FBR deserves some praise – BR
In a briefing to the Prime Minister, Chairman Federal Board of Revenue, Shabbar Zaidi, presented a very optimistic picture about the measures taken by the FBR and tax collections during the first two months of the current fiscal year. The PM was informed that 28 percent growth in tax collections was recorded during July-August, 2019 whereas 5.7 percent contraction was witnessed in customs duty. The FBR collected Rs 579.4 billion during this period as against Rs 505.8 billion in July-August, 2018, showing a growth of Rs 73.6 billion or 14.6 percent. The number of filers increased from 1.5 million in Tax Year 2017 to 2.5 million in Tax Year, 2018 and pending refunds of Rs 15 billion were paid to exporters and the remaining Rs 17 billion would be paid by the end of the current month. As for the policies, there was an ongoing exercise of verification of import documents of outlet sale of imported items across the country to check smuggling. Tax registration, issuance of tax certificates and filing of tax returns is being automated. The web portal has been made operational with the help of Nadra so that one can have access to all the financial information provided by various departments to the FBR at one site. To facilitate the taxpayers, a website viz. “Tax Asan” is being introduced. On the trade side, the Premier was informed that scanners have been set up at various customs stations through an export facilitation scheme and measures are being taken to stop smuggling of mobile phone sets by providing online phone registration system. The currency registration system was also made operational at all the major airports to facilitate passengers in declaring currency.
The report by the Chairman, FBR, to the Prime Minister seems impressive and is a clear indication of the hard work undertaken by the tax collecting authority in recent months. However, no mention has been made of the reaction of the PM to the report but this may be due to his indifference or the lack of some visible improvements or the weaknesses which needed to be commented upon. Anyhow, the fiscal developments during the first two months of FY20 could be compared somewhat favourably with the corresponding period of last year, both in terms of tax collections and policy initiatives. A substantial increase in tax collections was of course not an easy job when tax collections during the previous year were almost stagnant and customs duty collections had decreased substantially due to compression in imports. It is also well known that the FBR has undertaken a number of initiatives to broad base the tax system, document the economy and apprehend the tax evaders. The efforts of the FBR may be gauged from the fact that the number of tax filers increased from 1.5 million to 2.5 million in a single year. Verification of import documents has also been initiated to check smuggling and encourage the import of items through legal channels. This will increase the government revenue and save foreign exchange of the country through a meaningful reduction in imports. The automation of filing of tax returns and issuance of tax receipts would decrease direct contact between the income tax filers and the tax machinery and reduce the chances of corruption. The settlement of refund claims in time is meant to redress complaints of the business community and improve their liquidity position to facilitate productive activity in the economy.
While the achievements of the FBR seem to have been highlighted, the shortcomings or failures appear to have been ignored in the briefing. Tax collections of Rs 579.4 billion during July-August, 2019 are almost Rs 64 billion lower than the target of Rs 643.6 billion. If the expenditures on debt servicing and defence continue to be high as usual, fiscal deficit of the country would be higher and Pakistan could miss the primary deficit target of 0.6 percent of GDP agreed with the Fund for FY20. The missing of this target would undermine the credibility of the country in the international circles and could even result in the discontinuation of the existing EFF programme with the Fund. However, we appreciate other initiatives of the FBR but the FBR should have told the PM that these measures would take some time to yield the desired results and restore the confidence of the business community which has been badly shaken after the announcement of the budget for 2019-20.
KARACHI: The Karachi Tax Bar Association (KTBA) says the deadline recently reiterated by the Federal Board of Revenue (FBR) for filing of returns is unlikely to be met by most tax filers since the new form contains errors and the system is operating below par.
“The FBR uploaded on its web portal the return forms for tax year 2019 on Sept 2 without incorporating our suggestions,” says KTBA President Mohammad Rehan Siddiqui.
Giving some details, he said, the FBR issued draft of tax return form on August 23, 2019, and gave seven days to the country’s tax bars for suggestions and feedback, “but surprisingly the FBR uploaded the forms for individuals, association of persons (AoPs) and businesses on September 2, 2019.” This suggests the exercise to solicit feedback was a mere formality.
He further said that due short period the KTBA was unable to give suggestions to FBR over the tax return forms for tax year 2019, which has 65 pages. “Since there were many deficiencies in the draft tax return form, the KTBA wrote a letter to the FBR but never got any reply.”
Similarly, Mr Siddiqui said the FBR sought suggestions on the draft tax return form for tax year 2019 for corporate sector on August 29, but then it finalised the return form and uploaded it on the web portal on September 2, 2019.
The KTBA president further said that “till a few days ago the system was showing Nov 30 as last date for filing of tax returns. But now the same has been changed to Sept 30”.
He claimed that under the law FBR has to give 90 days for filing of returns after issuing forms but in this case the taxpayers will hardly get around 20-25 days because there is long closure on account of Ashura.
The KTBA president expressed his utter dismay over the demand that tax liability should be paid first and then extension could be considered. He explained that if a person was unable to compute his tax liability due to faulty tax return forms then how could he calculate his/her tax liability.
The FBR in a circular dated Sept 5 stated that “all chief commissioners IR are directed to ensure that before granting extension in the date of filing of income tax return for 2019 in the cases where last date of filing is Sept 30, the admitted tax liability is discharged before Sept 30.”
