could not be implemented after the Ministry of Water and Power refused to cooperate.

Now, the government has come up with a revised plan. Under the plan, it wants to divest 10% to 20% shares in three power distribution companies at the Pakistan Stock Exchange and use the proceeds to retire the debt.

Pakistan has promised to the IMF that the initial public offering (IPO) of Faisalabad company will be done by February 2017, to be followed by IPOs of Islamabad and Lahore companies by the end of 2016-17. However, sources in the Privatisation Commission said the government was facing problems in the listing of these companies.

PSM salaries

The ECC also approved the payment of outstanding three-month salaries to the employees of Pakistan Steel Mills (PSM) for the period June to August. An amount of Rs1.14 billion would be paid out of the lease money that PSM received from the Port Qasim Authority.

Still, the PSM employees would be waiting for salaries for the remaining two months. The ECC took the decision a day after the government revealed its intention to give the sick industrial unit on lease to foreign investors.

 

[republic_roi97]

Circular debt in power sector: Govt could not repay bank loans of Rs136.5b

Under the revised plan, the government wants to divest 10% to 20% shares in three power distribution companies at the Pakistan Stock Exchange and use the proceeds to retire the debt. PHOTO: FILE












Failed plans



PSM salaries

Haha, they are so damn broke, can't provide food, employment or electricity to their people and are making nuclear bombs and testin FN SCAR as their standard infant-re weapon. lOl, I am dying of laughter at their broke-a$$ condition.

 

[IndianHawk]

Haha, they are so damn broke, can't provide food, employment or electricity to their people and are making nuclear bombs and testin FN SCAR as their standard infant-re weapon. lOl, I am dying of laughter at their broke-a$$ condition.

They openly accepted that they will eat grass but fight with India nonetheless.
Now they are realizing that even thats not enough.

In few days a great paki leader will announce that they will survive on pure paki air but will still fight with India .
:biggrin2:.

 

[Indx TechStyle]

They openly accepted that they will eat grass but fight with India nonetheless.
Now they are realizing that even thats not enough.

If water is blocked by India, even grass won't be able to grow.

In few days a great paki leader will announce that they will survive on pure paki air but will still fight with India.
:biggrin2:.

Our smog will take care of their air as well. Pakis won't get anything to eat.:biggrin2:

 

[aditya10r]

If water is blocked by India, even grass won't be able to grow.

Our smog will take care of their air as well.:biggrin2:

And our Nukes will take care of their mard e momins...........................

 

[Indx TechStyle]

mard e momins...........................

Mard e popkins.......
Like @Just telling Truth is a true mard that even caliphate runs through his veins.

 

[Indx TechStyle]

Pakistan ranked among worst 10 countries for internet freedom: report