------------------------------------------------------------------- DAWN WIRE SERVICE ------------------------------------------------------------------- Week Ending : 2 June 2001 Issue : 07/22 -------------------------------------------------------------------
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CONTENTS =================================================================== NATIONAL NEWS + Investors assured of maximum facilities + Nawabshah farmers given state land + 16 killed as coach rams into oil-tanker + Interim PFC award for district govts likely + CE okays budget guidelines + Tax survey impact limited on revenue + Directive to prepare energy plans: 3 and 10-year strategy + 80% IT exemptions may be withdrawn: Selected people and areas + Pakistan cautiously optimistic: Musharraf-Vajpayee talks + IMF okays raise for government employees + Police top 'dirty dozen' chart + Chinese firm to give Rs 116 million loan for lab + Cyclone to hit coastal belt today; Villages inundated + One killed, 350 arrested on eve of Sunni Tehrik strike + New oil refinery being set up at Hub + Proportional Representation system being considered + Deep-sea fishing allowed --------------------------------- BUSINESS & ECONOMY + Pre-budget leaks warm up financial market + State Bank says drought to cost $927 million + Oil, gas attracts $ 911 million investment + SBP's third quarterly report on economy + $ breaks through new barriers: Rupee loses 2.2% in 10 days + ADB concerned at delay in $80 million KESC project + World Bank to give $350 million credit on June 13 + Money laundering hits Pakistan + Budget deficit to miss 5.3% target + IMF letter for third tranche received: Board meeting in July + Banks reluctant to give gas firms long-term loans + Rules relaxed for currency export: FAP team meets Shaukat --------------------------------------- EDITORIALS & FEATURES + The systems Ardeshir Cowasjee + Fog and illusions on the road to peace Ayaz Amir + Let's take the high road Irfan Husain ----------- SPORTS + Thorpe, Vaughan make Pakistan bowlers toil + Pakistan, India set on peace path, says Advani + Political uproar puts BCCI in a spin + Weak opposition saddens Waqar
DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS =================================================================== NATIONAL NEWS 20010602 ------------------------------------------------------------------- Investors assured of maximum facilities ------------------------------------------------------------------- By Qurban Ali Khushi DADU, June 1: Chief Executive Gen Pervez Musharraf on Friday said that the economic revival plan announced in 1999 placed prime importance on the rapid development of indigenous energy resources "as we believe this sector has the potential of reviving the economic fortunes of Pakistan." Inaugurating the Zamzama EWT plant gas-field near Dadu, he said the government was making all-out efforts to revive the economy with a view to making Pakistan self-sufficient in various sectors, particularly agriculture, industry, oil and gas. He said the government had launched various schemes under a joint venture programme and an atmosphere of cooperation, confidence, security and protection would be ensured which, he hoped, would enhance the size of investment in the country. Underlining the need for encouraging foreign investment in the country, he said a comprehensive policy had been formulated to provide maximum facilities to investors. The CE welcomed the investment from Australian entrepreneurs, particularly in the fields of oil and gas, and appreciated the efforts of M/s Broken Hill Proprietary Petroleum (BHPP) which had established and commissioned the Zamzama oilfield project within two years. He emphasized the need for a better utilization of resources, particularly coal, claiming that Pakistan had the biggest coal reserves in the world. Gen Musharraf invited the BHPP to also concentrate on exploration of coal. Emphasizing the need for execution of the exploration policy, the CE disclosed that the government would shortly be announcing a "more relaxed" petroleum policy. Since the government aimed at self-reliance, efforts would be made to minimize the amount of foreign exchange being paid on the import of furnace oil, he said, adding that Pakistan was paying foreign exchange of $900 million annually. He said there was a remarkable change in the global trend as natural gases were emerging as an important factor in the earth's reserves, and added that about 5 to 7 million cubic gas had been discovered in Pakistan. The CE said that the energy demand of the country was increasing day by day, adding that natural gas would prove to be an alternative for fuel. He was confident that foreign investors, particularly the Australian firms, would be cooperating with the government. Petroleum Minister Usman Aminuddin also spoke. APP adds: The CE said this was his vision and goal to increase the proportion of gas usage in the economy to over 50 per cent of the total energy supplies by 2010. "It is my understanding that the production from the Zamzama Gas will bring us closer to realizing this goal by adding almost 20pc to the current supplies of gas in the country apart from further investment in exploration." DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010602 ------------------------------------------------------------------- Nawabshah farmers given state land ------------------------------------------------------------------- By Zulfiqar Memon NAWABSHAH, June 1: Chief Executive Gen Pervez Musharraf visited the agricultural exhibition at Deh Sukhpur, Daulatpur Taluka, here on Friday. After visiting the exhibition, the Chief Executive also addressed Nazims , Naib Nazims, male and female councillors, and peasants at a ceremony in Dadlo Pir village, some 52 kms from Nawabshah, where ownership certificates of state land were handed over to landless peasants. He said: "Pakistan is like our family and we will not allow anyone to destroy it. We have to remove poverty from the country and for that purpose the economy has to be made stronger. "If the economy is improved the country would be stronger and that could be done if every Pakistani joins hands for the cause." He said that he was here to award certificates of ownership to peasants who had been deprived of their rights for many years, and added that state land situated in the riverine area throughout the country would be distributed among the peasants. Gen Musharraf said: "I have taken the start of distribution of agriculture land from Deh Sukhpur of Nawabshah." He said that soft- term loans would be provided for installation of tubewells, purchase of fertilizers, seeds and implements to boost crops. He said that today he was distributing certificates of ownership of 3,056 acres of agriculture land to 262 peasants, while earlier the governor had distributed 21,000 acres to 1,900 peasants. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010602 ------------------------------------------------------------------- 16 killed as coach rams into oil-tanker ------------------------------------------------------------------- By Aziz Malik HYDERABAD, June 1: Sixteen people died and 41 others were injured when a coach rammed into a stationary oil-tanker about 80km from here on the Super Highway on Friday. The Karachi-bound Jalbani coach, which was coming from Larkana, collided with the tanker near the Dada Bhoy cement factory in Nooriabad. The collision was so severe that both the coach (P0099- Kyc) and the tanker (9634) fell into a ditch. The front portion of the coach had to be prised to extricate the bodies from the seats. Twelve bodies and 25 injured were taken to the Abbasi Shaheed Hospital in Karachi, and four bodies and 16 injured were brought to the Liaquat Medical College Hospital, Jamshoro, by the highway police and the Edhi ambulances. Emergency was declared in the Abbasi Shaheed Hospital. Thirteen of the dead were identified as coach driver Badshah Brohi, Ghulam Qadir, 5-year-old Mala, daughter of Khamiso; Nazimuddin, Shamshad, Fida Hussain, Constable Qurban Ali of the Dadu police, Huzoor Bukhsh, and five members of the same family - Shahida Parveen, Sajjada Parveen, Murad Ali, eight-year-old Ahmad Ali and four-year-old Mohammad Mithan. The injured under treatment in the LMC Hospital were identified as Hamala, wife of Mohammad Malook; Nawab Khatoon, wife of Abdur Razzaq; Mohammad Rajab, son of Mohammad Murad; Mashooq Ali, son of Fateh Ali Dokri; Ghulam Qadir, son of Qaiser; Sanaullah, son of Illahi Bukhsh; Hazir Ali, son of Dhani Bukhsh; Khamiso, son of Wazir Dokri; Maya, daughter of Ghulam Nabi; Gulshad, wife of Ghulam Nabi Kambar; Zahid Hussain, son of Ghulam Nabi Kambar; Haji Mehar Ali, son of Amir Bukhsh; Mohammad Yousuf Shah, son of Mohammad Hussain Shah; Khalil Ahmed, son of Hazir Ali; Hakim and Abdullah. Ten of those taken to the Abbasi Shaheed Hospital were identified as Hayat Khatoon, Rukhsana, Pervez, Noman Ahmed, Imdad Ahmed, Sajjad Haider, Ghulam Asghar, Hajiyani, Noor Mohammad and Ayub. Our Dadu correspondent adds: The Nooriabad police registered an FIR (18/2001) on the complaint of oil-tanker driver Khan Badshah against the coach driver. The police impounded both the vehicles. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010602 ------------------------------------------------------------------- Interim PFC award for district govts likely ------------------------------------------------------------------- By Jawaid Bokhari KARACHI, June 1: Provincial Finance Commission may deviate from its original mandate and give an interim Award on sharing of fiscal resources between the provincial and (planned) district governments. Sources said a decision was awaited on a number of key issues of fiscal devolution, taxation powers of district governments and provincial responsibilities, without which no medium to long-term Award, as originally anticipated, could be formulated or announced. The complex issues relating to the Annual Development Plan are still unresolved. Sources said that federally-run institutions which would fall in the jurisdiction of district governments, were expected to be transferred in mid-August to the provinces to be handed over to the district governments which would be in place by then. The Sindh provincial budget and the district budgets have to be finalized and announced immediately after the national budget on June 16. For the transitional period, sources said, only an ad hoc or interim arrangement was feasible. The fiscal devolution plan has been hit by a lack of consensus on key issues. A meeting, presided over by Chief Executive Gen Pervez Musharraf about two weeks ago, revealed sharp diversion of views on fiscal devolution between the National Reconstruction Bureau and the federal ministry of finance. The reconciliation of conflicting views cannot be achieved within the span of two weeks before the national budget is unveiled. As the current developments indicate, the stalemate may last for at least six months or more of next fiscal. Sources said that Sindh Finance Minister Dr Abdul Hafeez Sheikh had directed his department to submit district profiles at the second meeting of the PFC expected next week. District budgets are being finalized, ensuring horizontal equity between various districts, says a source in the provincial government. Besides, development programmes have been rationalized. The province inherited a portfolio of projects, many of which were prepared more on political considerations than for economic benefits. Often projects were dropped or funds were denied. The outcome is that project execution often takes four-fold time because of political changes, weak monitoring and resources being spread too thin. Sources said the province was also facing a problem in respect of incomplete projects and in relation to diversion of provincial programmes. The issue is how to deal with them in absence of clear- cut directives and scarcity of funds. To sort out these, more time is needed. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010601 ------------------------------------------------------------------- CE okays budget guidelines ------------------------------------------------------------------- By Our Staff Reporter ISLAMABAD, May 31: A high-level meeting on Wednesday approved broad guidelines of budget for 2001-2002 with "minimum taxation". According to informed sources the meeting which was chaired by the Chief Executive, Gen Pervez Musharraf discussed a number of new budgetary proposals aimed at undertaking comprehensive structural reforms in the Central Board of Revenue (CBR). The meeting was told that the number of existing taxes were further being reduced and that the main tax will be the general sales tax (GST), to be effectively recovered from the next financial year. Also, the thrust of the budget will be to broaden the tax base but without further burdening the common man. The Chief Executive advised the policy-makers to take special care while formulating future policies to protect the interests of the common man. Presiding over a briefing on macro-economic framework and emerging challenges by the ministry of finance, he said, measures should be taken to encourage the agriculture sector since it forms the backbone of the economy. IT sector and the construction industry also needed encouragement, he added. Economic Advisor of the Ministry of Finance, Dr Ashfaque Hasan Khan, in his presentation stated that the medium-term framework had been prepared with a view to improving the country's macro-economic environment which was essential to promoting investment and growth. He identified five key elements namely; low inflation, low budget deficit, appropriate exchange rate, real interest rate and consistency in policy which form the macro-economic environment. Dr Khan also explained this year's developments including the impact of drought on agriculture. He said that the industrial sector had performed well by registering a growth of 7.8 per cent during the first nine months of 2000-2001. This growth was not only high but is also broad-based, he added. He further informed the meeting that inflation has been below the target while the country's exports had picked up. And there had been an improvement in the trade and current account balance, he added. Finance Secretary, Yunis Khan in his presentation gave an overview of the economy and the confidence building measures that had been initiated by the government. He also gave a brief review of the medium and short-term development scenario. In this context, he outlined a wide range of measures that had already been taken by the government which included abolition of wealth tax, reduction in number of taxes, promulgation of anti-dumping law; removal of restrictions on export of agricultural products, enactment of privatization law and strengthening of regulatory role of State Bank of Pakistan. The meeting was attended by federal ministers and senior officials. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010601 ------------------------------------------------------------------- Tax survey impact limited on revenue ------------------------------------------------------------------- By Our Staff Reporter KARACHI, May 31: The Central Board of Revenue (CBR) needs to collect about Rs140.5 billion between April-June 2001 to meet the revised tax collection target of Rs417 billion. The State Bank's third quarterly report released on Thursday says this would imply an average collection of about Rs47.5 billion every month till the end of the fiscal year. But the fact remains that this level of collection has been achieved only in one month in the last six years. (In June 1999 CBR had collected Rs48.2 billion.) Tax collection in the first nine month of this fiscal year stood at Rs276.6 billion, according to the report. (CBR says it has collected Rs308 billion in the first ten months i.e. between July 2000-April 2001). Commenting on the tax survey being carried out by CBR the State Bank report says that "the contribution of the survey to this year revenue collection has been somewhat limited." The survey had initially targetted to contribute Rs100 billion to the government exchequer. Without disclosing how much the survey has yielded so far the report remarks rather sarcastically that "CBR is of the view that surveys have generated an enormous amount of data which will allow it to increase collections in future." BUDGET DEFICIT: The report says that the realized deficit in the first half of the current fiscal year and tax collection in the third quarter provide sufficient evidence that the government will be able to meet its budget deficit target of 5.3 per cent of GDP. "However, quantitative targets for total expenditure outlay and revenues may differ from those envisaged in the federal budget." Needless to say that broadening the tax net along with strict expenditures control will remain the thrust of the government's fiscal initiatives in the current and next fiscal years. GOVERNMENT EXPENDITURES: Despite an advance payment of salaries in December 2000 on account of Eid, total government expenditures were 8.4 per cent lower than projected under the IMF programme targets. But the decline in total outlays was due to lower development expenditures. "In addition to this 2.3 per cent lower than projected interest payments also contributed to the saving on government expenditures," says the SBP report. Consequently the budget deficit amounted to Rs77.9 billion which is Rs26 billion below the IMF target for first half of this fiscal year. The report says that of the targetted Rs71.5 billion for external financing only Rs43.6 billion was realized due to lower than projected inflows from the World Bank and Islamic Development Bank. And as the government continued to retire its debt to commercial banks, non-bank borrowing contributed the bulk of deficit financing. The government financed nearly 60 per cent of its deficit from non-bank sources i.e. borrowing through national saving schemes as well as newly launched Pakistan Investment Bonds. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010531 ------------------------------------------------------------------- Directive to prepare energy plans: 3 and 10-year strategy ------------------------------------------------------------------- By Khaleeq Kiani ISLAMABAD, May 30: The government has directed energy related federal divisions and attached department to prepare three-year and 10-year perspective plans on energy sector to have a clear picture of the future demands and policies in the country. Official sources told Dawn that Energy Wing of the planning and development division has been declared a focal point to coordinate efforts of various federal government institutions towards preparing the perspective plans. The three-year plan 2004 would set priorities of the next three years and 10-year plan to be completed by 2012 would take into account a long term strategy to meet national energy requirements. These sources said that gas sector is going to be the main player of the energy sector mainly in power generation and fuel consumption in view of rising oil prices in the international market and being environment-friendly. The plans would set a clear cut road map for future composite energy initiatives involving power generation, transportation and other related needs. Primary commercial energy supplies in the country has touched over 43 million tons of oil equivalent. While the natural gas production has increased by around 10 percent during the last year, hydro-electricity generation has declined by over 14 percent. The overall share of various sources of energy supply mix is like 43.5 per cent oil, 40.5 per cent natural gas, 0.5 per cent LPG, 4.7 per cent coal, 10.7 per cent hydro electricity and 0.2 per cent nuclear power. Despite increase in gas production at home, import of petroleum products increased by over 8.7 per cent last year with a major 16 per cent share of furnace oil imports (over 6.5 million tons) mainly for the power generation, causing around $3.5 billion foreign exchange outflow in this sector. Due to inconsistent and self contradictory policies and unrealistic projections in the energy sector in the past have been causing crisis in power generation, oil and gas needs and supplies and foreign exchange erosion at the same time creating imbalance in the system itself. National demand for electricity has been growing but one sided policies resulted in hydel: thermal mix of 28:72 which is almost reverse of an ideal situation which Pakistan had maintained till end 1980's. Official sources said that the military government wanted to set the directions right in the energy sector for a longer period so as to avoid future crisis and imbalances that may occur in the form of surplus or shortages. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010531 ------------------------------------------------------------------- 80% IT exemptions may be withdrawn: Selected people and areas ------------------------------------------------------------------- By A Reporter ISLAMABAD, May 30: The federal government is considering to withdraw about 80 per cent income tax exemptions from the next financial year. Sources in the Central Board of Revenue (CBR) told Dawn on Wednesday that Saeed Ahmad Qureshi committee, formed to recommend amendments in the 1979 Income Tax Ordinance, has proposed to the government to withdraw maximum exemptions on income offered by the successive governments to selected people and areas. The International Monetary Fund (IMF) mission, which visited Pakistan in September 2000, was not happy with these unlimited tax exemptions on various sources of income, and reportedly proposed to the government to abolish these exemptions, the sources said. It was recommended that any allowance or facility which is paid outside Pakistan by the government to a citizen of Pakistan for rendering service outside Pakistan will be grossed up to include tax component, while salary of expatriate employees of Shoukat Khanum Hospital (existing beneficiaries may not be affected) will also be brought into tax net. The committee proposed to withdraw exemption on pensions of employees being citizens of Pakistan by virtue of employment with United Nations, Pakistani citizen over 60 years, government and armed forces employees. Any sum representing encashment of leave preparatory to retirement received by an employee of armed forces, federal and provincial government would be taxed, they said. Interest received by a non-resident for a loan to be utilized on a project in Pakistan, approved by the government will be taxed while any interest payable to a loan in foreign exchange against export letter of credit, which is used exclusively for export of goods manufactured or processed for exports in Pakistan will be brought into tax net, they said. The sources said interest on money borrowed from a foreign country by an industrialist undertaking in Pakistan for pursuing plant and machinery, if the government approves such a loan, will be taxed. While, any profit derived by a non-resident in respect of the Islamic mode of financing e.g. Morabaha, Musharika to be taxed. It was also proposed that income received on national saving certificates, national deposit certificates, defence saving certificates, post office saving bank account, and deposits in national saving centres under the national saving schemes and monthly income saving schemes where instalment is less than Rs. 1,000 (w.e.f 30.06.2001) will be brought into tax net. The committee recommended withdrawing exemptions on business income earned by the textbook boards and sports board of all the provinces and brought it into tax net. Any income derived by mutual fund or an investment company registered under the Investment Companies and Advisers Rules 1971 or a unit trust scheme and the income of modaraba will be considered to be taxed, they said. They said any amount paid by an individual by way of personal expenditure on medical services and federal education fee expended under FEF scheme will be taxed. The committee proposed that the income from the commercial activities of institute of engineers will be taxed while the income of private powers projects set up after July 01, 1998 (existing beneficiaries will not be affected) will be brought into tax net. It was also proposed that the amount withheld by civil Aviation Authority up to 31.12.1998 on account of security changes are redundant, they said. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010531 ------------------------------------------------------------------- Pakistan cautiously optimistic: Musharraf-Vajpayee talks ------------------------------------------------------------------- By Syed Talat Hussain ISLAMABAD, May 30: Pakistan sees the Musharraf-Vajpayee summit an opportunity to set the agenda of future talks with India but does not expect breakthroughs on significant issues, including Kashmir, diplomatic and military sources told Dawn. A day after Pakistani High Commissioner to India, Ashraf Jehangir Qazi, delivered in New Delhi General Pervez Musharraf's letter formally accepting Indian prime minister's invitation to talks - to the Indian foreign secretary Ms Chokila, Pakistani officials were cautioning the need for realism. "Pakistan is realistic about what can be gained from the meeting and does not have high expectations," a source said. "We are cautiously optimistic, as one meeting cannot yield much." "The outcome of the meeting of the two leaders will be significant for providing the framework for future interaction," a highly- placed military source said. Pakistan's approach towards the summit, according to the diplomatic sources involved in the preparations for the agenda of the meeting, was to find a meeting ground where the two countries could talk to each other on a more sustained basis. "It is not a one-off thing," a foreign office source said. "We want the dialogue process to be restarted". "Our effort will be to get a formal agreement (between the two leaders) on institutionalizing this dialogue. If that happens it will be a big achievement," he said. Asked what would be Pakistan's approach towards Kashmir, which is the most delicate and emotive subject for both countries, the sources said: "Our stand is and will be that Kashmir is a tripartite issue: Pakistan, India and the Kashmiris." He said that no solution could be imposed upon Kashmiri people. "The Kashmiris eventually have to be part of the dialogue for peace." Asked why the date of the summit was being wrapped in secrecy, the sources said that the dates had to be worked around a knee operation the Indian prime minister has to undergo in mid- June. "That will keep him away in the hospital for around 10 days," he said. "The meeting is possible only after that." On the signals emanating from India that Delhi would like to engage Pakistan in a more comprehensive dialogue, on the region's problems and common issues of poverty, the prospects of economic growth, trade and battling disturbing social trends like extremism, the Pakistani officials acknowledged that the "two sides need to broaden their vision". However, they said that "all sources of tensions and instability must be addressed, specially Kashmir". The sources also said that the Musharraf government was taking all Kashmiri groups into confidence on the upcoming visit to Delhi. "We do not want to give the Kashmiri mujahids the impression that they are being abandoned," a government source said. "They will be fully in the picture on what needs to be done on Kashmir." DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010531 ------------------------------------------------------------------- IMF okays raise for government employees ------------------------------------------------------------------- By Our Staff Reporter ISLAMABAD, May 30: The IMF has allowed the government to increase the salaries and pension of its employees, which will cost an additional Rs35 to Rs40 billion to the exchequer in 2001-02. Sources in the multilateral agencies said that good governance could not be expected without paying "sufficient and market-based" salaries to the civil servants. The IMF officials expect that the government would expedite civil service reform to achieve the objective of good governance. The chief executive, Gen Pervez Musharraf, was briefed by Finance Secretary-General Moeen Afzal on May 26 about the pay and pension committee's report. Mr Afzal, who also heads the pay and pension committee, was told to make the report more acceptable as it still needed "fine tuning". A senior official of the finance ministry, Mr Bilal has been assigned to finalize the pay structure by next week in accordance with the 15 to 20 per cent proposed raise to be formally announced in the budget speech of the finance minister on June 16. "A sizable increase in the pay and pension of the government employees and those who have retired, has been okayed by the IMF," said a source in a multilateral agency. Wherever possible, he said, the government should provide relief to people, including the government employees. The top structure of salaries was totally misplaced and needed to be improved to expect better performance from the government employees. A source in the finance ministry claimed that the IMF had also asked for increasing the income tax ceiling from Rs40,000 to Rs60,000 in the coming budget. The Saeed Qureshi Committee has reportedly gone further ahead by proposing this exemption to Rs80,000. At the same time, the government has been asked by the IMF to adhere to other conditionalities to avoid distortion in the economy. For example, they said, the government should increase petroleum prices in early June. Though the IMF officials believed that the government was generally adhering to the road map laid down earlier to revive the economy, they said the reform process needed to be accelerated. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010531 ------------------------------------------------------------------- Police top 'dirty dozen' chart ------------------------------------------------------------------- By Sabihuddin Ghausi KARACHI, May 30: Out of 12 selected government agencies in Pakistan, a survey has found police to be the most corrupt followed by lower courts, WAPDA, Income Tax, land revenue, customs, passport and identity card. Municipal corporations and development authorities, sales tax, PTCL, government-run hospitals and schools were also found to be nests of corruption but relatively at a lesser degree than police and other departments. Corruption ratings of these "dirty dozen" agencies was done by the Special Task Force on Reform of Tax Administration which made a detailed presentation of its report to the Chief Executive Gen Pervez Mushrraf in Islamabad early last week. Headed by Syed Shahid Hussain, a former executive of the World Bank, the Task Force includes ten other members drawn from various disciplines and professions. It has recommended sweeping changes in the country's tax administration and, as expected, has earned the wrath of the "status quoist" tax administrators and bureaucrats. The Task Force solicited views from a selected group of persons who included taxpayers, tax administrators and those who represented civil society. A five-point scale was drawn up in which one point represented "very little corruption" and five points "extremely widespread corruption". None of the "dirty dozen" qualified for the lowest or the highest, either one point or five points, but police earned 4.20 points followed by lower courts which secured 3.30 points. Wapda obtained 3.21 points in corruption, Income Tax department 3.21, Land Revenue 3.15, Customs 3.04, passport and identity card 3.04. The panel of respondents gave 2.80 points in corruption to municipal corporations and development authorities, 2.75 points to sales tax, 2.61 to PTCL, 2.46 to government hospitals and 1.96 points to government-run schools. "These ratings are important in two ways," the Task Force report says and adds "first, they are an indicator for government of Pakistan about its priorities, if it launches a department to department anti-corruption campaign". "Second, these can be used as baseline data to measure any change, trends in corruption, or impacts of any anti-corruption campaigns," the report said. An overwhelming majority of the respondents (80 per cent) whom the Task Force approached to seek their views considered all previous corruption reduction measures as "complete failures". The reasons given for this failure are the lack of sincerity of policy-makers, selective application of laws, enforcers themselves being corrupt and lack of understanding of the complexity of corruption. Respondents were also asked by the Task Force to comment on the effectiveness of some initiatives to reduce corruption in the public sector, such as outright dismissal of bureaucrats by Ayub, Yahya and Bhutto regimes, institutions of checks and balances within the organisations like Ombudsman, Ethesab cell by previous governments. Many felt these initiatives were politically motivated, insincere and focussed too much on punishment. There was a unanimous view that various tax amnesty schemes had helped in spreading corruption rather than curbing it. The 272-page report carries a whole chapter on corruption, spread over 26 pages and divided into six sub-chapters. Specific instances of corruption at policy level have been given in the report. One of such methods is the overnight changes in import duty structure by the CBR by issuing an SRO. These were linked to import of BMW cars, steel items, sugar export to India on which a rebate of Rs 4,500 per ton was given. An interesting example is cited of a retired tax administrator who visited CBR twice in his whole career for official work. "Both the times I had to pay Rs10,000 for my work", is how this tax administrator relates his experience, which speaks volumes about what's going on behind the high walls of CBR. The Survey found corruption more endemic in Income Tax department where 78 per cent employees are rated as corrupt and Customs where 76 per cent of employees are seen as corrupt. Sales tax is seen relatively less corrupt by both the taxpayers and tax administrators. The explanation is "it is a new tax and nobody fully understands it". In an hypothetical exercise, the survey found that for each hundred rupees of genuine income tax payments of a Pakistani business enterprise, the government can collect only Rs36. The assessor, assessee and the middleman tax practitioner share Rs64 among themselves and obviously the assessee gets the highest share to justify his deal. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010530 ------------------------------------------------------------------- Chinese firm to give Rs 116 million loan for lab ------------------------------------------------------------------- By Our Reporter ISLAMABAD, May 29: A Chinese company will extend Rs 116.5 million interest-free loan for the construction and expansion of Quarantine Laboratory of the Department of Plant Protection at Karachi. An agreement to this effect was signed here on Tuesday between the ministry of food, agriculture and livestock and China Guangdong International Co-operation Companies, the Chinese company. According to an official statement, the project is to be started soon and completed in fifteen months. The laboratory will test the plants and crops for agriculture-related diseases before being exported. Federal Minister for Food, Agriculture and Livestock Mr Khair Muhammad Junejo said at the agreement-signing ceremony that the expansion of Quarantine Laboratory of the DPP would diversify and increase the export of agricultural commodities from Pakistan. Expressing his gratitude, the minister said the project would have significant impact on increasing the competitiveness of the exports of Pakistani agricultural goods to the world market. Mr Junejo said that MINFAL would extend all facilities to the Chinese company for the completion of project within the stipulated time. "We wish this project to be completed on time and also to be followed by many other projects for expansion of agriculture in Pakistan," he added. The head of Chinese five-member delegation Mr Qui Meixing said that Pakistan was the first country to whom China had extended this facility. He said the project would be completed on time to the satisfaction of both the countries and with mutual efforts. He said the project, once completed, would give the agriculture business and production in Pakistan a big boost. He said China was also looking for establishing model agriculture farms in Pakistan for which paperwork had already begun. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010529 ------------------------------------------------------------------- Cyclone to hit coastal belt today; Villages inundated ------------------------------------------------------------------- Dawn Report KARACHI, May 28: The tropical cyclone (01A) would hit the coastal areas lying between the Indian border and Keti Bander sometime on Tuesday, the director-general of the Pakistan Meteorological Department told Dawn on Monday. People living in the low-lying coastal areas should move to safer places, PMD chief Dr Qamruzzaman Chaudhry spoke by phone from Islamabad. According to Dawn correspondent in Thatta, 12 villages and 20 dehs of coastal talukas of Shah Bandar, Jati, Kharochhan and Keti Bandar had been submerged by the sea water on Monday morning. Leaves of government employees in the Thatta district were cancelled. A PMD website updated at 10pm said the cyclone in the Arabian Sea had moved north-eastwards. Positioned at 21 degree N and 68.5 degree E, the cyclone was spiralling 430km south south-east of Karachi and 310km south of Keti Bander. The PMD chief said the landfall of the cyclone would be prefaced by rains and strong winds, adding that soon after the landfall the cyclone would lose its intensity rapidly. Karachi faced no major threat, he added. The submerged villages in Thatta included Raboo Malah, Faqirano Jati, Gul Mohammad Uplano, Umer Patel, Ismail Uplano, and Tako Kanehar. Dehs concerned included Deh Uplanki, Deh Nabi Bux, Deh Jaleho, Deh Vari, Deh Datori and Deh Allano. The Mukhtiarkar of Shah Bandar told Dawn that the majority of people were being shifted to the rural health centre at Jungo Jalbani and the primary school building. The Thatta district administration has established 25 relief camps in Chuhar Jamali, Sujawal, Chuch Jahan Khan, Ladaon, Jati, Mirpur Sakro, Garho, Ghorabari, Jungo Jalbani and other towns. A spokesman for the Fishermen's Cooperative Society in Karachi told Dawn that currently 500 boats, with around 7,000 fishermen aboard, were in the coastal areas. An official announcement issued from the Commissioner House Karachi said that some 10,000 residents of Baba Bhit Island had been shifted to safer places. People were also being evacuated from the Manora Island. A spokesman for the Pakistan Navy said that choppers and trucks loaded with emergency relief goods, were ready. He added that other relief agencies had also been put on standby. The spokesman said that as soon as the civil administration asked for help, the navy would come into operation. After a meeting, presided over by Karachi Commissioner Shafiqur Rehman Paracha, the deputy commissioners of Malir and West had visited various areas of their districts, the announcement said. APP adds: The directors of schools in Hyderabad region announced vacations in schools of the coastal areas of Thatta and Badin districts. In a press release, they said the decision was taken to facilitate the parents to shift to safer places with their children. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010528 ------------------------------------------------------------------- One killed, 350 arrested on eve of Sunni Tehrik strike ------------------------------------------------------------------- By Our Staff Reporter KARACHI, May 27: Law enforcement agencies have arrested hundreds of religious parties' activists in connection with a strike call given by the Sunni Tehrik for Monday. A man was shot dead and another wounded when three armed men riding a motorcycle opened fire at a sweet shop in North Karachi Sector 5- C-4, according to police. The dead was identified as Tahir, 30, and the wounded as Naeem, 28. Official sources confirmed that 350 Sunni Tehrik and Sipah-i-Sahaba Pakistan workers had been arrested since a crackdown was launched on Sunday. However, the Sunni Tehrik and the Sipah-i-Sahaba claimed that thousands of their workers had so far been picked up by law enforcement agencies. Three people were wounded in firing and four vehicles were set ablaze at different places on Sunday. Interior Minister Moinuddin Haider, at a function, and the home secretary, at a press conference, on Sunday, reiterated government's resolve not to allow any individual or group to take law into their own hands. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010527 ------------------------------------------------------------------- New oil refinery being set up at Hub ------------------------------------------------------------------- By Our Staff Reporter KARACHI, May 26: A new oil refinery in the private sector is being set up at Hub, Balochistan, at a cost of $50 million. The refinery will produce six petroleum products. The plant, being set up by Bosicor Pakistan Limited (BPL), has the refining capacity of 30,500 barrels per day, but in first six months it will have the capacity of 28,000-30,000 bpd, said director BPL, Amir A. Abbassciy at a press conference on Saturday. The cold commissioning of the refinery will take place from the first week of October this year while the full-fledged commercial operation will start by the end of this year, he said. The refinery has the capacity to produce 700 barrels per day (bpd) of liquefied petroleum gas (LPG), followed by 2,177 bpd motor spirit, 5,500 bpd high octane blending component, 4,350 bpd kerosene/jet fuel, 6,973 bpd high speed diesel, and 10,800 bpd furnace oil. Arrangements have already been made through a French company to import Qatar Marine Crude Oil ranging between 1.3 and 1.5 million tons per annum to produce various petroleum products. The plant will have new storage tank for its crude oil and refined petroleum products. On pattern of shareholding, he said, there is a 60 per cent equity participation and 40 per cent debt equity. He said the refinery, purchased and refitted by BPL, was set up by Tesoro Petroleum Inc, a US based oil refining and marketing company. That refinery has been operational since 1977. It was mothballed in 1993. The plant, which is approximately 23 years old has been completely refitted in order to achieve a service life of at least 20 years from the date of commercial production. He said that approximately 180 employees in four shifts (one standby) including office staff will be employed at the plant. The saving expected by import substitution is around $25-30 million per annum. An agreement has also been signed with Pakistan State Oil (PSO) for procurement of refinery's products. The entire civil, mechanical, electrical and cold commissioning works have been awarded to Siemens Pakistan Engineering Limited, Amir said. For the operation and maintenance of the plant, the company is at very advance stage of awarding the contract to Marubeni Corporation of Japan. Further, a letter of intent (LoI) has also been signed with Marubeni for the export of naphta, being used in making of polypropylene in Japan. The new refinery is expected to produce 50,000-70,000 tons of naphta every year. Bosicor has taken out advance loss of profit insurance with Adamjee Insurance Company Limited and re-insured in the international market. The sum insured is Rs586 million for the period November 30, 2000 to April 4, 2,002. The insurance period includes four weeks of testing. The insurance coverage, under construction all risk (CAR) and erection all risks (EAR) provided by Adamjee, is for Rs2.2 billion. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010527 ------------------------------------------------------------------- Proportional Representation system being considered: National Reconstruction Bureau making detailed study ------------------------------------------------------------------- By Rafaqat Ali ISLAMABAD, May 26: The government is considering introducing the system of proportional representation (PR) in the country, allowing political parties with relatively smaller vote bank to enter parliament, Dawn learnt from official sources. The think-tanks of the government, working in the National Reconstruction Bureau (NRB), are making a detailed study of the system which is working efficiently in many countries of Europe like France and Germany. The government, the sources said, would have no problem in introducing the proportional representation system as the Supreme Court in its decision validating the military takeover, had held that parliamentary form of the government should not be disturbed. 'Proportional Representation is a form of parliamentary system," they pointed out. The think-tanks expect that quality of representatives would improve, as persons with ability to handle macro-level matters would have better prospectus for introduction in assemblies as listed candidates of parties in multi-member constituencies. The supporters of the PR system argue that not only it would help bring more middle-income groups to the parliament, but it would also minimize the possibility of military intervention in future. The military adventurists would not be invited by the politicians as they would have a stake in the system. The government's think-tanks believe that the adoption of proportional representation system as an alternative to the existing majority system, would suit Pakistan's fractious society, divided on linguistic and ethnic lines. Under the new system, political parties would enjoy greater importance and non-political pressure groups, tribes, clans, and families would have lesser political role. The "independents", representing different tribes and clans, would not be in a position to dictate their terms. The position of political parties would be correctly reflected in elections in the proportional system and the parties having widespread support would not be over-represented and those with thin support would not be under-represented. Small parties would have better prospects of representation in the parliament by winning seats in multi-member constituencies irrespective of losing in single-member constituencies. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010527 ------------------------------------------------------------------- Deep-sea fishing allowed ------------------------------------------------------------------- By Faraz Hashmi ISLAMABAD, May 26: The federal government on Saturday decided to allow deep-sea fishing but under strict vigilance and a tough punitive regime to safeguard the interests of small fishermen and to check incidence of poaching. The decision was taken at a presentation given by Chairman National Fisheries Development Board Shafi Niaz to Chief Executive General Pervez Musharraf here at the Chief Executive Secretariat. Federal Minister for Agriculture Khair Mohammad Junejo, Chief of Naval Staff Admiral Abdul Aziz Mirza, Chief of Staff to the Chief Executive General Ghulam Ahmed, ministers of agriculture and fisheries of Balochistan and Sindh, director general Maritime Security Agency and other concerned officials attended the presentation. Installation of Global Positioning Satellite (GPS) monitoring system on-board every ship operating within the Exclusive Economic Zone of Pakistan has been made mandatory to keep strict watch on the vessels, Mr Niaz later told newsmen. He said an undertaking would be obtained from the vessel operators categorically stating that no trans-shipment of catch at high sea, no under-invoicing of fish catch and no discard of by-catch in the sea would be done under any circumstances, failing which license would be cancelled and renewal would be put on hold for three years. The meeting also approved a proposal of the Fisheries Development Board to revise the standard agreement to be signed between the vessel operators and the government. The changes proposed in the agreement and approved by the chief executive included enhancement of annual license fee of Rs. 500,000 to one million and revision of royalties. A sum of $5,000 was charged as royalty from a trawler on undertaking a trip of 60-days. The royalty fee has been now increased to $10,000 and the duration of the trip has been reduced to 45 days. However the medium sized vessels from 100 to 250 registered tonnage would have to pay $2,000 for a trip of 30 days and operate from Korangi Fish Harbor. The penalties on violation of different nature were also enhanced at the meeting. On violation of fishing beyond the period of the validity of license has been increased from Rs.200,000 to Rs.1 million. On fishing beyond the specified zone the penalty has also been revised from Rs.200,000 to Rs.1 million. The penalty of Rs.500,000 for fishing without license has been increased to Rs.2 million. The meeting also approved a proposal of Fisheries Development Board that a stock assessment survey should be carried out to determine marine resources of Pakistan. The National Institute of Oceanography in collaboration with the Marine Fisheries Department would undertake a fresh stock assessment survey to ascertain a realistic stock position of the marine resources. It will require financial assistance of some international donor agency like FAO, NORAD and JICA. The last such survey was done in 1985. Mr Niaz also said at the presentation that the governments of Balochistan and Sindh had issued licenses to two deep-sea fishing trawlers each, in violation of the federal fisheries law. He also apprised the participants about the reasons for canceling licenses of 10 Chinese, 10 South Korean and nine Taiwanese trawlers registered in Pakistan. The main reason, he said, was violations of conditions laid down in their agreement. He said that their respective governments had launched strong protest. He pointed out that at present there were 18,000 registered boats but exact figures about the operational ones were not available with the government. He stressed that the existing boats of small fishermen would be upgraded with better gears, latest navigational facilities, improved storage and ice facilities and proper training to the fishermen so that they could operate between 12 to 35 nautical miles. He said Korangi Fish Harbour would also be made operational and all necessary facilities would be provided by the federal and provincial governments. On a question he said the licenses would be issued for a period of one year on test basis and during this period strict watch would be kept on vessels operating in Pakistani waters. According to another important decision Sindh Minister for Fisheries would now head the board of directors of Fishermen Cooperative Society.
BUSINESS & ECONOMY 20010602 ------------------------------------------------------------------- Pre-budget leaks warm up financial market ------------------------------------------------------------------- By Our Staff Reporter KARACHI, June 1: Stocks on Friday generally tended further higher under the lead of blue chips on active follow-up support, triggered apparently by some pre-budget leaks. The KSE 100-share index gained another 4.22 points at 1,381.84 points. Although, the quarterly report of central bank paints a bearish economic outlook, as the ongoing drought could have negative impact on farm sector performance. There are positive signs of economic recovery on long-term basis after the irrigation water crisis is over. However, all was not bad with the broader indicators. The market sentiment was, however, not influenced by the central bank analysis and responded to its own positive basic fundamentals. The opening was fairly promising as plus signs were witnessed across the board but late profit-selling at the inflated levels allowed the broader market with trimmed gains. The KSE 100-share index early was up about 10 points, as all the leading base shares came in for active short-covering. However, towards the closing jobbers and short-term dealers moved in and sold at the early rise. It finally posted a fresh rise of 4.22 points at 1,381.84 as compared to 1,377.62 after the leading base shares came in for strong covering purchases at the lower levels. All seems set now, for the index to breach through the 1,400-point barrier possibly by the next week as strong selective buying is re-emerging from all the quarters. "We don't call it the advent of the pre-budget buying but those who have links in Islamabad are buying on selected counters in line with the budgetary leaks", stock analysts at the Finex authorities say. Information leaking from Islamabad about the incentives to be given to investors to boost stock trading has lured back a formidable section of leading operators, who are making extensive buying in sectors where chances of capital gains are pretty sure. Positive news from the foreign aid front including the release of the second tranche of $133m by the IMF, and drought aid from some other lending agencies have raised hopes that there may not be resource gap for the next fiscal. An idea of the market's firm stance may well be had from the fact that it discounted the reports that the KSE will complete the full circle of the T+3 trading system by Sept 3. Earlier, brokers and members have opposed the addition of three companies in the list. "Though bitter pill, we have to accept it as a reality", says one broker" but as the system needs heavy cash amounts almost daily, we have to tailor our operations according to our financial limitations". Although plus signs again dominated the list, price changes were mostly fractional and reflected weekend fears. However, some second-liners came in for active support and rose appreciably under the lead of Orient Insurance, Shadman Cotton, Ismail Industries, and Pakistan Telephones, which posted gains ranging from Rs1.35 to 4.45, the largest rise being in Pakistan Telephones. Others which ascended included Babri Cotton, National Refinery, Al-Ghazi Tractors, Lever Brothers and PIC, rising by Re1 to Rs20. Fazal Textiles, Shell Pakistan, Cyanamid Pakistan and UDL Industries were prominent among the losers, off by Rs2.00 to 5.25, followed by Adamjee Insurance, EFU Life, Data Textiles, and Regent Textiles, off Re1 to Rs1.80. Trading volume rose to 83m shares from the previous 73m shares, as gainers maintained a strong lead over the losers at 121 to 73, with 65 shares holding on to the last levels. ICI Pakistan topped the list of most actives, up 25 paisa at Rs9.65 on 14m shares; followed by PTCL, firm by five paisa at Rs18.25 on 8m shares; Worldcall Payphones, higher 95 paisa at Rs18.15 on 6m shares; Hub-Power lower 10 paisa at Rs20.20 on 6.260m shares; and PSO, firm five paisa at Rs142.50 on 6m shares. DEFAULTER COMPANIES: Kohinoor Gujar Khan came in for active support and was quoted higher by 10 paisa at Rs4 on 46,000 shares; followed by Colony Textiles, also up by the same amount at Rs7.80 on 5,000 shares; and Service Fabrics, easy five paisa at Rs0.55 on 1,000 shares. 