Tax consultant Syed Rizwan Shoaib told Dawn that the tax return forms have deficiencies and could not be filled.
He said it was not possible to do the computation of the tax return forms, which carry such errors and omissions where column for calculation of Rs2,000 tax amount on first slab of income of Rs1.2 million is missing.
Above all, he said, the calculation sheet gives erroneous tax amount and many a times the FBR portal fails causing hardship for tax consultants in filing returns.
Entering of the field formation staff of the Federal Board of Revenue (FBR) to business premises and forceful monitoring of stock, production and supply of manufactured goods without any prior intimation, notice or any show-cause notice has inflicted a negative impact on smooth business operations besides adding to the cost of doing business. The field formation staff is also carrying out such activities in sheer violation of the requirement of the relevant tax laws, said tax expert Muhammad Shahid Baig.
He said only the Federal Board of Revenue is empowered under relevant laws to post officers of Inland Revenue to monitor stock, production and supply taxable goods for the purposes of Sales Tax Act, 1990. However, the Chief Commissioners, as well as the Commissioners, are exercising these powers despite the withdrawal of the same through Finance Act 2018 to avoid abuse and misuse of the power by the officers acting single-handedly, he added. According to him, the objective of the 2018 Act is to ensure collective consultation among all the seven members of the Board before bringing the field staff into action against any business concern.
Unfortunately, he said, individual officers are passing such orders singly, which is a violation of the intent, object and mandate of the law. The exercise of powers vested in the Board cannot be exercised by any other office unless specifically provided under the relevant law.
He said the provisions of section 40B cannot be invoked in an arbitrary manner rather the same is required to be exercised for some object, ground or purpose that is legitimately and lawfully within the contemplation of the Act. There is no justification for posting officers on the business premises by an individual officer, he added.
In some cases, he pointed out; another violation of the relevant law is taking place as such officials are being posted at business premises which are not officers of Inland Revenue.
He said misinterpretation of section 40B of Sales Tax Act 1990 can be assessed from the fact that the said provision requires monitoring of production, sales and stock positions of taxable items but the field formation monitors the exempted goods as well during the proceedings. Therefore, posting of huge number of officials for monitoring of premises where no such production or sales take place is void and irrelevant.
Also, he has pointed out that the exercise of the power conferred under section 40B of Sales Tax Act 1990 is required to be time-bound and time frame or period must be given but most of such notices lack any such provisions, which is against the spirit of the law. According to him, the apex court has already mandated the requirement of specifying a time limit for the posting of officers under section 40B of the Act.
He said the powers conferred under section 40B are discretionary and monitoring has not been mandatory once the purpose is served but most of such notices lack any such provision and monitoring continues without a time bar to fleece genuine taxpayers.
KARACHI: The Federal Board of Revenue (FBR) has started issuing notices to tax evaders, mainly high net-worth individuals, on the basis of information obtained from the tax profiling system.
A notice contains all type of undeclared transactions made by a person on their CNIC, sources said. Around 20,000 notices have been issued by the Regional Tax Office (RTO) – II Karachi to high net-worth and high profile individuals.
The individuals have been identified through Tax Profiling System that was launched by the FBR on June 20, 2019. The FBR fed information of persons who made transactions under Income Tax Ordinance, 2001 and either concealed or did not declare the same to the tax authorities.
The purpose of the tax profiling system was to inform people about their transactions in various categories, including car purchase, immovable property transaction, receipt of bank profit, deductions of cash and non-cash transactions through banking system, fee paid to educational institutions etc made during tax year 2018 and past years.
The FBR asked those persons to file their returns for tax year 2018 and in this regard the revenue body had even extended the last date for filing the returns up to August 9, 2019. However, a large number of individuals failed to avail the offer. Hence the notices have been issued under section 114 of the Income Tax Ordinance, 2001 to force such non-compliant persons to file their returns.
Sources in RTO-II Karachi said the definition of high net-worth individuals was not restricted to directors or executives of companies, but it also included persons purchasing luxury vehicles and high valued immovable properties.
Similarly, the high profile cases include those persons who are politicians, sportsman, showbiz personalities etc. Sources said that the tax profiling system of the FBR compiled data of a person on the basis of details provided by withholding agents. The information has been provided by motor vehicle registration authorities, motor vehicle assemblers, immovable property registrars, banks, electric and gas providing companies, educational institutions etc.
Badaruddin Ahmed Qureshi, chief commissioner, Inland Revenue, said that under income tax ordinance, persons who own a certain area of land, flat, motor vehicle above 1000cc, industrial/commercial electric and gas connections were required to file annual income tax returns.
The chief commissioner said the notices issued to persons contained information with evidence of transactions. Giving example, he said the tax authorities provided evidence of cash and non-cash transactions, purchase of car and immovable properties and many other transactions made on their CNIC. The chief commissioner said it was polite intimation to the persons to file their returns and wealth statements for respective tax years. He also said if a person claims that tax was paid / deducted they should not hesitate to file their return because tax authorities would be lenient in such case and avoid any coercive action.
ISLAMABAD: Pakistan’s tax-to-GDP ratio has slipped to 11.6 percent in fiscal year 2018/2019 as compared with 13 percent in the preceding fiscal year, revealed by date released by the ministry of finance.
The revenue collection authorities of the federal and provincial governments unable to achieve collection targets during the last fiscal year. The primary reason may be the general elections held in July 2018.
