MARCH APRIL 2011

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					 MARCH / APRIL 2011

                                                                                                        INDUSTRY RESEARCH &
                                                                                                            ANALYSIS - IRA
 NBP Industry Newsletter                                                                                    Credit Manageme nt Group

Tracking Opportunity & Risk Related Developments

                                                                                            government has increased custom duty
MAJOR DEVELOPMENTS                            MARCH / APRIL 2011 ISSUE
                                                                                            by 28% on the import of raw textile from
                                             MAJOR DEVELOPMENTS                      1      Pakistan.
26% Increase in Export
(Page No…..2)                                Textile (Ginning, Spinning,
                                                                                            At a time when the decision regarding
                                             Weaving, Knits, Woven Apparel)          1
CNG primary fuel for majority of car                                                        the EU market access concession for the
                                             Oil (Marketing, Refining, Sourcing)     2      Pakistani products has been deferred till
owners
(Page No….. 3)                               Power/ Energy                                  March/April the Turkish government
                                                                                     4
                                             (Generation, Distribution)                     action of increasing cus tom duty to
Launching of $1.08 billion OGDCL's                                                          facilitate its local fabric manufacturers
                                             Cement / Construction / Steel           6      will add to woes of Pakistan textile
convertible bonds
(Page No….. 3)                               Automotive                              7      exports, sources said.
                                                                                            (The Nation - January 15, 2011)
                                             Telecommunication                       8
Development of five more oil gas fields
(Page No….. 3)                               Other Industries                        9      Trade transac tion to s upport textile
                                             Agriculture                                    sector
                                                                                     10
Spending of $10-12 B on oil import
(Page No….. 4)                               Micro Business & SME                    12     The ADB, IFC, Citibank, and Pakistan''s
                                             Financial Services                      13     MCB Bank announced that they have
1,150 MWs additional power by summer                                                        completed a landmark trade transaction
(Page No….. 5)                               Regulatory                              15
                                                                                            that will help boost the textile industry
                                             Macro Environment                       16     in Pakistan, a sector that accounts for
Circular debt nears Rs 500 B mark                                                           over 60 % of the country''s industrial
(Page No….. 5)                               Table: Risk-Opportunities               20
                                             Trends                                         activity.
10% growth Cellular phone users base
                                             2.6% GDP growth                                The four banks provided trade finance
(Page No….. 8)
                                             (Page No….. 18)                                coverage of up to 110 M for Ibrahim
Fertiliser sector profits grow 70% in 2010                                                  Fibers Limited to import state-of-the-art
(Page No….. 9)                                TEXTILE                                       German machinery to produce polyester
                                                                                            staple fiber and polyester chips. The
                                             Target of $25 textile export                   additional 650 tons-per-day capacity
Output of 12m Cotton bales
(Page No….. 11)                                                                             made possible by the transaction will
                                             Federal Minister for Textile Industries        m ore t han d ouble I brahim Fiber''s
                                             has said the textile export target of $ 25
Branchless banking is future                                                                polyester production, already one of
                                             B would be achieved at all costs, despite
(Page No….. 13)                                                                             Pakistan''s highest, to 1,250 tons per day.
                                             floods, gas and electricity crises in the
                                                                                            (Business Reco rder - January 6, 2011)
                                             country. He said the textile industry
Banks showed better performance in 2010
(Page No….. 13)                              would have been in a better position if
                                                                                            Disinvestment of 10% stake
                                             floods had not hit the cotton growing
Banks advised to tackle rising NPLs          areas of the country. Talking to media at
                                             APT MA, he said Pakistan had the               Nishat Mills Limited (NML) has decided
(Page No….. 14)                                                                             the offer price of Rs 19 per share for
                                             potential to meet the textile export target.
                                             (Daily Times - January 11, 2011)               divestment of its 10% holding in Pakgen
Surge in CPI inflation                                                                      Power. As of June 30, 2010, NML holds
(Page No….. 16)                                                                             119.1 M shares (or a 32% stake) of Pakgen
                                             $341.6m export at stake
                                                                                            at Rs 13.9 per share. "As per our estimates,
Fiscal deficit may reach 6% of GDP                                                          the transaction would lead to a one time
(Page No….. 17)                              The $341.6 M worth of Pak textile export
                                             to Turkey has put on stake, as Turkish         gain of Rs 0.11 per share for NML in




                                                                                                                     The Nation’s
                                                                                                                              Bank
                                                                                                           IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                    Credit Management Group

                                                  Tracking Opportunity & Risk Related Developments


FY11", Bilal Qamar, an analys t at JS          during July-January 2010-11 as against        purified terephthalic acid (PTA) essential
Global Capital said.                           $5.917bn in the same period of 2009-10        input in PSF production, has witnessed
(Business Recorder - January 15, 2011)                                                       a jump in primary PTA margins during
                                                Despite challenges of energy shortage,       the last quarter of 2010.
Import of 2 M cotton bales                     the textile sector of the c ountry has        (The Express Tribune - January 5, 2011)
                                               performed well during the first seven
Pakistan has to import nearly 2 M cotton       months of the CFY as its exports surged
                                                                                              OIL
bales to meet domestic demand until            by 25.88%.
June 2011, an official of pakistan Cotton                                                    Investment of $40m
Ginners association said. The world's          Textile exports during July-January 2010-
third-largest cotton consumer has so far       11 were recorded at over $7.44 B as
                                                                                             The Niko Resources (Pakistan) Ltd. has
imported over 1 M bales to meet the            against $5.917 B during July-January
                                                                                             assured the Minister for Petroleum and
shortfall after summer floods ravaged          2009-10, revealed data released by the
                                                                                             Natural Resources to invest more than
the 2010/11 crop thus reducing it to an        Federal Bureau of Statistics.
                                                                                             $40 M for drilling an offshore exploratory
estimated 11.70 M bales against an             (D aily Tim es - Februa ry 20, 2 011 )
                                                                                             well in Pakistan during the next weather
original ta rget of 14 M. Domestic
                                               Exports up by 26%                             wind ow ( September to Dec em ber).
consumption fluctuates between 14 M
and 16 M bales on average.
(Daily Times - February 9, 2011)               Textile product exports have increased        According to the Petroleum Ministry, the
                                               to $7.45 B in the first seven months of the   offshore drilling costs will be more than
Release of Rs 1.61 B                           C FY, a 2 6 % inc re as e over th e           $40 M and it will be completed during
                                               corresponding period in the preceding         this year after the monsoon.
The Textile Ministry Wednesday released        year.                                         (The Nation - February 4, 2011)
Rs 1.61 B for its various on-going support
schemes for the development of textile         According to the Trade Development            Boosting of 20% production
sector, as envisaged in the Textile Policy     Authority, the major items exported
2009. The Textile Ministry has already         include cotton cloth, knitwear, cotton        Germany has offered new technology to
released Rs 4,825 out of original allocation   yarn, bedwear and readymade garments,         OGDCL, PPL and other ex ploration
of Rs 7.5 B for the CFY against various        comprising 45% of total textile exports.      companies to enhance minimum 20%
schemes envisaged in the textile policy        (The Express Tribune - February 23, 2011)     produc tion of oil and gas from the
(2009-14).                                                                                   reservoirs on 50% production sharing
                                               Largest exporter to France                    formula.
The ministry has released Rs 120 M for
the Export Finance Mark-up Rate facility,      Gul Ahmed Textile Mills Limited has           "German company is ready to give
Rs 1 B for the drawback of local taxes         been declared the largest exporter to         guarantee of minimum 20% increase in
and levies while Rs 490 M has been             France in Home Textile category. In a
                                                 TEXTILE                                     production from oil and gas reserves,"
released for Magnetisation of PTA.             simple ceremony Chairman, Gul Ahmed
                                                                                             Honorar y Inve st men t C ou ns ellor
However, no amount has been released           Text ile Mill s L td and Pres id ent ,
                                                                                             Germany and former advisor Prime
agains t Mark- up Rate Su pport and            International Tex tile Manufacturers
                                                                                             Minis ter of Pakis tan t old. He s aid
refunds of p ast R&D c laim s in the           Fed eration received the pres tigious
                                                                                             OGDCL had recently closed Dhodhak
released amount, informed sou rc es.           awa rd f rom th e ch ief gu est , th e
                                                                                             field due to depletion.
(Business Recorder - February 10, 2011)        ambassador of France.
                                                                                             (Business Recorder - February 20, 2011)
Textile exports can touch $15 B mark           Gul Ahmed has also achieved this award
                                               in previous years and has been the largest    ARL to boost capacity
Pakistan's textile exports can rise to at      home fashion exporter to the European
                                               Union consistently for the last 25 years.-    Pakistan's Attock Refinery Limited (ARL)
least $ 15 B in next two years from the
                                               PR                                            is moving ahead with a plan to increase
present figure of $ 9 B per annum by
                                               (Business Recorder - January 26, 2011)        crude processing capacity by about 20
ensuring uninterrupted supply of gas,
elec tricity and water at the affordable                                                     %by the end of 2013 from c urrent
and supportive prices to the textile           Lotte benefits from hike in cotton prices     nameplat e c apac it y of 4 2,000 b/d.
indust ry along with availability of
st and ard in fras truc ture, m atc hing       Lotte Pakistan PTA has benefited from         ARL will spend $100 M to add a 12,500
incentives and facilities.                     the increasing use of polyester staple        b/d pre-flash unit that will take capacity
(Daily Times - February 25, 2011)              fibre (PS F) by internationa l textile        to 54,500 b/d within two years. It has
                                               manufacturers in the wake of rising           invited bids for the refining capacity by
26% Increase in Export                         cotton prices in the international market.    May. The company also plans to install
                                                                                             a 7,000 b/d isomerisation unit to increase
* Exports recorded over $7.44bn growth         Lotte Pakistan, a leading supplier of         gasoline production and improve quality


                                                                                                                                                 2
                                                                                                           IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                    Credit Management Group

                                                 Tracking Opportunity & Risk Related Developments


and add a 12,500 b/d diesel hyd ro-           slowdown in drilling ac tivity could          bonds in London Stock Exchange of the
desulphurisation unit, but has not set a      reduce the much-needed future oil and         OGDCL. The convertible bonds would
tim efr ame for the se projec ts yet.         gas production, according to Topline          be for 6% shares of OGDC L on 4.5%
( Da ily T ime s - Ja nua ry 2 2, 20 11 )     Securities.                                   annual interest rate and proceeds of the
                                                                                            bonds could be used for development of
CNG primary fuel for majority of car          No discovery has been made so far from        newly disc overed oil and gas fields in
owners                                        the drilling in the first half of 2010-11,    Sin dh a nd Khyber- Pakh tun khwa.
                                              said Topline Securities analyst in a          (Business Recorder - January 21, 2011)
A whopping 77% of Pakistani car owners        research note.
claim to use CNG as their primary fuel,       (The Express Tribune - January 19, 2011)      OGDCL enhances drilling Programme
while 81 % of them c la im to fa ce
problems with its supply, s aid the           14% increase in Global oil prices             OGDCL marked 40 wells on ground and
findings of a survey conducted by Gilani                                                    26 wells inc luding 13 exploratory, 2
Research Foundation-Gallup Pakistan.          After a record gain of more than 78% in       appraisal and 11 development wells were
                                              2009, the international oil prices (WTI)      spudded during the last financial year.
Seventy 7% of car owners claimed to use       grew by only 14% in 2010, less than
CNG as fuel in their cars, 17 % used          average annual gain of 21% in the last        OGDCL was joint venture partner in 16
petrol while 4% used diesel. 2% gave no       decade, analysts said. They said that like    wells drilled by other operators. OGDCL
response.                                     other commodities, uncertainty on global      is also c om mitted to acquire more
(The Express Tribune - December 29, 2010)     economic outlook also affected oil prices,    exploration acreage and to extend its
                                              which moved in a broad band of 65 dollar      exploration activities overseas wherever
Tight gas policy approved b y CCI             per barrel to 91 dollar per barrel in 2010.   a technically and commercially viable
                                                                                            potential is identified.
The Council of Common Interests (CCI)         As far as local oil market is concerned,
approved in principle Tight Gas Policy        retail prices of regula ted p roduc ts        OGDCL has its own eight- (8) rigs fleet;
that will offer 40 to 50 %higher price than   inc reased by only 11-13 %. "T his is         rigs are maintained in a professional
that of price announced in Exploration        primarily due to the fact that the impact     manner. OGDCL has a full department
and Production Policy 2009 to attract the     of international oil prices on local oil      of up keeping and maintenance of these
exploration companies to invest in tight      products comes with one month time lag        rigs.
gas fields it has learnt.                     and tha t is why the price hike in            (Business Recorder - February 18, 2011)
                                              international markets will be reflected in
"Conventionally, lease is granted to          local prices next year in January 2011,"      OGDCL remains successful
exploration companies for 30-year period      senior analyst at Topline Securities said.
including extension period but in Tight                                                     The OGDCL is effectively playing its role
Gas Policy, lease will be granted for 40-     He said though oil p rices remained           on exploration and production fronts,
year p er iod that includ es 10 -year         volatile during 2010 amid global financial    posting sound results during 2009-10.
extension," sources said, adding that         woes and turmoil in currency markets,
exploration companies will be given 40%       average WTI crude oil prices stood at         Its sales revenue and profit after taxation
higher price over and above wellhead          $79r per barrel as c om pared to $62          increased by 9.0% and 6.5% to Rs 142.572
pric e announced in Exploration and           a barrel average price during 2009, up        billion and Rs 59.177 B, respectively,
Production Policy 2009. "But companies        27%.                                          resulting in earnings per share (EPS) of
whic h succeed in recovering gas from         (Business Recorder - December 30, 2010)       Rs 13.76 as compared to Rs 12.91 during
tight fields within two years, will be able                                                 the preceding year, the official said.
to get 50 % high er price, " sourc es         Launc hing of $1.08 billion OGDCL's           (Daily Times - January 1, 2010)
maintained.                                   convertible bonds
(Business Recorder - February 2, 2011)                                                      Development of five more oil gas fields
                                              The P rivatisat ion C om mission will
Exploratory drilling down 32%                 launch convertible bonds of OGDC worth        There is a considerable increase in oil
                                              $1.08 B by end of March 2011 while            and gas production, share value, profit
Oil and gas exploration drilling in the       convertible bonds of PPL worth $304 M         of OGDCL and it would further increase
c ountry slowed down by 32% in 6              by end of the current year at London          with new projects in hand which have
months (July-Dec) of the current financial    Stock Exchange.                               been started. OGDCL has increased gas
year 201 0-11 at a t im e wh en th e                                                        production from its fields to 953 MMCFD
government is striving to tap more            He said that the privatisation commission     in February 2011 from 790 MMCFD in
indigenous energy resources.                  expected to generate $3 B through launch      August 2010.
                                              of convertible OGDCL, PS O and PPL
This is negative in a sense that the          bonds. He ad ded that $1 B could be           The oil production has also been hiked
                                              arranged through launch of convertible        from 33,128 barrels per day to 38,373


