Thursday, June 18, 2009

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Thursday, June 18, 2009

Asian stocks declined, dragging the MSCI Asia Pacific Index to a three-week low, as concerns about the strength of the U.S. economy dented prospects for export earnings.

Honda Motor Co., which gets more than half its sales in North America, dropped 3.6 percent as the dollar traded near a two-week low against the yen. Mitsubishi UFJ Financial Group Inc. sank 3.3 percent, pacing declines among banks, after Standard & Poor’s cut credit ratings on 18 U.S. lenders. Rio Tinto Group, the world’s third-largest mining company, slumped 8.9 percent as it began a $15.2 billion share sale.

The MSCI Asia Pacific Index lost 1.4 percent to 100.62 as of 2:43 p.m. in Tokyo, set to close at its lowest since May 28. A 43 percent rally from a five-year low on March 9 has taken valuations of the gauge’s stocks to the highest since September.

“Investors are using the weaker dollar as an excuse to take profit as valuations look stretched following the recent rally,” said Michiya Tomita, who helps manage $51 billion at Mitsubishi UFS Asset Management Co. in Hong Kong. “Any correction will be short-lived as long-term fund managers are still sitting on the sidelines with their cash.”

Japan’s Nikkei 225 Stock Average fell 1.7 percent to 9,671.62 paced by Sekisui House Ltd. after the homebuilder was downgraded at Credit Suisse Group AG. Hong Kong’s Hang Seng Index sank 2 percent.

The Shanghai Composite Index gained 1.4 percent, led by China Shenhua Energy Co., which climbed 4.1 percent as the World Bank raised its growth forecast for the country’s economy.

Sweeping Overhaul

Futures on the Standard & Poor’s 500 Index gained 0.3 percent. The gauge dropped 0.1 percent yesterday as President Barack Obama proposed the most sweeping overhaul of the U.S. financial regulatory system in 75 years. The plan includes an agency for monitoring consumer financial products and bringing hedge and private equity funds under federal scrutiny.

The dollar weakened against currencies in Japan, Australia, Singapore and Malaysia before a U.S. report that economists predict will show the Philadelphia region’s manufacturing industry shrank for a ninth month. Mortgage applications dropped 16 percent last week to the lowest level since November, the Mortgage Bankers Association said yesterday.

Honda declined 3.6 percent to 2,580 yen while Sony Corp., maker of the PlayStation 3 game machine, sank 3.7 percent to 2,460 yen as the yen strengthened to as much as 95.52 per dollar, a level not seen since June 3. Makers of electronics and cars accounted for 34 percent of the Topix Index’s 1.6 percent drop today, Bloomberg data show.


(Bloomberg)

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Thursday, June 18, 2009

The World Bank raised its growth forecast for China this year and advised policy makers to delay until 2010 any additional stimulus plan to boost the world’s third-largest economy.

China’s economy will expand 7.2 percent in 2009 from a year earlier, up from a 6.5 percent forecast in March, the Washington-based lender said in a quarterly report released today in Beijing. Stocks gained after the announcement.

The World Bank joins Goldman Sachs Group Inc., Morgan Stanley and UBS AG. in raising growth forecasts this year after a 4 trillion yuan ($585 billion) stimulus package triggered record loans and surging investment. The lender said it’s “too early” to say there is a sustained recovery, citing the economy’s dependence on government spending and echoing a State Council caution yesterday against excessive optimism.

It’s “not necessary, and probably not appropriate” for China to add fiscal stimulus this year, the World Bank said. Consumption is likely to slow, pushing down wages and employment, and the nation should retain room for stimulus in 2010, in case the global economy takes a turn for the worse, the bank said.

The Shanghai Composite Index rose 0.9 percent as of the 11:30 a.m. local time break in trading. Industrial & Commercial Bank of China Ltd. climbed 2 percent.

‘Critical’ Phase

Gross domestic product grew 6.1 percent in the first quarter this year from a year earlier, the least since 1999, as exports slid because of the global recession. The economy is in a “critical” phase, the State Council said yesterday, warning that a recovery is not yet on solid foundations.