After the general elections in 2018 the ruling PTI took the charge of new government in August 2018. However, after coming into power the PTI government presented two supplementary budgets to address the revenue shortfall. But the all efforts resulted in failure as the revenue collecting agency of the federal government i.e. Federal Board of Revenue (FBR) posted Rs561 billion shortfall for the fiscal year 2018/2019.
The FBR was assigned revenue collection target of Rs4.43 trillion for fiscal year 2018/2019. However, it was revised downward to Rs4.39 trillion. The FBR collected Rs3,829 billion in fiscal year 2018/2019 as compared with Rs3,842 in the preceding fiscal year.
The total tax revenue collected by federal and provincial revenue authorities was at Rs4,473 billion as compared with Rs4,467 billion in the preceding fiscal year. The FBR could achieve the ratio of 9.93 percent in 2018/2019 after posting total collection below the total of the preceding fiscal year.
During the last fiscal year there were two tax amnesty schemes were offered for undeclared foreign and domestic assets in order to boost revenue collection and document the economy. Yet the collection was below the desired level.
The frequent change in FBR highrarchy might hurt the collection effort. Three chairmen were posted during the fiscal year. Ms. Rukhsana Yasmin was appointed On July 02, 2018 as chairperson. Muhammad Jehanzeb Khan was appointed as chairman on August 29, 2018 and then the present chairman Syed Muhammad Shabbar Zaidi was appointed on May 10, 2019.
BRUSSELS:
The European Union is studying a reform of energy taxes to align them with climate targets; an EU document showed, listing as possible measures, higher minimum tax rates, fossil fuel levies and the end of waivers for the air and sea transport sectors.
The document, seen by Reuters, was prepared by the Finnish presidency of the EU ahead of a meeting of the bloc’s finance ministers on Saturday in Helsinki, which will discuss the matter.
EU rules on energy taxation have not changed for more than 15 years and they appear “outdated and poorly adapted to climate change challenges and developments in energy policy at EU level,” the document says.
In the last decade, EU countries have led the global shift towards renewable energy and set up the world’s largest emissions trading system to price carbon and reduce reliance on more polluting fuels.
But their taxes have not reflected these changes, as existing taxation “does not differentiate between renewable and carbon-intensive sources of electricity,” the document stated.
The confidential paper, which is not binding on EU authorities, urges a review of minimum tax rates for energy products, which currently differ among EU states and do not reward sources of energy for their efficiency.
It also calls for an end to energy tax exemptions granted to the aviation and maritime transport sectors in the EU, as they are “not in line with the decarbonisation objectives of the Union’s transport policies.” By increasing taxes on more polluting energy products, the EU could more effectively contribute to the fight against climate change, supporters of the plan say.
BERLIN: Germany is considering the creation of a “shadow budget” that would enable Berlin to boost public investment beyond the restrictions of constitutionally enshrined debt rules, three people familiar with the internal discussions told Reuters.
Government officials are flirting with the idea of setting up independent public entities that would seize the historic opportunity of zero borrowing costs and take on new debt to increase investment in infrastructure and climate protection, said the officials, who all spoke on condition of anonymity.
The debt-financed spending of those independent public bodies would not be accounted for under the strict fiscal rules of Germany’s constitutionally enshrined debt brake, but only under the more lenient rules of the European Union’s Stability and Growth Pact, the sources said.
SBP, Bank & Financial Institution
FED imposition may negatively affect local automobile assembling: SBP – PK – 9.9.19
KARACHI: The State Bank of Pakistan (SBP) has said that the imposition of federal excise duty (FED) may negatively affect local automobile industry as imported parts would become costlier.
The enhancement of FED on imported vehicles could increase the demand for locally assembled vehicles. “However, because of increase in FED on the imported parts, automobile assemblers, who mostly rely on imported components, might be negatively affect,” the SBP said in its Financial Stability Review (FSR) released last week.
FED on imported vehicles has been amended from 20 percent on vehicles above 1800cc to 25 percent for vehicles between 1800cc and 3000cc, and 30 percent for 3000cc or above.
The central bank said that the automobile sector has the highest operational efficiency in the corporate sector.
“It has, however, faced a contraction in the gross profit margin in CY18, as the bar on non-filers against purchase of new car affected the demand and the devaluation of the currency put pressure on production costs and profit margins.”
Resultantly, local assemblers increased their prices to sustain profitability.
“The outlook is positive in terms of enhanced production capacity as Kia, Hyundai and Renault are expected to enter the market in the coming years.”
Custom News
Model Customs Collectorate (MCC), Preventive has witnessed 15 percent decline in overall revenue collection during July-August period as compared to last corresponding period.
The department has collected Rs 22.58 billion during July & August as compared to the collection of Rs 26.048 billion made during last preceding period, depicting 15 percent decline during the aforesaid period.
The department has collected Rs 7.26 billion as customs duty, showing 53 percent negative growth as compared to Rs 11.126 billion collected during previous period.
Similarly, MCC Preventive has witnessed negative trend on accounts of income tax and federal exercise duty, depicting 17 percent and 58 percent decline respectively. Only sales tax collection has shown 9 percent growth with the collection of Rs 14.96 billion as compared to the collection of Rs 12.73 billion made during last corresponding period.