                                                                                                                                                 3
                                                                                                           IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                    Credit Management Group

                                                 Tracking Opportunity & Risk Related Developments


barrels per day and LPG from 118 tons         Accepted Practices for the Promotion of       both yearly and monthly basis, analysts
per day to 124 metric tons per day.           E nergy C ons erva tion a nd Sa fe ty         said.
OGDCL is pledged to develop five oil          S t a n d a rd s i n D if f er e n t C NG
and gas fields in a bid to produce about      Applications" said.                           However, in comparison to the 4% on y-
400 mmcfd natural gas and 500 metric          (Daily Times - February 18, 2011)             o-y basis sales growth in the first half of
tons of LPG per day to overcome energy                                                      2010, demand contracted by 3% on y-o-
shortage and would be able to produce         POL hits gas in TAL Block                     y basis in the second half of 2010 mainly
8000 to 9000 barrels per day oil from                                                       due to heavy floods in July and August
these new fields.                             POL has disc overed hydrocarbons in           2010, an analyst at JS Global Capital said.
(Business Recorder - February 22, 2011)       TAL Block in its exploratory well, Tolanj     (Business Recorder - January 11, 2010)
                                              X-1, which is being drilled in Khyber
US firm shows interest in setting up          Pukhtoon Khwa Province of Pakistan.
refinery                                                                                     POWER / ENERGY
                                              According to POL Tolanj X-1 well was
Northfield Commodities, a US energy           spudded on June 21, 2010 and in the           Conversion of 2 KESC plants to coal
trading firm, has expressed interest in       Lumshiwal Formation, upper 48 metres
set ting up a ref inery in P akistan.         of the drilled section produced around        KESC and a Chinese company Global
                                              16.3 mmcf gas per day during Barefoot         Mining Limited have inked an agreement
This was discussed by the representatives     DST at the rate of 32/64" fixed choke size    to c on vert two B in Q asim power
of the commodities company along with         at flowing wellhead pressure of 2392 psi.     generation units to be powered by coal.
other investors in their meeting with         (Daily Times - February 16, 2011)
Federal Minister of Petroleum a nd                                                          According to KESC spokesman, under
Natural Resources.                            Import one M tons of oil                      the agreement KES Cs two power
(The Express Tribune - February 1, 2011)                                                    generation units at Bin Qasim with a
                                              T he P SO and Ku wait Pet roleum              capacity of 420 MW that are operated on
Oil sales down                                Corporation have concluded negotiations       expensive furnace oil would be converted
                                              to ink a deal for direct import of one M      so that they c an be fueled by cheap
According to the latest figures released      tons high-sulpur fuel for one year, which     imported coal.
by OCAC, total oil sales was recorded at      would cause annual saving of $3.3 M.          (The News - February 4, 2011)
11.3mn tons during 7MFY11 (Jul-Jan) as        Briefing the National Assembly Standing
compared to 11.8mn tons last year, down       Committee on Petroleum and Natural            Over $100 B could be saved
by 4%. Major reason behind decline in         Resources, PSO MD said that it was a
sales is lower diesel consumption which       remarkable achievement regarding gas          Pakistan could save over $100 B being
fell by 9%YoY to 4 M ton during 7MFY11.       s up p ly a rr an gem en t w ith KP C.        spent on the import of oil and gas, if the
Diesel which contributes 35 % in total oil    (Business Recorder - January 20, 2011)        government devises an 'energy mix'
c o n s u m p t i on a n d u s e d a s a                                                    utilisation plan for next 12 years. Pakistan
transportation fuel, its demand fell due      Stress survey: PPL awards contract            needs to increase nuclear, hydel, coal-
to slowdown in trading activities amid                                                      based power projects in the country's
floods. Similarly, FO, the heavyweight        NXT Energy Solutions has announced            energy mix, encourage/facilitate private
oil product with 44pc share in overall oil    that it has received a letter of award from   s ec t or p ar ti c ip at io n an d f os te r
consumption, its sales reduced by 3%YoY       the PPL giving it permission to conduct       develop ment of renewable energy
to 5m n tons . I nterest in gly, petrol       a stress field detection airborne survey      sources, energy experts said.
consumption continue to show a rising         at a cost of $2.66 M.
trend, up 18% to 1.3mn tons on account                                                      These indicative numbers are based on
of persistent CNG shortage.                   T he let ter re pres ent s t he f orma l      studies undertaken by the Energy Expert
( Th e Na tio n - Febr uar y 5, 2 01 1)       acceptance of a bid submitted by NXT,         Group whose policy recommendations
                                              a Calgary-based company, a press release      once implemented are expected to lead
Spending of $10-12 B on oil import            said.                                         to a minimum of a $100 B savings over
                                              (The Express Tribune - January 6, 2011)       12 years ($30 B from oil and $70 B from
Pakistan spends around $10-12 B a year                                                      gas).
on import of crude oil and petroleum          High Oil consumption                          (Business Recorder - January 30, 2011)
products to meet its energy requirements.
However, it is working on policies to         The oil consumption in the country has        17 hydropower projects
substitute liquid hydrocarbon fuels with      increased to fresh high of 20 M tons in
natural gas in a bid to cut its import bill   the year 2010, up 0.5% from 2009. This        The Fed eral Government has lif ted
and improve the environment, Federal          inc rease was mainly on the bac k of          certain rest ric tions on est ablishing
S ecr etary f or E nvironm ent w hile         healthy demand in December 2010 when          electricity projects of over 50 mw, which
addressing a workshop on "Globally            oil consumption improved by 11 % on           will pave the way for setting up 17


                                                                                                                                                 4
                                                                                                           IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                    Credit Management Group

                                                 Tracking Opportunity & Risk Related Developments


hydropower projects in Azad Jammu             provide $242 M to help the country            ahead of an anticipated harsh winter and
and Kashmir, Kyber Pakhtunkhwa (KP)           modernise electricity transmission lines      concerns over production disruptions in
and Punjab provinces. All these projects      and curtail losses that have contributed      Australia amid floods had led to an
would be functional by the end of 2017.       to a crippling power shortage, the bank       abnormal jump in the commodity's price.
                                              said.                                         (The Nation - February 6, 2011)
Sources in the Planning Commission said
that all bottlenecks had been removed         The new loan is part of $810 M the            2nd Wind energy project initiated
which had halted the c ons truct ion          Manila-based bank approved in 2008 for
p rog res s of 5 10 7 m w c ap a c it y       the Power Distribution Enhancement            With a life of 20 years, the turbine will
hydropower projects.                          Investment Programme, the bank said           generate two kilowatts (KW) of energy
(Business Reco rder - J anuary 9, 2011)       in a statement.                               and is expected to recover its production
                                              (The Express Tribune - January 29, 2011)      costs in the first year of operation. The
90% of IPI pipeline completed                                                               locally designed wind energy turbine
                                              ADB sanctions Rs.2,318B                       will cost Rs.200,000 per KW, which is
Iran said 90pc work on the Iran-Pakistan-
                                                                                            considerably less than the im ported
India gas pipeline was complete within
                                              ADB sanctioned another loan of Rs 2,318       turbine, whic h would cost Rs1 M per
its territory and it was open for having
trade arrangements with any country in        M for the improvement and upgradation         KW.
the energy sector.                            of grids and distribution system of
Addressing a press conference here, Iran's    FESCO said, CEO.                              AGECO Limited had earlier installed the
Ambassador to India said work was also                                                      first wind energy turbine to power traffic
in progress on the Pakistani side and it      Addressing a high level meeting at            signals at the F-7 crossing in Islamabad.
was ready to start 50 per cent of the total   FESCO Headquarter, he said that this          The company has planned to generate
60 mcm capacity once the pipeline was         amount would be spent on up-gradation         enough wind energy to supply electricity
in place.                                     of four grids in addition to the expansion    for street lights and traffic signals of the
(The Nation - February 9, 2011)               of 6 grid stations.                           capital.
                                              (The Nation - February 9, 2011)               (The Express Tribune - February 13, 2011)
$100m for Uch-II power plant
                                              $36.8 M loan to Pakistan's wind farm          Energy crisis causing 2% loss in GDP
The loan will fund construc tion of
404MW gross capacity Uch-II. Located          The ADB will be providing a loan to help      Energy crisis in Pakistan had been
on surplus land at the existing Uch-I site,   fund the first privately owned and            causing a loss of 2 percent in GDP - Rs
the projec t would be developed by a          fin anc ed win d fa rm in P akis tan .        75 B in t erms of exports red uction
British power company. The plant is                                                         whereas hundred of thousands get
expected to take 30 months and would          Turkish firm, Zorlu Enerji Electrik Uretim    jobless every year. These were the
be c omplet ed in Sep tember 2013 .           will use the $36.8 M loan to install wind     conc erns s hown by expert s while
(Dawn - January 19, 2011)                     turbines to increase the output of its wind   addressing at a seminar on "Energy
                                              farm - located in the southern S indh         Security and Climate Change" organised
1,150 MWs additional power by summer          province, 100 kilometers northeast of         by Associate, Sustainable Development
                                              Pakistan's commercial hub of Karachi -        Policy Institute (SDPI).
Pepco DG (Energy Management and               from the current 6 megawatts to a total       (Business Recorder - February 18, 2011)
C on serva tion) Engin eer s aid th at        56.4 megawatts.
1,150MW electricity would be added to         (Daily Times - February 5, 2011)              Circular debt nears Rs 500 B mark
the national grid with the commissioning
of the five new power plants by summer.
                                              106MW project - Agreement signed              The country's energy sector is fac ing
He was giving a weekly briefing to media
at the Wapda House.                                                                         about Rs 500 B circular debt, whic h
                                              WAPDA and SAMBU-SARCO, joint                  includes Rs 301 B old and Rs 140-150 B
The Pepco DG said that three power            venture of a Korean and Pakistani firm,       fresh debts which have piled up recently
plants of 225MW each including Liberty        signed Rs 7.52 B agreement for 106MW          due to inefficient top brass of Pakistan
Tech, Hubb at Narowal and Helmor at           Golen Gol Lot-II Hydropower Project at        Electric Power Company (Pepco), sources
Bhikkhi, and Foundation of 175MW and          Wapda House.                                  told.
Chashma Nuc lear P ower Plant-II of           (The Nation - December 28, 2010)              (Business Recorder - February 23, 2011)
300MW would be generating electricity
by summer this year.                          Coal prices down by 12pc                      10 nuclear power plants to be set up by
(Business Recorder - February 2, 2011)                                                      2030
                                              The coal prices have fallen for the first
ADB lends $242 M for power sector             time since Nov 2010. Coal has slipped to      Ten nuclear power plants will be set up
                                              FOB $122/ton from its peak of $138/ton,       in the country by the year 2030 to help
The Asian Development Bank (ADB) will         a decline of 12 percent. Stock build-up       cope with the current electricity crisis,


                                                                                                                                                 5
                                                                                                             IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                      Credit Management Group