20010601 ------------------------------------------------------------------- State Bank says drought to cost $927 million ------------------------------------------------------------------- By Mohiuddin Aazim KARACHI, May 31: The State Bank says Pakistan is set to lose $927 million in the next fiscal year as a result of the drought and its GDP is to grow below 3 per cent against targeted 4.5 per cent. "Therefore the per capita income is likely to remain stagnant," says the central bank in its third quarterly report on the state of the economy. In carefully-chosen words, the report states that the IMF programme has so far not helped Pakistan in reviving investment nor has it facilitated the economy in picking up. The report, covering economic developments of the first three quarters of this fiscal year, was released here on Thursday. The report estimates the impact of the drought on the balance of payments in detail, examining the possible loss of foreign exchange in terms of lower exportable surplus of major crops and additional fuel oil imports. It estimates a total loss of $747 million due to availability of lower export surplus coupled with an additional oil import of $180 million as a result of the drought. Fuel oil import goes up in drought as it reduces hydel power generation thereby increasing the country's reliance on thermal power generation that requires additional import of crude oil. The report says: "The good standing with IFIs (international financial institutions) has not yet helped revive widespread investment nor has the economic activity picked up to meet the expectations of the public at large." But it adds that medium- term financial assistance from IFIs is crucial for the country. And the authors of the report hope that if end-June targets are successfully met chances of converting the IMF standby credit into a longer-term facility by September 2001 are quite strong. The report confirms that GDP (gross domestic product) would grow below 3 per cent in the current fiscal year against the original target of 4.5 per cent mainly due to the drought and water shortage. The report frankly admits that Pakistan has missed the revenue target for both end-December 2000 and end-March 2001 set by the IMF despite the fact that tax collection as such has gone up. Naturally, the country "will have to request a waiver for end- June target." The report says though the State Bank easily met in end-March the revised target of net domestic assets set by the IMF it had to made heavy buying of foreign exchange from open market to meet the target of net foreign assets. The SBP purchased $1.56 billion from the open market in the first nine months of this fiscal year against $1.37 billion in the year-ago period. The central bank says exports have not done well in the first three quarters of this fiscal year adding that if the trend persists export earnings in full fiscal year would reach $9.2-$9.3 billion. The original target was $10 billion. The report says oil imports exceeded $2.5 billion in the first nine months of the current fiscal year but since the growth in total import bill remained below the growth in exports, the trade deficit narrowed down to 1.7 per cent of GDP from 2.3 per cent a year ago. And that helped the country post a current account surplus in the third quarter and narrowed the balance of payments gap to $575 million between July 2000-March 2001 from $1.03 billion in the corresponding period of last fiscal year. But this did not ease pressure on the rupee as it depreciated in the third quarter when SBP reduced its support to the inter-bank market. The report says during the first nine months of this fiscal year a higher average annual rate of inflation was recorded in all three price indices when compared with the corresponding period last year. Inflation based on consumer price index rose by 4.8 per cent in the first nine months of the current fiscal year as against 3.4 per cent in the year-ago period: wholesale price index and sensitive price index rose by 6.7 and 5.4 per cent respectively against 1.4 and 1.6 per cent. AGRICULTURE: The report says that drought and water shortage may result in a minus 5.4 per cent growth in the production of major crops during this fiscal year against the target of 3.2 per cent. And this, in turn, may pull down overall agricultural growth to 0.2 per cent against the target of 3.9 per cent. Major crops are cotton, wheat, rice and sugarcane. The report warns that if the existing drought also impacts minor crops and livestock and fisheries the overall agricultural growth might fall even below 0.2 per cent. LARGE-SCALE MANUFACTURING: In the first nine months of this fiscal year, large manufacturing sector grew by 8.8 per cent compared to 3.5 per cent in the same period a year earlier. The report says this growth was driven by a sharp recovery in the production of refined sugar and value addition in petroleum refining. Since the cotton crop this year is 4.5 per cent less than the previous year the textile sector grew by only 4.6 per cent in the first nine months of this fiscal year against 13.5 per cent last year. EXTERNAL SECTOR: Trade deficit in the first three quarters of this fiscal year stood at $1.32 billion, only marginally above the deficit in the corresponding period of the last fiscal year. The report cites three main reasons for the trade deficit: (i) weak international prices for Pakistan's main textile exports (ii) higher imports of machinery on account of the textile sector's BMR drive (iii) import of sugar and pulses to compensate for low domestic production and more importantly (iv) the ballooning oil import bill. But what helped the country narrow down its current account deficit to $575 in July 2000-March 2001 from $1.03 billion in July 1999-March 2000 was heavy foreign exchange buying by SBP from the open market coupled with higher inflow of remittances. The report says the remittances rose to $803.9 million in the first nine months of this fiscal year from $678.1 million in the same period the year before, mainly due to Hajj receipts and compensation for Kuwait war affectees. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010601 ------------------------------------------------------------------- Oil, gas attracts $ 911 million investment ------------------------------------------------------------------- By Our Staff Reporter KARACHI, May 31: Minister for Petroleum and Natural Resources, Usman Aminuddin has said that Pakistan has attracted $911 million foreign investment in the oil and gas sector in the last 18 months while more investment is in the pipeline. Speaking after performing the ground breaking ceremony of White Oil Pipeline Project of Pak Arab Pipeline Company (PAPCO) at the Port Qasim, he said the main thrust of the government was to promote foreign investment to develop the oil and gas sector. He said the government also wants to improve the existing infrastructure for movement of petroleum products. Usman said his ministry is concerned at the inadequacy of the existing transportation infrastructure against the backdrop of the growing oil demands of the upcountry areas. On white oil pipeline project, he said that China has accepted National Bank's guarantees in place of government of Pakistan required for the foreign currency credit of $120 million, which is being extended to the contractors of CPECC by China Exim Bank. He said with the completion of this pipeline, targeted for December 2, 2002, up to 12 million tons per year of additional petroleum supplies would become available to the upcountry areas which account for approximately 70 per cent of the country's total oil consumption. He said the new pipeline would not only improve oil transportation logistics but will also bring about savings in transportation cost. The 817 km and 26 diameter underground pipeline commences from the FOTCO Oil Jetty, terminating at Mahmoodkot, District Muzaffargarh. The cost of the project is $480 million. On gas sector, he said the Chief Executive is inaugurating the Zamzama Gas Field in Dadu on June 1. The field has already started pumping 60 million cubic feet of gas a day in the Sui Southern Gas Company's system. He avoided a direct reply when the waiting newsmen asked him whether the oil prices are being increased next month, but said that oil prices have gone up in international market. He said that the price fixation on June 15 will be the last exercise on the part of the government and from July 1 oil marketing companies (OMCs) will determine the prices in line with global price trends after incorporating relevant costs and government levies. He ruled out the possibility of any price increase in the wake of this move of giving responsibilities to the OMCs to fix the prices of petroleum products. He said the government has also decided to revise gas prices after every six months. On problems being faced by the government in drilling oil and gas wells in Balochistan, he said talks were under way with the Sardars of the areas to settle the issues amicably. Managing Director, Pak Arab Refinery Limited (Parco), Dr Shahid K. Hak said out of $480 million project cost of white oil pipeline, Parco's equity participation is 51 per cent followed by Shell 26 per cent, PSO 12 per cent and Caltex 11 per cent. The local currency financing amounts to Rs 14 billion and is arranged by a consortium of local banks. Mr Wilson, director Shell Pakistan, SAQ Razvi, deputy managing director, PSO and Mohammad Zubair, director, Caltex also spoke on the occasion. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010601 ------------------------------------------------------------------- SBP's third quarterly report on economy ------------------------------------------------------------------- KARACHI, May 31: Following is the summary of third quarterly report (July 2000-March 2001) of the State Bank of Pakistan 1 released on Thursday: Overview The continuing drought and water shortages have taken a heavy toll on Pakistan's economy. Most recent estimates indicate that overall GDP growth in FY01 will decline to below 3 percent. Therefore, per capita income is likely to remain stagnant. Despite a falling share of agriculture in Pakistan's economy, production of major crops has a very direct impact on the manufacturing sector and purchasing power in rural areas.2 On a positive note, the country was able to post a current account surplus in its balance of payments in the third quarter of this year. Returning to the drought, a shortfall in the production of major crops (cotton, sugarcane, wheat and rice) also requires import of primary products. Adding to this burdens, the water shortage has impaired the country's ability to generate hydel power, which has fuelled Pakistan's huge oil import bill in the first three quarters of this fiscal year. Against a provisional growth rate of 9.6 percent for major crops in FY00 (which increased aggregate growth to 4.5 percent last year), the revised estimate this year could be as low as negative 5.4 percent. Despite this exogenous development, Pakistan's cotton crop this year will not be impacted. An early sowing season and the fact that this is a less water intensive crop (compared to the other major crops), have been its saving grace. Large-scale manufacturing (LSM) recorded strong growth of 8.8 percent compared to 3.5 percent last year. LSM growth was driven by a sharp reversal in the production of refined sugar and high value addition in petroleum refining. Since this year's cotton crop is 4.5 percent less than the previous year, the textile sector was only able to post 4.6 percent growth against an impressive 13.5 percent in the first three quarters of last year. Assisted by an increase in the production of automobiles (cars, motorcycles and light commercial vehicles) and certain consumer durables (air-conditioners and refrigerators), this was able to compensate for textiles. In terms of Pakistan's fundamental imbalance, tax collection has been able to show an improvement in the tax/GDP ratio for the second consecutive year with an increase of 14.9 percent this year. Nevertheless, there have been slippages vis-a-vis IMF revenue targets for two consecutive quarters (end-December and end-March). Given the cumulative nature of revenue collection, Pakistan will have to request a waiver for the end-June target. The fiscal deficit on the other hand, is expected to remain unchanged from the original target of 5.3 percent of GDP. Most of the fiscal adjustment is likely to be made by curtailing expenditures. IMF targets Looking at the other targets that are part of the IMF's stabilization programme, the ceiling on SBP's net domestic assets (NDA) was easily met in end-March 2001. A much-needed relaxation on this target (given the problems faced in end-December) was negotiated in mid-February, with the result that banks helped SBP shift GOP debt to their books. However, the need to increase Pakistan's liquid reserves to meet the end-March target for SBP's net foreign assets (NFA), did result in heavy purchases of foreign exchange from the kerb market. Against US$1.37 billion in the first three quarters of FY00, SBP managed to buy US$1.56 billion from the kerb market this year. In terms of worker remittances, the larger inflows this year was largely because of exceptional inflows on account of compensation from Kuwait (for Gulf war affected Pakistanis) and the Haj sponsorship scheme. External sector The performance of Pakistan's external sector has been lacklustre. Exports have not done as well as targeted, and if the trend witnessed in first three quarters of this year persists (an 8.4 percent increase), exports are likely to reach US$ 9.2 - 9.3 billion for the full year. Export revenues continued to suffer from low international prices despite increased volumes for the second consecutive year. The most disappointing results have been in the textile sector; given its share in total exports, textiles have adversely affected the country's export performance. Oil imports have already exceeded US$ 2.5 billion during the period under review. Nevertheless, the growth in Pakistan's import bill has been below export growth, resulting in the second consecutive improvement in the trade deficit from 2.3 percent to 1.7 percent (of GDP) this year. The upshot of this is that Pakistan was able to post a current account surplus in the third quarter of FY01. This is largely because Pakistan's non-oil import bill is almost stagnant in the first three quarters of this year compared to FY00. However, this did not ease pressure on the rupee, as the third quarter witnessed continuous depreciation as SBP support to the interbank market (in terms of supplying hard currency) was gradually reduced. Helped by lower economic growth this year, the ratios of the external imbalances (trade and current account deficits as a percentage of GDP) have narrowed. In terms of the financial sector, despite the fact that the third quarter witnesses an increase in bank liquidity, SBP could not ease its monetary policy by lowering T-bill rates. With strict stabilization targets (especially government borrowing from the central bank) and a stagnant Rupee deposit base, lowering T-bill rates would have made it harder to meet these targets. Despite tight liquidity conditions during the course of this year, private sector credit posted a sharp increase on account of the textile sector (which no longer had to resort to self-finance as it had last year)3, sugar and automobiles. The rise in production of consumer durables can also be traced to the increasing popularity of leasing facilities. This in turn explains the active role of leasing companies in mobilizing long- term funds from the bond market to sustain their operations.4 Looking ahead, the fact that Pakistan has successfully met the IMF's quarterly targets has enhanced the country's credibility with the International Finance Institutions (IFIs). Pakistan's performance in the last six months has been greeted by pledges of further assistance from the World Bank and the Asian Development Bank. Still, adverse external developments may put pressure this quarter in building up liquid reserves. If end-June targets are successfully met, the chances of converting the stabilization programme (SBA) into a longer-term structural adjustment programme (PRGF) by September 2001 are quite strong. This will provide the breathing space to implement sector-specific reforms in the banking system, capital markets, the energy sector, restructuring of public sector enterprises, and allow a revival of the privatization drive. The good standing with the IFIs has not yet helped revive widespread investment, nor has the pace of economic activity picked up to meet the expectations of the public at large. This situation has been further exacerbated by the drought, low international prices for Pakistan's exports, depressed demand in the industrialized world and inadequate capital flows. Unless Pakistan receives medium-term assistance on soft terms to offset these adverse effects, the external payment position will remain under severe strain. The balancing act between keeping the debt burden under control and achieving a healthy balance of payments will remain the biggest challenge facing the country in the next few years. 