Frankfurt: Exports from Europe´s largest economy Germany enjoyed an unexpected rebound in July, official data showed on Monday, making for a bright spot in the data amid signs of a looming recession.Some 115.2 billion euros ($127 billion) of German goods were sold abroad in July, up 0.7 percent month-on-month and 3.8 percent year-on-year, federal statistics authority Destatis said in seasonally-adjusted figures.
Analysts surveyed by Factset had predicted a 0.8 percent month-on-month fall. With imports down 1.5 percent month-on-month, at 93.7 billion euros, Germany´s trade surplus reached 21.4 billion euros — up from 18.1 billion in June.
A geographical breakdown showed trade both with countries that share the euro single currency and the wider European Union shrank in July, while export growth came from business with non-EU nations climbed by 9.8 percent.
After years of booking massive annual trade surpluses, Germany´s export-oriented economy has made it a target for criticism from international organisations like the International Monetary Fund and especially US President Donald Trump.
But an advantage during global upturns has become an Achilles´ heel as growth ebbs, with Trump´s trade war with China, weakness in emerging markets and the threat of no-deal Brexit weighing on confidence and activity.
After German GDP shrank in the second quarter, many economists now expect a “technical” recession — or two successive quarters of negative growth.
KARACHI: Federal Board of Revenue (FBR) has said that customs duty shall be applied on re-importation of goods that are manufactured and exported from Pakistan.
The FBR issued Customs Act, 1969 updated June 30, 2019 and explained re-importation of goods produced or manufactured in Pakistan under section 22 of the Act.
Section 22: Re-importation of goods produced or manufactured in Pakistan
If goods produced or manufactured in and exported from Pakistan are subsequently imported into Pakistan, such goods shall be liable to customs-duties and be subject to all the conditions and restrictions, if any, to which goods of the like kind and value not so produced or manufactured are liable on the importation thereof:
Provided if such goods have been imported within one year of their exportation and have been consigned to the person in whose account they were exported and have not undergone any processing since their exportation, the appropriate officer not below the rank of Assistant Collector of Customs may admit the goods-
(a) Where at the time of exportation of such goods, rebate, refund or drawback of any customs or Federal Excise duty or any other tax levied by the Federal Government or any tax, cess or duty levied by the Provincial Government was allowed on payment of customs duty equal to the amount of such rebate, refund or drawback as the case may be;
(b) where such goods were exported in bond, without payment of –
(i) the customs-duty chargeable on the imported materials, if any, used in the manufacture of the goods; or
(ii ) the Federal Excise duty chargeable on the indigenous materials, if any, used in the manufacture of such goods; or
(iii) the Federal Excise duty, if any, chargeable on such goods; or
(iv) any other tax chargeable on the material used in the manufacture of such goods; or
(v) any other tax chargeable on such goods, on payment of customs-duty equal to the aggregate amount of all such duties and taxes calculated at the rates prevailing at the time and place of importation of goods; or
(c) in any other case, without payment of duty.
Section 22A: Temporary export of imported plant and machinery
Imported plant and machinery, temporarily exported that have not undergone any alteration, renovation, addition or refurbishment, may be re-imported duty free subject to the specific or general terms and conditions the Board may by the rules prescribe.
Market News (Stock, Currency, Oil, Gold, Textile & Cotton)
The Chinese yuan’s tumble is stirring hopes of a long-awaited volatility boost for forex markets but any rise will be too late for the currency funds that have shut down this year, and it may be too small to hold out much hope for those that remain.
Currency traders who wring out more profits when prices move wildly consider themselves cursed by the prolonged calm in forex markets brought about by rock-bottom interest rates and central banks moving more or less in tandem on monetary policy.
The yuan’s Aug. 12 plunge below 7-per-dollar lifted vol – shorthand for the implied volatility gauges embedded in currency options – to eight-month highs.
But the spike proved shortlived: A Deutsche Bank index of three-month implied volatility weighted across major currencies has slipped back to 7.52 after surging to 8.11 immediately after the yuan move.
For currency investment funds it was yet another episode of volatility gauges flickering to life briefly, then subsiding.
Such vehicles which focus on buying and selling currencies, FX futures and swaps, have seen money-making opportunities dwindle, and last year saw $2.34 billion flow out of FX mutual funds – the most since 2015.
The outflow has eased somewhat this year, with $159.08 million draining out from January to July, according to fund research firm Morningstar. But total net assets at currency mutual funds worldwide have fallen to $6.86 billion, having declined every year but one after peaking in 2012 at almost $18 billion.
Now with vol on most major currencies bumping along near record lows, more fund managers may be tempted to throw in the towel.
“If the audience doesn’t embrace it, eventually you have to pull that plug,” said Axel Merk, CIO of Merk Investments, which this summer closed an absolute return currency fund aimed at retail punters. He described returns as “fairly modest”.
Merk’s $6.7 million fund was one of the 10 currency mutual funds to shut this year, following 17 closures in 2018, Morningstar said.
Merk, who has one other FX fund, said recent volatility increases meant this year was shaping up better than 2018, but he added: “It’s not like our phone is ringing off the hook”.
Hedge funds, which borrow and invest to juice up returns, have been hit hard, too: just 49 now actively trade currency futures and cash forwards in the interbank market, according to the BarclayHedge index. That’s down from 145 in 2008 and 53 at the end of 2018.