                                                  Tracking Opportunity & Risk Related Developments


s a i d P a k is t a n A t o m ic E n e rg y   Rs 27 B Thar coal water carrier scheme         c ond uc t ed by T h e Visi on C orp .
C om m is s ion ( PAE C ) C ha ir m an .       approved                                       (The Express Tribune - February 6, 2011)

He said that more than 10 nuclear power        Consid ering that the most crit ic al          Cement rates up
plants established will generate up to         infrastructure project is the supply of
1,000 megawatts of electricity. "This is       fresh water to Thar coal fields, the Central   The cement prices were skyrocketing and
going to be a long battle but we will win      Development Working Party at its               cement rates have been increased by Rs
this beca use all it requires is will,         meeting held in Islamabad on January           40 per bag during the last six months.
d eterm ina tion an d c omm itm ent ."         21 approved a scheme for Thar coal water       Du e to high rates of c ement t he
(The Express Tribune - January 12, 2011)       carrier at a cost of Rs 27 B.                  construction industry was facing serious
                                               (Business Recorder - February 6, 2011)         hardships, while government was not
Iran to supply electricity to neighbours                                                      taking any steps to control the prices.
                                               $66 M aid to help build two dams
I ran will exp ort 70 m egawatts of                                                           The industry sources said that cement
electricity to Afghanistan and Pakistan        The US will provide $66 M to Pakistan          prices during the last six months were
in the current Iranian year, which ends        to help complete Gomal Zam and Satpara         as under: Last August cement was at
on March 20, Fars news agency reported.        d am p roj ec ts , a cc ord in g t o t wo      selling at Rs 305 per bag, in September
(The Express Tribune - January 4, 2011)        agreements signed by Acting US Special         Rs 310 per bag, October Rs 315 per bag,
                                               Envoy for Afghanistan and Pakistan and         November Rs 335 per bag, December
2nd Powership arrives                          Pakistani officials here.                      2010 Rs 340 per bag, January Rs 341 and
                                                                                              in February, 2011 the cement bag was
The Turkish company KARKEY's second            US AI D Mis sion D irec tor, Wap da            selling at Rs 344 each in market.
                                               chairman and Secretary Water and Power         (The Nation - February 11, 2011)
powership "Alican Bey" has arrived
Karachi.                                       Ministry represented their countries on
                                               the occasion.                                  Cement sector to feel heat
An official of the company told that the       (Dawn - January 8, 2011)
                                                                                              Not as much now because of previous
total project installed capacity would be
                                               Raising of Rs.20bn allowed                     inventory build up, the country`s cement
330 megawatt (MW) as compared to the
                                                                                              sec tor is likely to feel the heat of the
contract capacity of 232 MW, providing
                                               The ECC of the cabinet allowed the Water       soaring international prices of coal (the
additional 98 MW additional capacity.
                                               and Power Development Authority to             black gold), going forward.
(Daily Times - February 1, 2011)
                                               raise Rs.20 B through TFCs and Islamic
                                               Sukuk bonds for the $11 B Diam er-             Global coal pric es continue to climb,
KESC hikes tariff by 96 paisa per unit                                                        already 34 %up since June last year. The
                                               Bhasha dam.
                                                                                              two major reasons listed by market
NEPRA has approved to KESC to hike                                                            watchers were: Temporary supply shocks
                                               Wapda already raised Rs.16 B in 2006-
power ta riff by 9 6 p ais a per unit.                                                        from Australia and a higher demand in
                                               07 for the dam which is estimated to
                                               generate 4,500MW of electricity and store      China.
According to the NEPRA official, KESC                                                         (Dawn - January 15, 2011)
                                               6.4 M acre feet of water.
proposed to raise tariff by Rs 1.01.
                                               (Dawn - January 14, 2011)
                                                                                              Domestic sale up 7%, exports decline
It said the hike granted in fuel adjustment                                                   20%
charges and will be payable in upcoming        CEMENT / CONSTRUCTION
electricity bills.                             / STEEL                                        Cement sale for domestic market during
(The News - February 1, 2011)                                                                 the month of January 2011 remained
                                               Eyes on new destinations                       1.907 M tons, registering a growth of 7
NEPRA approves increase in electricity                                                        % while export was 0.566 M t ons,
prices                                         Cement industry leaders have identified        showing a 20% decline compared with
                                               Iraq, Sri Lanka and African countries as       la st mon th i .e . D ec em ber 2 01 0.
NEPRA allowed power d istribution              potential export destinations during the
companies to raise electricity prices by       CFY.                                           Cement sale for the period from July 2010
33 paisas per unit under the monthly fuel                                                     to January 2011 was 17.2 0 M tons,
adjustment formula.                            Pakistan had the capac ity to produce          registering a decrease by 12.01% as
                                               44.88 M tons of cement by the end of           compared to corresponding period.
NEPRA gave permission for the increase         fiscal year 2009, though it only produced
during the hearing of applications filed       33.22 M tons due to lower demand and           The decline is in contrast to the last year
by power d istribut ion c om panies .          inc reased losses due to the pressure          when local consumption of c ement
(The Express Tribune - February 24, 2011)      placed on pricing, according to a research     increased by 14.70% in 2009-10 but the


                                                                                                                                                   6
                                                                                                            IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                     Credit Management Group

                                                  Tracking Opportunity & Risk Related Developments


overall increase in cement sales was           slowdown in globa l dem and an d              However, if new entrants are allowed to
9. 30% d ue to d ec lin e in exp orts .        commissioning of new capacities in the        import 100% components at 32.5% duty
(Daily Times - February 9, 2011)               region.                                       for some years, it will severely affect the
                                               (The Nation - January 5, 2011)                business of local auto-part vendors and
PS increases steel prices                                                                    will also give an edge to the new entrants
                                                AUTOMOTIVE                                   over existing manufacturers.
According to the source, the PS increased                                                    (The Express Tribune - January 8, 2011)
the prices of steel billets 150x150 mm by      Age limit raised for imported cars
Rs 1000 to reach Rs 54,000 per ton. Price                                                    Heavy investment likely
of MS Slabs has been raised by Rs 1,000        The Cabinet approved an increase in the
to stand at Rs 51,500 per ton as compared      age limit from 3 to 5 years for imported      All the previous records of used c ars
to Rs 50,500 per ton previously. They          cars. It also directed the Finance Minister   import are expected to be broken this
further said that price of MS Thick Plate      to settle the matter of salary payment to     year as investors from various sectors
has gone up by Rs 1,000 to reach Rs 54,000     the employees of devolved ministries.         are likely to put billions of rupees in the
per ton. Galvanised coils after witnessing     Brief in g m edia a bout the C abinet         import of used vehicles as the import
an increase of Rs 500 stand at Rs 83,300       decision, Information Minister said the       policy relaxation is luring them to earn
per ton. Cold Rolled products have also        Cabinet allowed import of five years old      hefty profits.
increased by Rs 500 to stand at Rs 78,300      used vehicles in view of high prices of
per ton, however, Hot Rolled products          local cars.                                   The Federal Cabinet in its meeting on
have witnessed an increase of Rs 1,000         (Business Recorder - January 27, 2011)        26th January allowed 5 years old cars to
to Rs 2,500 per ton in different categories.                                                 be imported under gif t, transfer of
(Daily Times - February 5, 2011)               Car sales improved                            residence and personal baggage schemes.
                                                                                             (Daily Times - February 16, 2011)
Malaysian firm to invest $437m by 2015
                                               Car sales have increased by 12% in 1st 7
                                                                                             Rs 3.5 B by IMC
                                               months of CFY FY11 to reach 72,580 units
Malaysia C o Bandaraya Development
                                               as c om pared to 64, 965 units in the
Berhad is investing $437 M in Pakistan                                                       Indus Motor Corporation will invest Rs
                                               correspond ing period last year, data
to develop a golf resort, a five star hotel,                                                 1.5 B more on the expansion of its highly-
                                               releas ed by Pa kista n Au tomot iv e
five housing schemes, condominiums                                                           a dv a n ce d pr e ss sh o p i n th e
                                               Manufacturers Ass ociation (PAMA)
and shopping areas.                                                                          manufacturing plant by August 2011.
                                               showed.
The BRDB General Manager said the                                                            According to the officials, the company
                                               Acc ording to the latest num bers by
investment started in 2006 and would                                                         is working aggressively to culminate the
complete in 2015. In the first nine years,     PAMA, new year registration factor and        operations of second phase of the press
it will construct 420 housing units, 5         deferred sales from December were seen        shop to achieve the maximum level of
condominiums containing 400 units and          as "major reasons" behind surge in sales,     localization in the production of vehicles.
shopping facilities containing 121 shops,      which is also evident from the past trend,    An amount of Rs 3.5 B is estimated to be
he added.                                      as car sales on a month-on-month (MoM)        spent on the press shop, Rs 2 B and Rs
(The Express Tribune - December 29, 2010)      basis recorded a substantial increase of      1.5 B on phase one and two respectively.
                                               73% to stand at 12,934 units as against       (Daily Times - January 19, 2011)
Hin dra nc e i n c em ent p rod uc ti on       7,446 units in December 2010.
                                               (Daily Times - February 11, 2011)             Irish c ompany keen to manufacture
The regional competition has started to                                                      trucks
hinder the local cement export, as the         Policies to stimulate investment
production came down to 32.3 M tons in                                                       Federal Minister for Industries and
2010 versus 33.4 M tons of 2009, down          Consistent and long-term policies are         Prod uc tion c haired a m eet ing of
by 3% However, on monthly basis, the           necessary to ensure further investment        representatives of M/s Harris Group of
sale registered a rise of 3% to 2.5 M tons     in the automobile sector, DG PAMA,            Ireland wit h senior officials of t he
in December.                                   said.                                         Ministry and Engineering Development
                                                                                             Board.
According to the latest figures, though a      In a media said that OEMs are importing
growth of 5 % was witnessed in 1H2010,         components, which are not produced in         The Irish company showed keen interest
floods in Jul-Aug resulted in demand           the country, at 32.5% duty. However, if       to invest in the t rucking sec tor of
contraction of 11% in 2H2010. Local sales      they import any components that are           Pakistan.
were recorded at 22.7 M tons in 2010           produced in the country they would have
against 22.1 M tons in 2009, up by 2%.         to pay a duty of 50 per cent. "It is an       The c ompany intends to establish a
However, on the export front, sales            agreed arrangement that protects rights       refurbishing facility for up-gradation of
declined by 14% to 9.7 M tons due to a         of local vendors," he said.                   used trucks. In addition, they will set up


                                                                                                                                                  7
                                                                                                              IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                       Credit Management Group

                                                Tracking Opportunity & Risk Related Developments


a commercial vehicle testing centre for      gover nm ent wou ld c ons ide r t he             Imports of cellphones
roadwort hiness based on E uropean           recommendations given by the industry
standards and provision of full dealer       and stakeholders.                                The demand for mobile phones remained
network.                                                                                      in place in 5 months (July-November) of
(Daily Times - January 26, 2011)             Chairman PTA, said the country would             the CFY 2010-11, data shows.
                                             see about $1 B investment in telecom
Help in auto parts m anufact uring           sector.                                          According to Federal Bureau of Statistics
                                             (Daily Times - January 12, 2011)                 data, mobile phone imports rose 100 %
Pakistan is working with Malaysia to                                                          to $ 180 Min J uly-Novem ber 201 0
have technical collaboration in auto parts                                                    compared to imports worth $91 Min the
                                             10% growth Cellular phone users base
manufacturing with buy-back guarantee.                                                        sa m e p eri od th e p revi ous yea r.
                                                                                              (The Express Tribune - January 6, 2011)
                                             Cellular phone operators have attracted
This was stated by the Minister f or
                                             a substantial number of new customers            Opti ca l fib re c abl e sys tem to b e
Industries and Production while talking
                                             towards their network with plenty of             established
to media at the 2nd Malaysia-Pakistan
                                             different voice and text packages offered
Palm Oil Trade Fair and Seminar (POTS)
                                             in first half of the current fiscal year 2010-   Pakistan is to establish c ross border
2011 at a local hotel.
                                             11, registering a 10 % growth in base            Optical Fibre Cable system at a cost of
                                             compared with corresponding period of            Rs 3.7 B between Pakistan and China for
He said that Malaysia will help Pakistan
to further strengthen its auto vendors       previous fiscal year.                            security of information, official sources
industry.                                                                                     told . The m ain concern of the two
(Dawn -January 18, 2011)                     Pakistan Telecommunication Authority             countries is the p ossibility of India
                                             (PTA) statistics showed that 3.59 Mnew           monitoring the communication activities
                                             mobile phone subscriptions reported in           of the two countries, through undersea
Spending of $150 M in Pakistan
                                             1HFY11 against 3.24 M connections                cable.
                                             added by the cellular phone operators            (Business Recorder - December 28, 2010)
Yamaha Motors Pakistan will spend $150
million and set up a new plant at 50 acres   in 1HFY10.
                                                                                              Pakistan tops
plot in Bin Qasim near Karachi said
President Yamaha Motors in a meeting         The overall c ellular phone users' base
                                                                                              C ellu lar su bs cr ibers in P akis ta n
with President of Pakistan.                  has inc reased to reac h 102.777 M by
                                                                                              surpassed 102.77 M mark in 2010, adding
                                             December 2010 whereas it stood at 97.57          a total of 3.59 M subscribers from July to
President Yamaha Motors said their           M by December 2009.                              December 2010, said the latest report
c omp an y would brin g ad van ce d          (Daily Times - February 24, 2011)                p ubl is hed         by     P ak is ta n
technology to Pakistan where initially                                                        Telecommunication Authority (PTA).
22,000 motorcycles of 125-150 cc, per        Take over of Nayatel
year, would be manufactured in the                                                            The count ry's c ellu la r tele-d ensity
factory with EFI engines and during the      Telecoms operator Etisalat is in takeover        reached 61.7 % in December 2010, up
next ten years its production would reach    talks with internet provider Nayatel, one        from 60.8 % six months prior.
to 750,000.                                  of Pakistan's fastest-growing companies.         (The Express Tribune - February 24, 2011)
                                             "They want to totally buy us out," Nayatel
Th e c ompany would also provide             chairman told Reuters in an interview,           Qubee investment to reach 150 M
c om prehens ive train in g, tec hnic al     add ing talks had slowed over the
education to its employees, dealers and                                                       Qubee plans to expand its advanced
                                             potential cost of a deal. "Ultimately it
vendors.                                                                                      internet tec hnology t o millions of
                                             comes down to price," said Chairman,
(The News - February 23, 2011)                                                                customers in various cities in Pakistan
                                             adding he also expected interest from
                                             Chinese and Norwegian companies .                by th e end of t he yea r wit h t he
 TELECOMMUNICATION                                                                            investment of US $150 million, said Chief
                                                                                              Marketing Officer (C MO) of Augere
                                             Nayatel made its name by investing early
3G to bring about 1 B                                                                         Holdings.
                                             in a fibre-optic network for direct
The Secretary Cabinet Division said 3G       connections to homes and businesses to           Briefing journalists at a local hotel, he
services would hopefully be available to     allow for heavier data downloads. The            unfolded Qubee's future plans to be
the Pakistani mobile users by the end of     internet, telephone and cable TV service         executed d uring the calendar year.
2011.                                        provider has paid-up capital of about $5
                                             million. Annual sales among its 7,000            The total investment of the company will
The Secretary Cabinet Division, speaking     customers top $12 million, said Khan,            be increased to $150 M by the end of
said that the local manufacturing of 3G      with revenue growth of 40-50 % a year.           current year, he said.
handsets is very import ant and the          (Business Recorder - January 25, 2011)           (Business Recorder- Janua ry 28, 2011)