“Overall growth prospects have improved somewhat, compared to three months ago, but with little carry-over into 2010,” the World Bank said. “The massive monetary impulse of the first five months will support economic growth in the coming quarters.”

Goldman Sachs forecasts an 8.3 percent expansion this year, Morgan Stanley estimates 7 percent and UBS predicts growth of 7.5 percent.

“I don’t think China will see a V-shaped recovery back to high single-digit growth rates,” said Louis Kuijs, the World Bank’s senior economist for China in Beijing. “The impact of the policy stimulus next year can realistically not be as large as it has been this year.”


(Bloomberg)

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Thursday, June 18, 2009

TOKYO: The euro rose on Wednesday as investors bought it back after steep falls against the dollar and yen this week, but the market struggled for clear direction as it tried to decide if a dollar recovery had run its course. The dollar has fallen against major currencies such as the euro and Australian dollar this year, with investors unwinding safe-haven dollar positions.

The worst of the economic crisis faded and as questions arose over its suitability as the world's reserve currency. Both it and the yen have clawed back some lost ground this month as investors have paused to assess whether rallies in riskier assets including shares have got ahead of themselves. But with a question over its reserve currency status resurfacing on Tuesday, analysts said the market was not sure which direction to head.

"The market seems to be bewildered, facing lots of different factors," said Kazuyuki Kato, treasury department manager at Mizuho Trust and Banking. "And investors are shying away from taking risks after stocks entered a correction phase as optimism for the economy had gone too far," he said.

The euro edged up 0.2 percent from late US levels to $1.3860 after earlier veering towards a one-month low of $1.3747 set on Tuesday. It has gained 11 percent on the dollar since March but is below its 2009 high of $1.4339 set this month.

The greenback fell on Tuesday after Russia suggested ahead of a meeting with leaders of Brazil, India and China there was a need for a reserve currency other than the dollar. In the event, the four leaders avoided the reserve status issue in their statement after the summit, causing the dollar selling to peter out.

"The global financial markets are in correction mode," Yamamoto said. Traders and analysts said currency flows seemed to be driven by short-term players, making the market choppy, but some saw the dollar and the yen as having room to strengthen a bit more.

"The dollar can continue a bit higher but overall the medium-term trend lower is still intact," a senior trader at a European bank in Hong Kong said. The yen reversed early gains after driving the dollar to a two-week low below 96.00 yen and the Australian dollar to a three-week low below 76.00 yen. The dollar rose 0.2 percent to 96.60 and the Aussie dollar climbed 0.5 percent to 76.80 yen.

Traders said talk that Japanese investors may repatriate funds from euro zone bond redemptions had helped push the euro down versus the yen this week, with 15.6 billion euros ($21.6 billion) of redemptions and 2.1 billion euros of coupon payments falling due. The euro has fallen 2.5 percent against the yen since Friday but short-covering pushed it up 0.6 percent to 134.16 yen.

(Reuters)

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Thursday, June 18, 2009

NEW YORK: The dollar fell across the board on Tuesday, pressured by comments from Russia suggesting a need for a global reserve currency other than the greenback. Safe-haven demand for the dollar also fell after data showed a rebound in US housing starts and an unexpectedly small rise in producer prices.

Investors snapped up higher-yielding currencies such as the Australian dollar. But Russia's dollar-negative comments dominated the market, a day after the country's finance minister backed the greenback's role as the world's reserve currency.

Russian President Dmitry Medvedev said on Tuesday that existing reserve currencies, including the dollar, have not performed their function, and a new supranational currency was in the making. "Clearly the largest holders of US Treasuries are increasingly nervous about the fiscal stability of the US going forward," said Omer Esiner, senior currency analyst at Travelex Global Business Payments in Washington. "That said, I don't think it's to anybody's interest to see a run on the dollar."

In late New York trading, the euro was 0.3 percent higher at $1.3839 on electronic trading platform EBS. The euro had gained after German think-tank ZEW said its economic sentiment index surged to 44.8 in June from 31.1 in May, exceeding expectations for a reading of 35.0 and suggesting market optimism for a recovery this year.