Currency-specific hedge funds have earned returns of 2.38% this year, well below 7.56% returns at multi-strategy macro funds, data from Hedge Fund Research shows. Clearly those able to invest in different assets could generate higher profits than those restricted to currencies.
Such macro funds are increasingly retreating from currency trading, focusing on government bonds instead, people familiar with the sector say.
Forex traders aim to profit from arbitraging between markets and betting how one currency might move against another; the mix of different expectations and positions can create unexpected price swings, sparking volatility.
But years of low or sub-zero interest rates, trillions of dollars in stimulus and perhaps most crucially, the almost total lack of policy divergence between the world’s big central banks, has all but eliminated such opportunities.
This year for instance, as the Federal Reserve turned tail on policy tightening, forex markets were gripped by hopes of a vol turnaround. Those were dashed pretty much immediately as other central banks followed the Fed’s cue.
Asset manager QTS Capital Management decided around that time to ditch spot forex trading via its flagship hedge fund, where assets had shrunk to $11 million, down from $20 million three years ago. It now trades currency futures.
“(Spot FX) strategy can only work when there are healthy interest rates,” QTS portfolio manager Ernest Chan said.
The vol doldrums have claimed big names too, including two funds run by Franklin Templeton’s high-profile manager Michael Hasenstab. The U.S.-listed Global Currency Fund closed to investors in June and is to be liquidated in October, while a sister fund listed in Luxembourg will shutter in September.
The funds, investing in assets offering long or short exposure to currencies, were closing because they were “very small”, a Franklin Templeton spokesperson said.
The Luxembourg fund had assets of $8.78 million as of July 31, roughly the same as at inception three years ago, the spokesperson said, adding: “We didn’t see interest in it… We didn’t see it grow.”
Similarly, the U.S. fund had $32.83 million under management as of the end of July, down 11% this year and a staggering 88% versus five years ago, when it held $270.35 million, Morningstar data shows. Over the past five years it posted a 2.7% loss, the company website says.
The GAM Star Discretionary FX fund closed in February, having seen its total net assets slump to below $1 million versus more than $100 million two years ago, according to Morningstar.
The fund’s timing was unfortunate: It opened in 2009, just as central banks embarked on a quantitative easing (QE) spree, printing money to boost economies battered by the 2008 crisis.
“Having a standalone currency fund wasn’t working in a world of QE,” said Adrian Owens, who managed the GAM fund.
Whether currencies are eventually shocked out of their stupor is unclear, but many say a rebound is only a matter of time. Once, and if, volatility returns, investors waiting on the sidelines will likely get back into the game.
“I’m not expecting any real volatility spike, but it was so low for so long that the probability it increases is getting bigger,” said Andreas Koenig, head of global FX at Amundi Asset Management.
London: Global stock markets mostly climbed on Monday after China unveiled fresh stimulus measures, while below-par US jobs data reinforced expectations the Federal Reserve would cut interest rates this month.
London equities fell on a rising pound, which jumped on official data that showed the British economy grew by 0.3 percent in July, reducing the likelihood of a UK recession this year.Sterling also won support before a critical vote on an early UK general election.
Elsewhere, the euro wavered as dealers mulled speculation that the European Central Bank could decide this week to loosen monetary policy. “One broad theme is the prospect of monetary stimulus, which may be propping up some markets today,” said City Index analyst Fiona Cincotta. “There are significant fears that the global economy is running out of puff.”
Sterling jumped half a percentage point against the dollar meanwhile, pushing down London´s benchmark FTSE 100 index which features numerous multinationals with earnings in the US unit.
Britain´s parliament is to shut for business later Monday in a suspension ordered by Prime Minister Boris Johnson in an apparent bid to stop MPs blocking no-deal Brexit on October 31. “While parliament seems to be falling apart, the economy is holding up reasonably well,” noted Paul Dales, chief UK economist at research consultancy Capital Economics. “July´s surprisingly strong rise in GDP suggests that it has not fallen into a recession.”
Most Asian markets started Monday on a positive note to build on last week´s gains after China unveiled fresh stimulus measures and below-par US jobs data reinforced expectations the Federal Reserve will cut interest rates this month.
The People´s Bank of China on Friday said it would slash the amount of cash lenders must keep in reserve to its lowest level in 12 years, freeing up more than $100 billion for the stuttering economy. Asian investors were broadly upbeat on the move, while a weaker-than-forecast reading on US jobs creation increased the chance the Fed will reduce borrowing rates again at its policy meeting this month.
LONDON:
Oil prices rose on Monday after Saudi Arabia, the world’s largest exporter of crude, named oil veteran Prince Abdulaziz bin Salman as its new energy minister, a move seen strengthening an output-cutting deal between OPEC and other producers.
Prince Abdulaziz, son of Saudi King Salman and a long-time member of the Saudi delegation to the Organization of the Petroleum Exporting Countries (OPEC) replaced Khalid al-Falih on Sunday.
Global benchmark Brent crude futures were up $0.35 at $61.89 a barrel by 0846 GMT, while US West Texas Intermediate was up $0.31 at $56.83 a barrel. Prince Abdulaziz helped negotiate the current agreement on supply cuts between OPEC and non-OPEC countries including Russia, a group known as OPEC+ and has been instrumental in cementing that cooperation, OPEC sources said.
Speaking on Monday, Prince Abdulaziz said the pillars of Saudi policy would not change and that the OPEC+ deal would survive.