                                                                                                                                                    8
                                                                                                        IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                 Credit Management Group

                                                Tracking Opportunity & Risk Related Developments


SMS volume projected to cross 300bn          Engro and FFBL outperformed the sector       cereals plant, capable of producing over
by 2013                                      as thes e grew by 73 % and 72%,              30,000 boxes of cereal per day, start
                                             respectively on a yearly basis in 2010.      working. The pla nt is loc at ed in
The popular trend of exchanging low-         On the other hand, Dawood Hercules           Faisalabad Industrial Estate, which will
cost SMS will double in terms of volume      switched to a net profit of Rs.3.25 B from   give the country an opportunity to export
to more than 303.277 B per annum within      a loss of Rs.1.78 B in 2009.                 breakfas t c ereals proces sed usin g
the next three years, a research report      (The Express Tribune- February 26, 2011)     Pakistani maize.
said.                                                                                     (Business Recorder - January 11, 2010)
                                             Deals finalised to import urea of $100 M
Portio Research said that more than                                                       Danish Co to import Pakistani dates
151.6385 B text messages were exchanged      Following the directives of the ECC of
during 2009 in the country, which spells     the Cabinet, TC P signed commerc ial         Catsus, one of Denmark's leading fruit
to 1,532 SMS per subscriber. To elaborate    agreement worth $100 M with Saudi            snack producer company, would now
the SMS volume further, an average of        Basic Industrial Corporation (SABIC) for     import nutritional dates from southern
621.2 M SMS were exchanged each day          import of upto 300,000 tons of urea to       of Pakistan to develop fruit bars for
during 2009 or 128 messages per head         meet local demand.                           children in Denmark.
per mont h were sent agains t t he           (Business Recorder - February 8, 2011)
subscribers' base of 99 M.                                                                It would import around 800 tons of dates
( Da ily T im es - Ja nua ry 14 , 2 011 0    Interest shown by Chinese firm               per year carrying a total value of $0.65
                                                                                          M. This is the first time that Pakistan
GSMA Gl obal Mobile A wards for              A Chinese firm, AMLONG has shown             would ex port dates to Denmark, a
Easypaisa                                    interest in setting up a steel mill of 1 M   development that encourages room for
                                             tons at Kalabagh - based on local iron       Pa kis ta ni prod uc t s in Den ma rk.
Telenor's Easy paisa - the service that      ore deposits.                                (The Nation - February 16, 2011)
had Rs.1 B worth of transactions in less
than a month - has been selec ted as a       The company officials held meetings with     Fauji Fertiliser - Agritech Merger
nominee for the GSMA Global Mobile           various government organisa tions
Awards, according to Telenor officials.      including Ministry of Industries and         The C CP is sued it s c ond itional no
                                             Produc tion, said an EDB statement.          objection certificate to the bidding by
The GSM Association an association of                                                     Fa uji Fertiliser C o. Limited for the
mobile operators and related companies       The delegation showed keen interest in       proposed acquisition of 75% to 79.87%
devoted to supporting the standardizing,     the project and requested CEO EDB to         shares of Agritech Limited by FFC.
deployment and promotion of the GSM          arrange a visit to the site. Accordingly,
mobile telephone system.                     a 7 member delegation led by GM, EDB         Earlier, FFC had submitted its pre-merger
(The Express Tribune - January 21, 2011)     visited Makarwal/Chichali iron ore           application on 2nd August, 2010 for the
                                             deposits on January 10-11.                   acquisition of 75% to 79.87% shares of
                                             (Daily Times - January 13, 2011)             Agritech Limited.
 OTHER INDUSTRIES                                                                         (The Express Tribune - January 27, 2011)
                                             Start of 1st biofertilizer plant
Fertiliser sector profits grow 70% in                                                     Fertiliser DAP prices continue to soar
2010                                         The first-ever bio-fertilizer plant in the
                                             country with capacity of producing over      Prices of DAP reached Rs.3,100 per bag
The fertiliser sector marked 2010 as an      5,000 bags daily is being opened in City,     after an increase of Rs.100 per bag. FFCL
eventful year with a substantial increase    it was learnt.                               and Engro Fertiliser Limited have both
of 70% in profitability on a yearly basis,                                                raised prices, citing increases in the
ac cord ing to a report p repa red by        The plant, which is equipped with the        international m arket f or DAP and
Summit Capital.                              lates t tec hnology of 21 st c entu ry,      phosphoric acid.
                                             agricultural experts said and added that
The report is based on the analysis of top   though this technology is available in       Fertiliser prices have consistently shown
4 fertiliser companies namely FFC, Fauji     advanced countries including China and       a rising trend for over a year now.
FFBL , Engro Fertiliser and Dawood           India yet this plant is of its first kind    Fertiliser sector analyst said that during
Hercules.                                    being set up in Pakistan.                    2010, urea prices increased by 11% while
                                             (The Nation - January 15, 2011)              DAP prices surged by 32%.
Net profit of the sector rose mainly due                                                  (The Express Tribune - January 28, 2011)
to higher fertiliser prices and one-time     Cou ntry's firs t cereal p lant s tarts
impairment loss on invest ments of           functioning                                  Foreign comp anies s hown interest
Rs.3.79 B booked by Dawood Hercules
last year, said Summit Capital analyst.      Country's first state of the art breakfast   Foreign c om panies have expressed


                                                                                                                                              9
                                                                                                             IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                      Credit Management Group

                                                   Tracking Opportunity & Risk Related Developments


interest in direct investment and joint         Potential to fetch $1 B                       Urea sales drop by 21%
ventures in the PNS C. The finance
m i ni s tr y h a s a ls o a p p re c ia t ed   Pakistan has full potential of fetching       Fertilizer sales have dropped by 21% in
rec ommendations forward ed by the              precious forex of $1 B every year through     Jan. 2011 as compared to corresponding
federal ministry of ports and shipping          promotion of Animation Industry (Video        period of last year due to Rs350 per 50-
for considering PNSC as the offic ial           Games I nd ustry) that is full-f ledge        Kg bag increase in the price of Urea and
shipping company for all public sector          entertainm ent industry world over            profiteering in the country, agronomists
organisations. The final decision will be       having exp ort potential of $ 70 B.           told.
taken by the Economic Coordination
Committee (ECC).                                Acc ording to P SEB officials, global         Chairman Pakistan Agri-Forum said that
                                                gamming industry has seen a meteoric          farmers applied about 4.5 M bags of 50kg
PNSC's role is rapidly expanding in             rise over the past several years. The world   for sowing and growing of winters crops,
international shipping of oil and the first                                                   especially wheat till 31st Jan. last year,
                                                market for gamming software is expected
phase of expanding its fleet will involve                                                     whereas total sales of urea Fertilizer from
                                                to be worth of approximately $91.96 B
an investment of $270 million to include                                                      Dec. 2010 to 1st February 2011 has not
                                                by 2015, as per various credible estimates.
eight new ships. The Chairman said that                                                       been more than 3.4 M bags.
                                                The video game industry in the US and
PNSC is making rapid progress despite                                                         (Business Recorder - February 7, 2011)
                                                Canada alone will reach $21.6 B in sales
international recession.
                                                by 2013.
(The Express Tribune - January 13, 2011)
                                                (Business Recorder - February 19, 2011)        AGRICULTURE
Ins uran ce s hare in GDP d ecl ines
                                                Record handling of oilseed                    0.320m animals exported
Despite strong growth in asset base of
13.3%, the share of insurance sector assets     Pakistan's first fully automated dry bulk     The Senate was informed by Minister for
in the GDP declined marginally to 2.8%          cargo terminal Fauji Akbar Portia Marine      Livestock and Dairy Development told
in calendar year, 2009 as against 2.9% in       Terminals Ltd at PQA, has created a           the House during the question hour that
the previous year, said a State Bank report     record by discharging 16,500 M tons of        the commercial export of live animals
issued recently.                                canola oilseeds in a day, comfortably         was started about 19 mont hs bac k.
(Dawn - January 29, 2011)                       beating the previous 1-day record of          During last two financial years, 70,440
                                                about 9,500 M tons achieved at KPT.           cattle, 64,849 buffaloes, 1,84,777 goats
Investments in edible oil refineries                                                          and s heep, a nd 42 3 c am els were
                                                This feat was made possible due to the        exported.
The investments in edible oil refineries        Terminal being bu ilt on a 9- hectare
rec ently had boosted palm oil trade            facility, which is capable of catering to     Giving the break-up, he said a total of
bet ween Mal ays ia a nd Pa kist an ,           Panamax size vessels up to 80,000 DWT.        5,515 animals, including 1,260 cattle, 1,825
Ma laysia n M inist er of P lanta tion                                                        buffaloes, 2,430 goats and sheep were
                                                The terminal can handle over 4 M tons
Industries and Commodities, said. He                                                          exported in the year 2008-09.
                                                of dry cargo and provides handling of
said Pakistan's oils and fats markets had       import and export cargo complemented
grown from 2.7 M tons in 2000 to 3.7 M                                                        In year 2009-10 the export soared to
                                                by bagging stations and storage facilities    3,14,947 animals, including 69,180 cattle,
tons last year and palm oil accounted for       to exporters and importers at the port.
almost 50% of the total.                                                                      63,024 buffaloes, 1,82,347 goats and sheep
                                                (Daily Times - January 7, 2011)               and 423 camels.
(Daily Times - January 19, 2011)
                                                                                              (Dawn - February 5, 2011)
                                                'Seafood sector c an earn $2 B yearly'
Largest Urea plant commissioned
                                                                                              4.6MT rice exported
                                                There is a great potential in the Pakistani
The gas efficient new urea fertilizer plant
                                                sea food ind us try t o ea rn f oreign        The country has exported 4.6 M tons of
of Engro Fertilizer Ltd has started trial
production.                                     exchange up-to $2 B if fishermen adopt        rice to 120 countries of the world in
                                                modern methods and exporters opt for          current FY with limited res ourc es.
According to a communique despatched            shrimp-farming on a mass-scale, said
to KSE, urea is the largest single train        Provincial Minister for Fisheries during      This was stated by Vice Chairman of
urea plant in the world with the                his visit to the international exhibition     REAP while briefing the newly-inducted
production capac ity of 1.3 M ton p.a.          on fisheries, livestock and dairy at Expo     officers of Commerce & Trade Group,
using sophisticated modern technology.          Centre, Karachi. He als o urged the           who visited Rice Exporters Association
                                                s ea f ood ex p or t er s a n d p r iva t e   of Pakistan head office.
Engro Fertilizer is the 100% subsidiary         entrepreneurs to come forward and make
of Engro Corp.                                  investment in the sector..                    He said presently we are exporting rice
(The News - December 29, 2010)                  (Business Recorder - February 9, 2011)        to 120 countries and we have captured


