Pakistan In Focus

FDI to surge with well trading across borders

The business community has voiced a firm hope that Pakistan will attract significant foreign direct investment (FDI) for export projects once the country displays a modest improvement in the trading across borders parameter in the World Bank Ease of Doing Business Index.

Speaking to sources, Overseas Investors Chamber of Commerce and Industry (OICCI) President Irfan Siddiqui lamented Pakistan’s low regional trade volume despite availability of cheap labour and raw material for the production of export-oriented goods and access to Gulf Cooperation Council (GCC) and Central Asian markets.

“Pakistan ranks 111th out of 189 countries on the trading across borders parameter, whereas India is at 68th place, China at 56th spot, Sri Lanka at 96th and Vietnam at 104th,” he said. “We have the potential to attract FDI for export projects once we show improvement on this front.”

In the meantime, he said, the leadership should encourage local industrialists to invest in technology, explore new non-traditional sectors and forge partnerships with key international brands to attract foreign investment into the country.

ECC may okay SSGC, K-E deal

The Economic Coordination Committee (ECC) is likely to approve the signing of an arbitration agreement between Sui Southern Gas Company (SSGC) and K-Electric as well as some other entities like NTDC, a move that will pave the way for the issuance of a national security certificate (NSC) for acquisition of the power utility by a Chinese firm.

In 2016, KES Power (Pvt) Limited submitted an application for NSC to the Privatisation Commission for the transfer of 66.4 percent shares in K-Electric to Shanghai Electric Power (SEP).

The arbitration agreement will settle the dispute over receivables between SSGC and K-Electric. The ECC will meet on Wednesday to deliberate on the issue. Sources told that the management of SSGC had recommended entering into an arbitration agreement with K-Electric under the auspices of the federal government.

The board of directors has also authorised the SSGC managing director to sign the arbitration agreement under the umbrella of the federal government.

Government wants to freeze expenditures

The Government has proposed a freeze on current expenditures of a majority of departments and ministries in the next budget, indicating only a 1.3 percent average increase in their allocations, excluding the impact of a likely 20 percent rise in salaries.

“The average 1.3 percent increase too is on account of increments that government employees get during the middle of a fiscal year,” a top finance ministry official told.

But still there are a few departments that will get a double-digit increase in budget – like the judiciary.

“It has been proposed to freeze all operational expenditures at their current levels,” the senior ministry official added.

The government is considering announcing the budget on June 11, which will be the fourth budget of the ruling party, the Pakistan Tehreek-e-Insaf (PTI).

The estimated size of the budget is around Rs8 trillion and the overall budget deficit will be over 6 percent of gross domestic product (GDP) as Finance Minister Shaukat Tarin is now considering setting the FBR tax target above Rs5.5 trillion.

SBP reserves rise $177mn to $15.8bn

The foreign exchange reserves held by the central bank rose 1.13 percent on a weekly basis, according to data released by the State Bank of Pakistan (SBP) on Monday.

On May 7, the foreign currency reserves held by the SBP were recorded at $15,774.5 million, up $177 million compared with $15,597.9 million in the previous week.

According to the central bank, the rise came on the back of official inflows of the government.

Overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $22,910.3 million. Net reserves held by banks amounted to $7,135.8 million.

Pakistan borrowed $2.5 billion through Eurobonds on March 30, 2021 by offering lucrative interest rates to lenders aimed at building the foreign exchange reserves.

Pakistan received the first loan tranche of $991.4 million from the International Monetary Fund (IMF) on July 9, 2019, which helped bolster the reserves. In late December 2019, the IMF released the second loan tranche of around $454 million.

The reserves also jumped on account of $2.5 billion in inflows from China. In 2020, the SBP successfully made foreign debt repayment of over $1 billion on the maturity of Sukuk.

In December 2019, the foreign exchange reserves surpassed the $10 billion mark owing to inflows from multilateral lenders including $1.3 billion from the Asian Development Bank (ADB).

New energy tariff slabs on the cards

The government has decided to create new categories of electricity tariffs for consumers in a bid to reduce the volume of subsidy.

The decision is likely to be implemented from June 1, 2021.

Sources told that the government had not set the timeline for implementation of the decision. It has authorised the finance minister to decide the timeline of implementation.

Following its implementation, eight million consumers will be out of the subsidy net in the first phase. At present, 22 million electricity consumers are getting the subsidy. However, it will be limited to 13.9 million consumers.

The federal government will request the National Electric Power Regulatory Authority (Nepra) on behalf of power distribution companies (DISCOs) to make changes to the existing tariff slabs.

Nepra will be requested to expand the definition of lifeline consumers to include the residential Non-Time of Use (ToU) consumers having maximum of last 12 months and current month

’s consumption of 100 units. Two tariff rates for 50 and 100 units will continue.

Pak-China ties to enhance regional trade integration

Bilateral economic cooperation between China and Pakistan would go a long way in promoting regional and global trade integration, said Adviser to Prime Minister on Commerce and Investment Abdul Razak Dawood.

Talking to source on Tuesday, he said that both the countries had already strengthened cooperation in various fields of economy, particularly in trade and investment for mutual benefit and advantage of the whole region.

Dawood said that during the last 10 months (July-April), Pakistan’s exports to China increased by 31 percent to $1.951 billion from $1.491 billion in the corresponding period of last year.

“CPFTA-II has a very positive impact on Pakistan’s exports in all potential sectors, which indicates that it is going in the right direction, for which the credit goes to the exporters,” the adviser added.

He said that the CPFTA-II had brought down tariffs to zero for Pakistan on 313 high-priority tariff lines, which benefited the country as almost half of Pakistani exports to China were covered in these lines.

Special economic zones to create 1.47mn jobs

Four Special Economic Zones (SEZs), which are under construction, will create 1.47 million jobs besides playing an important role in promoting the local industry to lead the country towards sustainable economic growth.

“Rashakai M-1 SEZ (Nowshera), Dhabeji SEZ (Thatta), Allama Iqbal Industrial City (Faisalabad) and Bostan SEZ (Balochistan) will create around 475,000 direct and 1 million indirect jobs across the country,” a senior official of the Board of Investment (BoI) told source on Monday.

Talking to source, the official voiced hope that the SEZs would jointly promote overall industrial growth in the country and reaffirmed that the development of these zones was the top priority of the government.

He was of the view that industrial cooperation with China would make Pakistan a manufacturing hub in the region while the establishment of industrial zones would steer investment opportunities for local businessmen.

The 1,000-acre Rashakai SEZ has attracted over 2,000 domestic and foreign investors from different sectors of the economy and it is playing a vital role in promoting rapid industrialisation in the country. He said that the SEZ would be developed in three phases and as per the plan construction work would be done on 247 acres of land in the first phase, 355 acres in the second phase and 399 acres in the third phase.