“The options for a change of policy are relatively limited,” said Petromatrix analyst Olivier Jakob. “The price reaction is muted because we don’t expect a strong change.”
Russia’s oil output in August exceeded its quota under the OPEC+ agreements to cut 1.2 million barrels per day. OPEC oil output rose in August, gaining for the first month this year as higher supply from Iraq and Nigeria outweighed restraint by Saudi Arabia and losses caused by US sanctions on Iran, a Reuters survey found.
The United Arab Emirates Energy Minister Suhail al-Mazrouei said on Sunday that members of OPEC and non-OPEC producers were “committed” to achieving oil market balance. Prices climbed for a fourth day running on Monday, also supported by comments from Mazrouei that OPEC and its allies were committed to balancing the crude market.
The OPEC+ deal’s joint ministerial monitoring committee will meet on Thursday in Abu Dhabi. Trade and geopolitical tensions are affecting the market more than demand and supply, Mazrouei said, but he was quick to rule out hasty steps influenced by the trade war between the United States and China.
Prices on Monday were also supported by a rise in oil imports in China in August, with shipments to the world’s biggest importer up 3% from July and nearly 10% higher in the first eight months of 2019 from a year earlier.
Abu Dhabi: Saudi Arabia´s new energy minister Prince Abdulaziz bin Salman on Monday reportedly endorsed curbing oil output to address an oversupply, as major producing nations prepare to deliberate fresh cuts.
In his first comments since being appointed by his father King Salman on Sunday, the minister signalled no major change in approach in Saudi Arabia, the de facto leader of OPEC which pumps about a third of the cartel´s oil.
“The pillars of our oil policy are pre-determined and will not change,” he said according to Saudi broadcaster Al-Arabiya. The prince is in Abu Dhabi to attend the World Energy Congress, followed by a meeting on Thursday of the OPEC+ alliance´s Joint Ministerial Monitoring Committee (JMMC), which monitors a supply cut deal reached last year.
The ministers will consider fresh cuts, even though analysts are doubtful such a move would succeed in bolstering crude prices which have been badly dented by the US-China trade war. However, Prince Abdulaziz appeared to swing his support behind further output reductions to rebalance the crude market.
“Cutting output will benefit all members of OPEC,” he reportedly said. The appointment of Prince Abdulaziz, half-brother to de facto ruler Crown Prince Mohammed bin Salman, marks the first time a royal family member has been put in charge of the all-important energy ministry.
He replaces veteran official Khalid al-Falih as the world´s top crude exporter accelerates preparations for a much-anticipated stock listing of state-owned oil giant Aramco, expected to be the world´s biggest.
The OPEC petroleum exporters´ cartel and key non-OPEC members want to halt a slide in prices that has continued despite previous production cuts and US sanctions that have squeezed supply from Iran and Venezuela.
Analysts say the JMMC has limited options when it meets in Abu Dhabi. UAE Energy Minister Suheil al-Mazrouei said Sunday the group would do “whatever necessary” to rebalance the crude market, but admitted that the issue was not entirely in the hands of the world´s top producers.
The oil market is no longer governed by supply and demand but is being influenced more by US-China trade tensions and geopolitical factors, he said. The UAE minister said that although further cuts will be considered at Thursday´s meeting, they may not be the best way to boost declining prices.
“Anything that the group sees that will balance the market, we are committed to discuss it and hopefully go and do whatever necessary,” he said.
“But I wouldn´t suggest to jump to cuts every time that we have an issue on trade tensions.” While cuts could help prices, they could also mean producers lose further market share, analysts say.
The 25-nation OPEC+ group, dominated by the cartel´s kingpin Saudi Arabia and non-OPEC production giant Russia, agreed to reduce output in December 2018. That came as a faltering global economy and a boom in US shale oil threatened to create a global glut in supply.
Previous supply cuts have mostly succeeded in bolstering prices. But this time, the market has continued to slide — even after OPEC+ agreed in June to extend by nine months an earlier deal slashing output by 1.2 million barrels per day (bpd). The new factor is the trade dispute between the US and China, whose tit-for-tat tariffs have created fears of a global recession that will undermine demand for oil.
DUBAI: Saudi Aramco is expected to give lead roles to JPMorgan, Morgan Stanley and National Commercial Bank for its planned initial public offering (IPO), Reuters quoted a source familiar with the transaction, as saying.
It will also likely add Citi, Goldman Sachs, HSBC and Samba Financial Bank to the list of banks managing the transaction, a first phase of which could take place locally before the end of this year, said the same source and two other sources familiar with the matter.
Aramco is preparing to sell up to a 5 percent stake by 2020-2021, in what could be the world’s biggest IPO. It is still meeting banks pitching for roles on the deal, and is expected to appoint the advisers in the coming days, two of the sources said.
Morgan Stanley, JPMorgan and HSBC were chosen to play a leading role in the transaction before the process was halted last year.
Goldman Sachs, HSBC, and JPMorgan declined to comment. Aramco declined to comment to a separate Reuters request on the likely appointment of JPMorgan, and did not comment on a subsequent request on the likely roles of the other banks.
Citi, Samba, Morgan Stanley and National Commercial Bank did not immediately respond to requests for comment.