                                                                                                                                                   10
                                                                                                           IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                    Credit Management Group

                                                  Tracking Opportunity & Risk Related Developments


various non traditional markets of the         kinnow, has totally waived the duty from      Tea worth Rs 23.543 B consumed in 2010
world because basmati rice is famous for       January 4, 2011, allowing duty-free
its aroma and quality allover the world.       import of the fruit from Pakistan into        Pakistan, being one of the biggest black
(The Nation - January 30, 2011)                Iran.                                         tea consumers, has imported 118.008 M
                                                                                             kgs of this commodity worth Rs 23.543
Output of 12m Cotton bales                     Pakistan exported 360,000 tons of kinnow      B ($283.656 M) during the year 2010.
                                               in 2009-10, of which about 44,000 tons        Kenyan remained the major producer
Farmers have supplied 11.38 M bales of         was the share of Iran only. The impact        with its share of 58.44 %in the total tea
cotton to the market in the current season     of the waiver would take Iran's kinnow        imports in the country as Pakis tan
so far and total production is expected        imports to 130,000 tons and, finally, the     imported 68.968 M kg black tea worth
to reach 12 M bales, which is short of the     figure of kinnow exports from Pakistan        Rs 16.409 B ($197.704 M) from this East
target following damage to the crop in         may touch 400,000 tons.                       Afric an c ountry during this period.
floods last summer, market data shows.         (Business Recorder - January 11, 2010)        (Business Recorder - January 4, 2011)

At the start of the season in the middle       Potato export to Russia                       Palm oil bill crosses $1 B mark
of last year, the country was expected to
produce 14.6 M bales of cotton, but the        Pakistan's potato export to Russia during     According to Federal Bureau of Statistics,
crop is likely to show a shortfall of 2.5 M    the current season is expected to range       the country's palm oil import bill, in
bales, causing prices to peak in the           between 120,000 Mmetric tons to 125,000       terms of volume, surged by 61 %during
domestic market. Cotton spot rate rose         metric tons worth Ms of dollars, exporters    June-January period of current FY as
to Rs11,800 per maund (37.324 kg) while        of the c om mod ity re vealed here.           compared to same period of last FY. Palm
in the open market prices surged to as                                                       oil import bill reached $1.093 B during
high as Rs13,000.                              The national exchequer is likely to benefit   t his p er iod a ga in st $ 67 8 M i n
(The Express Tribune - February 19, 2011)      immensely in terms of foreign exchange        corres ponding period of last year,
                                               as the existing rates of the vegetable in     dep ict ing an increas e of $415 M.
Reduction in lint shortfall                    the international m arket stand in the        (Business Recorder - February 26, 2011)
                                               range of $500 per metric ton.
Despite the anticipated shortfall of 1.65      (Daily Times - January 16, 2011)              Wheat procurement target set
M bales in lint production during crop
season 2010-11, the country will c over        Export of upto 3 M ton s of wh eat            The government set 6.5 M tons of wheat
around 1 M bales by the end of April                                                         procurement target for the public sector
2011, final cotton fortnight arrival report    Pakistan is expected to export up to three    organisations for the year 2011 with a
revealed.                                      M tons of wheat this year after a bumper      support price of Rs 950 per 40 kg. This
                                               2009/10 c rop and c arryover from the         was dec ided in a meet ing of t he
According to Pakistan Cotton Ginners           previous harvest led to a domestic market     Agric u ltu re Minis try' c om mit tee,
Association's fortnight arrival report till    surplus, food minister said.                  constituted by Economic Co-ordination
February 1, 2011, the c ountry faced a                                                       Committee of the Cabinet to review the
shortfall of 1.41 M bales.                     "We are expecting to export between two       country's existing wheat proc urement
                                               M tons and three M tons of wheat this         policy here.
He said till February 1, 2011 the textile      year, and some wheat has already been         (Business Recorder - February 4, 2011)
sector bought around 9.91 M bales out          s hipp ed out ," h e told rep orte rs.
of the total arrival to 11.10 M bales in the   (Dawn - February 3, 2011)                     Rice exports cross $1 B
ginneries. Ahmad said cottonseed arrival
during fortnight till February 1. 2011, the    Entrance of Pakistani Meat                    The country's rice exports crossed $1 B
ginneries in the country received 130,000                                                    mark in the seven months of the current
bales while stocks withheld with the           MD Zain Poteh, who is imp orting              FY FY11. This was announc ed by the
ginneries stood at 723,950 bales. He said      Pakistani beef, said he expects to continue   Rice Exporters Association of Pakistan
the country's consumption for 2011 will        importing 25,000 kg of beef every two         in a press release issued here. According
stay around 15.5 M bales and a possible        weeks, keeping in view the encouraging        to Reap figures, 2.080 M tons rice, worth
shortfall to 1.8 M bales will be met by        response from Malaysian consumers.            $1.141 B has been exported during the
making imports from USA, Brazil etc.                                                         seven months of FY11 against 2.397 M
(Daily Times - February 4, 2011)               Addressing a launching ceremony in            tons worth $1.180 B exported in the
                                               Kuala Lu mp ur, he said a sec ond             c orr es p ond i ng p eri od of FY 1 0.
Duty waiver on Pakis tani kinn ow              consignment of meat from Pakistan was         (Business Reco rder - February 9, 2011)
import                                         on its way to Malaysia. The exported
                                               beef comes from young breed of cows           Rs 59.6 B retired
Iran, which had been charging a nagging        from Cholistan.
90% customs duty on import of Pakistani        (The Express Tribune - February 25, 2011)     The retirement of loans under commodity


                                                                                                                                                 11
                                                                                                          IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                   Credit Management Group

                                                 Tracking Opportunity & Risk Related Developments


operation picked up sharply as the            ATM c ard, which c an be us ed to            make it more productive and competitive
procurement agencies retired Rs 59.60 B       withdraw cash up to 20 %of the loan."        in the local as well as in the international
in July-January period of current FY 2010-                                                 markets.
11. Sources in banking sector told that a     Sindh Bank is expected to disburse Rs12
key development was witnessed in              B in loans in the year 2011 to various       The objective of the co-operation is to
banking sector as a massive retirement        sectors, while unskilled and semi-skilled    establish a general framework to facilitate
of commodity financing was made by            workers numbering at least 6,000 will be     cooperation in specific areas in order to
gover nm ent owned p roc urem ent             employed. Fifty branches of the bank         promote development of the SMEs in
a gen c ie s a nd ot he r bor row er s.       will be opened in various business centres   en gin eer ing s e ct or of P a kis ta n.
                                              in Sindh and other provinces.                (Business Recorder - February 12, 2011)
Retirement under commodity financing          (The Express Tribune - January 11, 2011)
surged to Rs 59.6 B during first seven                                                     Plan for SMEs development
months of current FY as compared to Rs        Wheat exports resume
20.5 B in same period of last FY, posting                                                  A Holland -based organisa-tion has
a surge of 190 percent. With the current      Pakistan has resumed wheat exports for       announced to voluntarily c halk out a
retirement, the outstanding stock of          the first time in three years , s elling     developmental plan for flourishing the
commodity operation narrowed down             cargoes to Bangladesh and Myanmar and        Sialkot-based SMEs and modernizing
to Rs 353.6 B in January 2011 as compared     more deals are likely as the nation takes    them to enable them to meet the global
to Rs 413. 191 B on J une 30, 2010 .          advantage of rising global prices and        trade challenges under the WTO regime.
(Business Recorder - February 5, 2011)        surplus stocks at home, following last
                                              year's bumper harvest.                       Senior expert of Holland-based said that
Increase in Seafood exports                                                                there was a dire need of putting Sialkot-
                                              Asia's third largest wheat produc er,        based SMEs on modern lines. He said
Exports of fish and fish preparations         Pakistan has sold 200,000-500,000 tons       that PUM organization of Holland would
                                                                                           soon chalk out of multiple developmental
surged by 31.01 %during the first seven       mainly to Bangladesh and Myanmar and
                                                                                           plan to flourish t he Sialkot SMEs
months of the current FY over the same        international traders are taking positions
                                                                                           voluntarily.
period of last year. The fish and fish        for more deals after Islamabad lifted a
                                                                                           (The Nation - January 17, 2011)
preparations f rom the c ountry were          ban on overs eas sales last m onth.
record ed at $151.812 M d uring July-         (The Nation - January 14, 2011)
                                                                                           Rs 78 M micro-grants
January (2010-11) as against the exports
of $115.879 during the corresponding           MICRO BUSINESS & SME                        The USAID will provide nearly Rs 78
period of last year, Federal Bureau of                                                     million in m ic ro-grants to farmers,
Statistics reported.                                                                       reac hing out to over 100,00 0 dairy
                                              Islamic microfinance
                                                                                           animals over the next six months.
The seafood exports during January 2011
increased by 9.13 %as compared to the         The speakers at the first National Islamic
                                                                                           Titled 'Khushaal Livestock', the project
exports of same m onth of last year.          Microfinance Conference said that
                                                                                           is in partnership with Engro Foundation
                                              Islamic m ic rofinanc e addres sed the
                                                                                           and is being implemented by Engro
Fish exports during January 2011 stood        lim itations posed by interes t-bas ed
                                                                                           Foods. The flood-relief assistance is part
at $19.923 M against the exports of           loaning, besides facilitating the poor by    of a long term, enduring partnership
$18.257 M in January 2010. As compared        Shariah-compliant methods as well as         between the United States and Pakistan
to the exports of $23.079 M in December       focusing on micro-enterprises. "Islamic      in the economic sector.
2010, the sea exports during January 2011     microfinance enables us to reach out to
witnessed negative growth of 13.67            millions of people, rendering them skills    The United States is working with Engro
percent, FBS reported.                        a nd p ro vid i ng t h em e c on om ic       Foundation to help over 15,000 dairy
(The Nation - February 26, 2011)              environment to u se their skills in a        farmers in Sindh, who were affected by
                                              productive and profitable manner," they      the summer flooding of 2010, to restore
Farmers to receive loans                      observed. The moot was organised by          dairy productivity of farm animals to
                                              Farz Foundation at LCCI.                     pre-flood levels.
Sindh Bank would provide loans for            (The Nation - January 30, 2011)              (The Nation - January 30, 2011)
agriculture, livestock and fisheries on
eas y terms bes ides of fering other          MoU inked                                    Suroor's acquisitions
financing facilities, said Adviser to Sindh
Chief Minister.                               The Engineering Development Board            The takeover of three commercial banks
                                              and Small and Medium Enterprises             - Arif Habib Bank, Atlas Bank and
Talking to the media at a complaint cell      Business Support Fund have agreed and        MyBank - by Suroor Investment has been
at the Chief Minister's House, she said       MoU is signed to develop and promote         followed by acquisition of a microfinance
"each farmer will be provided with an         the engineering industries of Pakistan to    bank in Pakistan.


                                                                                                                                                12
                                                                                                           IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                    Credit Management Group

