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profit.com.pk
Saturday, 31 March, 2012
cOmment
Oil will remain a problem
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Negative list to be phased out by December 2012 g Deals begin to shape up amongst businessmen of Pakistan and India g
KARACHI
F
GHULAM ABBAS
oR the first time in the over 60 years history of Indo-Pak relations, the businessmen on both sides have seriously started talks/deals after the expected phase out of negative list of trade by the end of this year. the traders, exporters and importers in the two South Asian neighbors have started making trade deals and future planning in various sectors in view of the opening of border for business by December 2012 as the government has announced to normalize bilateral trade. the concerned people from all those sectors which directly or indirectly are expected to be affected by the imports from the neighboring country, have also started taking measures aimed to save their sectors as the government and specially Ministry of Commerce decided to keep the list no more affective by the end of this year.
though the ministry has notified over 1200 items in the negative list on the request of various sectors but all the said items would be importable after the announced phase out timings. Despite the reservations of various industries including auto, pharmaceutical, rice and others, the cabinet has approved the summery forwarded by the ministry okaying the phase out plan. As the trade normalization process nears, the sources claimed that the exporters and importers on both sides of the birder have started interactions with their counter parts. Interestingly, the import of rice from India, where the product is comparatively cheaper, has already started via Azad Kashmir. According to sources, various companies of Monocycle manufacturers/assemblers have almost finalized planning to import parts from India, which would later be reassembled in the country as the Indian motorbikes were comparatively cheaper. Besides, the sources said, the Indian
motorbikes would have more verities and value addition as compared to the existing vehicles in the country. Apart from the giant motorbikes manufacturers like honda and Suzuki, the small groups and companies of the sector were likely to go for imports from the neighboring country. on the other hand, sources claimed, Nokia products, which were mainly assembled/manufactured inChina nad later imported to Pakistan would also do the same business from India. this way, they said, the Nokia cell phones would be cheaper by Rs 200 to Rs 300/ set as compared to the existing prices in the country. Interestingly, the rice exporters of the country who were against the trade normalization process have also reportedly changed their minds after the sudden hike in price of the product in international market. According to rice exporter the prices of the highly consumed commodity has jumped by 15 percent in international
markets despite of the lower price of Indian rice. the price of Basmati in local markets was also increased by 10 percent approximately. the exporters, who were fearful about the influx of Indian cheaper rice in the local market, were seen confident of its share in the international market after the jump in price. they, sources claimed, were now thinking of having trade links with the Indian rice exporters and importers. According an exporter, who did not want to be named, said that over 300 businessmen from various sectors were planned to visit New Delhi next month during the scheduled event of “life Style Pakistan’ where fruitful Business to Business meetings and trade talks were likely be held with their counters parts in India. According to sources almost 300 exhibitors have applied for Indian Visa while another 100 businessmen were also scheduled to attend the forthcoming important event in Delhi.
RENt crude is likely to remain bid in the international market for at least the foreseeable future, another fine example of how exogenous shocks can hold our fragile economy hostage at any stage. And considering our overwhelming reliance on imported fuel, consumers must brace for repeated price shocks across the board (oil being an essential input in far too many processes). Normally one would expect the post 18th amendment environment to feature provincial governments stepping in to provide subsidy, but seeing bloated deficits and shrinking revenue, not to mention disappointing incompetence in the wake of devolution of power, there’s little chance of prices not rising. Moving from what should be done to the more practical what can still be done, the government must at least heed ogra’s advice of posturing towards long term contracts. Apparently the regulatory authority is up to speed on reasons for oil’s abnormal bull run in the absence of justifying demand-supply dynamics. the reason is geopolitical uncertainty – Iran war, arab spring, revolutions in Africa’s commodity producers – that is near impossible to factor in using conventional risk management procedures. If we are to watch our interests, we must bypass unforeseen fluctuations and set long term prices. As geopolitical risk premium increases, so will futures contracts, so the sooner we get a handle on the price issue the better. It might just provide a little price stability in the non-energy market as well. At the risk of repetition, outside factors assume existential financial proportions only when deficits are swollen out of control. And that, more often than not, especially in economies like ours, reflects more a failure of the incumbent than just trying times. In the macro framework the oil phenomenon is only about as relevant as the PSE debate. All centre on, or encroach upon, the government’s fiscal elbow room. So long as its budget is not brought under control, the economy will remain exposed to price shocks, both external and homegrown.
IRSA settles water releases… for now g
Provincial discord likely if water inflows did not improve ISLAMABAD
A
AMER SIAL
lthough the Advisory Committee of the Indus River System Authority (IRSA) on Friday amicably resolved the issue of water releases for the early Kharif period but with estimated water losses of 40 percent and overall shortage of 10 percent for the current season, the provincial discord on water releases is likely to intensify by the next meeting in late
May if the water inflows did not improve. An official source said that the Punjab raised objection over the estimated 40 percent losses for the season but the other provinces opposed it on the grounds that during low water inflow period the losses were on the higher side. It was pointed out that since the record of inflows and outflows was done manually there was less acceptability of the reliability of the figures. the revival of telemetry system was again stressed at the
meeting. Even Chairman IRSA Mazhar Ali Shah later talking to reporters accepted that telemetry system was required to mechanically access the data. he said that they were considering on reviving the telemetry system. the telemetry system was deployed at a cost of Rs 380 million in 2003-04 to counter the provincial disharmony over the water inflows but the system failed to take off due to number of reasons including providing of substandard equipment by the contractor and non installation of equipment on provincial borders due to law and order issues. About the
water availability for the season, he said, it was estimated at 63.88 million acre feet (MAF), out of which Punjab will be getting 31.65 MAF, Sindh 28.82 MAF, Balochistan 2.56 MAF and Khyber Pakhtunkhwa 0.82 MAF. he said the shortage for the early Kharif period from April 1 to June 10 was estimated to be 20 percent but overall the water shortage is estimated to remain 10 percent during the whole season till September 30. According to the source, Water and Power Development Authority (WAPDA) representatives informed the meeting that the resettlement issues with the
Mangla dam affectees were resolved and the reservoirs would be filled to 1242 feet for this year. the previous maximum level of the reservoir was 1202 feet. they gave a green signal for normal water releases during the early Kharif period as the reservoir will filled to the brim in the monsoon season, July-August period. Representatives of the Met office informed the meeting that the water inflows will start turning normal from April 15 with the rise in temperatures and more water will be coming in the rivers as their catchment areas have received heavy snow during the last winter season.