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BUSINESS Saturday, 14 September, 2013
Moot held under EU funded TRTA-11 to investigate changes in FDI Regulations KARACHI: Better investment policies are the key to promote investment in the country, said Ms. Rabyia Javeri Agha, Secretary Trade Development Authority of Pakistan (TDAP) while addressing the inaugural session of the training workshop on 09 September on “Trade and Investment” organized at Karachi under the European Union funded TRTA II programme. She mentioned that trade and investment are two sides of the same economic coin and the countries that are integrated in the global supply and investment chain would be the driver of future economic growth. She emphasized that Pakistan needed to become one of those nations by building its capacity and becoming a reliable supplier of goods and services. She further informed the audience that Pakistan has executed Bilateral Investment Treaties with 47 countries and 52 agreements for avoidance of double the EU funded TRTA II programme is implemented by the United Nations Industrial Development Organization (UNIDO) in association with the International Trade Centre (ITC) and World Intellectual Property Organization (WIPO). The training course is jointly conducted by ITC and PITAD in collaboration with TDAP Karachi. The program has three main components where Component 1 is about trade policy capacity building. The training is delivered by Professor Julien Chaisse from the University of Hong Kong. PRESS RELEASE
Pepsi-Cola Pakistan-BURGER KING Restaurants signing deal LAHORE: Jahanzeb Khan Country Head, Pepsi-Cola Pakistan & Afghanistan and Maryam Hassan Chief Executive Officer MCR Pakistan (Pvt) Limited signed an exclusive agreement for supply of carbonated and noncarbonated beverages to BURGER KING in Pakistan. The ceremony was attended by senior leadership teams from both organizations. Burger King is opening its restaurants in Pakistan, starting from Karachi most probably from next month. Pepsi-Cola Pakistan is the leading beverage company in Pakistan, which is an important emerging market for PepsiCo. Pepsi-Cola is a household name that offers a wide range of products like Pepsi, Mountain Dew, 7UP, Mirinda, Sting, Slice and Aquafina in Pakistan. The company enjoys a leading position in CSD and energy categories and is a strong challenger in juice drinks and water categories. PRESS RELEASE
Business is never so healthy as when, like a chicken, it must do a certain amount of scratching around for what it gets. –Henry Ford
SBP raises rate for first time after IMF loan REGULATOR TIGHTENS MONETARY POLICY TO CURB INFLATION
IMF HAD SUGGESTED EASING INTEREST RATE TO LURE FOREIGN INVESTORS
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ISMAIL DILAWAR
OvING quite in contrast to the market sentiments, the State Bank of Pakistan on Friday increased the cost of borrowing by adding 50 basis points to the current 9 percent discount rate. The rate-hike also goes against the inducement of the IMF that had proposed monetary easing to draw foreign investment, something the dollar-hungry country needs as a permanent source of foreign exchange. The central bank instead focused more to curb the burgeoning backbreaking inflationary pressures in the country. As the analysts described it, the unexpected and rapid increase in inflation, driven mainly by rising trend in international oil prices and devaluing rupee, has been a major factor behind the increase in the discount rate. The new policy rate would take effect from Monday, Sept 16. The decision to raise the policy rate was taken at a meeting of the SBP's Central Board of Directors held at SBP under the chairmanship of SBP Governor Yaseen Anwar. "Fundamental issues for sluggish long-term economic growth in Pakistan such as weak economic management and low productivity had largely remained unaddressed," said Anwar while unveiling
the Monetary Policy Statement (MPS) for the next two months during a press conference at the SBP. He said the “economy has experienced bouts of growth and stable inflation but a sustainable performance has remained largely elusive”. According to the SBP governor, a relentless increase in fiscal borrowings and a secular decline in both domestic and foreign investments are only symptoms of structural issues. “The role of monetary policy was always going to be limited in this environment; both in terms of keeping inflation low and stable and supporting private investment activity. However, in the wake of considerable deceleration in inflation over the last two years, the SBP did lower its policy rate by 500 basis points.” Anwar said the SBP also intervened in financial markets by imposing a minimum savings deposit rate at 6 percent and containing volatility in the foreign exchange market. It also calibrated its liquidity operations in a manner that balanced financial stability considerations and medium-term inflation risks. As a result of these actions, he said the weighted average lending rate declined by 423 basis points by end-July 2013 while deposits of the banking system grew by 15.9 percent and the depreciation of exchange rate was limited to 5.1 percent in FY13. He said the real private investment ex-
penditures have declined for the fifth con- stock of energy sector circular debt, reducsecutive year, reaching 8.7 as percent of tion in electricity tariff related subsidies, GDP in FY13. He said higher interest rates and introduction of some taxation measwere not the major constraining reason for ures the new government has shown intentions to address deeper issues the priafflicting the fiscal accounts. vate secRegarding the external sector, tor credit the SBP governor said the off-take, stress has gradually increased adding with every passing month of that two 2013 due to shrinking net cap“fundaital and financial flows and mental high loan repayments to the factors reIMF. Anwar said despite these sponsible pressures and speculations of a for the drop in the value of the Pak lackluster rupee the foreign exchange increase market had largely remained in credit stable in FY13. He said the demand likeliare: perhood of sistence SBP Governor Yasin Anwar receivof energy i n g shortages higher and deterioration in law and order condifinantions”. He said the increase of Rs1.446 c i a l trillion in budgetary borrowings from the flows banking system during FY13 was almost has inRs 1 trillion higher than the original target creased and was even higher than the total expangiven sion in M2. “Deviation of this scale has significantly constrained effective mone- that a new IMF program has been aptary management, disrupted financial inter- proved for Pakistan in September 2013. mediation in the economy, and has led to a This would ease pressure in the foreign exchange market. Anwar said the impact of sharp increase in domestic debt,” he said. Anwar said that the inability to raise upward adjustments in energy prices on inthe tax-to-GDP ratio was the fundamental flation outlook cannot be under-estimated. source of large fiscal deficits, high borrow- In addition to having a direct effect on CPI ings, and rising debt. He further said that inflation, there is a high likelihood of conwith swift settlement of the outstanding siderable indirect effects as well, he added.
