1. A Sorry Yarn
More less for Sindh's cotton growers as even a bumper crop
at home cannot compere with duty-free imports abroad.
2. Missing the Target
Once again, exports fall far short of the government's
ambitious targets.
4. KSE’s Free Fall?
Despite the slump in the Karachi Stock Exchange, the government refuses to come to its
rescue
5. Canadian firm providing assistance for ambitious Karachi Mass Transit project
A Sorry Yarn
More less for Sindh's cotton growers as even a
bumper crop at home cannot compere with duty-free imports abroad.
Hundreds of small farmers belonging to Sanghar district in Sindh set ablaze a sizeable amount of pbutti (seeded-cotton) as a token protest against the reduction of the cotton price in the local market, which according to them does not even cover the input cost of their crop. Cotton growers from lower Sindh complain that due to the import of large quantities of cotton from abroad by spinners, local stocks prices have plummeted.
In light of the cotton crop failures for three consecutive years, local textile manufacturers had opted for a cautious approach and imported lint to meet any shortfall during the year. They also availed the 1999-2000 Trade Policy, whereby the government allowed the duty-free import and export of cotton-and the advantage of low prices of raw cotton in the international market, against the anticipated higher rates of local cotton (Last year, local lint prices went as high as 2,700 rupees per maund, inclusive of GST).
By the ent of August, Pakistan textile mills had imported around one million bales of raw cotton, mainly from the Central Asian countries, Australia, Argentina, Syria and USA.
However, due to a good cotton crop this year and a large quantity of imports, the cotton rates in the local market have dropped dramatically. Now the textile manufacturers are dictating their terms in the local market. "Spinners are not procuring much." Says Abdul Rashid Balagamwala, ginning factory owner in Tando Adam, Sanghar. "Mills are lifting small quantities and then demanding further reduction in price for more stocks."
As a result, growers are in a predicament. On the one hand, they are not fetching the requisite prices for their goods, while on the other, they cannot hold on to their products for an increase in price, of which there is, in any case, no guarantee, since they need funds to purchase fertiliser and pesticides and pay the pickers as well.
(Published by monthly Newsline September 1999)
Missing the Target
Once again, exports fall far short of the government's
ambitious targets.
With the overall decline in economic growth, Pakistan's exports suffered a significant decrease during the fiscal year 1998-'99. The government, with its customary optimism, had initially fixed an export target of over 10 billion dollars in exports at the start of the fiscal year, and was forced to revise the target but could not even achieve the revised target. Compared with the previous year. Current figures show a drop of 10.5 per cent.
Government officials attribute the slump to the uncertain economic conditions prevailing in the country after the imposition of economic sanctions in the aftermath of Pakistan's tit-for-tat nuclear blasts on May 28, 1999.
The overall international recession has also deepened the crisis. "Our exporters suffered mainly due to the foreign exchange crisis," says Wajid Jaead, the private sector businessmen turned Minister of State and Chairman of the Export Promotion Bureau (EPB). Most exporters agree that restrictions on foreign exchange and freezing of foreign currency accounts on the eve of the nuclear blasts coupled with sky-rocketing utility charges added to the declining trend in exports.
Pakistan's export eairnings have remained stagnant at around 8 billion US sollars for many years due to the overall economic decline in the country and the dire straits of local industries, an increasing number of which are closing down because they can no longer make ends meet. The lack of competitiveness and a careless approach towards quality control further inhibit the export of Pakistani goods, while the South-East Asian economic and currency crisis has also hampered the growth of exports from Pakistan.
(Published by monthly Newsline August 1999)
Despite its potential for high returns compared to other avenues of investment, there is currently a slump in the real estate market that has created hardships for those in middle income bracket who urgently need cash. "Those who want to sell their properties are unable to dispose of it, while those with purchasing power are reluctant to buy even at the cheaper rates. Compared to sellers, there are at the moment less buyers in the market." Comments Salahuddin Haider, chief executive of VIP Estates in Clifton.
The slide in Karachi’s property rates is not an overnight phenomenon nor is it an isolated one. It has come at intermittent intervals in the past, predictably after a boom period, and lasted a short while. This time around, however, it is unusual in that it has been prevailing since 1996. It began early that year when the proces of property had reached their peak. Some property experts, in fact, believe that in 1996 rates had attained unrealistic highs and that they are now more reasonable. Nevertheless, with the passage of time, the slump, which was exacerbated by the economic crisis following the sanction in the wake of the nuclear tests last May, has become more profound.
"During my 18 year in the property business I have seen many ups and downs in the industry, but this slump is very serious," says Zubair Shaheen, a property dealer in Clifton. He claims that least 200 estate agencies have closed down in the city and the remaining are scraping by whit only 10 to 20 per cent of their usual business. Meanwhile, most estate agents have opted for other jobs.
(Monthly Newsline May 1999)
Following the IMF loan, came a separate credit of USD 350 million from the World Bank for reforms in the banking sector. Islamabad has also sought a re-scheduling of its loans servicing with the Paris Club, a consortium of donor countries and subsidiary organisations of the IMF, and a relief of USD 3.5 billion is likely from that direction.