2. Executive Summary Real Sector Developments in the third quarter of FY01 were dominated by the acute water shortage in the country. Since agriculture has strong spillovers on the rest of the economy, the downward revision in the size of Pakistan's major crops will not only tone down economic growth projections, but will also require urgent actions to reduce the degree of vulnerability of the agricultural sector to weather conditions. Declining levels of rainfall for the third consecutive year, which resulted in the drawing down of water reservoirs last year (to support bumper crops in wheat and rice), does not bode well for the future. Given the country's dependency on irrigated farming, water management will become a critical aspect of economic policymaking. The adverse impact of the drought on Pakistan's major crops may result in negative 5.4 percent growth this year, compared to a target of 3.2 percent set at the beginning of the year. If this were to happen, overall agricultural growth will be almost stagnant this year (growth of only 0.2 percent), compared to 3.9 percent last year5. This significant decline will have serious consequences for poverty and living standards in rural areas. Cotton is the only major crop that should be able to meet the target set at the beginning of the year. Two factors are responsible: first, as a Kharif crop that is sown at the end of the fiscal year, the water shortage did not impact cotton as strongly as it has others; and second, cotton is not a water intensive crop. On the other hand, water intensive crops like sugarcane and rice have had to bear the brunt of the water shortage - against full year targets for this year, actual production is expected to show a shortfall of 15.3 percent (for sugarcane) and 5.9 percent (for rice). To add to this problem, impact of the water shortage has not been even in the two main agriculture provinces of Pakistan (Sindh & Punjab). Other than endowment differences in terms of the flow of irrigated water and the larger proportion of brackish groundwater in Sindh, Punjab was able to cope with this crisis more effectively. The results speak for themselves; area under cultivation for wheat and rice in Sindh fell by 29.5 and 20.9 percent, respectively, while the national average declines were only 1.7 and 5.5 percent. A sustainable longer term solution requires a more consistent strategy across provinces to build small dams / bunds, and to allocate existing canal water more strategically. Manufacturing sector Fortunately, the performance of the manufacturing sector has been much better for the first three quarters of this year. Large-scale Manufacturing (LSM) was up by 8.8 percent compared to 3.5 percent for the corresponding period last year. The source of this reversal is the sharp increase in value addition by food, beverages and tobacco. More specifically, positive value addition by sugar, strong growth in the production of vegetable ghee & cooking oil, and a very sharp reversal in the production of cigarettes, allowed this sub-sector to grow by 10.0 percent in the first three quarters, against negative growth of 17.1 percent in the corresponding period last year. After textiles, this is the largest sub-sector of value addition in LSM. The food sub-sector was able to overshadow the lower growth posted by textiles, as production of ginned cotton and yarn were lower this year. The refining of petroleum products (which is the third largest source of value addition in LSM) showed strong growth compared to FY00, which was supported by higher imports of crude petroleum. These two sectors were clearly the swing factors in the high growth shown by LSM. For the second consecutive year, production of automobiles and chemicals has shown rising growth rates. The production of cars, motorcycles and light commercial vehicles (LCVs), has been strong enough to compensate for the shortfall in the production of trucks and tractors. On the supply side, the introduction of new brands of compact cars played a large role, while the increasing use of leasing enhanced demand for such products. In the chemicals group, the largest increases were shown in paints, varnishes / polishes and the production of chlorine gas. As complementary goods, these products are used by the automobile sector, while chlorine gas is used in the preparation of vegetable ghee. Excluding outliers, the trimmed growth during the first three quarters of this year was 9.5 per cent against 6.6 per cent in the corresponding period last year. In fact, the sharp negative growth in food, beverages & tobacco last year that has been reversed this year, has played a pivotal role in narrowing the difference between overall and trimmed growths in the two years. To summarize, low growth in agriculture has been compensated by strong growth in manufacturing, which is spearheaded by the food group (especially sugar). Despite indications that the country will meet the cotton target this year, the fact that this crop is 4.4 per cent lower than last year, has pulled down growth in the textile sector. On the upside, the increasing popularity of leasing consumer durables has boosted demand for cars, motorcycles and airconditioners / refrigerators. Fiscal developments Tax collection in the first three quarters of this fiscal year is up 14.9 per cent over last year. Keeping in mind the impact of the drought on Pakistan's GDP, growth of tax revenues should exceed nominal growth, which means the tax to GDP ratio will improve this year. However, even with this impressive growth in revenues, the IMF's quarterly targets for end-December and March were not met. As a consequence, the end-June 2001 targets stands revised at Rs417.3 billion, from an original target of Rs430.2 billion. Tax collected so far represents 98.3 per cent of the third quarter target, and 66.3 per cent of the full year revised target. It should be noted that ambitious targets set at the onset of the fiscal year (IMF programme year), paints a bleaker picture than is actually the case, which undermines the perceived improvement in revenue collection. In terms of the fiscal deficit, driven by higher than projected non-tax revenue and stricter expenditure controls, the budget deficit for 1H-FY01 was 0.7 percent (of GDP) lower than targeted under the IMF programme. Monetary Developments Unlike developments in Q2-FY01, the financial sector was reasonably calm last quarter. The sharp retirement of commodity financing to banks, the on-going maturity of government securities held by banks, and the seasonal plateau of private sector credit during Q3- FY01, allowed commercial banks to be more comfortable in terms of liquidity. Nevertheless, following the events in end-December, banks were hesitant about locking in funds and were not forthcoming in the fortnightly primary auctions6. It was only after the IMF relaxed its end-March net domestic asset (NDA) target, did banks place more funds in government securities7. Given the self- fulfilling nature of expectations, once banks were less panicky about this target and more forthcoming in the auctions, it allowed SBP to meet the NDA target almost effortlessly8. Money supply actually fell during Q3-FY01, but is to be expected for this period of the year. In aggregate terms, money supply increased by Rs66.1 billion in the first three quarters against a full year target of Rs147.0 billion. In the remaining part of this year, except for commodity financing in end-May and June 2001, there is likely to be a fall in net domestic assets of the banking system in the last quarter. However, with an ambitious net foreign asset (NFA) target for end-June, monetary growth for the full FY01 will increase from the end-March level, but should not exceed last year's increase in M2 (which was Rs 120.1 billion). In effect, although inflationary pressures will remain, this is primarily on account of cost-push factors and not because of excessive purchasing power in the economy. In terms of sectoral distribution, working capital loans to the textile sector increased sharply. Two inter-related factors are responsible: first, the textile sector relied more on self- financing last year; and second, the increase in lint cotton prices raised demand for bank financing. The sugar sector also increased borrowing from the banking system on account of an increase in the market price of sugarcane and a sharp reversal in the production of refined sugar. The bulk of the increase in term financing, on the other hand, was driven by the textile and automobile sectors. Despite an increase in market liquidity compared to Q2-FY01, T-bill rates were stable with a mild increase of 50 to 60 basis points in March. SBP could not afford to reduce interest rates for two distinct reasons: (1) this would have made it difficult to meet the NDA target for end-March, and (2) although the third quarter witnessed a gradual depreciation of the rupee, SBP feared that if its monetary policy was eased, this could unhinge the foreign exchange market. The unfortunate consequence of this monetary stance was the increase in export refinance rates (in both early January and early April) and the expected increase in early FY02. Prices Annualized average inflation rates have been 4.8 and 6.7 per cent for CPI and WPI, respectively (for end-March 2001), but price increases in the third quarter have been subdued compared to the first two quarters. Although the inflationary impetus once again comes from non-food items, the overall impact of this category was contained; while retail gas prices increased by an average 20 per cent on March 17th, retail petrol prices were reduced by 7.0 per cent while diesel prices dropped by 15.7 per cent on March 15th, on account of the fall in international oil prices. In terms of food items, 70 out of 163 posted a price increase during the third quarter of FY01. Although only 47 items showed a decline, the sensitive nature of these items (e.g. sugar, rice, milk and edible oil) appeased the public view on prices. Capital Markets The Karachi Stock Exchange (KSE) displayed bearish sentiments in the third quarter of this fiscal year. Other than expected movements in the KSE index following the announced results of heavyweight companies9, the real damage followed a report from Merrill Lynch that was published on February 19th. Selling pressures following the decision of a large foreign fund to close its position in Pakistan resulted in a fall in the KSE index from 1,511.6 on Feb 19th to 1,324.4 by the end of March. Corresponding to this sell-off, the country's foreign exchange reserves were depleted by US$64 million during the course of the quarter. In terms of the dispute between KSE and SECP that surfaced in end- December, a mutually satisfactory solution was achieved. In spite of this, the market's resentment did not disappear. In early May 2001, issues relating to capital market reforms advocated by SECP (specifically the movement towards the T+3 regime) has become contentious. Looking at the bond market, the issuing of corporate bonds (Term Finance Certificates) by leasing companies continued last quarter. Although only one company entered the market during Q3-FY01, out of the 18 new issues since FY96, six have been issued this year. The growing interest in issuing long-tern bonds by leasing companies, which account for five of the six bonds issued this year, is directly related to the increasing popularity of leasing consumer durables. External Sector Pakistan's external sector was able to show a current account surplus in the third quarter of this year. Although this narrowed the gap in the balance of payments (BOP) for the first three quarters (frown US$1.03 billion last year to US$ 575 million), the need to build up liquid reserves during the course of Q3- FY01, meant the authorities had to monitor the foreign exchange market very closely. In fact, the urgency to increase liquid reserves during the quarter resulted in record levels of outright purchases from the kerb market; SBP's purchases are already US$1.56 billion during the first three quarters. This, coupled with lumpy inflows of remittances on account of Haj receipts and compensation for Kuwait war affectees, allowed the country to narrow its current account deficit. Looking at detailed trade numbers using custom records, the US$1.32 billion trade deficit during the first three quarters of FY01, was marginally above the deficit in the corresponding period last year. The main reasons for this are: (1) weak international prices for Pakistan's main textile exports, (2) higher imports of machinery on account of the textile sector's BMR drive, (3) import of sugarcane and pulses to compensate for low domestic production, and most importantly, (4) the ballooning oil bill that has already exceeded US$2.5 billion in the first three quarters of this year. For the second year in a row, growth in export revenues came on the back of substantial quantitative increases. The total quantity effect during the period July-March 2001 was positive US$759.4 million, which was undermined by a negative US$432.9 million price effect. It should be noted that the bulk of these effects are driven by textile exports. The water shortage has also impacted Pakistan's trade deficit. Other than higher imports of sugar and pulses, low water reservoir levels have impaired the generation of hydel power. To make up for this shortfall, reliance on thermal power generation has increased, with the resulting import of more crude petroleum. Looking ahead, this issue will continue to pressure the external sector. To finalize this summary, given the free-float of the exchange rate and the fact that the underlying fundamentals are still weak, the rupee continues to witness a gradual depreciation. 1. Date of commencement: May 7th 2001. Date of completion: May 21st 2001. 2. In terms of its impact on manufacturing, textiles and food, beverages and tobacco are the two largest sectors of value addition in large-scale manufacturing. On the other hand, the crop size of cotton and wheat is critical in determining the volume of purchasing power in the rural sector. 3. In terms of working capital loans, against Rs8.9 billion disbursed in the first three quarters of FY00, this year witnessed net lending of Rs25 billion. 4. Out of 6 new corporate bonds issued this fiscal year, 5 were by leasing companies with a combined mobilization of Rs1.6 billion. 5. If the wheat crop in FY00 is revised upward to 21.2 million tonnes (which is not the case in the 9.6 per cent growth shown by major crops last year), the agriculture sector will shrink by 1.3 per cent during FY01. 6. This is the main avenue of bank lending to the government. 7. In broad terms, this target tries to limit government borrowing from SBP, commercial banks and non-bank financial institutions (NBFIs). 8. If banks had remained hesitant, this would have either forced SBP to sharply tighten monetary policy or resort to other methods to meet the target. 9. In a nutshell, we had negative results for PTCL on January 25th; positive for Engro Chemicals on January 31st; negative for Shell and positive for PSO in mid-February. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010530 ------------------------------------------------------------------- $ breaks through new barriers: Rupee loses 2.2% in 10 days ------------------------------------------------------------------- By Mohiuddin Aazim KARACHI, May 29: The US dollar on Tuesday flew past Rs63 in inter- bank market and crossed the barrier of Rs65 in kerb thus forcing the rupee down to an all time low. Bankers said the dollar closed at Rs 63.10/Rs 63.15 in inter -bank market as higher than normal outflows pushed up the demand for greenbacks amidst relatively low supply. Bankers said the dollar had shot up to Rs 63.20 in early trade but later on it registered a modest fall as panic buying ended at the close of the day. On Monday the dollar had closed at Rs 62.75/ Rs 62.80 in inter-bank market. Thus it gained 35 paisa overnight. Bankers said the central bank watched the fall of the rupee rather calmly and made no intervention in the inter-bank market. In kerb the US dollar closed at Rs 65.40/ Rs 65.50 on Tuesday up from Rs 64.85/ Rs 64.95 on Monday thus forcing the rupee to shed 55 paisa or a little less than one per cent of its value in a single session. Currency dealers said the fall of the rupee in inter-bank market mirrored in open market transactions. They said as the rupee nose- dived in inter-bank market dealings and the gap between inter-bank and open market exchange rates narrowed down, speculators started hoarding dollars from kerb. Hence the fall of the rupee. The RUPEE SLIDE IN INTER-BANK MARKET: In the past ten days the rupee has lost Rs 1.40 or 2.2 per cent of its value against the dollar in inter-bank market. What is weakening the rupee so fast is a big question. The economic managers have so far not come out with a convincing answer leaving general public and professionals in an utter state of confusion. Bankers say a major reason for the fall of the rupee is that the State Bank has started allowing banks to foot oil import bills on their own. Previously SBP was providing a major chunk of the required foreign exchange to pay oil bills. Bankers said more than $25 million flew out of the system only on Tuesday-thanks to oil import payments but no SBP official was ready to confirm it. Bankers said corporate demand for the dollar was also up. Bankers also say that lately SBP has been buying dollars from inter-bank market to make debt payments. The central bank is supposed to have liquid foreign exchange reserves worth about $1.2 billion at end-June under the terms of the $596 million IMF standby programme. Bankers say this also limits the SBP ability to intervene in the market but sources close to the central bank say this is not the case. "You cannot have a stable unless your current account deficit comes down," remarked one of the sources. "Making futile attempts to intervene in the market is worse than no intervention at all." But he said it was naive to presume that SBP had not been intervening in the market at all. "Lately the State Bank has been buying dollars from the banks on one day only to sell them the other day." But bankers say buyings are much larger than the sellings and leave no positive impact on exchange rates. DEFENDING THE RUPEE THROUGH INTEREST RATES: Then the question arises why the central bank is not defending the local currency by increasing interest rates. Sources in SBP say eventually SBP may do this though there are no official indications for such a move. The problem is that if SBP tightens its monetary policy to defend exchange rates it will not only invite criticism from the trade and industry but will actually limit the prospects of economic growth. Pakistan economy is set to grow only 2.6 per cent during this fiscal year ending in June against the original target of 4.5 per cent. But on the other hand if the exchange rate is not defended at a certain level and the rupee is allowed to depreciate further against the dollar it will only speed up the dollarization of the economy and the capital flight besides making servicing of $33 billion external loans very expensive. But senior bankers close to SBP believe that the central bank would be forced to tighten its monetary policy before the end of June if it has to keep the exchange rate at a manageable level. And what makes their statement sound logical is that there is room for increasing interest rates keeping in view that the inter-bank market has been very liquid for some weeks: Call rates have been oscillating between 4-5 per cent on an average against the SBP repo rate of 13 per cent. Central bankers admit that this high level of liquidity in the market is one of the reasons for the ongoing decline of the rupee. STABILITY IN KERB RATES: In the past 10 days the rupee has shed 95 paisa or 1.4 per cent of its value against the US dollar in the open market. But in the mean time the spread between the inter-bank and open market exchange rates has narrowed down from Rs 2.80 per dollar to Rs 2.35. Bankers say this contraction in the spread is luring speculators to hoard dollars in anticipation that the spread would eventually expand forcing the rupee down- and allowing them to make big money. Historically there has been a much larger spread between inter- bank and open market exchange rates providing incentives to speculators. But as Pakistan entered into the IMF standby credit programme the Fund started insisting that the spread must be contained. The Fund took the position that one solid reason for the spread being very large was that the central bank has been a net buyer of foreign exchange in the open market. That is why SBP sometime does not defend the exchange rate in inter-bank market expecting that it would narrow down the differential between inter- bank and open exchange rates. