PAKISTAN’S ECONOMIC TIMES
New 5-year plan faces hard choices
The Pakistan Tehreek-e-Insaf (PTI) government faces a tough choice between implementing an economic stabilisation programme that will lead to creating slightly over 5 million jobs or giving economic stimulus to fulfill promise of creating 10 million promised jobs. In case it picks up the option of economic stabilisation, the average economic growth rate by the end of the PTI government’s tenure will be equal to 4.8percent that the last Pakistan Muslim League-Nawaz (PML-N) government had achieved in its five-year tenure. Despite achieving 4.8percent growth rate, the PML-N government had missed all the macroeconomic targets set in 11th Five-Year plan 2013-18. The Ministry of Planning and Development is in the process of finalising the 12th Five Year Plan (2019-23) while keeping in mind the PTI’s economic priorities. It also wants to avoid the path that the PML-N government had taken. “As a result of the PML-N’s economic policies, Pakistan was on the brink of default,” said Federal Minister for Planning and Development Khusro Bakhtiar on Wednesday while explaining his government’s economic priorities to a group of journalists. “The core objective of 12th Five Year Plan is to create 10 million jobs in 5 years and enhance sustainability of the economic growth through building fundamentals,” he added. The Planning Ministry’s initial assessment for the next five years shows that the economy could grow at a rate of 4.2percent in this fiscal year, which will pick to 5.4percent in the next fiscal year. For 2020-21, the assessment shows the annual economic growth rate at 6percent, which will then pick to 6.5percent and ultimately reach 7percent by the end of the fiscal year. This pace of economic growth will create nearly 9.5 million jobs. On the basis of this high economic growth rate scenario, the average economic growth rate for the 2018-2023 period is projected at 5.8percent. An internal assessment of the Finance Ministry suggested that economy may grow at only 3.9percent rate in the current fiscal year, which will pick to 4.3percent in the next fiscal year. It has projected a 4.8percent growth rate for 2020-21, 5.3percent for 2021-22 and 6percent for 2022-23, which is the last year of the PTI’s five-year term.
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Foreign direct investment in Pakistan hits 6-month high
Pakistan achieved a six-month high foreign investment in different productive sectors of the economy in December 2018 after the country finished a year-long exercise of letting the rupee depreciate against the US dollar to create an equilibrium. Foreign direct investment (FDI) increased 17percent to $319.2 million in December 2018 compared to $272.8 million in the same month last year, the State Bank of Pakistan (SBP) reported on Wednesday. This is also for the second consecutive month that the FDI has continued to surge on a month-on-month basis.
“The pending rupee devaluation was one of the biggest concerns of foreign direct investors. Now when Pakistan has addressed the concern, it has regained foreign investors’ trust on the country,” Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General M Abdul Aleem told.
The SBP has devalued the rupee by a whopping 32percent in the last 13 months to Rs138.90 to the US dollar on Wednesday. Besides, the political uncertainty linked to the July 2018 general elections has come to an end and investors have gradually built trust on the recently installed government in the country as well, he added. In the recent months, the foreigners squeezed investment in wait for clarity on economic policies of the new government.
“The government has taken tough decisions over rupee devaluation and (key) interest rate hike. The initiatives have apparently won the investors’ confidence,” he said. Unlink the previous five months when China remained the only healthy foreign investor in Pakistan, Netherlands and Norway also appeared as significant foreign direct investors in December 2018, according to SBP. China alone has invested net FDI worth $120.6 million in December, while Norway and Netherlands have appeared as the second and third largest investor with $65.2 million and $47.6 million, respectively. Sector-wise, it was financial business which attracted the single highest investment worth $137.3 million in the month. This was followed by chemicals with $50.9 million and construction $45.1 million. Cumulatively in the first six months (July-December) of the current fiscal year, FDIs have dropped 19percent to $1.31 billion compared to $1.63 billion in the same period last year.
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Russia ready to invest $2bn in energy projects
A state-run Russian firm, Inter RAO Engineering, has offered to invest $2 billion in Pakistan’s water and power sector projects, including Mohmand dam. Inter RAO Engineering is one of the largest Russian public energy companies that has joint ventures with European companies like Siemens in Russia. The Russian firm wants a deal on government to government basis between Russia and Pakistan. This Russian firm is also building a dam in Afghanistan on the Kabul River. Pakistan and Russia have already signed a governmental agreement to build the north-south LNG pipeline. The two countries also signed a memorandum of understanding (MoU) for an offshore gas pipeline project. Now, Russia’s state run firm has offered investment in water and power projects in Pakistan. Sources told that representatives of the firm held a meeting with officials of the Water and Power Development Authority (Wapda) in November 2018 and offered to invest $2 billion in Pakistan. The firm also expressed interest in investing in Mohmand dam. The sources said the officials of the Russian firm had also held a meeting with Minister for Power Omar Ayub and expressed interest to invest in the Jamshoro Power Plant. The representatives also desired to meet the water minister but the meeting did not take place. The Russian firm is ready to invest in some key water and power sector projects, including the 7,100MW Buji, 52MW Nauseri, 2,800MW Yulbo, 2,200MW Tangus and 800MW Mohmand dam projects. The firm is also ready to provide technical support and financing for these projects. The total cost of these projects has been estimated at Rs318 billion. The Indus River system has an identified hydropower potential of 60,185MW, out of which around 9,406MW is exploited, which accounts for 15.6 per cent of total identified potential. The Indus River has an identified hydropower potential of 39,558MW. Tributaries of the Indus in Gilgit-Baltistan have the potential of 1,698MW and tributaries in Khyber-Pakhtunkhwa 4,028MW.