The dollar fell more than 1 percent against the yen to 96.43, its largest one-day fall in more than two weeks. The ICE Futures' dollar index, which tracks the value of the greenback against a basket of currencies, dropped 0.5 percent to 80.737.

The summit of Brazil, Russia, India and China, known as the BRIC group, steered clear of any direct assault on the US dollar's dominance. However, in a joint communique the leaders of the world's biggest emerging economies called for "a stable, predictable and more diversified international monetary system."

A Russian delegation source also told Reuters that BRIC finance ministries and central banks were tasked to work on reserve currencies proposals. Ronald Simpson, managing director of global currency analysis at Action Economics in Tampa, Florida, said the communique appears to "have taken some wind out of the dollar's sails for now."

Despite the lack of direct reference to the dollar's future role as a global reserve currency, Simpson said BRIC's demand for a more diversified currency system is "not exactly a subtle hint about the dollar" and suggests that over time, countries like BRIC may "start to undermine the importance of the dollar's global standing." "It's not in anybody's best interest to bail out of the dollar right now ... but the kind of shift in global thinking has weighed the dollar down," he said.

(Reuters)

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Thursday, June 18, 2009

KARACHI: Local and international commercial banks and development financial institutions (DFIs) led by the State Bank of Pakistan (SBP) are likely to finance the long-awaited CNG bus project for Karachi. This was observed in a meeting, comprising representatives of CDGK, CNG bus supply and manufacturing firms and banks, held last Tuesday at SBP.

According to sources in Karachi Mass Transit Cell (KMTC) of City District Government Karachi (CDGK) the bankers and DFIs after being satisfactorily briefed by CDGK have shown interest in providing loan to the pre-qualified manufacturers and suppliers of CNG buses.

They said, almost 37 bankers and 25 bus suppliers, who participated in the meeting, were given a detailed briefing on the important project by Director General KMTC Malik Zahoorul Islam regarding the project, its procedure and the facilities to be provided to the bus suppliers. Although the ground work for launching the project was completed, it needed the private-public support to run these buses on at least 40 routes of the city.

The selected and qualified banks led by SBP, the sources said, in co-operation and co-ordination of Enercon would provide the 80 percent loans of the project. The government would also provide subsidy of at least Rs 0.7million for each bus while the private bus suppliers would facilitate 20 percent equity, they added.

Initially, they said, 500 CNG powered buses were to run on the city routes and this would gradually increase to 4,000 during the next five years, they added. For the successful launching of the project, the co-ordination and help of other institutions like Hydro-Carbon Development Institution of Pakistan (HDIP), Infrastructure Project Development Facility (IPDF) and Enercon were also stressed in the meeting.

It is pertinent to mention here that President Asif Ali Zardari, in his visit to the city on April 20, 2009, had approved the project and directed to run approximately 500 CNG buses on the city routes by end of this year. At least 14 private companies including M/s Midway Consortium, a Punjab based CNG dedicated bus supplier, which has vast experience in operating such buses in Lahore and other cities of Punjab had earlier shown interest to operate their buses in Karachi.

Participants of the meeting and representative of federal government for projects included Chief Executive of HDIP Hilal Raza, Legal Advisor of IPDF Muhammad Awais, Chief Economist Government of Sindh Orangzeb Haq, Chief Technical Officer of Enercon Asif Mehmood.


(BRecorder)

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Thursday, June 18, 2009

KARACHI: The rupee moved both ways on the currency market on Wednesday in process of trading, dealers said. On the interbank market the rupee firmly held its overnight levels against dollar for buying and selling at 81.05 and 81.10, they said. The local currency may drift lower but likely to trade in the range of 81.10 and 81.20 in the near future, they said.

During the third Asian session a rally in euro lost steam on Wednesday and major currencies struggled for direction as the market tried to decide whether a pause in dollar's medium-term slide was over or had a little further to run. The dollar has fallen steeply against major currencies such as euro and Australian dollar this year, with investors unwinding safe-haven dollar positions as the worst of the economic crisis faded and as questions arose over its suitability as the reserve currency.