                                                  Tracking Opportunity & Risk Related Developments


Su roor I nves tment, a United Arab            According to the report, the number of       3.5 trillion or $ 40.8 B and Rs 2.1 trillion
Emirates-based group, has acquired a           cross-border transactions increased by       or $ 24.5 B respectively.
microfinance bank and an announcement          154 %in volum e and 19 %in value,
in that regard will be made soon, said         however, the large value payments            The credit to the private sector has also
Summit Bank Senior Vice President in a         settled through PRIS M dec reased by         shown an encouraging trend with Rs 113
talk after a press briefing on the re-launch   6.51% in volume and 11.35% in value of       B disbursed so far in the current FY11,
of Summit Bank, formerly Arif Habib            transac tions in comparison with the         particularly on account of commodity
Bank.                                          previous quarter.                            financing which has further been aided
(The Express Tribune - February 8, 2011)                                                    by high commodity prices.
                                               It said that the volume and value of
 FINANCIAL SERVICES                            paper-based retail payments during the       Deposits rose by 9.7% in 4Q to record an
                                               quarter under review were 82.959 M and       18.5 % rise in the calendar year and reach
                                               Rs 35.60 trillion showing a decrease of      Rs 5.1 trillion $ 59.8 B. The increased
Acquisition of house financing portfolio
                                               9.44% in number of transactions and          liquidity in the system is due to high
BankIslami has signed first of its kind        12.18% in value of transactions. It also     monetar y a ggregate ( M2) growth,
deal to acquire Citibank Pakistan's house      pointed out that the volume and value        pu s hed up by h igh g ov ernm en t
financing portfolio amounting to Rs 953        of e-banking transactions during the         bor row ing a nd f a vor ab le B OP.
M.                                             quarter reached 52.58 M and Rs 4. 7          (Daily Times - January 8, 2011)
                                               trillion, respectively.
This is the first time a bank has acquired     (Daily Times - December 29, 2010)            Increase in MCB's Profit
mortgage assets of another bank. It is
expected that this transaction will open       Improvement in Islamic banking share         MCB Bank Limited has c ompleted yet
door for other sim ilar transactions                                                        another rem arkable year in term s of
enabling banks to acquire entire business      Islamic Banking Industry has sustained       financial performance and posted a profit
or product lines.                              growth momentum despite prevailing           before tax of Rs 26 B in the year ended
(Daily Times - December 28, 2010)              tenuous economic conditions; and overall     December 31, 2010, with a rise of 13%
                                               share of IBI in the country's banking        from 2009, and profit after tax of Rs 17 B
Branchless banking is future                   sys tem also im proved t o 6.4% in           with an increase of 9% from last year.
                                               September 2010.
Governor SB P has said branchles s                                                          The BoDs of the bank also declared final
bankin g is futu re of the c ountry's          Sources told that the Islamic banking        cash dividend of Rs 3.0 per share and
financial sector as it opens up great          assets, deposits and financing continued     10% bonus share for the year ended
opportunities for banks to tap into the        exhibit-ting strong growth with total        December 31, 2010.
un-exploited potential by bringing the         assets increasing to Rs 424 B at the third   (Business Recorder - February 11, 2011)
unbanked segment of the society into the       quarter end (September 2010) from Rs
financial system.                              411 B at the beginning of the quarter; the   Mu tual funds s ector 18. 7% growth
                                               y-o-y growth in the assets was 31%.          registered
He said that SBP had been at the forefront     (Business Recorder - Ja nuary 6, 2011)
in introducing a compac t regulatory
                                                                                            The mutual funds industry has registered
framework for branchless banking as
                                               Banks showed better performance in           growth of 18.7% to reach at Rs 238 B
Pakistan was one of the few countries in
                                               2010                                         during first seven months ( July10-
the world where branchless banking took
                                                                                            January11) of the CFY. "The size of the
off as a result of Branchless Banking
                                               The SBP statistics showed the advances,      mutual funds indu stry witness ed a
Regulations issued by SBP in March 2008.
(Business Recorder - January 21, 2011)         deposits and investments of the banks        remarkable performance in this period
                                               grew by 6. 9 %, 15. 8 %, and 9 .7 %          mainly on account of Islamic inc ome
1st report on payments system                  respectively in 4Q 2010 with calendar        funds and money market funds, which
                                               year 2010 growth totaling to 6.8%, 18.5%     grew by 158% and 95% during the first
According to SBP's 1st Quarterly Report        and 27.8% respectively.                      seven months of the CFY", an analyst at
on Payments Systems released, 60 more                                                       Invest Capital and Secu rit ies said.
bank branches have been upgraded to            SBP weekly data showed accelerated           (Business Recorder - February 23, 2011)
Real Time Online Branc hes while the           growth in the asset base of banks, which
number of plastic cards (ie ATM, debit         was up 8.6% in 4Q 2010 alone, leading        120% growth registered
and credit cards) also increased by 5.23%      to the full year growth to 13.4% to reach
as compared to the previous quarter.           Rs 6.8 trillion or $ 79 B.                   Pak-Qatar Family Takaful (PQFTL) has
                                                                                            recorded 120% growth in its Takaful
The report said that the value of ATM          Advances and investments led the way,        business in year 2010 which grew to Rs
transactions increased by about 5% o Rs        as both have registered sharp growth in      1.04 B as compared to previous year's Rs
262,524 M.                                     4Q and up 6.9% and 15.5% to reach Rs         466 M. According to a press release issued


                                                                                                                                                 13
                                                                                                          IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                   Credit Management Group

                                               Tracking Opportunity & Risk Related Developments


here, the PQFTL recorded 66% growth         figures during the half year ended on          additional economy activity of over $4
in its branch network, which increased      December 31, 2010.                             B by filling this gap.
to 44 branches in 21 cities across the                                                     (Daily Times - January 23, 2011)
country.                                    NI T-State Enterprise Fund (SEF) has
(Business Recorder - February 1, 2011)      earned a net profit of Rs 2. 061 B             ABL's Profit increases
                                            translating into earning per unit of Rs
Savings scheme for small investors          7.04.                                          The profit after tax of Allied Bank Limited
blocked                                     NIT-Equity Market Opportunity Fund             (consolidated) increased to Rs 8.283 B in
                                            has earned a net profit of Rs 215 M,           the year ended December 31, 2010 as
The ministry of finance has blocked an      translating into a per unit earning of Rs      compared to Rs 7.149 B earned in the
initiative for mobilizing Rs.80 B public    4.58 whereas the net income of NIT             corres pond ing p eriod in 2 009. T he
savings through short-term treasury bills   Government Bond Fund stood at Rs               earning per share of the bank has
with maturity period of three months to     139.2 M which translates into earning          increased to Rs 10.59 in the period under
one year because of opposition from         per unit of Rs 0.45 and NIT Income Fund        review against Rs 9.14 in the same period
commerc ial banks and international         (IF) earned a net income of Rs 95.6 M          a year back.
lenders.                                    which translated into earning per unit of
                                            Rs 0.48.                                       The board of directors of the bank in its
Sources told that the Central Directorate                                                  meeting held on Friday at Lahore
of National S avings had finalised a        Du ring 1HY 11, th e Fund 's NAV               recommended a final cash dividend for
scheme to launch three different savings    increased by 21.22% from Rs 25.92 (ex-         the year at Rs 2.00 per share i.e 20 %. This
instruments of three months, six months     dividend) as on June.2010 to Rs 31.42 as       is in addition to interim dividend already
and 12 months at the prevailing market-     on December 31, 2010 against an increase       paid at Rs 2.00 per share i.e 20 %. The
based interest rates of about 12-13%.       of 23.66% in the benchmark KSE-100             board also recommended issuing bonus
                                            Index.                                         shares , by utilizing share premium
But private banks and some international    (Daily Times - February 9, 2011)               account, in the proportion of one share
lenders feared the scheme would lead to                                                    for every ten shares held i.e 10 %.
a run on their deposits.                    PBIT im plem ents RE IT tax p oli cy           (Business Recorder - February 12, 2011)
(Dawn - February 11, 2011)                  reform
                                                                                           Recovery of NPLs
Bestway Group invests 230m in UBL           Punjab Board of Investment and Trade
                                            (PBIT) has been able to implement Real         Recovery against NPLs by banks and
T he B e st wa y Grou p , U K bas ed        Estate Investment Trust ( RE ITs) tax          DFIs has been on a significantly slow
conglomerate founded and chaired by         policy reform via government of Punjab.        pace as it registered a noticeable decline
Sir Anwar Pervez announc ed it has          REITs are mutual funds that use pooled         of 43.39% in the qu arter end ed on
increased its shareholding in United Bank   capital of large number of investors to        September 30, 2010. Sources in banking
Limited UBL to 51.07% by acquiring an       purchase develop and manage real estate        sector told that NPLs of banking system
additional 20% of shares from Abu Dhabi     assets. Units of REIT funds are listed/        reached an all-time high level of Rs
Group provided fully integrated advisory    traded on a stock exchange. REIT is an         508.832 B in September 2010 from Rs
and financing solutions and acted as sole   ideal vehicle for small savers and other       475.946 B in June 2010, mainly due to
bank in the deal.                           individuals to invest in real estate while     flood s, high interest rates and slow
                                            maintaining liquidity and benefits of          economic activities.
UBL is Pakistan's second largest private    cap ital m arkets. REIT has mu ltiple
bank. In 2002, a consortium consisting      benefits to economy such as it can bring       The State Bank said that banks and DFIs
of Bestway Group and Abu Dhabi Group        transparency to real estate transactions,      recovered Rs 10.650 B in July-Sep 2010
acquired 51% of UBL shares together         increase participation of general public       against Rs 18.813 B in a quarter earlier,
with management rights and control of       in profitable real estate projects and kick-   depicting a d ec rease of Rs 8.163 B.
bank through Government of Pakistan's       start economic act ivities, eliminate          (Business Recorder - January 13, 2011)
privat ization proces s. Consortium         housing backlog and provide quality
currently owns 61.37 % of bank with         living, bring standardization and best         Banks advised to tackle rising NPLs
Bestway Group at 31.07 % and Abu            practices to the construction industry,
Dhabi Group at 30.30 %.                     efficiently c hannels Foreign Direct           The SBP has stressed upon the banks to
(Daily Times - January 28, 2011)            Investment and substantially increase          devise ingenious strategies to deal with
                                            government revenues. RIETs can also            the high level of Non-Performing Loans.
NIT registers 143% growth                   provide a viable channel to direct foreign
                                            investment into the country's housing          SBP's quarterly Performance Review of
National Invest-ment Trust (NIT) has        sector. Assuming an annual incremental         the Banking System for the quarter ended
registered a phenomenal growth of 143       shortfall of 370 thousand units, according     September 2010 revealed the growth in
% in net profit excluding unrealised        to an estimate, REITs could trigger            NPLs, which decelerated during the first


                                                                                                                                                14
                                                                                                         IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                  Credit Management Group

                                                Tracking Opportunity & Risk Related Developments


two quarters of CY10, grew by 7.4%           manu fact uring ind ustry prod ucing         records of transactions and identification
during the quarter under review reaching     exportable goods is eligible for financing   data in a systematic manner.
Rs 494 B as banks' lending portfolio.        under the SBPs' Long Term Financing          (Daily Times - January 2, 2011)
                                             Facility (LTFF). According to a Circular
"This coupled with over-the-quarter          (SMEFD Circular Letter No 2) issued,         SBP extends waiver up to June 30
decline in lending portfolio amplified       fina ncin g for p la nt, ma chiner y &
the deterioration in infection ratios," it   equipment to be used by the ex port          The SBP has decided to extend waiver
said.                                        oriented projects in glass sector for        up to June 30, 2011 for availing financing
(Daily Times - December 28, 2010)            producing exportable goods shall also        under the Export Finance Scheme (EFS)
                                             be eligible under the LTFF Scheme.           to those exporters whose export proceeds
 REGULATORY                                  (Business Recorder - January 21, 2011)       were overdue. The extension in waiver
                                                                                          has been granted through a Circular
2nd installment of mark up rate              Banking Companies FBR Amendment              (SMEFD Circular Letter No 6) issued to
                                             bills passed                                 t he P res id e nt s / C E O s/ C ou n tr y
According to a Circular (SMEFD Circular                                                   Managers of all banks.
No. 1) issued, the Ministry of Finance       The National Assembly p ass ed 'The          (Business Recorder - February 25, 2011)
has advised to release 2nd instalment of     Banking Companies (Amendment) Bill,
the subsidy under the Scheme for the         2010 and The Federal Board of Revenue        Limit fixed
period from 01-07-2010 to 31-12-2010 to      (Amendment) Bill, 2010' unanimously.
the beneficiaries of the textile sector.     (Business Recorder - February 25, 2011)      The SBP has directed banks and DFIs to
(Daily Times - January 16, 2011)                                                          ensure that overall credit card and
                                             Banks can buy up to $250000 bills from       personal loan limits availed by a person
Payments to exporters                        exporters                                    from all banks/DFIs in aggregate should
                                                                                          not exc eed five m illion rupees. For
The SBP announced the offices of SBP-        The SBP allowed all banks/DFIs to            implementation, the SBP has amended
BSC (Bank) will release Export Finance       purchase/discount bills upto $250,000        c ert ain provi sion s of P rud en tia l
Mark-up Rate Facility to the extent of 8     f rom ex p or t er s w it ho u t ra t in g   Regulations for Consumer Financing
per cent of total claims against the cases   restrictions. Earlier, only "A" rating       with immediate effect, in this regard a
which have been found in order and           ba n ks / DF I s w er e al lo w ed           Circular (BPRD Circular No 1) has been
where 92 per cent reimbursement has          purchasing/discounting of bills, however     issued.
already been made to the banks under         on the banks' request the State Bank         (Business Recorder - January 7, 2011)
the scheme.                                  allowed purchase and discount of upto
                                             $250,000 bills from any exporter without     Loan write offs procedure
Banks should immediately pass on this        any rating restrictions.
a dd itiona l reim burs eme nt t o t he      (Business Recorder - February 24, 2011)      According to a Circular, (SMEFD Circular
c on cerned exporters , s aid S MEFD                                                      No. 1), the S BP ha s announc ed a
Circular Letter No. 07 of 24th February,     Third party fund transfer through            procedure for reimbursement of write
2011 issued to the Presidents / CEOs of      PRISM allowed                                off of loans outstanding as of December
all banks.
                                                                                          31, 2 009 against the borrowers of
(The Nation - February 25, 2011)
                                             According to a Circular (PSD Circular        Malakand, Swat, Buner and C hitral
                                             No 2) issued , all participating banks of    districts under the Prime Minister's Fiscal
Opening of dedicated Home Remittance
                                             PRISM are allowed to send individual         Relief Package to rehabilitate Economic
Payment Centres
                                             3rd party fund transfers (using MT 103)      Life in Khyber Pakhtunkhwa, Federally
The SBP has allowed all the banks to         through PRISM System for amounts of          and Provincially Administered Tribal
open d edic ated Hom e Remitta nce           Rs 10 million and above. "This, limit,       Areas.
Payment Centres with immediate effect.       however, will not be applic able t o         (The Nation - February 3, 2011)
This decision has been taken by the State    National Clearing Company of Pakistan
Bank keeping in view the rising trend in     Ltd. (NCCPL) request for Fund Transfers      SBP lifts ban on cash export
t he hom e rem it ta nc es an d th eir       in PRISM System," the Circular added.
importance for the economy. According        (Daily Times - February 12, 2011)            In a major move to increase foreign
to a Circular (BPRD Circular No. 2)                                                       inflows t he SBP allowed Ex change
issued.                                      ASBP amends regulation for MFBs to           Companies to export cash in three major
(Daily Times - January 16, 2011)             maintain transaction records                 currencies UK Pound Sterling, Euro and
                                                                                          UAE Dirham and im port equivalent
Glass manufacturing industry eligible        Th e SBP has amend ed P rudent ial           dollar against export. Ban on the export
under LTFF                                   Regulation No 17 for Microfinance Banks      of these currencies was imposed by the
                                             with im mediate eff ec t to introduc e       SBP on May 9, 2008, when Pak rupee
T he SBP has announc ed that glas s          minimum requirem ents to m aintain           ag ain s t t he d olla r w as ra p id ly