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010530 ------------------------------------------------------------------- ADB concerned at delay in $80 million KESC project ------------------------------------------------------------------- By Khaleeq Kiani ISLAMABAD, May 29: The Asian Development Bank (ADB) has expressed serious concern over a 30-month delay over a $80 million power project of Karachi Electric Supply Corporation (KESC) even as Karachiite's continue to face repeated power breakdowns. Official sources told Dawn that an ADB mission which visited Pakistan early this month had already declared KWSC 6th Power (Sector) Project as "problematic" after assessing its progress as "unsatisfactory and partially satisfactory". In view of ADB's adverse comments, the federal government has sought a detailed report on the subject. The $40 million loan agreement on 220KV transmission line ring around Karachi city was signed in 1994. The implementation on the project has been termed as 'unsatisfactory' in view of the fact that it was 30 months behind schedule. The project scope was also declared unsatisfactory as only one of the four sub-projects had been implemented as the other four were cancelled in spring cleaning of 1998. However, project costs have been highly satisfactory as there were no cost overruns. So far, an amount of $68.5 million has been released by the ADB. On the counterpart funding side, the government performance has been unsatisfactory that resulted in delay of contract and cancellation of other sub-projects while implementation covenants were also classified as unsatisfactory. Audited financial statement was found satisfactory though submission of statements were delayed by around three months. The main cause of delay, the sources said, was disagreement with local councils and military authorities on right-of-way access and due to the need to take existing lines out of service. Another reason was that the remaining packages including conventional grid stations and underground cables under the ADB-financed transmission system reinforcement and expansion, the bids had been evaluated in the first half of 1997. However, KESC's liquidity problem at the time impeded further firm commitment and the contracts could not be awarded. The closing date of December 31, 1998 has been extended by 18 months, up to June 30, 2001. The KESC's request for utilisation and reallocation of loan savings and a further extension of loan closing date to June 30, 2001 has also been approved. The bank mission early this month has given guidelines on procurement of 220KV cables, cable sheaths along with reconciliation and outstanding disbursement accounts besides a set of instructions on how to prepare the executing agency's project completion report (EAPCR). DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010530 ------------------------------------------------------------------- World Bank to give $350 million credit on June 13 ------------------------------------------------------------------- By Our Staff Reporter ISLAMABAD, May 29: The World Bank will disburse a $350 million Structural Adjustment Credit on June 13, a senior Finance Ministry official said on Tuesday. Talking to Dawn, the additional secretary and spokesman for the ministry, Dr Waqar Masood Khan, said the World Bank's executive board was meeting on June 12 to formally approve the credit. "This will be an upfront single tranche to be disbursed the very next day," he added. SAC, said Dr Masood, was a highly concessional assistance for Pakistan to help improve its balance-of-payments position. The credit, he claimed, would be offered as the government was ensuring good governance and an equitable use of public resources. The credit would support reforms in various sectors. In reply to a question, the spokesman said that initial talks had been held with the IMF for securing the Poverty Reduction Growth Facility which would replace the $596 million Standby Arrangement expiring on Sept 30. In this regard, he stated, detailed talks were expected in July. The PRGF, he added, would be a medium-term facility for three years. In reply to another question, Dr Masood said that the tax- to-GDP ratio was being increased from the present 10 per cent to 14% in the next three years. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010529 ------------------------------------------------------------------- Money laundering hits Pakistan ------------------------------------------------------------------- By Jawaid Bokhari KARACHI, May 28: The United States has placed India and Pakistan in the "primary concern list" of countries hit by money laundering that accounts for an estimated annual global capital flows of $1,000 billion, handled by the world's leading banks. The US State Department's announcement coincides with the recent IMF decision of adding "money laundering" as conditionality for providing balance-of-payments support to an aid recipient country. Official sources here, however, say that the IMF conditionality is country specific and there is no move to apply "money laundering" conditionality to Pakistan. Pakistan's foreign trade is at $20 billion, and official and non- official remittances estimated at $5-6 billion. Considering the size of foreign trade and forex operations, the scope for money laundering is very limited when compared to global volume. The IMF estimates that the amount of tainted money being cleaned through the world's financial system is massive between $500 billion and $1.5 trillion a year. On May 15, the State Department said that 175 countries had been put on three categories of "concern" list. Pakistan is on the list of "primary concern." Yet, in another interesting development, the French are investigating the charge of "money laundering" against a major Pakistani bank and have detained a senior banker. Over the past 18 months, the military government has launched a vigorous campaign against tax evasion and loan defaulters that has resulted in the flight of capital, entrepreneurs and professionals. In the past two years, an estimated 5,000-6,000 Pakistanis have spent about $1 billion in getting immigration visas to the US, Canada and Australia. The flight of capital is estimated officially at $1 billion per annum. Studies carried out in developed countries show that money laundering has grown simultaneously with globalization and specially, with the lifting of capital control and the development of international payment system. Bank of America sees nearly $1 trillion pass through its internal wires every day, according to a foreign press report. Globalization is also encouraging capital flows from the periphery countries to world financial centres, from the poor to the rich states, and from the developing to the developed states, says a leading economist. The developing states have also been hit by brain drain at a time when human resource is seen as the key to economic progress. Islamabad is now making a major bid to divert home remittances from unofficial channels to official channel. No questions would be asked if remittances are sent through inter-bank market. Incentives would be offered in the next budget to lure investment by non- resident Pakistanis. Board of Investment officials expect that local businessmen who have investments in foreign countries, would respond to the opportunity offered by the State Bank decision to allow local companies to invest abroad, to move from the informal to the formal sector. The US has pointed out that money laundering distorts business decisions, increases the risk of bank failures and takes control of the economy away from the government. Politicians in the UK and the US have expressed dissatisfaction over their countries' efforts to tackle money laundering, says London Economist. A British parliamentary committee said in March that "the government should take coordinated, coherent and properly resourced action to fight money laundering if the United Kingdom, through the City of London, is to maintain its reputation as one of the most important international financial centres." In USA, says the Economist, a report on money laundering by Senate Democrats criticized some of the America's biggest bank, including Citigroup's J.P. Morgan Chase, Bank of America and Bank of New York. In February, Citigroup was involved in investigations against Joseph Estrada, the ousted President of the Philippines. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010529 ------------------------------------------------------------------- Budget deficit to miss 5.3% target ------------------------------------------------------------------- By Ihtashamul Haque ISLAMABAD, May 28: The government is unlikely to achieve 5.3 per cent GDP budget deficit as prescribed by the International Monetary Fund (IMF) during the current financial year. "Perhaps we will end up having 5.4 per cent fiscal deficit instead of 5.3 per cent for a variety of reasons," said Secretary General Ministry of Finance Mr Moeen Afzal. Speaking at a one-day conference on Debt Committee's report here on Monday, he said the present government had decided to achieve economic stability by bringing about discipline in all the ministries and other government departments. "Every small and big development project now has to be approved by the Executive Committee of the National Economic Council (ECNEC) and the Central Development Working Party (CDWP) and nobody can bypass these organisations," the secretary general said. The government had invited politicians at the conference to brief them about the country's debt problem with special reference to the report of the Debt Reduction and Management Committee headed by Dr Pervez Hasan. Talking about reduction in foreign debt, Moeen Afzal said the debt committee had proposed viable recommendations to reduce the country's huge foreign and domestic debt. He said he agreed that it could take three to five years to achieve the desired results. He said Pakistan was likely to hit $9.1 billion exports at the end of the current fiscal. Likewise, he said the rate of inflation will be 4 to 5 per cent. Former Finance Minister and PML leader Sartaj Aziz said the targets set by the Debt Committee to reduce debt were very high. He said exports position was not competitive and the cost of production was very high. "Utility charges are very high and due to Pakistan's image abroad, our exports are not increasing," he said. He said political uncertainty was adding to various problems. The target of raising three billion dollars through privatisation and to eventually retire the country's debt was too ambitious, he said. "In 1990 Pakistan secured hard loans to pay off its soft loans," he said, disagreeing with the government that 5.5 per cent growth rate could be achieved in the coming years. Mr Wasim Sajjad said that purchasing power of a common man had weakened greatly due to the deteriorating economic situation over the years. "Rulers should change their lifestyle and set an example for others to follow," he added. "Nothing could be achieved through halfhearted attempts," Wasim Sajjad observed. Secretary General of the PML like-minded group Gohar Ayub Khan said there was no dedication seen in the governments to reduce the country's debt. He was of the view that there was a real need that the rulers practised austerity. He said the use of expensive cars by the rulers should be stopped in order to reduce the nation's expenditure. The suspended Speaker of the National Assembly Illahi Bux Soomro said it was not fair to expect the common man to continue offering sacrifices to reduce foreign debt. "The government is not providing any relief to 80 per cent of the population," he said, adding only those should be taxed who could pay. Nawabzada Mohsin Ali Khan, former finance minister of NWFP and a leader of Tehrik i Insaf, said he did not know where had all the foreign loans taken by the successive governments gone. He said former prime minister Nawaz Sharif broke the law to build motorway by taking away the powers of ECNEC and giving unnecessary powers to National Highway Authority (NHA) to execute the project. Mr Mohsin said that Chief Executive Gen Pervez Musharraf could not tolerate 270 members of the National Assembly so how would he tolerate 22,000 elected people coming in the wake of local bodies elections. Former Commerce Minister Zubair Khan claimed that a joint commission of the World bank and the ADB had observed that military government's reform agenda was over-extended. "That commission had concluded that it was difficult to have a real impact of the reforms and also from where the government will finance this reform programme", he added. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010528 ------------------------------------------------------------------- IMF letter for third tranche received: Board meeting in July ------------------------------------------------------------------- By Our Staff Reporter ISLAMABAD, May 27: The government has received the draft letter of intent (LOI) from the International Monetary Fund for the release of third tranche amounting to $133 million under the Stand-By Agreement, an official spokesman said. The IMF board will meet in July to consider the LOI on the basis of government's performance in the third quarter (Jan-March) of the current financial year, the spokesman said at a hurriedly-called press conference here on Sunday. He said the government had sought a waiver from the IMF on the revenue collection target for the current year under the SBA as against the 9-month target of Rs279.3 billion it could collect only Rs276.7 billion, registering a shortfall of about Rs3 billion. The spokesman claimed the government had achieved all the performance targets and met other criteria set in the SBA for the third quarter. The government's performance with regard to net domestic assets was quite satisfactory as against the target of Rs8 billion the actual achievement was Rs16.1 billion, he said. The target for fiscal deficit for the whole year was Rs152.8 billion and the actual fiscal deficit in the third quarter remained at Rs145 billion, lower by only a little over Rs7 billion than the target set in the performance criteria with three months still to go. In the performance criteria, the whole year target for bank borrowing was set at Rs19.9 billion and in the nine months the government borrowed about Rs13 billion. In the remaining three months it has to restrict additional borrowing to about Rs6.9 billion to meet the full-year target. To a question about foreign exchange reserves, the spokesman said it was not included in the performance criteria of the Fund. The spokesman said the IMF mission during its just concluded visit carried out a preliminary review of the third quarter and held meetings with different ministries. He said preliminary discussions on Poverty Reduction Growth Facility (PRGF) were held with the IMF mission but the substantive talks would be held after the end of the SBA. Poverty Reduction Growth Facility is a multi-billion dollar highly concessional medium-term facility, which spans over a period of three years. The mission will visit Pakistan in the second week of August to review the fourth quarter performance, he added. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010528 ------------------------------------------------------------------- Banks reluctant to give gas firms long-term loans ------------------------------------------------------------------- By Khaleeq Kiani ISLAMABAD, May 27: The commercial banks are reluctant to provide long-term financing to the gas utilities SNGPL and SSGCL unless they pledge their assets and receivables, says a World Bank report. The report, made available to Dawn, was finalized by the bank in consultation with the chief executives of the two utilities and submitted to the ministry of petroleum and natural resources on April 20. The bank says the main reason for commercial banks' reluctance is the poor financial performance of the utilities and the result is that size of short-term financing is too low to commensurate with their expansion requirements. The bank, now spearheading reforms in Pakistan's gas industry, is of the view that distorted tariff regime and bad distribution and transmission system coupled with fixed and low return on investment to gas companies has put the country in a paradox. The financial performance of the two gas utilities is guaranteed by the government through gas development surcharge, calculated on the basis of difference between wellhead price and end-consumer price, and does not provide for incentives to improve efficiency. The allowed rate of return on assets of 17 to 17.5 per cent is determined on historical basis: the corresponding return on equity is of the order of 10 per cent, which is incommensurate with the requirements of investors in Pakistan. Given the fact that much of the debt is expressed in foreign currency, the utilities have incurred significant foreign exchange losses. Their liquidity ratio and debt service coverage ratio is close to or below one. In this situation, the companies have not paid cash dividend to shareholders for many years now. They have also been unable to contribute towards their investment programme and build the extensions necessitated by the growth in demand. The bank is of the view that distorted tariff structure in which industrial, commercial and power consumers subsidize the household and fertilizer sector are equalized throughout the country and do not reflect the increasing share of gas produced to the south of Sui and shipped to the north. The report says no seasonal tariffs are maintained so that customers do not get signals as to the necessity of saving gas in winter, and given the considerable winter shortages there are no incentives to build gas storage's in depleted gas fields to improve service to the consumers. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010527 ------------------------------------------------------------------- Rules relaxed for currency export: FAP team meets Shaukat ------------------------------------------------------------------- By Our Staff Reporter KARACHI, May 26: Money changers can now take out five foreign currencies out of Pakistan instead of selling them to state-run National Bank. But they can exercise this liberty only if they bring in advance the equivalent amount of these currencies in US dollars. This was decided at a meeting between a 16-member delegation of money changers and Finance Minister Shaukat Aziz in Islamabad on Friday, said a press release. President of Forex Association of Pakistan Malik Bostan who led the delegation told Dawn that the new system would be effective from Monday. He said State Bank Governor Dr. Ishrat Husain who was also present at the meeting agreed that the new system would work. Dawn inquiries show that under the new system money changers would bring in advance through telegraphic transfers (TTs) the dollar equivalent of the foreign currencies they wish to export. Then National Bank would send the foreign currencies to Dubai to be handed over to the representatives of the money changers. The list of the foreign currencies that money changers can export under this system include (i) Pound Sterling (ii) Deutsche Mark (iii) Saudi Riyal (iv) UAE Dirham and (v) Kuwaiti Dinar. Thus two things become clear: (i) Money changers would continue to sell the US dollars and all other foreign currencies minus the above- listed five currencies to NBP, and (ii) they will not be allowed even to take out these foreign currencies on their own as was the practice in case of all foreign currencies minus the US dollar before NBP started buying these currencies from money changers in April. Money changers started selling all foreign currencies to NBP late last month under an SBP directive that stopped them from carrying any foreign currency outside Pakistan on their own. SBP had to take this decision to plug leakage's in the name of export of foreign currencies that was telling heavily upon the health of the rupee. Initially money changers were getting only the rupee equivalent of the foreign currencies sold to NBP but later on it also started giving them the US dollars against all foreign currencies. Money changers say they have so far sold $100 million worth of foreign currencies including the above-listed five currencies to NBP. "I hope with the permission given to us to export five foreign currencies supply of US dollars will increase in open currency market," said Malik Bostan. He said the supply of greenbacks had fallen sharply in the market pushing the rupee down during this week because money changers were not getting enough dollars from NBP in exchange of other foreign currencies. Now that the money changers would bring in TTs in dollars against five major foreign currencies to be exported by them it would naturally increase the supply of dollars in the open market and stabilize the rupee as well. A press release issued by Forex Association of Pakistan said the money changers would surrender all such TTs to SBP. Bankers say this would help SBP buy dollars from money changers as and when needed. The rupee this week remained under immense pressure both in inter- bank as well as open currency market: It lost 1.3pc of its value in inter-bank market and 1.5pc in kerb as demand for dollar rose amidst dwindling supply. INCOME TAX: Bostan said the finance minister also promised to resolve the income tax problems of the money changers. He said the minister was informed by the delegation that the CBR had lately sent notices to some money changers demanding income tax on the deals they had struck in the past with foreign exchange houses abroad to help boost supply of dollars in Pakistan. He said the CBR had also started probing the source of income of those who had transacted such business claiming that it was in violation of Protection of Economic Reforms Act of 1992. He said the minister had assured money changers that he would discuss the issue with CBR chairman.Back to the top
EDITORIALS & FEATURES 20010527 ------------------------------------------------------------------- The systems ------------------------------------------------------------------- By Ardeshir Cowasjee THERE is a world of difference between the Code Napoleon and the Code Naqvi, which is soon to fall upon us. Whereas General Napoleon Bonaparte did proclaim that his code was indestructible, he was not so presumptuous as to maintain it was immutable, unchangeable. But General Tanvir Naqvi and his co-generals insist that the laws they intend to enforce will forever remain in the form in which they are now presented to this country. The Code Napoleon, officially known as the Code Civil des Francais, became the law of France in 1804 and remains extant to this day, with revisions. France is one of the great countries and has learnt how to live with the world. It is pragmatic, able to smell out rats, corrupt prime ministers and their corrupt spouses, and crooked admirals of countries with which it does business. It comfortably relieves the governments of such countries of much money and where necessary bribes with kickbacks, sells its submarines, and then decorates the admirals who were so friendly and cooperative. It is not so much the system or the laws which matter - it is the men who administer the system and implement the laws. Our province of Sindh can boast of having had a few competent men who have done their best to effectively govern. The oldest of such men to come to mind is Astad Gorwala, a Parsi of Bombay, an officer of the Indian Civil Service, who spent most of his career in Sindh administering the province prior to partition. He was incorruptible, a man of the people, sought out by each district. When he retired he went back to Bombay and became a pamphleteer, constantly opposing the corrupt and the inefficient administrators of the government. I hold a copy of his pamphlet, 'Opinion', of August 28 1979. On top of the front page I read, "Weekly Copy, Paisas 5, Annual Subscription Rs.2." The page opens up, "Since independence, presidents of India have been scholars, gentlemen and scholars, politicians, even clowns arousing the laughter of Indians at least. Now we have a trickster as president... Why all this trickery, oh Trickster Nilam Sanjiva Reddy? You, from the exalted Rashtrapati Bhawan, are not likely to make a reply, so we must make do with our own humble speculations." He wrote incessantly against Indira Gandhi and her emergency. But when she closed down many a newspaper and arrested and jailed many an editor, she gave special instructions that neither Gorwala nor his pamphlet was to be touched. And, when Gorwala lay ill and dying, Indira took the trouble to call on him at his Ridge Road home, his publishing house. Now to administrators of Sindh who people still remember. We start with Kunwar Idris, district magistrate and collector of Karachi in the late 1960s and early 1970s, starting his steady rise up the hierarchy. When, at the end of 1988, Benazir Bhutto embarked upon her democratic adventure, she appointed him chief secretary of Sindh. He was of course given orders by husband Asif, which he tended to ignore. This was not to the liking of Benazir, who called him, told him very firmly that he had upset her husband, and that "when my husband speaks you must take it that the prime minister speaks." He survived with the PPP government until the end of 1989 when he had to decide between either taking action according to the dictates of his conscience or "responding positively, without question, to the party programme and its democratic principles," the party and its leader having swum through "rivers of blood" to get where they were. His choice displeased Benazir and he was shunted into a siding to head Bankers Equity. Idris retired honorably, is now a member of the private sector, and writes a weekly column which is printed besides mine each Sunday. As can be judged from his writings, he is highly skeptical of the Code Naqvi, with good reason, and its general might do well to have a talk with him. During the first half of the 1970s, ZAB's government found in London, happily posted in our High Commission as economic counselor, civil servant Abdul Karim Lodhi. His help was sought to instigate Benazir Bhutto's election as president of the Oxford Union, as had been ordered by her father. He refused to bend, or to involve himself in the unorthodox action required of him, and, ZAB following form, ordered his dismissal. He was reinstated by Zia and was later selected by daughter Benazir to follow Idris as her chief secretary in Sindh. During Lodhi's tenure, Zubair Kidwai was secretary of the provincial transport ministry. One fine day Zubair and the managing-director of the Karachi Transport Corporation who had been summoned to his office were physically threatened by their minister, the PPP stalwart Manzoor Wassan. The minister, having failed to gain his secretary's acquiescence in wrongdoing through purely verbal means, thought he could do so at gunpoint, using his armed guards. The incident was obviously reported to the chief secretary who wrote to his chief minister, Aftab Shahban Mirani, asking him to immediately issue orders to his ministers and other party members instructing them "that no one shall cause firearms or any other weapons to be carried into the office rooms. If anybody does so, from now onwards, Sir, with due respect, one will have to order the physical removal from the secretariat of both the minister and his companions bearing arms. The government has provided adequate police security in the secretariat. If that is not considered enough by anybody, it cannot be supplemented by ruffians ..... Now, reverting to the ugly incident, Sir, it so happens that both the affected officers have a known reputation for uprightness, competence and integrity. One wonders if anything similar can be used to describe the errant minister .... Mr Manzoor Wassan should personally apologize to both officers, preferably in the presence of his private secretary and the two guards (of course, minus their weapons)....." Lodhi survived Benazir. Then came Jam Sadiq Ali as chief minister of the Jatoi caretaker government who one day swore that for as long as he was CM of Sindh Lodhi would be his CS. Two days later, Lodhi was removed and installed as head of State Life. Another strong officer, Saeed Mehdi, was sent to Sindh as chief secretary at the start of Nawaz Sharif's second round. He was humane, he helped people. Firm, incorruptible, he stood up well to the bullying tactics of his chief minister, the corrupt (now absconding) Liaquat Jatoi. Jatoi did his best but could not manage to get rid of him as Mehdi had gained the trust of his boss Nawaz. To Mehdi's misfortune, he was so trusted by Nawaz that he took him away from Sindh and posted him as his principal secretary in Islamabad. He remained as such until October 12, 1999, when he was arrested along with his boss from the prime ministerial mansion. Nawaz has since hit the jackpot and languishes in Saudi Arabia, but Mehdi remains in jail in Pakistan, a forgotten man. It is time someone woke up to his existence. It is time for the chief executive to pass judgment on his sins or crimes, give him bail, and move him over to house arrest. No man who has served with or under Mehdi speaks ill of him. When Mehdi so unluckily left Karachi, his replacement was Zubair Kidwai. He lasted with Liaquat Jatoi for eight months and was then moved to federal government. When General Pervez Musharraf took over, Kidwai was brought back as chief secretary and again managed to last a mere eight months with the military government before being again shifted to Islamabad and rewarded with the post of secretary to the ministry of religious affairs from where he will soon retire. General Tanvir Naqvi should remember that the system he is setting up must have checks and balances galore as it will be operated by corrupt, venal, inept men, which is all that elections can now throw up. Men such as the four officers I have mentioned can well be used to help 'restructure', to help in the grassroots devolution process, to help set up the Code Naqvi so that it too may last for two centuries and more. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010601 ------------------------------------------------------------------- Fog and illusions on the road to peace ------------------------------------------------------------------- By Ayaz Amir THE holy warriors, mindless champions of jihad, are at one end of the spectrum; the Track Two peaceniks, who dance the bhangra at the sight of Indian border guards and otherwise babble of peace at all costs, at the other end. There is, however, no divine ordinance which lays down that Indo-Pak relations should be a zero-sum game, a choice of absolutes: war or peace, bitter hostility or headlong retreat. There are real points of contention between the two countries and given these, a kind of rivalry or competition between them will exist for the foreseeable future. Nor is there anything wrong with this. The Berlin Wall fell in the West. In the sub-continent the Iron Curtain or, since this is the sub-continent, the Reed Curtain is still very much in place. So it is not particularly helpful to draw analogies from afar and apply them to our neighbourhood. When western ideologues, as relentless in their proselytizing as the Christian missionaries of the 19th century, say this is the era of cooperation and not confrontation they should be looked in the eye and asked, "Pray, for whom?" Europe - minus the Balkans and Russia - beats the drums of cooperation because it no longer has the Soviet Empire to contend with, that dinosaur having crashed to earth under its own weight. There are, however, historical knots elsewhere which remain to be untied. The new missionaries of globalization and international cooperation should be reminded of this unfinished business. Of what use is globalization to the embattled Palestinians? To the human flotsam caught in the wars of Africa? To the despairing people of Kashmir? Plutarch said long ago that conquerors were always lovers of peace: they liked to enter your cities unopposed. Israel is a lover of peace: it would like the Palestinians to accept meekly the terms of conquest imposed upon them. The comparison with India-in-Kashmir I would not like to make because coupling Israel and India in the same breath is grist to the mills of the hate-India lobby in Pakistan. There is already too much dust (and resulting confusion) swirling in the atmosphere. We can all do without contrived or manufactured hatred. But as an aside, let us bear witness to the new imperialism. The cold war was an affair of West and East. But the Rome and Carthage of the 20th century imposed their mutual hostility upon the rest of the planet. Now that the nature of the game has changed, a new set of values, without regard to individual differences, is again being imposed from above. The gospel changes; the commandments undergo a revision. But the fury of the reigning prophets remains the same. India and Pakistan must settle their differences by themselves, on their own terms, and not as a result of outside prodding. India is right in this, and Pakistan wrong. The Pakistani craving for outside mediation or any other forms of intervention in the settlement of the Kashmir dispute is evidence of weakness and intellectual confusion. For it is tantamount to saying that on our own we are helpless and must count on the favour of friends for a favourable outcome in Kashmir. There are two problems with this approach. Firstly, if our own means be insufficient, why should the world (or the US) give us a free lunch in Kashmir? Weakness on the ground cannot be turned to victory at the negotiating table. Secondly, if someone else brokers a deal the terms of it will still favour the stronger party. The Camp David and Oslo Accords are not exercises in justice. They hold up a mirror to reality and as such they come with qualifications attached. Egypt got back the Sinai as a result of the Camp David Accords but in return agreed to castration at American hands. It still has a powerful military but this military can fight Libya or Sudan, not Israel. Camp David saw to this. Pakistan's on-off fascination with the idea of outside intervention in Kashmir is thus based on naive foundations. It is also reflective of adolescent diplomacy. Just because we feel something will go down ill in India we raise it as a policy option. True, the UN resolutions on which our Kashmir case rests are emblems of multilateralism. Nor is there any reason for us to ditch this concept. But at the same time it would not hurt us to remember that if ever a halfway solution of the Kashmir issue is struck it will be through the collective wisdom of India and Pakistan, not through any outside agency. The Simla Accord was meant to be a victor's document but its insistence on bilateralism as the vehicle for settling Indo-Pakistan disputes is not misplaced. Only a fool would extrapolate from this that we should stop airing our concerns on Kashmir to a worldwide audience. But public relations is one thing, working towards a solution quite another. Sure, size and economic clout give India the advantage at any bilateral table. How to correct this inherent imbalance? This was Pakistan's strategic problem in the wake of defeat in the '71 war and the Simla Accord which soon followed. For close on 17 years - that is, from 1972 to 1989 - Pakistan stopped making even ritualistic noises about Kashmir. That was India's historic chance to settle with the Kashmiri people and bring them closer into the Indian Union. But it bungled the opportunity and is paying the price of failure ever since. When India ruefully contemplates the wreck of its efforts in Kashmir, it should take time out from blaming Pakistan (and the ISI) and ponder a bit over its own lapses. India's loss was Pakistan's gain. The moment Kashmiri Muslims rose against Indian rule, the scales of bilateralism, hitherto tilted against Pakistan, were restored to a semblance of balance. From the shadows where the Kashmir dispute had lain for full 17 years it emerged once more into the light. A strategic error once committed cannot be corrected by piecemeal measures. India has responded to the freedom uprising in Kashmir by force and repression and not the tools of imagination. Therein lies its continuing failure. As for Pakistan, it has merely manipulated the lever placed into its hands by a combination of Indian folly and Kashmiri discontent. In its crucible of dirty tricks it did not forge the lever in the first place. The fact that the roots of the Kashmir uprising lie within Kashmir also accounts for the ultimate failure of the propaganda blitz mounted by India over the issue of "cross-border terrorism". It brought India handsome dividends, and Pakistan no small embarrassment, while it lasted. But it could not erase the facts on the ground. Heaping embarrassment on Pakistan could not by itself put an end to the armed struggle. Hence the change of tack which is less a concession to Pakistan than an acknowledgement of reality. None of this is cause for Pakistan to gloat over. Whatever India's compulsions, it is in Pakistan's interests