Open Market Rates: The rupee continued weakness against dollar, losing 10 paisa for buying at 81.20 and five paisa for selling at 81.30, they said. The rupee, however, failed to retain its firmness in terms of euro, losing 70 paisa for buying at 112.00 and selling at Rs 113.00, they said.

Open Buying Rs 81.20
Open Selling Rs 81.30

Interbank Closing Rates: Interbank Closing Rates For Dollar On Wednesday.

Buying Rs 81.05
Selling Rs 81.10

(BRecorder)

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Thursday, June 18, 2009

BERLIN: The head of the World Trade Organisation is hopeful long-running trade talks can be wrapped up next year. Trade ministers came close to reaching a deal on the Doha round of talks in July 2008, but they collapsed because of a dispute between Washington and emerging economies, spearheaded by India, over proposals to help farmers in poor nations.

The Cairns Group, 19 nations accounting for more than 25 percent of the world's agricultural exports, said last week that trade officials from the United States, Europe and India had shown fresh resolve to conclude the Doha talks launched in 2001.

"I am optimistic that Doha will be concluded in 2010," Pascal Lamy, the WTO's director general, told Germany's Sueddeutsche Zeitung. "The developing countries are pressing for that. But so far there have only been political declarations of intent. Whether the negotiations really progress depends largely on the US Congress," he added. The Doha deal is estimated to be worth $150 billion for the world economy and considered even more important now that the world faces its worst economic crisis in decades.


(Reuters)

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Thursday, June 18, 2009

BRUSSELS: The eurozone's unadjusted external trade surplus rose in April as exports showed signs of stabilising on a monthly basis and fell less than imports, though shipments sank more than a quarter from a year earlier. The surplus in the 16 countries using the euro came to 2.7 billion euros ($3.75 billion), compared with an upwardly revised 1.8 billion euro surplus in March and a 2.2 billion surplus in April 2008, European Union statistics office Eurostat said.

Unadjusted exports fell 27 percent year-on-year to 102.1 billion euros and imports dropped 28 percent to 99.4 billion. Seasonally adjusted, the trade balance continued a trend of narrowing deficits since January. The gap shrank to 300 million euros from March's 1.8 billion as exports fell only 1.3 percent month-on-month and imports declined 2.7 percent.

"Taken together, the last three months suggest that exports are starting to stabilise after they fell off a cliff between October of last year and January of this year," said Nick Kounis, economist at Fortis. The eurozone economy contracted 2.5 percent quarter-on-quarter in the January-March period - its deepest fall on record - in what economists said was likely the low point of the recession.

Negative trade on the back of exports plunging faster than imports lowered the quarterly result by 0.3 percentage point. "A poor net trade performance has contributed to the eurozone's deep economic contraction," said Howard Archer, economist at IHS Global Insight.

"Plunging domestic demand in Britain and the United States, as well as substantially deteriorating activity in emerging Europe, has been a particular concern for eurozone exporters," Archer said. Detailed data for April was not yet available but a country breakdown for January-March showed the eurozone's trade surplus with its biggest trading partner, Britain, fell to 12.2 billion euros from 15.0 billion a year earlier.

The surplus more than halved with the United States, the single-currency area's second-biggest trade partner, to 4.9 billion. The trade deficit with energy exporter Russia more than halved to 5.4 billion euros from a year before as oil and gas prices plunged.

The eurozone's trade gap with China contracted to 26.4 billion euros in the first quarter from 27.5 billion a year before. Separately, Eurostat said construction output in the eurozone rose 0.6 percent month-on-month in April for the second month running, limiting the year-on-year drop to 4.7 percent versus 8.3 percent in March and 12.5 percent in February.


(Reuters)

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Thursday, June 18, 2009

DUSHANBE: The global economy should begin showing signs of recovery by next year, IMF managing director Dominique Strauss-Kahn said on Wednesday during a visit to the Central Asian state of Tajikistan. The fund chief said that although 2009 was likely to continue to bring difficulties, negative global financial trends should begin to retreat by 2010.