The IPO is a centerpiece of Saudi Arabia’s economic transformation drive to attract foreign investment and diversify away from oil. The kingdom is gearing up to fast-track a local listing of Aramco by bringing in the head of Saudi Arabia’s sovereign wealth fund, Yassir al-Rumayyan, who was recently named new chairman of the state oil giant and leads an executive committee overseeing plans to float shares in Aramco.
Should Aramco proceed with a local listing this year, international banks on the deal would be tasked with promoting the company to international investors looking to buy its shares on the Saudi main exchange, Tadawul.
It is not clear yet on which international exchange Aramco would list its shares, but sources have recently told Reuters that the board of Saudi Aramco has determined that listing in New York would carry too many legal risks to make it a realistic option.
Earlier this year Aramco raised $12 billion in its first international bond issue, obtaining over $100 billion in demand. Many saw that deal as a relationship-building exercise with international investors ahead of its planned initial public offering, scheduled for last year and then postponed to 2020-2021.
The debt sale was expected to help fund Aramco’s $69.1 billion acquisition of a 70% stake in petrochemicals firm Saudi Basic Industries Corp (SABIC) from the Saudi sovereign wealth fund, a deal that many saw as a transfer of government funds aimed at boosting the Saudi Crown Prince’s economic agenda.
ISLAMABAD:
The government seems to be quite active in the energy sector or hard work of the last year of the Energy Task force has started yielding results. Earlier, a draft of the Alternative Energy Policy was circulated which attracted stakeholders’ interest, and now the ingredients, if not policy, of the oil and gas sector has been revealed.
Simplifying and activating the petroleum concession, incentives for local gas production, carrot-and-stick approach with old refineries, opening up LNG sector and privatising LNG terminal business relieving the government from onerous financial risk and responsibilities are some major policy thoughts. The article will examine the sector issues in some detail.
Freeing up LNG Terminals business?
We will take the issues one at a time but let us start with the most important and probably contentious issue of LNG terminals. Currently, the government or its nominee public sector companies have to enter into a take-or-pay contract with the LNG terminal developers and owners under a competitive bidding process.
Although take-or-pay contracts are not uncommon in the energy sector, there is political controversy about it and public opinion is turning against such liabilities. Senior members of the previous government are under investigation on it and are behind bars. There is a lot of private sector interest in LNG terminals, if not the sector, as is evinced by five international companies that have shown keen interest. Almost riskless, LNG terminal business in the form of take-or-pay contracts and sovereign guarantees should and has evinced a lot of interest. However, it would be of interest to see if that interest would sustain in the new policy.
The CNG sector had earlier been granted an open policy which the sector has not yet been able to avail. However, now the CNG sector may be able to form some coalition with international companies in this respect. Associations have problems in decision-making and there are always usurpers ready to exploit.
There is no free lunch. The government is shifting the risk and risk cost money. However, an additional advantage is the flexibility and supposedly higher efficiency of the private sector. There are problems and issues, however. Firstly, we will have to decide whether over-supply is better or some-under supply can be afforded.
If the current capacity trap in the power sector is a guide, one would be more inclined to suffer, say, an hour of short supply in a day than having to pay for two or more hours of surplus. The competition requires a surplus which has costs. Cyclical crisis of capitalism is well known.
Secondly, the side-by-side management of the regulated sector and existing term contracts have to be handled somehow. For example, LNG-Qatar contract of $10-12 vs seasonally variable lower spot prices of $4-14. Some back-to-back contracts would have to be there to absorb the supply under these contracts. Or the government would have to resell the gas to the market at acceptable market price, earning and losing money seasonally. However, this issue is more related to opening up the whole LNG and gas sector than liberalising LNG terminals business.
Thirdly, would regulators have any oversight role or not? LNG terminals capacity may be more than demand and pricing may be based on 60-70% capacity utilisation. It would not be a pure competition situation of many buyers and many sellers. There are allegations or fears of collusion even in the cement and sugar where possibly much more competitive ingredients exist? Moreover, it would have to be assured that there are no restrictive practices and that there is third party access to the LNG terminals and the associated transmission facilities. And finally, should the other two LNG terminals be eventually brought under market mechanism? Maybe eventually under a negotiated settlement?
Streamlining concession
The local gas production scenario does not appear to be very hopeful. It appears that LNG will form an increasingly higher share in our gas supply. It is already 40% and known reserves can hardly survive beyond 10 years. There is potential if exploration activities are incentivised and enhanced and bottlenecks of the sector are removed. The new policy approach intends to do this. They want to reduce or eliminate red-tape and simplify the concession approval process.
It appears that they want to cut the feathers of petroleum concession bureaucracy and bring in the regulator to solve the grievances of E&P companies. It is hoped that the new arrangement would be better than the existing one. How about an Energy Tribunal which handles a wide variety of issues of the whole energy business, developers, contractors, etc? The scope of existing electricity tribunal (B-to-B), although not yet implemented, may be broadened?
Incentivising local production
There is a possibility of incentivising and expanding output from the known oil and gas resources. There are marginal fields or the ones that have been closed down or may be about to be closed, which could have produced more under an incentive programme of slightly higher prices, after all, we import LNG at higher prices. There are existing policies in this respect, which have not been able to attract enough interest and increase local gas supply. The new policy approaches appear to be acting in this direction, streamlining and further incentivising. Surely, some short-term improvement would come by.
