Nationwide Updates

► Globalisation slows down amid national concerns

During the last few decades, the world had moved towards growing global economic integration that served to bring different countries closer to one another. In 1944, Bretton Woods Conference resulted in the creation of International Monetary Fund (IMF), World Bank (WB) and predecessor to World Trade Organisation (WTO). In 1989, World Wide Web was created, integrating the whole world into one single unit, through the Internet. During the same year, the Berlin Wall fell and socialist countries started switching over to market economy. The decade of 1990's brought with it policies of deregulation, liberalisation and privatisation and economic reforms were launched in many countries including Pakistan and India, to open up the economy and boost foreign investment.  (The News)

► Of markets and their imperfections in Pakistan

International donor agencies have a set prescription for reform: allow the market to set the price; dictation of price through government decree is what these agencies are almost congenitally opposed to. They allege that by interfering in the market mechanism through either setting a minimum or maximum price, whatever the case maybe, leads to distortions to the long term detriment of the consumer. Therefore the market is considered the best adjudicator of the price of a commodity. This approach conforms to classic economic theory. The market has the inherent capacity to bring equilibrium to the price of any commodity through stabilising at a point where supply equals demand.  (Business Recorder)

► Imposition of 35 percent margin on import LC opening criticised

Fawad Ijaz Khan, Chairman, Plgmea has condemned the decision of SEP to impose 35 percent margin on all L/C opening for imports. Fawad said that there is acute shortage of raw material especially leather in local market and exporters of leather garments have to import raw and wet blue leathers. They open L/C ranging from 60-120 days. The discount rate has also been raised by SBP. The prices of leather have risen sharply besides costs of other inputs. This additional financial cost will affect leather garments exporters, which have been showing sign of improvement.  (Business Recorder)

► Stuck in rough waters

It is getting ugly out there. The private sector says they find business pages of newspapers pretty depressing. The government needs to generate positive economic news to nurture positive sentiments among key economic players. If law and order and the rising cost of living have driven masses up the wall, the hike in the cost of doing business and political uncertainty are dampening prospects of much-needed investment in agriculture and manufacturing sectors. “Use your connections to get oil facility, charm overseas investors to invest in infrastructure, sell the new image of a democratic Pakistan to European Union and get as much support as possible to bridge social sector deficit.  (Dawn)

► An abrupt and belated move

Last Thursday, the State Bank appeared to have woken up to the fact that the country was facing high inflation and increased the benchmark rate by a record 150 basis points. This followed the earlier four hikes of 50 basis points each in April 2005, July 2006, July 2007, and January 2008. These abrupt and harsh measures could undermine the credibility of the bank. The State Bank Governor’s statement contained many contradictions that need careful examination but the knee-jerk nature of the measures point to a major shortcoming: the bank failed to anticipate the rapid deterioration in inflation, growth and other key macro indicators.  (Dawn)

► Support policies for a turnaround 

THE business confidence of the textile industry was somewhat renewed after two top textile tycoons, Bashir Ali Mohammad and Tariq Say eed Saigol were included in the Economic Advisory Council. They were expected to play a meaningful role in the continuation of the existing support policies and a possible restructuring of the existing textile sector’s debt. But the State Bank’s decision to further tighten the monetary policy—the increase in the policy rate from 10.5 to 12 per cent --- has once again upset the textile industrialists. The industry is seeking to retain all financial incentives and concessions in lending rates for at least ‘next two fiscal years’, to enable it to work for a turn around.  (Dawn)

► A challenge to economic resources and the environment

The concept of 'Striving towards a more equitable Pakistan' is one which is fundamental to the stability of Pakistan. It is not only a potentially effective concept but is a vision that is close to every Pakistani's heart. Global environment, policies and frameworks have begun to unfold changes that have deep implications on our economy – these changes have become more visible than we can adjust and absorb. We now live in a globally connected world – a world that has come closer due to the ICT revolution and a world where exploding populations continue to pose a challenge to economic resources and environment.  (The News)