"We.... expect that the rate of growth in the global economy will begin to recover in 2010, and with the rate of growth recovering in the world economy, so too will it grow in your country," he told reporters through a translator. Strauss-Kahn made the comments to reporters after meeting with Tajik president Emomali Rakhmon as part of a tour of Central Asian states, many of which have been badly affected by the global financial downturn.

Despite data that the plunge in remittances from Tajik labourers working in Russia and China is straining the economy, Strauss-Kahn said Dushanbe had pursued largely sound anti-crisis measures.

"I think what has been done by the government was correct given the situation in the economy, especially on the monetary side and by letting the currency depreciate," he said. Tajikistan - a mountainous former Soviet republic which borders China and Afghanistan - has struggled to provide even basic services for its citizens in recent years, with blackouts the norm across much of the country last winter. The IMF boss began his regional tour on Monday in Central Asia's economic powerhouse, Kazakhstan, whose resource-driven economy has been battered as the global economic downturn has forced down commodities prices.

The trip comes as China and Russia are both seeking to increase their influence in this strategically vital region, as evidenced by billions in loans, aid and investment from Moscow and Beijing in recent months. Strauss-Kahn is due to arrive in Bishkek later today, where he will meet with Kyrgyz President Kurmanbek Bakiyev before wrapping up his trip in reclusive Uzbekistan on Thursday.

(BRecorder)

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Thursday, June 18, 2009

TOKYO: Japan's economy hit bottom in the January-March quarter, Finance Minister Kaoru Yosano said Wednesday, as the central bank also slightly upgraded its views on the economy. "We can firmly presume that the economy hit the bottom," Yosano told reporters, after the government upgraded its monthly economic assessment saying there were signs of recovery.

"But there are things that Japan alone cannot control. Naturally downside risks exist, depending on the trend of the world economy," Yosano said, adding that the first quarter was "clearly the bottom." His comment came as the Cabinet Office lifted its assessment for the second straight month in June, saying the economy was expected to pick up soon as exports and industrial production improve. "While the economy is in a difficult situation, signs of a pickup are seen in some areas," the report said in its Japanese-language edition.

Many private economists have already said the world's number two economy had probably hit the bottom and was slowly climbing out of its worst recession since World War II. The government report also said Tokyo hoped that its stimulus packages as well as improvement overseas would help put Japan on a firmer path to recovery. However, the report also cited risk factors including worsening housing starts, falling capital expenditure and deteriorating employment.

It also said that weak employment and private spending posed difficulties going ahead. The government's view was largely echoed by the Bank of Japan, which also upgraded its evaluation, saying in its June report that the economy had "begun to stop worsening." Bank of Japan governor Masaaki Shirakawa said Tuesday that the Japanese economy was in the process of hitting the bottom thanks to improving exports and production as well as increased public spending. Looking forward, Shirakawa said uncertainty remained but the economy was likely to pick up.

(BRecorder)

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Thursday, June 18, 2009

WASHINGTON: US consumer prices edged up in May on higher gasoline prices, but fell over the past 12 months by the most since 1950, in a sign that inflation was no threat for now as the country fights a brutal recession. The Labour Department said on Wednesday its Consumer Price Index edged up 0.1 percent month on month, after being flat in April, below market expectations for a 0.3 percent increase.

-- Consumer prices post largest 12-month drop since 1950

-- Current account deficit smallest since Q4 2001

Compared to the same period last year, however, consumer prices fell 1.3 percent, the largest decline since April 1950. Concerns have grown in recent weeks that inflation could resurface this year, given massive efforts by the US government and the Federal Reserve to pull the economy out of the longest recession since the Great Depression of the 1930s.

"These numbers today and yesterday clearly show that at least for now the immediate concerns over inflation are not justified," said Marc Pado, market strategist at Cantor Fitzgerald & Co in San Francisco. US stock index futures were barely higher, while Treasury debt prices trimmed losses on the data.

A separate report from the Commerce Department showed the US current account deficit shrank in the first quarter to $101.5 billion, the lowest since the fourth quarter of 2001. The CPI data showed that core prices, excluding food and energy, also rose only 0.1 percent, slower than April's 0.3 percent monthly increase, as prices for tobacco and smoking products fell after surging the last two months on the back of a federal excise tax increase.