                                                                                                                                               15
                                                                                                             IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                      Credit Management Group

                                                Tracking Opportunity & Risk Related Developments


depreciating.                                Concess ion al t ax regi me for REITs           Average 7.46% Banking sector spreads
(Business Recorder - January 20, 2011)
                                             The SEC P has s uccess fully secu red           The banking s ect or sp read s ha ve
SBP raises SLR for Islamic banks             concessional rates of stamp duty and            averaged at 7.46% for the year 2010 as
                                             registration fee for Real Estate Investment     compared to 7.47% in 2009, a mere
According to the SBP Circular, in exercise   Trust properties in Punjab and Sindh.           decline of 1bps. The average lending rates
of the powers conferred upon the SBP                                                         for the year stood at 13.39% in 2010,
under section 36 of the SBP Act, 1956,       In Punjab, the stamp dut y on REIT              compared to 13.98% in 2009; while
and section 29 of the Banking companies      property purchases has been reduced             average deposit rates stood at 5.93% in
Ordinance, 1962, it has been decided to      from 2% to 0.5%. On REIT property sales,        20 10 , as a gain st 6 .5 1% in 200 9.
in cr eas e t he St at ut ory L iqu id ity   the duty has been cut from 2% to 1%. In         (Business Recorder - January 28, 2011)
Requirement (SLR) for Islamic Banks and      Sindh, the stamp duty on purchases has
Islamic Banking Branches.                    been reduced from 3% to 0.5% and on             $81 M C/A deficit
(Business Recorder - February 24, 2011)      sales it has been brought down from 3%
                                             to 1%. In both provinces, the registration      Pakistan C/A deficit narrowed to $81 M
SBP sets 10 refinance rate under EFS         free on purchases has been completely           in the seven months of CFY 2010-11 from
                                             waived on sales and has been reduced            $3.052 B of the corresponding period of
The SBP has set 10 percent per annum         from 1% to 0.5% on sale.                        last FY, SBP figures showed. Analysts
the rate of refinance under the EFS from     (Daily Times - January 23, 2011)                said the higher exports, increase in
January 1, 2011.                                                                             inflows of remittances and foreign direct
                                             Servic e ch arge s on RIS M S ys tem            investment have kept C/A deficit under-
"It has been dec ided rate of refinance      imposed                                         control despite imports of service sand
under the EFS applicable from January                                                        goods have been showing increase in the
1 , 2 011 an d on ward t ill f ur ther       The SBP announced to impose service             CFY.
instructions shall be 10.00 percent per      charge of Rs 200 per transaction in PRISM       (Daily Times - February 19, 2011)
annum."                                      System from all direc t participants.
(Daily Times - January 1, 2010)              PRIS M System, as a part of Payment             Growth in Corporate profits
                                             Systems reforms, was implemented in
Relea se of mark up rat e su bs idy          July, 2008, by SBP with a significant initial   After 4 years of flat earnings, listed
instalment                                   investment in the project.                      com panies ' profits are likely to post
                                             (Business Recorder - February 6, 2011)          earnings growth of 20 % in 2011 experts
The SBP has advised banks, DFIs and                                                          said.
microfinance banks (MFBs) to submit
claims for second installment of mark-        MACRO ENVIRONMENT                              They were of the view that other than
up rate subsidy with respect to Fiscal                                                       taxes, oil prices would remain the key
Relief Package of the Government of          Agriculture disbursement - 46% target           risk factor. If oil prices increase to average
Pakistan for the beneficiaries of eligible   achieved                                        $85 per barrel in FY11 corporate earnings
sectors other than textiles in Khyber                                                        growth will be 23% while earnings
Pakhtunkhwa, Federally and Provincially      Commercial and specialised banks have           growth will reduce to 18% if oil pric e
Administered Tribal Areas.                   achieved 46% of target of agricultural          stays at average $75 per barrel. Similarly
                                             credit by disbursing over Rs 124 B credit       any change in interest rates will also
According to a Circular (SMEFD Circular      in 1st 7 months of CFY. Sources told that       affect corporate earnings' marginally.
Letter No. 3) issued.                        an indicative agricultural disbursement
(Daily Times - January 29, 2011)             target of Rs 270 B was set by the SBP for       Experts believe that earnings growth in
                                             CFY 2010-11 (FY-11).                            FY11 will be robust at 20 % which will
Revi sion of in ves tmen t polic y for                                                       continue in FY12 and FY13 albeit at a
pension funds                                During the initial months of CFY                lower pace due to below average GDP
                                             agricultural credit disbursem ent by            growth and non resolution of the circular
The SECP has revised the investment          commercial and specialised banks was            debt issue.
limits for pension fund s under the          weakened and posted a decline of some           (The Nation - January 13, 2011)
Voluntary Pension System. A statement        4.38% 1st half (July-Dec 2010). However,
issued by the Commis sion said that          in the first month of second half, credit       Surge in CPI inflation
investment limits were revised in view       disbursement witnessed improvement
of re-composition of sectors by the KSE.     and in J anuary, 2 011 alone banks              The CPI inflation surged by 14.19 % in
The re-composition led to over-exposure      disbursed Rs 23.3 B, which was Rs 5.4 B         January 2011 over the corresponding
of pension funds' investments in some        or 30% higher than Rs 17.9 billon               period of the last year with pric es of
of the merged sectors.                       di sbu rs ed d u ring J an ua ry, 20 10.        perishable food items soaring to 44.39 %,
(Business Recorder - Janua ry 22, 2011)      (Business Recorder - February 24, 2011)         according to Federal Bureau of Statistics


                                                                                                                                                   16
                                                                                                           IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                    Credit Management Group

                                                 Tracking Opportunity & Risk Related Developments


Official figures of CPI inflation released    chief has already hinted for 6% deficit of     up has been at the back of translational
by the FBS showed a decline of 1.30 %         the GDP which would be covered by              loss (USD vs other foreign currencies),
in inflation which was largely attributed     bor rowing more than Rs 10 00 B.               meaning thereby that slow moving
to the change in base effect.                 (The Nation - January 8, 2011)                 inflows govern the outstanding E DL
                                                                                             stock.
Ac cording to official data CPI July-         Exports to touch 22 B mark
January 2010-11 remained at 14.55% as                                                        On the other hand, Public and Publicly
compared to the same period last fiscal.      The country is facing a worsening but          Guaranteed (PPG) debt stood at $44.9 B
Compared to January 2010, the S PI            manageable economic situation, which           as of end September 2010 consequent to
increased 18.80% and WPI increased by         requires a new economic strategy to            addition of $1 B and $884 M in respect
22.60% on the y-o-y basis. The main           overcome c risis, said Federal Minister        of multilateral and Paris Club debt. The
commodities, which showed an increase         for Finance and Economic Affairs while         Bank of C hina deposits witnessed
in prices during J anu ary 2011 over          talking to media persons at the head           another $100 M repayment in the first
December, 2010 are as under:                  office of SBP.                                 quarter of 2010-11.
(Business Recorder - February 9, 2011)                                                       (Business Recorder - February 6, 2011)
                                              He said country's exports in the last 6
Increase in Debt and liabilities              months had increased by 20 % and hoped         Fiscal deficit may reach 6% of GDP
                                              that exports would cross $22 B by end of
Pakistan' total debt and liabilities stocks   2011. More than $10 B remittances were         Governor SBP has said that 6 %budget
have recorded an 8% increase reaching         also expected this year, he added. He          def ic it for th e CFY would mea n
new peak level of Rs 11.054 trillion by       said that the task of economic recovery        government has to borrow Rs 1 trillion
the end of December 2010 bec ause of          was not so easy, but the government was        from the banking sector, whic h could
expansion in fiscal deficit followed by       making all out efforts to achieve the          hurt the private sector and increase the
rising security, subsidies and c urrent       target. He hoped that the GDP growth           cost of credit.
expenditure.                                  target for the year would be achieved.
                                              (Business Recorder - January 23, 2011)         He said that "at the c urrent rate based
The SBP revealed that the country's total                                                    on first quarter, the fiscal deficit could
d ebt an d liabilities (d om estic and        E xp ort s t o US cr os s 2 bn m ark           reach to 6 %of the GDP." The financing
external) stocks are rising gradually and                                                    of fiscal deficit through the SBP would
posted an increase of Rs 833.6 B in first     USA remained the top im porter of              push up inflation, he added.
s ix m on t hs ( J u ly- D ec ) of C FY.      Pakistani products by importing over $2        (Business Recorder - January 5, 2011)
With current surge, the overall stocks of     B worth of goods in the first half of the
debt and liabilities have crossed the Rs      CFY.                                           Surge in Food exports
11 trillion mark and reached Rs 11.054 B
as on December 31, 2010 as compared to        Although, Pakistani authorities made           Food exports form the country witnessed
Rs 10.221 B on June 30, 2010. This increase   numerou s initiatives to diversify its         increase of 33 % in January and 12.95 %
m ainly originated f rom the rise in          export markets and even managed to             during the first seven months of CFY.
government domestic and external debt,        achieve some success in this regard,
as domestic debt posted a surge of some       however USA retained its position as the       Overall food exports were recorded at $
14 %and external debt 24.5% during first      top importer of Pakistan products over         2.035 B during July-January (2010-11) as
half.                                         the years. During July-December of this        against the exports of $ 1.801 B during
(Business Recorder - February 18, 2011)       fiscal, Pakistan exported $2.018 B worth       July-January (2009-10), according to the
                                              of goods aga in st $1. 744 B in t he           data of Federal B ureau of Statistics.
E c on om ic i nd i c at ors s how d i m      corresponding period of previous year,         (Daily Times - February 22, 2011)
performance                                   the official statistics suggest.
                                              (Daily Times - January 28, 2011)               Foreign debt servicing
Apart from the fiscal deficit, the main
f ou r ec onomic ind icat ors s howed         Rise in External debt / liabilities            Pakistan's external debt servicing stood
deteriorated performance in the first five                                                   at $2.169 B during first quarter (July-
months (July-Nov) of the CFY against          External debt and liabilities increased to     September) of ongoing FY, according to
the same period of last year, as all of       $58.4 B during first three months (July-       Pakistan Debt Policy Statement 2010-11.
t hem rem ained in negative z on e.           September 2010) of the on-going FY - an        During July-September 2010, Pakistan's
                                              alarm for th e economic mana gers,             servicing on external debt was recorded
The fiscal deficit has already surged to      acc ord ing to Pakistan Debt Polic y           at $2.169 B. Out of the grand total,
3.3 % in the 1st half (July-Dec.) of 2010-    Statement 2010-11.                             principal repayments were $1.436 B and
11 against the target of 2.3% for the said                                                   int eres t pa yme nts were $ 233 M.
period, which is an alarming situation        A rise of $2.8 B in the first quarter of the
for the government, as the Central Bank       year at a time when IMF inflows dried          The SBP has already warned that the


                                                                                                                                                 17
                                                                                                            IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                     Credit Management Group