► Food shortage, high prices of essential items and poverty 

Food shortage and poverty alleviation are presently the two serious socio-economic problems that have engulfed many developing countries including Pakistan. They have serious implications for political and economic stability of fragile governments, world economic order and global security. The twin crises are interlinked and likely to stay for some years. Tackling them needs global effort as well as effort by the governments that are seriously affected by them. Pakistan is one of the seriously affected countries. It needs global support, efforts by the government, public and private sector to address the issues on priority basis.  (The News)

► Some thoughts on the upcoming budget

All the previous governments used to talk about economic revolution but the economy continued to slide down despite their claims of improvement in the macro and microeconomic indicators. The past governments paid little attention to expand the tax base to generate more revenue. The structure of custom duty was not revamped to make it more realistic in view of the global tends in foreign trade. Likewise, concrete measures were not taken to increase the productive capacity of the economy to enhance the supply position of essential commodities to stabilise their prices. Hence, the increase in salaries and wages did not improve the purchasing power of low income groups.  (The News)

► Privatisation of Hazara phosphate fertilisers

The government, immediately on taking over, has declared to "completely reverse" the economic policies pursued by the previous government and to formulate new pragmatic policies. It will, however, continue with the privatisation of the state-owned enterprises as cornerstone of its economic agenda, with reprioritisation and possibly making privatisation programme more worker-friendly. The pace of privatisation has remained very slow in the last two years or so, since the Supreme Court of Pakistan aborted the moves to privatise Pakistan Steel, and transactions for divestment of a number of state enterprises, in particular industrial units, could not materialise within the scheduled timeframe.  (Business Recorder)

► July-April EU investment falls to $414.7 million

European Union (EU) countries' investment in Pakistan has declined by 78 percent during the current fiscal year due mainly to the poor law and order situation and political unsuitability in the country. The country is continuously facing a political turmoil for the last one year and despite the establishment of political government the country is still facing some political problems. The political parties are still locking horns over the judges issue and two leading parties, Pakistan People's Party (PPP) and PML-N coalition is also at stake on the deposed chief justice issue, which has badly hurt the foreign investment.  (Business Recorder)

► Saudis eying investment in farming

A 3-day international conference of the World Economic Forum (WEF) held from May 18-20 at Sharm El Sheikh, Egypt, provided an opportunity to the world leaders and investors to discuss, on the sidelines, issues of bilateral trade and investment..Prime Minister Syed Yousuf Raza Gilani held a number of bilateral meetings with President Bush, President Hosni Mubarak, Prime Minister of Jordan and agriculture minister of Saudi Arabia. Mr Gilani’s meeting with Saudi agriculture minister was considered significant in the context of attracting Arab investors in the development of agriculture in Pakistan.  (Dawn)

► Wheat: where has the trading surplus gone?

THE biggest question mark lurking before the Punjab food planners these days is where the over two million tons of tradable surplus of wheat has gone. Administrative measures involving law-enforcing agencies, policy reversals, increased commodity financing and direct raids on farmers and middlemen’s stocks have failed to deliver the desired results so far, going by the pace and volume of official wheat procurement drive in the province. The government has, as usual, rushed to order imports ignoring the domestic factors responsible for the fiasco and letting the guilty go scot-free.  (Dawn)

► Using technology to alleviate poverty 

Pogrammes like ‘One Laptop Per Child’ are aimed at fighting poverty through the use of technology and have paved way for some remarkable innovations, creating ripples on the socio-economic development landscape. Such initiatives are known as Information and Communication Technology for Development (ICT4D). The phenomenon has been gaining popularity in developing countries like India, Sri Lanka and Bangladesh. Even in Pakistan, ICT4D has gained some roots. But its tremendous potential for poverty alleviation programmes have yet to be realised.  (Dawn)

► Government spending Rs one billion on agriculture research  

The Punjab government is spending Rs one billion to overcome food crisis and attaining self-sufficiency by adopting modern scientific methodology in agriculture sector. This was stated by Chief Executive, Punjab Agriculture Research Board (PARB) Dr Mubarik Ali while talking to APP here on Sunday. He said the whole world is facing food scarcity including Pakistan, therefore, the Punjab government is focusing on getting maximum yield of crops within the minimum input. However, the agriculture research system in the province is being corrected and put on the right track in order to give impetus to the agriculture sector which remains one of the pivots of the economy, he added.  (Business Recorder)