The rise in the monthly core CPI was the smallest advance since December 2008. The increase came as new vehicle prices rose for a fifth straight month. Shelter and medical costs also contributed to the gain in the core index. Core prices increased 1.8 percent year-over-year after a 1.9 percent 12-month rise in April.

Gasoline prices rose 3.1 percent from April versus a 2.8 percent drop a month earlier. The food index fell 0.2 percent in the month, declining by the same margin for two straight months. Data released on Tuesday showed producer inflation was muted in May, despite higher gasoline prices. Compared to the same period last year, prices paid at the farm and factory gate experienced their steepest fall since 1949.

Investors have been pricing in rising inflation risks in the bond market. Benchmark Treasury debt yields spiked to an eight-month high last week. The yield difference between Treasury Inflation-Protected Securities and Treasuries has grown since the beginning of the year.

But analysts reckon the bond market is getting ahead of itself and argue the economy is more at risk of deflation than inflation, citing excessive slack in productive capacity and huge stocks of unsold goods. According to Fed data on Tuesday, US capacity utilisation dropped to a record low 68.3 percent in May. "The worries that everyone has about inflation, it's something that may occur, and it's certainly not an imminent threat to the economy," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York.

The first-quarter current account deficit equalled 2.9 percent of US gross domestic product, a sharp drop from 4.4 percent in the fourth quarter and the lowest since 2.8 percent in the first quarter of 1999, a Commerce Department official said. The current account is the broadest measure of total US trade with the rest of the world, covering goods, services and income transfers.

US exports and imports both fell in the first quarter as severe world recession hit consumer demand and crimped trade. Exports dropped to $509.6 billion, from $591.7 billion in the previous three months, while imports shrank more steeply, to $581.5 billion from $715.1 billion.

(BRecorder)

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Thursday, June 18, 2009

BEIJING: The Chinese Vice-Minister for Industries and Information Technology assured that his country will help Pakistan in developing agriculture and telcom sectors. He held out the assurance during his meeting with visiting Minister for Investment Senator Waqar Ahmed Khan.

The two sides also reached an agreement to strengthen their interaction to bring together the relevant private sectors of the two countries to achieve the results. On the occasion, Senator Waqar briefed the Chinese Minister who had visited Pakistan in 1993, about the investment opportunities his country offered for foreign investment particularly for Chinese.

Meanwhile, Commerce and Sourcing House (CASH), a Pakistani company based in Shenzen China organised an 'Agriculture Investment' conference in collaboration with the Ministry of Investment and Pakistan Embassy in Beijing. CASH plans to bring a group of Chinese investors in agriculture sector to Pakistan in near future for which discussion was also held with the Board of Investment (BOI).

The Chinese companies participated in the conference include manufactures of agriculture machinery, agro-based industry, poultry and husbandry equipment, horticulture and other related agriculture fields.Addressing the conference, Waqar Ahmed said Pakistan attached great importance to its socio-economic partnership with China.

The two sides geared up their co-operation for developing KK highway and digging a tunnel along this land link. Through this tunnel, "not only we lay gas pipeline to fetch gas from Turkmenistan but also lay a railway track and optical fibre. These utilities could also be used by our Chinese brethren," he pointed out.

(BRecorder)

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Thursday, June 18, 2009

KARACHI: The country has registered a deficit of some three billion dollars in services sector trade during the first 11 months (July-May) of the current fiscal year mainly due to high payments on account of transportation, travel and government services. However, the deficit is about 51 percent lower than the same period of last fiscal year ie 2008, in which services sector posted over six billion dollars deficit.

Month on month basis, services sector trade has posted a surplus of 253 million dollars in May 2009, as services sector exports are higher than the imports. Services sector exports stood at 740 million dollars in May 2009 against imports of 487 million dollars. The country posted a deficit of 269 million dollars in April 2009 with 559 million dollars imports and 290 million dollars exports.

The State Bank on Wednesday said the country's services sector trade performance is gradually improving as overall imports and deficit have declined by 5.73 percent and 26 percent respectively during July-May period. Services sector exports in first 11 months stood at 3.656 billion dollars against the imports of 6.638 billion dollars, depicting a deficit of 2.982 billion dollars during July-May.