too to walk, in Mr Vajpayee's evocative phrase, the high road of peace. Resources poured into militarization and such follies as the sub-continent's nuclear race are resources taken away from social and economic development. We need quiet and tension-free borders much as India does. Will the Kashmir uprising last into eternity? What if it peters out? What will balance the bilateral scales then? For a true equilibrium in the subcontinent, our universities and colleges must hold their own against India's; our scholars should be of the highest quality; our research institutions the envy of the East; our maestros the finest exponents of subcontinental music; our skill at technology the best in the region; our agriculture the feeding source of countries near and far; and Lahore's famed Hira Mandi, now sadly going to pot, the hottest international destination between Singapore and the Suez Canal. With inner strength comes outward grace. On Kashmir we must stand firm without feeling the need to protest too much, the very consciousness of fortitude allowing us to speak with a softer tongue. In this context, there is no harm in admitting that the Indian invitation to General Musharraf was more sensitively worded than our response which had the wooden imprint of the foreign office all over it. When will we learn the more subtle use of words? The challenge for both countries is to realize their limitations. Pakistan cannot win Kashmir by force, India cannot browbeat Pakistan through a mix of swagger and misplaced snobbery. In any true negotiations both sides will have to give something, retreat a bit from their dog-eared positions. Not that a solution to their problems is around the corner. It is foolish even to think on these lines. But both countries will have registered a major advance if they can learn the art of conversing with each other without making a sticking-point of every quibble or comma. The scope for miracles when Musharraf and Vajpayee meet is thus out. But if the two leaders can lay the basis of a politer discourse in the subcontinent - a discourse free of the hectoring and finger-pointing which seems part of our common inheritance they will have done their bit by history. DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010602 ------------------------------------------------------------------- Let's take the high road ------------------------------------------------------------------- By Irfan Husain Before starting this week's column, let me first make it clear where I stand: as an avowed pacifist, I am convinced that human life is too precious to waste over land. OK, I suppose the modern state has a duty to protect its borders, but beyond that, to waste blood and treasure on fighting other people's battles is something that is neither sensible nor prudent; above all, it is not usually in a nation's best interest. Let as examine our Kashmir policy to see if it passes this test. Legally. We do not claim Kashmir to be part of Pakistan; indeed, even Azad Kashmir has its distinct constitutional existence separate from Pakistan. What we have claimed these past five decades is that Kashmiris should have the right to a plebiscite to decide whether they want to become part of India or Pakistan, and in two resolutions over fifty years ago, the UN Security Council upheld this right. So far, so good. Having taken up (diplomatic) cudgels on behalf of the Kashmiris, why did we have to fight two-and-a-half wars over their land? Why must our entire foreign policy be hostage to Kashmir? And, above all, why must we maintain a confrontational posture vis-a-vis India at a suicidal cost to ourselves? After all, there are other (Muslim) causes we support without going to war over them. Obviously, we consider Kashmir to be different as we hope to gain that territory if and when a plebiscite is held there. Let us then admit that our ambitions are more territorial than ideological or based on any fundamental principles. Let us also remember that there are many unimplemented UN resolutions, but mercifully, we do not show any inclination to go to war over them. We need to keep this central fact in view when we consider the forthcoming talks between the Indian and Pakistani heads of government. Another fact that must focus our minds is the vast (and growing) military and economic disparity between the two countries. >From this evident truth flows the impossibility of ever wresting Kashmir from India by force. An outgunned nation seek's foreign support, but we are more isolated today over Kashmir than ever before, so there is no prospect of an alliance to help our cause. Given these facts, we need to ask ourselves whether our present Kashmir policy is sustainable or even desirable. The best we can achieve is to continue our overt and covert support of militants in that suffering valley, causing civilian and military casualties. But having conducted this low-intensity campaign for over a decade, we must realize its futility. India can and will sustain this conflict for years more if necessary. But can we afford to? We must understand that in the imperfect world we live in, UN resolutions are only as effective as the will of the major powers to implement them. Clearly, in the case of Kashmir, nobody in the world, including our closest friends, is willing to lift a finger. While the issue may be of paramount importance to some of us, for the rest of the world it elicits nothing more than one big yawn. The unpalatable reality is that Pakistanis tend to get far more worked up over 'Islamic' causes than other Muslims do over Kashmir. There is a school of thought that holds that irrespective of logic and cold realities, we must continue confronting India. According to these people, ghairat or national honour dictates that we either get what we want, or beggar ourselves in the attempt. Never mind that our economy is in tatters and that we are in hock to the tune of $35 billion to international donors, and a similar figure to domestic lenders; never mind that jihadi outfits and other zealots wreak havoc within Pakistan, frightening potential investors away; and never mind that our hugely expensive and overbearing military establishment has been the cause of both political and economic underdevelopment. For this small but powerful lobby, the subtext is that Pakistan can only be defined through enmity with India. This is to be the be-all and end-all of Pakistan's existence. Fifty four years after independence, it seems that we can have no destiny other than hostility towards our neighbour. But after all these years of hatred and confrontation, what do we have to show for this policy except wasted dreams, shattered lives and lost hopes? Surely our people deserve better. Successive generations of Pakistanis have had to put up with a ramshackle infrastructure, rampant unemployment, grinding poverty, disease and illiteracy. Are the champions of ghairat proposing more of the same? Must we fight to the last Pakistani for the rights of Kashmiris? Ironically, the most vocal proponents of this hard-line policy are sitting comfortably abroad while urging the rest of us to hold fast. In his invitation to General Musharraf, Mr Vajpayee talks about the need to resume the "composite dialogue" between the two countries. This makes sense: to focus exclusively on Kashmir, as many Pakistani politicians and columnists would like, is to ensure the failure of the talks in advance. The issue is too raw and sensitive to be solved overnight. There must be a cooling off period in which the killing stops and the hysteria subsides for any breakthrough to occur. Kashmir can be put on the back burner while mundane matters like trade and travel are sorted out. After all, if we have been unable to resolve this thorny issue in all these years, it can surely wait a bit longer. What should take priority is to reach an understanding on matters that are not so bitterly disputed so that we can change the atmospheres in the subcontinent, replacing accusations and artillery shells with discourse and reason. I realize this is expecting too much of generals and politicians on both sides, but then too much is at stake not to demand that they put their petty prejudices and pride aside when they sit down to parley. The one big favour General Musharraf and Mr Vajpayee can do themselves and the rest of us is to leave their tired, hackneyed foreign office briefs behind. The Kashmir dispute has held well over a billion people of South Asia hostage for far too long. It has not allowed SAARC, the regional grouping, to even approach its true potential; it has prevented the people of this vast subcontinent from travelling freely; and it has made us all a laughing stock in a world that is shooting ahead while we remain mired in old enmities and sterile territorial disputes. Enough is enough. It is time to move on and open a new chapter in South Asia.
SPORTS 20010602 ------------------------------------------------------------------- Thorpe, Vaughan make Pakistan bowlers toil ------------------------------------------------------------------- MANCHESTER (England), June 1: Graham Thorpe was left stranded on 98 not out when rain interrupted his unbroken stand of 189 with Michael Vaughan as England battled back into the second Test against Pakistan on Friday. The home side, tottering on 15 for two at one stage, reached 204 for two in reply to Pakistan's first innings of 403 before rain ended play on the second day with 65 minutes left at Old Trafford. The left-handed in-form Thorpe, targeted by the touring side as the key to the England batting after making 80 in the first Test at Lord's, hit one six and 12 fours during his 224-minute innings. Vaughan was 84 not out, having hit 11 boundaries and batted eight minutes longer than his partner. The bad weather will upset the touring side more than their opponents. Pakistan need to win to square the two-match series after being routed by an innings and nine runs at Lord's, and they set out their stall on the opening day, scoring at more than four an over as Inzamam-ul-Haq led the line with 114. Thorpe and Vaughan, however, almost proved his equal as the test rattled along at one-day pace, only slowing when conditions deteriorated after tea. Earlier, England's openers Marcus Trescothick and Michael Atherton had fallen with the score on 15 and within the space of eight balls, Trescothick bowled by Wasim Akram as he played defensively across the line for 10 and Atherton snicking a catch behind off a Waqar Younis off-cutter after making five. Thorpe and Vaughan, newly installed as England's number three, provided a nice contrast in styles, the Surrey batsman launching himself into a series of square cuts while the Yorkshireman relied more on sweetly-timed drives. Thorpe began his innings forcefully if unconventionally, opening his account with a top-edged six over the slips off Waqar. The pair put on 50 off 49 balls, Thorpe reaching a 71-ball half-century which included 38 in boundaries by cover driving off-spinner Saqlain Mushtaq to the fence while Vaughan reached his 50 from 79 deliveries. Vaughan played only a couple of false shots against Saqlain, finding a leading edge as he tried to turn to leg and then dragging an inside edge just past his stumps. But his performance, bettering his previous best test score of 76 against West Indies at Headingley last year, suggested England's injured captain Nasser Hussain will not be returning to the number three position after agreeing to promote Vaughan above him. The batsmen's dominance of the opening two days has been amply reflected in the number of boundaries rattling the boards. Pakistan scored more than half their runs in boundaries - 230, made up of 53 fours and three sixes - while England have hit 24 fours and one six. Pakistan had resumed the day on 370 for eight, adding 10 before Rashid Latif was dismissed for a test-best 71, including 10 fours. He was run out by a direct throw from Trescothick at gully. Darren Gough ended the innings by trapping Waqar lbw for five. Caddick, Gough and fellow pace bowler Matthew Hoggard all took three wickets.-Reuters DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010601 ------------------------------------------------------------------- Pakistan, India set on peace path, says Advani ------------------------------------------------------------------- NEW DELHI, May 31: Indian Home Minister Lal Krishna Advani, the cabinet number two, said on Thursday Pakistan's positive response to India's invitation to talks had set them on the right course for peace. Advani spoke favourably of the correspondence between the Indian premier and Chief Executive Gen Pervez Musharraf. "Prime Minister Atal Behari Vajpayee's letter to him (Gen Musharraf) and his positive response to it indicates that talks will begin and we shall make good progress," Advani was quoted by the Press Trust of India as saying. He was addressing a ceremony of the Indo-Tibetan Border Police Force (ITBP) in occupied Kashmir at Leh, 400 kilometres from Srinagar. Advani, however, promised there would be no let-up in fighting the Mujahideen in held Kashmir. In his response to Vajpayee's invitation, Gen Musharraf said he wanted to "overcome the legacy of distrust" between the two countries. He said the Kashmir dispute was the fundamental cause of tension and needed to be discussed candidly along with "all other outstanding issues". Vajpayee said on Wednesday he was satisfied by Gen Musharraf's reply. SUMMIT: The proposed Pakistan-India peace summit in New Delhi is unlikely to take place before mid-July because of Indian Prime Minister Atal Behari Vajpayee's upcoming knee operation, cabinet spokesman Pramod Mahajan said on Thursday. Vajpayee will undergo an operation on his right knee in Mumbai on June 7. His left knee- joint was replaced in similar surgery back in October. "Last time it took 10 days in the hospital, after which it will take around three weeks for him to be able to walk normally," Mahajan said while talking to reporters after a cabinet meeting.-AFP DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010530 ------------------------------------------------------------------- Political uproar puts BCCI in a spin ------------------------------------------------------------------- NEW DELHI, May 29: India's cricket chiefs were left red-faced on Tuesday after the government questioned their plans to play a Test match in Pakistan for the first time in 12 years. "I think we are back to square one," an official with the Board of Control for Cricket in India (BCCI) said. "It's all very confusing. I am not sure when we will play against Pakistan again." The BCCI, taking refuge in an official directive that permitted cricket matches against Pakistan in multi-nation events, agreed to play across the border in the Asian Test Championship. The India-Pakistan match in the championship, which also features Sri Lanka and Bangladesh, was scheduled to be played in either Lahore or Karachi over Sept 13-17. Not only did the BCCI publicly confirm that India would take part, but it also signed up to a new Asian Cricket Council (ACC) ruling that imposes hefty fines on teams refusing to play a match. Sports Minister Uma Bharti, however, stunned cricket officials on Monday by saying the BCCI had jumped the gun in announcing India's participation in the Asian Championship. "The BCCI should not take the liberty of making such announcements," she said. "To play in Pakistan, the BCCI has to first give a written proposal to the sports ministry which in turn would forward it to the foreign ministry. The final decision rests with the foreign office," Bharti said. The BCCI's fears were confirmed by Foreign Minister Jaswant Singh, who told a press conference Monday the government was not in favour of resuming cricketing ties between India and Pakistan. "Cricket matches between the two countries were less cricket and more of a gladiatorial contest," Singh said. The BCCI official, who requested anonymity because he did not want to "get into trouble," said the sports ministry's flip-flop was tarnishing India's image in international cricket. "One day they say we can play against Pakistan in multi-nation events, now we hear something else," the official said. "We agreed to the Asian Test Championship because we have a written directive from the sports ministry about multi-nation events. "The Asian Championship is not only about India and Pakistan. There are Sri Lanka and Bangladesh also to contend with." If the proposed India-Pakistan Test come about, it will be India's first on Pakistani soil since 1989. The two sides played three Tests in India in 1999 despite unsuccessful threats from Hindu fundamentalists to disrupt the matches. India cancelled a scheduled tour of Pakistan in December and then twice pulled out of the Sharjah limited-overs series in the United Arab Emirates.-AFP DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS*DWS 20010527 ------------------------------------------------------------------- Waqar hails Indian decision ------------------------------------------------------------------- LONDON, May 26: Pakistan cricket captain Waqar Younis has welcomed India's decision to take part in the Asian Test Championship in September. Waqar, currently leading the side on a two-Test series in England, said he was delighted the Indian government had not blocked its Test team from travelling to Pakistan for the first time in 12 years. "I have been looking forward to playing India in Pakistan for two or three years," he said. "It's a welcome decision by the Indian government. It's good for Asian cricket." The tournament, also involving Sri Lanka and Bangladesh, takes place between September 2001 and February 2002. Pakistan are expected to host India at Karachi. The two teams last met in India in early 1999 but India's last Test series in Pakistan dates back to 1989. Earlier this year the Indian government refused to allow bilateral matches, although it has not blocked meetings within multi-team tournaments. Former Pakistan captain Wasim Akram, also on tour in England, added: "The Indian government has now realised that sport and politics should be kept apart. It's for the sake of millions of cricket fans from both countries."-Reuters ------------------------------------------------------------------- You can subscribe to DWS by sending an email to <subscribe.dws@dawn.com>, with the following text in the BODY of your message: subscribe dws To unsubscribe, send an email to <unsubscribe.dws@dawn.com>, with the following in the BODY of you message: unsubscribe dws ------------------------------------------------------------------- Back to the top.
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