Earlier, in September 1998, sensing the gravity of Pakistan’s economic mess and a possible default in payment to lending institutions, the US government had eased the economic sanctions for one year. (It is believed that this was due to Pakistani assurances that it would sign the CTBT during 1999, a fact denounced, by right-wing religious parties led by the radical Jamat-e-Islami, as a rollback of the country’s nuclear programme).
For a country, facing economic sanctions after the nuclear tests of May 1998, said the government’s economic managers, the credits from the Fund and the Bank would provide relief to the economy. However, independent economists, bankers and businessmen see them only as a further burden on the ailing economy. Pakistan already owes about USD 30 billion to various lending agencies and these packages, intend to avoid an immediate default, would provide but a brief respite.
Moreover, these short-term benefits will not count for much as the time will come when the country will have to pay back the money.
(Himal- South Asian (February 1999) monthly from Nepal)
The KSE had sought the PM’s assistance through a letter urging immediate remedial measures to the check the current slump in the stock market. In response to the KSE’s SOS, the Prime Minister send his aide, Finance and Commerce Minister Ishaq Dar, to pacify the bourse management. Dar, however, declared that, "The Government cannot risk pumping fresh funds into the market due to poor liquidity position of its financial institutions like NIT and ICP."
KSE’s Chairman Muhammad Yasin Lakhani, had demanded that the government set up a 10-billion rupee fund to save the capital market. The finance minister responded by asking the KSE managers to reorganise, suggesting they re-design the 100-index.
The country’s stock markets are witnessing the worst ever period since the nuclear tests. Equity experts were expecting a recovery after the relaxation of economic sanctions by the developed countries and approval of the withheld loans by the Bretton-Wood institutions. But despite the approval of credit and rescheduling of Pakistan’s outstanding loans, the situation has not improved. In act, it has aggravated.
Local as well as international investors are still reluctant to enter the market and make long-term commitments. The confidence of the investors, which was shattered after the controversial economic decisions taken by the government in the wake of the May 28 nuclear blasts, has not yet been restored, even though the government has relaxed most of its terms.
(Monthly Newsline March 1999)
Karachi has borne the brunt of this slump given that the hotel business is largely concentrated here. Although the imposition of governor’s rule in Sindh has improved the situation to a certain extent, the number of visitors to the metropolis has still not increased appreciably.
Pakistan, for which the formulation of a tourist policy is perennially low on every government’s priority list, has never been a popular tourist destination anyway and the deteriorating law and order situation over the past few years has further discouraged the few who did venture here.
The current economic stagnation and lack of investment opportunities have now adversely affected the arrival of business from abroad as well.
The hotel business had already been dealt a major blow two years back by the official ban on marriage feasts from which it derived a considerable profit. "The meals served at wedding were catered by the hotels themselves. But now we serve cold drinks manufactured by beverage companies, which drastically slashes our profit margin," says Jawaid Akhtar, Director of Marketing, Karachi Sheraton Hotel.
To cover their losses, hotels have taken to billing rental charges on a per head basis. "Before we would adjust rental charges through the catering, but now we try to compensate through rentals," says Moazzam Ali Khan, chairman of Pakistan Hotels Association (PHA).
(Monthly Newsline April 1999)
The National Mass Transit Authority of Pakistan had awarded the contract to the Canadian firm on a BOT (build, operate and transfer) basis in 1995. The company had formed a consortium of international companies to design, plan and schedule the project. The consortium will operate this mass transit facility for 30 years.
A 14-km elevated light rail network with 14 stations and a bus feeder system will be constructed in the largest city of Pakistan with a population of over 10 million. SNC-Lavalin, a Montreal-based company, is also a partner of TITC in this project. Estimated cost of the project is US $ 600 million.
After conducting the "tit-for-tat" nuclear explosions in May 1998, Islamabad had been facing economic crisis due to international sanctions. To meet its financial deficit the federal government stopped to allocate funds for the time being for mega development projects like KMTP.
However, the provincial Sindh government had made an allocation of rupees 100 million as a first installment to its share for the KMTP in the annual development plan (1998-99) with hopes that Japan, one of the major sponsors of the project, will keep its commitment following the economic sanctions on Pakistan.
The Pakistan officials said that the Canadian soft-term loan of US$308 million was also in the pipeline. The government, the officials said, will quickly approach financiers from the Middle East, such as Islamic Development Bank (IDB) and Kuwait Fund, to boost financial resources in case Japan EXIM or Asian Development Bank fail to provide finds to this project.
It may be recalled that after the initial study of Karachi Mass Transit, it was realized that the port city of Karachi was in dire need of a Mass Transit Program.
Karachi being the hub of economic activities of Pakistan is growing rapidly. According to official figures, the population of Karachi is increasing at an average annual rate of six per cent as compared to average national population growth rate of 2.9 per cent.
In order to fulfill transport requirements of a growing population, it was felt necessary to either implement a project to give it away to some one in the private sector on a build-operate-transfer basis.
Under this project elevated light rail network will run from Mereweather Tower to Sohrab Goth via M.A. Jinnah Road & Shara-e-Paklistan.
(Montly Canadian Asian News, August 1999)