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profit.com.pk
Thursday, 08 March, 2012
UAE willing to start Khalifa Refinery Project in Pakistan g
Project involves an investment of $6 billion g Pakistan demands 6-month plus multiple visa for businessmen g Pak-uAe Business Council to be set-up to enhance trade, investment KARACHI
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JAVED MAHMOOD
AkISTAN’S Ambassador to United Arab emirates Jamil Ahmed khan said UAe was willing to start its khalifa refinery Project in Pakistan, involving a huge amount of $6 billion investment. “The project was lingering on due to different reasons, but in a recent Joint Ministerial Commission (JMC) of Pakistan and United Arab emirates (UAe) in Dubai, UAe has expressed its willingness to start work on this mega project,” Jamil khan said while talking to senior journalists and FPCCI representatives at Federation House on wednesday. khan gave a comprehensive presentation to FPCCI representatives about potential of trade and investment in UAe and progress relating to recent meeting of Pak-UAe Joint Minister Commission (JMC). He said establishment of a 500Mw power project was also part of the khalifa refinery Project. According to history of the project, the proposed khalifa Coastal refinery will be established in khalifa Point at Hub, Balochistan, near Gaddani coastal area. It would span on 1,800 acres and will be the largest single foreign direct investment ever, if the project is materialised. The project had been put on hold several times since 2007 due to various issues, like lack of gas supply, security, poor governance and circular debt, which has affected IPIC’s other investments in Pakistani energy sector. The refinery will have a capacity of 250,000 barrels per day, equal to 13 million tonnes of petroleum products per year. The project was approved by the government of Pakistan in October 2007, but it could not be initiated due to various reasons.
LAHORE
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STAFF REPORT
TANDArD & Poor’s, one of the two biggest global rating agencies, released a report on Tuesday on the “Asia-Pacific Sovereigns,” labelling it as “mixed outlook in an uncertain year”. Analyst, Agost Benard, who follows Pakistan for S&P warns, “we could lower the rating, if major slippages in policy occur, resulting in renewed balance-of-payments difficulties or rising public debt trajectory.” He asserts, “while the upside potential is currently limited in our assessment, we could raise the rating if Pakistan shows progress in its fiscal consolidation efforts, evident through moderating fiscal deficits and a steady reduction in public debt.” Pakistan has been rated at B-/Stable/C; T&C B-, recovery 3. The last rat-
Owners of the refinery will be Pak-Arab refinery (PArCO 24 per cent) and International Petroleum Investment Company of AbuDhabi (IPIC 76 per cent). Pakistan’s Ambassador to UAe Jamil khan further said UAe had also extended its support to Pakistan to finalise the Free Trade Agreement (FTA) with Gulf Cooperation Council (GCC) that would prove a breakthrough in Pakistan’s economic and trade ties with GCC. GCC is a member organisation of countries situated in the Gulf and it is just like the european Union. “In the upcoming third meeting, expected in April, we will try our best to achieve the task of signing FTA with GCC,” he added. Once we achieve this task, Pakistan will be able to increase exports to GCC. Mr khan said Pakistan had demanded uniformed tariff of 5 per cent on exports to GCC. At present,
he said, different countries in the umbrella of GCC charge different tariffs on exports from Pakistan, ranging up to 10 per cent, excluding additional duty and tariff. He said after the signing of FTA, Pakistan is expected to get uniform tariff and may be lower than the existing tariff of 5 to 10 per cent. He further pointed out that during recent JMC, Pakistan had asked UAe officials to provide multiple visas to business for more than six months period. He said UAe had reduced the timeframe of multiple visas from six to three months for all countries in the world, but Pakistan had demanded relaxation in this condition and more than six months multiple visa for the businessmen. Pakistan’s ambassador to UAe also said during recent JMC that both countries have decided to form a joint Business Council platform to
promote their economic and trade ties. Pakistan and UAe would soon nominate 10 members each for formation of the council, he added. He urged FPCCI representatives to explore trade and investment avenues in UAe that imported about $160 billion dollars goods in 2010 and exported products worth $250 billion. Quoting an international study, Mr khan said by the year 2020, trade flows between the Gulf region and China could soar to $350 billion (from $59 billion in 2005). Meanwhile, he said, JP Morgan estimates that the global liquidity has increased by $3.9 trillion in GCC from 2002 to 2009, of which around 50 per cent came from Asia and 40 per cent from the oil producers. He said there was enormous potential of growth in trade with GCC, especially United Arab emirates.