Fundamental issues for sluggish long-term economic growth in Pakistan such as weak economic management and low productivity had largely remained unaddressed.
Stocks market ‘shocked’ over unexpected rate hike BANKS BIGGEST BENEFICIARY OF POLICY RATE HIKE KARACHI STAFF REPORT
Banks will benefit the most as the central bank Friday added 50 basis points to 9 percent discount rate (DR). The upward revision, the analysts believe, was contrary to the market expectations, especially those on the stocks market. It has been approximately 32 months since the policy rate hike was witnessed at 14 percent in January 2011. "SBP's higher inflation outlook shocked market participants who were relying more on government-IMF agreement and expecting no change," said Mohammad Sohail, senior equity analyst and chief executive of Topline Securities. Moreover, he said senior government officials and not the SBP officials, statement of no change gave conflicting
An unexpected and rapid increase in inflation, mainly due to the rising trend observed in international oil prices coupled with depreciation in PKR against USD, has been a major factor behind the increase in discount rate. InvestCap analyst Abdul Azeem signals to the markets. "Time will tell when and for how many months inflation remain above 9.5 percent," said the stocks broker. InvestCap analyst Abdul Azeem commented that an unexpected and rapid increase in inflation, mainly due to the rising trend observed in international oil prices coupled with depreciation in PKR against USD, has been a
major factor behind the increase in discount rate. The SBP expects inflation for the FY14 between 11 and 12 percent. The SBP's decision to increase the DR would not bode well for the equity markets, especially for highly leveraged companies. "We predict the cement sector to be the worst affected by this move; similarly the textile sector and Engro from the fertilizer sector would have a negative impact on their valuations largely due to increase in cost of borrowing eroding the bottomline," said Azeem. However, the banks are expected to be the main beneficiary due to improved spreads after increase in DR. "Also, we reiterate a positive stance on the E&P and power sector consequent to the rising oil prices and negligible debt exposure," the analyst said.
Govt working on long term power projects: Khwaja Asif ISLAMABAD: Federal Minister for Water and Power Khwaja Asif has said that the government was working on long term power projects to generate 20,000 MW for overcoming power crisis within five years. PTV, he said that government had decided to introduce modern technology such as smart meters to overcome electricity pilferage in the country, adding that legislation had also been made for effective campaign against power theft. To a question, he stressed the people to avoid extra usage of electricity. He said that about 2500 MW electricity could be saved by checking power pilferage and extra usage. He said that Gomal Zam Dam project in South Waziristan was completed at a cost of Rs 22 billion, adding that it had capacity to produce 17.4 MW electricity. The Minister said that government was paying attention to generate electricity through coal as it was a cheaper source of energy production. APP
ECNEC APPROVES 10 PROJECTS WORTH RS 51,791M ISLAMABAD APP
The Executive Committee of the National Economic Council (ECNEC) in a meeting at the Prime Minister’s Office on Friday approved 10 developmental projects amounting to Rs 51791.435 million. The meeting of the Committee was held under the Chairmanship of the Finance Minister, Senator Muhammad Ishaq Dar. The ECNEC which had earlier constituted a committee under the chairmanship of Minister for Planning and Development, Ahsan Iqbal, to review the Kachi Canal Project was informed that the committee had decided to visit the site to ascertain the
progress tomorrow. The field visit report would be submitted to ECNEC later. Three projects in Khyber Pakhtunkhwa will be completed with a total funding of Rs. 7160.16 million, while the allocation for one project in Sindh is Rs.2094.747 million, with one project amounting to Rs.4795.80 million in Balochistan, while two projects amounting to Rs.10116.288 million and three Federal Projects amounting to Rs.27684.260 million were also approved by ECNEC in its meeting. The project Reconstruction of Nawabshah-Sanghar Road was approved by ECNEC with the condition that if it would not attract funds from donors/agencies the entire cost would be borne by the Govern-
ment of Sindh. It envisages reconstruction of the existing 61 km road along with the improvement of existing culverts and bridges to improve the existing road width ranging 6-7.3m to 7.3m with 2.5m wide treaded shoulders on both sides. The Dirgi Shabozai (N-70) to Taunsa Sharif road construction project was also approved on the condition that the Balochistan Government would allocate Rs.250 million in its current budget for 2013-2014, while the Federal Government would include its share in the budget 201415 for the project. The plan had been lingering for the past four years, and would reduce the distance between Punjab and Balochistan by 90 kilometers.
ISLAMABAD: Federal Minister for Finance Senator Mohammad Ishaq Dar chairs a meeting of Executive Committee of National Economic Council. Online