Services sector deficit is 3.071 billion dollars lower than the deficit witnessed in corresponding period of last fiscal year ie 2008. Services sector deficit in July-May of 2008 stood at 6.053 billion dollars. "Heavy payments on account of transportation, travel services, insurance, technical fee, royalties and government sector are major contributors in the services trade deficit," economists said.

They said that declining imports of services sector and increasing trend in exports is a positive sign, which would definitely help reduce services sector deficit. Export of services sector surged by 26 percent to 3.656 billion dollars during the first 11 months of FY09 over the exports of 2.909 billion dollars in same period of last fiscal year. Services sector imports reduced by 25 percent to 6.638 billion dollars in July-November of FY09 as compared to imports of 8.962 billion dollars in corresponding period of FY08.

The country earned 1.107 billion dollars on account of transportation against payments of 3.211 billion dollars, depicting a deficit of 2.104 billion dollars in first 11 months of FY09. Transportation deficit has contributed some over 70 percent share in overall services sectors deficit, as the country has only one shipping carrier - Pakistan National Shipping Corporation.


(BRecorder)

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Thursday, June 18, 2009

LAHORE: The Advisor to Prime Minister on Finance, Shaukat Tarin, has said that the government will spend Rs 40 billion during 2009-10 financial year for providing incentives to value-added textile sector, the details of which would be given in the trade policy.

Addressing a post-budget seminar here on Wednesday, he said that the government had accepted most of the demands of textile exporters in the budget. He said the government has allocated substantial amount of Rs 60 billion in the federal budget to assist the industries involved in value-addition, small and medium enterprises, and revival of industrial activity in the country.

"The manufacturing sector should show some patience, as the government has declared next fiscal as 'year of industrial revival'," he added. The Advisor said that the government would provide much support to the value-adding sector, which would also be available to other sectors.

The export refinance has been increased from last year's Rs 140 billion to Rs 250 billion in the 2009-10 budget. The SMEs would have access to credit through Rs 10 billion credit guarantee fund, while the new entrepreneurs would get venture capital, without collateral, from a separate Rs 10 billion fund established for this purpose, he said. He said that the government was fully aware of the fact with regard to declining industrial production and would take all possible measures to remove all irritants that pushed up the cost of business.

He assured the manufacturers that the government has intention to increase the incentive package by another Rs 10 billion, if required. The issues like research and development grant and other facilitation have already been addressed in the textile package.

He assured the business community of removal of irritants in the tax laws relating to powers of income tax officials, for which the trade bodies, associations, other stakeholders and the public sector departments would be taken into confidence.

He held inflation responsible for seven percent banking spread and said that some larger banks have a larger spread of up to 10 percent, which is unjustified. The State Bank has been asked to negotiate with such banks for reduction in their spread. He said the economic consolidation has been achieved in first year while the next year would be more comfortable.

He said that interest rate would further come down by 100 basis points (bps) which would help reduce inflation in the country. The government will take along the representatives of trade and industry and a business council comprising 50 businessmen from different regions and trades would be constituted which would meet the President, the Prime Minister and the Finance Minister once in a month.

The cross subsidy on gas would be removed from next fiscal year that would reduce the energy cost of the industry. The government is also considering to levy carbon tax on CNG, he added. "The agriculture sector must be brought under the tax net in 2010-11, and I will quit my office if I could not do this" he added.

The CVT imposed on property is a regressive tax that would be changed to capital gain tax in 90 days after finalisation of National Finance Award, in consultation with the provinces, he added. Former federal finance minister Dr Salman Shah criticised the present government for its economic policies and said that the budget was based only on presumptions.

About further loans from IMF, in case of failure of Friends of Pakistan to fulfil their donation pledges, would be very costly even if the loan was immediately returned, as full IMF charges would have to be paid. There would be a shortfall of about Rs 300 billion in the resources calculated in the budget. Revenue target, he said, would not be met. He said that circular debt in October 2008 was Rs 50 billion, and increased to Rs 190 billion in 10 months.

(BRecorder)

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