PRO 31-10-2012_Layout 1 10/31/2012 12:34 AM Page 1
Wednesday, 31 October, 2012
cement exports blocked by Ntbs Cement dispatches to India decline by 16pc during July-Sep FY13 g APCMA wants Islamabad to pressure New Delhi on removal of non-tariff barriers g Manufacturers say trade ties with India should be on equality basis
g
KARACHI
T
STAFF REPORT
HE installed and unutilised capacity of cement industry in Pakistan could be effectively exploited through exports to India that is being granted the status of Most Favored Nation (MFN) provided the non tariff barriers are abolished by the New Delhi. A spokesman of the Association of Pakistan Cement Manufacturers (APCMA) said Islamabad must pursue the case of cement industry which has been facing problems due to non-tariff barriers in India despite increasing demand. He said that cement is one of the industries having potential to help bridging the gap between the volumes of trade between the two countries in which Pakistan’s exports are far less than possible. Hence it will be a win-win situation for the both countries in future if their exports are level and local industries are encouraged to meet the demand of each other’s market through their strong sectors, they added. The spokesman urged that both governments should avail the opportunity and strengthen each other, as Pakistan is best
cement provider to India having lots of demand in the construction sector while its production units are running full capacity. It is an irony that Pakistan liberalized its trade with India last year short-listing few items in the negative list but Indian government, on the other hand, has not fulfilled its promise to withdraw all non-tariff trade barriers, causing hurdles in the free flow of trade between the two countries. According to Chairman APCMA Aizaz Mansoor Sheikh Pakistan’s cement exports to India contracted by 16 percent in the first quarter of current fiscal year to 137,742 tons as against 163,340 tons exported during the corresponding quarter of last year. Sheikh said Pakistan’s cement was preferred by Indians because of high quality and cement sector was expecting a quantum jump of at least 0.5 million tons in last fiscal on easing of NTBs by India, but it did not happen. “Exports to India in fact have been on constant decline ever since the two countries opened their borders for liberal bilateral trade,” he said. The decline is not due to lack of cement demand in India but because of very stringent non tariff barriers erected by our neighbor,” he said adding Pakistan’s cement was preferred by the Indians because of better quality.
Cement exporters having potential to export a big quantity to Indian market are facing a strict resistance by the Indian government as NTB are not removed even after having been specifically mentioned during different rounds of official and unofficial talks between the two countries. The exporters’ issues, including a complex six to seven months process to obtain a certificate from Indian authorities should be resolved on the priority basis because it was committed by the Indian government for having a status of MFN from Pakistan. They mentioned the quality certificate for cement exporters is valid for one year period merely, despite of six to seven months procedural duration. But none of the exporters is allowed to continue their exports after expiry of certificate limit that are needed to get renewal in a brief period. The complicated process of quality certificate holds on cement exports of many companies at a time hence the exports quantity shrinks gradually, they mentioned. The procedures have not been eased by the Indians and the certification cost is very high as the exporters have to bear heavy expenses for the visit and stay over of Indian inspectors. They pointed out that Pakistani and Indian railways could exchange the same number of wagons for transportation of
goods exports however the Pakistani wagon could not carry big cement orders due to restriction by Indian government as a rule of reciprocal. The railways wagons from the Indian side are limited for cement exporters which increases their cost of cement transportation heavily, cement exporters said. The cement manufacturers said Pak-
Debt quagmire gets thicker g
Government’s ‘unfunded debt’ skyrockets by over Rs 100 billion as savers sideline more money KARACHI ISMAIL DILAWAR
Muhammad Ali Jinnah, the founding father of Pakistan, once stated that: “Thrift as a national asset is going to play an important part in the building up of the state. So save and invest in Pakistan saving certificates”. If first quarter of the current fiscal year is any criteria the Qauid’s countrymen, widely believed to have forgotten many of his precious sayings, are following their founding father’s instruction well. The official data for July-September FY13 reveals that during the period under review the crises-hit Pakistanis managed to save over Rs 154 billion under the government-backed National Savings Scheme (NSS). This amount shows a phenomenal growth of 184 percent or over Rs 100 billion when compared with the corresponding quarter of FY12 when the savings under NSS had been calculated at only Rs 54.298 billion. A month-wise account of the savings reported by the State Bank reveals that during the first month of FY13, July, the NSS attracted a huge amount of Rs 27.284 billion as against Rs 19.200 billion in the same month of FY12. August and September were no exception with savers investing, respectively, R s