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Country’s reliance on imported cotton on the rise
Owing to unavailability of high quality cotton in Pakistan, the country’s textile industry is becoming increasingly reliant on imported fibre. The cotton imported from the United States has been greatly helping the textile industry cope with challenges such as high production costs and compliance requirements. Consequently, the cotton import from the US is rapidly increasing. According to statistics released by the US cotton promoter – the Cotton Council International (CCI), the number of textile mills and garment manufacturers importing US cotton in Pakistan has greatly increased over the past six years. In 2012, big spinning and weaving units with US licence as well as textile manufacturers including those producing yarn and fabric were limited to six or seven. The number increased to 36 by 2018. Pakistan now ranks 5th in the list of top importers of cotton from the US. According to statistics, Pakistan’s annual demand for cotton is 14 million bales while production ranges between 10 and 10.5 million bales. Pakistan is importing about 1.5 million bales from the US. The Pakistani firms importing cotton made in the US mostly comprise spinning and weaving mills. However, the denim and garment manufacturers and knitting units are also importing American cotton. Three of the most popular retail brands in Pakistan, Gul Ahmed, Al-Karam and Nishat Chunian are also importing cotton from the US.
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Govt determined to lift trade relations with all neighbours: Asad
Pakistan wants to lift trade relations with all its neighbours and regional countries, including Iran, India, and Turkey, said Finance Minister Asad Umar. Addressing the 11th annual report launch by Burky Institute of Public Policy on Wednesday, the minister said Iran was an important neighbour of Pakistan in the west and the world should stop creating impediments in the way of trade between the two countries. He said, “Whenever the World Bank and other international bodies come to me, they always say that intra-regional trade is extremely important for boosting economic growth,” adding that they advised resuming good trade ties with India. He said the prime minister had already taken the initiative to start developing trade relationships with India and hopefully the new leadership of India, after the general election, would give positive response to the PM’s move. Umar said that during his visit to Turkey last week he discussed the issue with the Turkish vice president and shared that trade relations between the two countries should be improved.
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Sindh, SECP to organize business registration portal
Four Sindh government departments and the Securities and Exchange Commission of Pakistan (SECP) have signed a memorandum of understanding (MoU) for launching a business registration portal in an attempt to facilitate entrepreneurs in completing all registration formalities online. Sindh Chief Minister Syed Murad Ali Shah, Labour Minister Murtaza Baloch and senior World Bank economist Amjad Bashir were present on the occasion. The chief minister thanked the World Bank for helping to improve investment climate in the province. The partnership between the Sindh government and the World Bank had been re-energised and “we are working together in many spheres of the economy to improve the living standards”, he said. He emphasised that remarkable progress had been made in reforming the business climate as well as in the ease of doing business project on which the provincial government was working to improve the country’s global ranking.
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Pak offers to release confiscated cellphones after payment of duty, fine
The federal government announced on Wednesday that mobile phones which have been seized or voluntarily presented to Customs authorities after January 15, could be released on payment of applicable duty and taxes along with a 10% fine. The decision was taken after overseas Pakistanis, mobile phone dealers and users voiced their concerns against the government policy of confiscating imported phones. To get the mobile phones back, users and importers will have to pay a fixed sales duty ranging from Rs250 to Rs1,500 depending on the price of the phone. Further applicable tolls include advance sales tax, advance income tax and other taxes. Besides, a 10% fine of total tax amount will also have to be paid. According to a notification issued by the Federal Board of Revenue (FBR) on Tuesday, only PTA-approved handsets will now be used in the country. Meanwhile, foreign nationals travelling to Pakistan need to declare details of their cellphones in forms available at customs counters at airports of their respective countries. Similarly, overseas Pakistanis visiting the home country will be required to register their mobile phones at the airport or their nearest customs collector office within the next 15 days.
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Qatar shows interest in CPEC, investment in Gwadar
Qatar has expressed interest in the China-Pakistan Economic Corridor and has shown willingness to invest in the deepsea port of Gwadar, it is reported on Wednesday. Qatar plans to invest in food storage facilities that will be established at the port in Gwadar. The investment will also help develop the region and the local economy. Prime Minister Imran Khan is scheduled to leave on an official trip to Qatar on January 22 and is set to hold meetings with the Qatari leadership.