                                                   Tracking Opportunity & Risk Related Developments


total debt and liabilities services increased   Meanwhile according to the figures of         likely to be six % of GDP or even more
t o one t rillion rupees in 200 9-10 .          Federal Bureau of Statistics, the country     than that as against 4.7 % agreed to by
(Business Recorder - February 6, 2011)          exported goods worth of $8.883 B in the       the two sides after devastating floods.
                                                first five months (July-November) of the      (Dawn - February 2, 2011)
2.6% GDP growth                                 CFY.
                                                (Business Recorder - January 5, 2011)         Inflation soars
P akist an's GD P growt h h as been
projected at 2.6 % during 2011 and 3.8 %        Rs.401 B borrowing                            Inflation jumped 14.55 % high during (7
in 2012. The WB's flagship report 'Global                                                     months) J uly- Jan 2010- 11 over the
E c onom ic Pros pec t s (GE P ) 2 011 '        The central government's borrowing            corresponding months of the last year,
projected. GEP 2011 said that in Pakistan       from the banking system for budgetary         Federal Bu reau of St atist ic s ( FB S)
a standstill on policy implementation,          support has increased to Rs401 B during       reported. Driven by food and fuel prices,
s evere d isrupt ion t ied to ma ssive          July-January FY11 from Rs148 B in the         the headline inflation, which is based on
f lood ing a nd c on tinu ing s ecu rity        same period last year.                        consu mer pric e ind ex (CPI ), ros e to
problems have constrained economic                                                            39.47% and 19.39% respectively in the
activity. Pakistan's currenc y exchange         From July 01 until January 8, 2010, overall   last 7 months 20 10-11 than 200 9.
rate depreciated by 34 % since January          government's sector borrowing to finance
2007 partly tied to large and persistent        deficit financing surged to Rs347.3 B         The monthly comparison of January 2010
structural macroeconomic imbalances.            while the inflationary borrowings from        with January 2011 witnessed an increase
(Daily Times - January 13, 2011)                the central bank also stood higher at         in inflation by 14.19 %and the indices
                                                Rs154b, compared with Rs23 B during           CPI, SPI and WPI have inc reased by
Project Approval                                the equivalent m onths of p ast FY.           14.91%, 18.80% and 22.60% respectively.
                                                (The Nation - January 20, 2011)               (Daily Times - February 9, 2011)
The government approved 70 projects
worth Rs170 B in a meeting called to            Highest exports                               Double investment in gold
approve schemes for the Balochistan
Package to address the grievances of the        On the heels of last months' export data,     The volatile gold prices in the country
most neglected province amid a financial        Pakistan forged ahead with its exports        witnessed a 100 % increase in the number
crunch.                                         record breaking spree, achieving the          of invest or s besid es doubled t he
                                                highest ever monthly exports figure of        investment in 2010, metal analyst said.
Out of the 70 projects, half were for the       $2.329 B January 2011. Pakistan's exports
Balochistan Package with a total cost of        during January, 2011 were valued at US        "Com parin g 200 9, th e nu mber of
Rs31 B. The government also gave the            $2.329 B which was 38.2 % higher than         investors and invest ment in gold
go-ahead to 35 other schemes amounting          the level of US $1.685 B during January,      remained on the higher side as the yellow
to Rs139 B, which was more than four            2010.                                         metal has always been considered a safe
times the value of Balochistan projects.        (Business Reco rder - February 9, 2011)       haven for investors in terms of safer
(The Express Tribune - January 22, 2011)                                                      investment all over the world," Pakistan
                                                IMF sets terms                                Gems a nd Jewellery D evelopm en t
Government's struggle                                                                         Com pan y (P JGD C) D irect or sa id.
                                                Welcoming wider political engagements         (Daily Times - December 28, 2010)
Likewise other economic targets, the            on economic policies, the IMF has set
government is also struggling to achieve        three pre-conditions for tangible progress    Japan pledges soft loan
annual export target of above $20-B in          on its $11.3 B standby programme with
the FY 2010-11, chiefly due to the ongoing      Pa kis ta n th at p ra c tic a lly st an ds   Government of Japan has pledged a soft
power crisis and high mark-up rate. "The        suspended since May 2010.                     loa n a m ou nt ing to 1 9 .7 B Ye n
industry is facing worst power and gas                                                        (approximately US $233 M) to Pakistan
loadshedding, besides other issues, which       The IMF wants the authorities to move         in a bid to promote the ec onomic
crippled the economic activities that is        forward with a better macroec onomic          stabilisation and development efforts.
a ff ect ing ex p or ts . T her efore, th e     framework and sus tainable budget             The notes were signed and exchanged
government has to struggle to achieve           deficit, focus on struc tural items like      between , A mbass ador of Japa n to
the annual ex port target s et for the          introduction of reformed general sales        Pakistan and Secretary Economic Affairs
ongoing FY," an official told.                  tax within th e CFY c ou pled wit h           Division (EAD).
                                                addressing losses in the energy sector
The government had set $21.5 B export           and strengthening central bank role in        "T he Government of Jap an is fu lly
target for the CFY, however, later it was       limiting government borrowing to start        committed to support Pakistan in its
revised to arou nd $20 B af ter the             with. Mainly because of these issues,         endeavours to fight against terrorism
unprecedented floods, which destroyed           according to visiting IMF mission, the        and, at the same time, to create a strong
the main export items of the country.           fiscal deficit remains very large more        and sustainable economic foundation,"


                                                                                                                                                  18
                                                                                                          IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                   Credit Management Group

                                                Tracking Opportunity & Risk Related Developments


the Japanese Ambassador said adding,         Jul-Dec 2010, reflecting surplus in the       to the member countries on important
we look forward to the ownership of the      country's external balanc e with the          issues.
government of Pakistan in leading the        support of International Monetary Funds'      (Business Recorder - January 27, 2011)
mid-to long-term rehabilitation and          assistance and foreign exchange inflows.
reconstruction as well as its mobilisation                                                 Review free trade agreement
and effective use of domestic resources.     The SBP report said the NFA of the
(Business Recorder - January 22, 2011)       banking system expanded by Rs 69 B            The federal government has decided to
                                             during Jul-Dec FY11 compared with Rs          review the free trade agreement with
LSM growth down                              55.3 B in the corresponding period last       Malaysia and the Federal Board of
                                             year. The improvement in overall NFA          Revenue has been asked by the ministry
The LSM sec tor witnessed a negative         came from both, the central bank and          of commerce to prepare a presentation
growth of 1.57 % during July-December        scheduled banks as the inflows from the       on the duty and taxation structure under
2010, when compared to the same period       IMF und er the Emergenc y Na tural            the agreement.
last year.                                   Disaster Assistance (ENDA) in Sep 2010
                                             reversed the fall in the central bank's       This paper will come under discussion
Data released by the Federal Bureau of       NFA seen in the first two months of CFY.      in a meeting expected to be held between
S tatistic s ( FB S) showed tha t L SM                                                     representatives of the two countries by
production in December grew by 2.96          In addition to institutional inflows and      the end of January in Kuala Lumpur,
%c omp ared with Dec ember 2009 .            grants, net purchases of foreign exchange     sources said.
                                             in the inter-bank market also contributed
Analysts highlighted that large-scale        to the rise in SBP NFA during Jul-Oct         Pakistan imports palm oil costing $1 B
m anu fac tu ring an d infras tru ct ure     FY11, SB P qua rterly report stated .         annually and due to a 15% concessional
development in the country took a hit        (Daily Times - February 3, 2011)              duty given to Malaysian palm oil its share
due to severe rains and flooding in 2010.                                                  in total palm oil imports has risen to 70%
Successive cuts in funds allocated for       Exports to China increased                    from 55% whereas palm oil imports from
development projects in the federal                                                        Indonesia have come down to 30 % from
budget had also taken the steam out of       From Jan-Dec 2010, Pakistan's exports to      45%.
the LS M sector during the previous          China increased by nearly US $ 500 M          (The Express Tribune - January 6, 2011)
calendar year.                               and their overall growth rate was 37.4%.
(The Express Tribune - February 23, 2011)                                                  Real GDP may grow to 3%
                                             According to the figures released by
Monetary expans ion not in cont rol          China Cu stom s, the total Pakistani          Pakistan's real GDP is likely to grow up
                                             exports to China last year were US $ 1.7      to 3% in the CFY (FY11) according to the
Monetary expansion in the first seven        B c ompa red to US $ 1.2 B in 2009.           1st Q Report of the SBP on the State of
months of the CFY as reported by the         (Dawn - February 4, 2011)                     the Pakistan's E conomy whic h was
SBP grew at an alarmingly high rate of                                                     released.
8.6 per cent, reflecting uninterrupted       Green room status
government borrowing from banking                                                          According to the Report, performance of
system and the central bank.                 Ahead of presenting Pakistan's case for       the commodity producing sectors of the
                                             a decisive debate on its request for more     economy is expected to improve in
The SBP reported that both net domestic      access to enhance its exports to European     months ahead due to expected better
asset (NDA) and net foreign asset (NFA)      market on January 31, the European            contribution by the services sector and
of the banking system were higher than       Commission has allowed Pakistan to sit        improvement in the performance by the
last year, pushing the broad money (M2)      in the 'green room' where the member          c om m o d it y p r od u c i ng s ec t o rs .
to expand at a bigger pace.                  countries take important decisions.           (Dawn - February 2, 2011)

Higher monetary exp ansion, while            As a result of the new status, Pakistan's     Food import bill rises 75%
ref lect ing t he d eteriorat ing f isc al   ambassador on WTO and the Commerce
discipline, is also a sharp catalyst for     Minister will have permission to sit in       A phenomenal growth of 75 % was
acceleration in inflation. The January       the 'green room' where exec ut ive            recorded in the import of food products
inflation slightly slipped to 14.19 %        committee members of EU take decisions        during the first half of the CFY mainly
compared to over 15% in December.            on key trade issues. It is a very special     on the back of increase in import of sugar
(Dawn - February 16, 2011)                   st atu s f or a develop ing cou ntry.         and palm oil.

Growth in NFA                                In the long run, this will provide Pakistan   The food import bill swelled to $2.708 B
                                             a good opportunity to interact with any       in July-Dec of the CF against $1.547 B in
The net foreign asset (NFA) of the           EU member country's representatives           the same period of the last FY, statistics
banking system expanded to Rs 69 B in        and lobby for grant of special concessions    released.


                                                                                                                                                19
                                                                                                               IN DUSTRY RESEARCH & ANALYSIS - IRA
                                                                                                                        Credit Management Group

                                                  Tracking Opportunity & Risk Related Developments


The main contributors to the ballooned         The la ck of innovative an d lates t             measures to c ontain inflation, while
food import bill sugar and palm oil            techniques and inability of the export           revising its inflation estimate for the CFY
regis tered 368 % and 60 % inc rease,          sec tor to meet huge orders would be             from 13.5-14.5 %to between 15 and 16
respectively in their import and having        "impeding factors" to realise full potential     per cent.
the high import figure in absolute term        of European Union's trade concession
                                               offered to Pakistan, says SBP.                   The estimate, contained in the central
mainly led the food products import
                                                                                                bank's State of the Economy report for
record such a high growth.                                                                      the first quarter of the CF, was released.
(Daily Times - January 20, 2011)               "The evidenc e suggests that Pakistan
                                               export sector lacks modern technology,           (The Express Tribune - February 3, 2011)

Policy rate unchanged at 14%                   designing techniques and inability of the
                                                                                                Trade deficit touches $9.32 B
                                               exporters to meet large orders are the
                                               major impeding factors", SBP's quarterly         Pakistan's exports increased to $2.328 B
The SBP has decided to leave its key
                                               report on SBP's ec onom y ind ic ated.
policy rate unchanged at 14 % for the                                                           in January 2011, up by 9.51 %over $2.126
subsequent two months, SBP Governor                                                             B over the previous month, according to
                                               EU offered trade concessions to Pakistan         Federal Bureau of Statistics. According
said.                                          on 75 items mostly related to textile            to provisional trade figures released by
                                               sector. After legal modalities i.e. approval     the FBS country's trade deficit reached
The previous three consecutive rate rises      from EU governments and European                 $9.32 B during July-January 2010-11, on
s ou gh t to d iscou rage governm ent          parliam ent, tariff concessions would            account of $13.23 B exports and $22.55 B
borrowing, but they proved ineffective         come into effective.                             imports.
in weaning Islamabad off State Bank            (Daily Times - February 4, 2011)
funding.                                                                                        The trade deficit for the same period of
                                               Re vi s i on i n i n fl a t i on fo re c a s t   last year was $8.530 B last year with
SBP last raised the rate by 50 basis points                                                     $10.78 B exports and $19.32 B imports.
to 14 %on Nov. 29.                             The SBP chided the government for                Analysis of the data showed that export
(The News - January 29, 2010)                  "ex ce ss ive bu dget ar y borrowing,            witnessed a growth of 22.66% during the
                                               particularly from the central bank"              1st 7 months of the CFY and imports by
                                               because it is increasing overall demand          16.73% over the corresponding period of
L it tl e d i vid en d f rom E Us t rad e
                                               and also d iluting the effec t of the            the last FY. Analysts attributed increase
concessions                                                                                     in exports to the per unit price increase
                                                                                                ins tea d of inc rease in the quantity.
                                                                                                (Business Recorder – Februa ry 10, 2011)


                                       Table: Risk & Opportunity Trends
                                              (Based on Current Development)

                       S ECTOR                                                     RIS K         OPPORTUNITY
                       Textile
                       Oil
                       Power/Energy
                       S ugar
                              Construction/S teel
                       Cement /
                       Automotive
                       Telecommunication
                       Other Industries
                       Agriculture
                       Micro Business & S ME
                       Financial Services
                       Regulatory
                       Macro Environment
                       *    Up            Down                                  No Change



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