S&P releases report on Asia-Pacific Sovereigns ing/outlook change was done in Aug 24, 2009, when the rating was raised to ‘B-’ from ‘CCC+’ with a stable outlook. S&P said it continued albeit slower economic growth in 2012 (in the region) which was one reason for its stable outlook on a majority of Asia-Pacific sovereign ratings.However, it expected challenging global outlook to be complicated by domestic political issues in the year ahead. The rating agency covers more than 20 countries in the report, including Pakistan. In regard to his comments on Pakistan politics, the analyst clearly needs to be updated. He cited major ‘weaknesses’ as “Political instability and security risks.” The analyst says the “Near-term risks of major political insta-
bility have risen over the past several months as a three-way tussle between the judiciary, executive, and the military plays out. In an apparent effort to assert its independence, the Supreme Court has indicted Prime Minister Yusuf raza Gilani for contempt of court for not acting on a ruling to reopen corruption charges against incumbent President Asif Ali Zardari.” And S&P analyst goes on to speculate “If the proceedings result in Mr Gilani being forced out of office, it would not necessarily result in the collapse of the government, in our view. However, already-low government effectiveness would weaken further, and the likelihood of early elections, which are scheduled for 2013, would increase.”
In regard to the country’s economy, S&P analyst, Agost Benard reported that the pressures on balance of payments that the rating agency had foreshadowed earlier were now becoming apparent, but the reserves cushion remained adequate for the time being. For the July–December 2011 period, the current account registered a deficit of $2.4 billion, compared with a surplus of $8 million for the same period a year before. while remittance rose by a healthy 19.5 per cent year on year for the period, this could not offset the 32 per cent expansion of the trade deficit. In the capital account, FDI flows declined further, falling 36.6 per cent in the second half of 2011 to just $532 million. The overall balance of payments thus
QuiCk edit
Cotton, dissecting interests and profitability
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ew Delhi’s decision to ban cotton exports (to protect indigenous production) and subsequent supply contraction in the international market epitomises the machinations of slowing, post-recession, emerging Asia. The first spillover effect on Pakistan, considering resulting price distortions, will be a welcome bid in exports, which should be handled carefully, rather than lament violation of free market scruples. when the bulk of the international economy is in the process of bottoming out of a severe recession, protecting comparative advantage is paramount. It is simply foolish to expect authorities not to interfere in times of record quantitative easing. One, India being the world’s second largest cotton producer and China the largest importer, Delhi’s supply crunch will push China to look for alternates. This should already have prompted the Pakistani commerce ministry to exploit a potential windfall opportunity. Two, ever since cotton prices crashed in the international market, following last year’s unprecedented price rise, Pakistan’s trade balance has come under immense strain. Combined with aid rollback and slowing growth, cotton depreciation was pushing Pakistan’s deficits into very dangerous territory. New demand-supply and price dynamics might just provide some face saving. But even more importantly, the hazards of a narrow export basked must already be pretty apparent to relevant authorities. Just as rising prices often save the day for Islamabad, cyclical collapses run the risk of retarding the entire economic growth engine. As exports are apparently saved again, we must finally re-visit the trade regime very seriously, especially since our traditional export markets as well as products are increasingly compromised. europe’s slowdown will keep meaningful export increases at bay, while a Chinese hard landing will erode much of the commodity’s international market demand. we must improve manufacturing and industry, and diversify our export mix. That is the only sure way of increasing profitability.
registered a deficit of $1.8 billion, compared with a surplus of close to $1 billion a year ago. In the year ahead, the current account should get a boost from the recent decision by eU to allow duty free access for 75 products from Pakistan for a two-year period. Debt service commitments for the one-year period from this January amounted to $2.4 billion (amortisation plus interest), which was a manageable burden against foreign reserves of $17.1 billion as of January 2012. external liquidity thus remained adequate, but could become a pressure point in the event of an exogenous shock or if donor inflows diminished, S&P observed and presented its ‘Outlook’ for Pakistan: “The stable rating outlook balances adequate external liquidity against vulnerability stemming from ongoing structural fiscal weaknesses and significant political and security risk”.