64.369 billion and Rs 62.738 billion in various government papers under the head of NSS. Last year during these months the NSS had mobilized only Rs 10.786 billion and Rs 24.310 billion. The analysts believe that this savings-prone trend could be of immense significance for the country’s ailing economy, had the saved amount been used by the cash-strapped government for development purposes. Last fiscal year, FY12, saw the countrymen managing to save over Rs 242 billion despite a persistent backbreaking double-digit inflation. The economists, however, warn that these savings are categorized by the government as an “unfunded debt” that has to be repaid to the savers with noticeable returns. During July-June FY12, the cash-strapped government garnered Rs 242.168 billion through selling its risk-free NSS certificates. This amount showed am increase of 3.0 percent or Rs 7.22 billion when compared with Rs 234.943 billion the government had raised in FY11. According to analysts, the funds-starved federal government would be repaying this Rs 242 billion with a profit of 20 to 40 basis points announced by the Central Directorate of National Savings (CDNS) in March this year. The current rate of return on NSS instruments, reportedly, stands at 11.87 percent on Special Saving Certificates (SSC), 12.12 percent on Regular Income Certificates (RIC), 14.28 percent on Be-
hbood Saving Certificates (BSC) and Pensioners Benefit scheme, 12.33 percent on Defense Saving Certificates (DSC) and 8.40 percent on the NSS savings accounts. The economic observers, though positive towards the current upward trend in national savings, are critical of piling up of the heavily-indebted government’s liabilities for the retirement of which the latter was doing no provisioning. “The money that come to the government through saving schemes is a liability and is called unfunded debts,” views Asfar Bin Shahid, a senior analyst. But, the analyst believes, more worrisome was the fact that the government was using these debts without creating a separate fund that could ensure retirement of the borrowed money. “Spending these unfunded debts without doing provisioning… is a dangerous thing,” A.B Shahid warns. He says setting a sort of collateral for these unfunded debts by the government would also provide the investors with a confidence against his/her money. “It’s a kind of Confidence Building Measure that we are apportioning a certain amount to retire your debt,” says the analyst. The provisioning against the unfunded loans, the analyst suggests, becomes easier when the maturity periods have been set in advance for these credits. About usage of the NSS debts, the analyst said, ideally, every penny of the taxpayers’ money should be spent “optimally” for the development purposes, especially in the socio-physical infrastructure side. “Increase in savings is a positive sign no matter where the money is being preserved or channeled into those sectors where it could generate economic activity,” Shahid opines. A recent history of the government “unfunded” borrowings through NSS instruments shows that the saving certificates had fetched the government over Rs 224.767 billion in FY10, Rs 267.223 billion in FY09, Rs 86.639 billion in FY08, Rs 67.651 billion in FY07 and Rs 6 billion in FY06. The investments in NSSs, which amounted to a meager Rs 6 billion in FY06, surged by over 1000 percent in FY07, over 28 percent in FY08 and over 208 percent in the recession-hit FY09 and then dipped by 15.8 percent in FY10. And, in FY12 a recovering global economy seems to have restored the investors’ confidence who bought saving certificates worth Rs 242 billion. On March 30, the federal government had marginally raised returns on various saving instruments under the NSS with effect from April 1 in line with recent increase in the yields of Pakistan Investment Bonds.
istan should cement trade ties with India on equality basis rather than giving easy access to Indian company in the exchange of nothing in the presence of NTBs. They demanded the government to raise the issues of NTBs before Indian government for immediate solution and allow Pakistani cement makers to explore markets in all potential provinces on priority basis.
IMF’s bInoculars
No change in global financial structure ISLAMABAD ONLINE
The International Monetary Fund(IMF)has said that change in the global financial structure is not visible yet, in part because policymakers and bankers have delayed implementation of reforms in some places. In a speech to the Canadian International Council International Monetary Fund Managing Director Christine Lagarde said the world’s financial system remains weak and policies in the major advanced economies have not been sufficient to rebuild confidence. In setting out the challenges facing policymakers and bankers, Lagarde said banks are still weak in many countries. As a result, many borrowers still face very tight borrowing conditions. This creates a feedback loop of tight credit that stifles investment and growth. At its recent Annual Meetings in Tokyo, the IMF released its latest Global Financial Stability Report, which said risks to financial stability have increased and financial markets remain volatile as the crisis in Europe continues.Lagarde urged action on the financial reform agenda given the high price the crisis has taken on economic growth. “The financial sector the source of this crisis is holding down the recovery in key parts of the global economy,” said Lagarde. “Considering the staggering economic and human costs over the past six years, we must do whatever it takes to make sure this does not happen again.” The IMF recently assessed reform progress as part of the Financial Stability Report, and found that reforms are heading in the right direction, but they have not yet delivered a safer financial system. Also, IMF staff recently conducted a study on the costs of regulatory reform and found that the likely long-term increase in borrowing costs would be about one quarter of one percentage point in the United States, and lower elsewhere. Lagarde said Canada has one of the strongest financial sectors in the world. While it faces its own challenges, there are important lessons the country can teach the rest of the world about how to build a stronger, safer financial system.