The need for a market manager
There has to be some market manager which currently, Petroleum division is doing directly. In the power sector, there is NTDC and CPPA-G which are doing these functions. Demand and supply management and balancing the cost and price and managing subsidies etc could be better done in a corporate setup. While gas system operator may take time to implement along with other sector restructuring issue, there should be no problem in bringing about this central agency.
Role of Pakistan LNG may have to be broadened along with its capacity building or it is merged in a new company. The first or second step in gas market liberalisation would be and should be the parting away of spot purchases function from the public sector to the private sector.
Replacing old refineries through
a tax holiday
Fortunately, there is no more import of furnace oil. However, there is a lot of infrastructure of local production in the form of refineries and of consumption in the form of furnace oil power plants. The nexus and matching of this demand and supply do create some rationale and market pressure for not undoing the furnace oil totally. The problem is the high cost of furnace oil and low efficiency of old furnace oil power plants. In the intervening period, local refineries must manage to export furnace oil at some loss? The government seems to have made its mind to show the door to the old, inefficient and market incompatible refineries and has offered them tax holiday incentive for new investments.
This appears to be a step in the right direction. Alternative energy would be able to able to fill the gap, if any, at lower prices. There is thinking that some rules should be developed to maintain the availability of the efficient ones of FOPPs in one form or the other to take care of possible LNG emergencies.
Concluding, the path from the public sector to competition, the private sector and market liberalisation is a difficult one. Some further home work may be required with respect to LNG terminals. LNG/gas storage issue has to be resolved and many others. The positive news is coming from other areas as well. It appears that we are moving in the right direction.
Cotton prices rose on Monday, helped by a weaker dollar and as some investors covered their short positions before the government’s monthly demand and supply crop report due on Thursday.
Cotton contracts for December rose 0.27 cent, or 0.46%, to 58.85 cents per lb at 1:00 pm EDT (1700 GMT). It traded within a range of 58.23 and 59.09 cents a lb.
“A weaker dollar is probably helping cotton a little bit this morning,” said Jim Nunn, owner of Tennessee cotton brokerage Nunn Cotton, adding that positive news about the US-China trade dispute is keeping prices from slipping further.
The dollar index was down 0.2%. A weaker greenback makes commodities priced in dollars, such as cotton, cheaper for holders of other currencies.
Last week, China and the United States agreed to hold high-level talks in early October in Washington, cheering investors hoping for a trade war thaw as new US tariffs on Chinese consumer goods chip away at global growth.
However, demand concerns continue to plague the market, Tennessee cotton brokerage’s Nunn said.
Prices for the natural fiber have fallen about 20% so far this year due to a protracted trade war between one of world’s biggest exporter of cotton, the United States, and China – the largest consumer.
Meanwhile, the US Department of Agriculture’s (USDA) monthly World Agriculture Supply and Demand Estimates (WASDE) report is due on Thursday.
“People are getting their positions evened before the (monthly Supply and Demand) report comes out,” said Sid Love, commodity trading adviser at Kansas-based Sid Love Consulting.
Total futures market volume fell by 13,848 to 10,783 lots. Data showed total open interest gained 959 to 227,008 contracts in the previous session.
FAISALABAD:
Agriculturalists and farmers are afraid that cotton production may decline further this year as the sector is plagued by wrong policies of federal and provincial governments.
Cotton production and area under cultivation is also falling primarily because growers have shifted to sowing sugarcane and wheat which guarantee minimum support price.
In the previous fiscal year 2018-19, area under cotton cultivation dropped to 2.37 million hectares compared to 2.7 million hectares in the preceding year – a reduction of 12.1%. Production of the crop also witnessed a decrease of 17.5% to just 9.9 million bales during the last fiscal year.
In 2017-18, cotton production reduced to 11.94 million bales from 13.96 million bales in 2014-15.
Government has set a target of 15 million bales of cotton for fiscal year 2019-20, which experts claim would be missed again.
Additionally, production of cotton has also endured a hit from pest attacks.
A few months ago, Prime Minister Imran Khan took notice of the declining cotton production and directed the agriculture department to resolve the issue. However, neither the provincial government of Punjab nor the federal government has done anything to improve the situation so far.
A meeting, held to fix minimum cotton support price of cotton at Rs4,000 per 40 kilogram, ended inconclusively last week.
Punjab produces 65% of total cotton majority of which is produced in Southern Punjab. Both Bt and non-Bt cotton varieties are cultivated in Pakistan, however, the share of Bt cotton is 80%.
While talking to The Express Tribune, cotton experts said that situation of textile industries was worsening day-by-day due to lower availability of local produce due to which, the industry had to rely on imports.
“Textile mills had made deals in advance with ginners at relatively higher prices but actual price of cotton at the time of harvesting was less which resulted in losses for them,” Hameed Ahmad, an agriculture expert, told The Express Tribune. “On the other hand, cotton farmers had also taken advances from local ginners and middlemen and they also suffered losses due to low prices.”
Talking about crops of Sindh, he added that the cotton plantations were hit by swarms of locust pests which destroyed some of the produce.
The key reason behind 30% reduction in cotton output was continuous decline in area of cotton production, non-feasibility of good seeds, low returns and lack of awareness in farmers regarding cotton production.
“Farmers are not getting good average yield per acre,” an official in the Punjab Agriculture Department commented. “Agriculture department has fixed a quota of 2.85 million acre land for production of 15 million bales of cotton.”
University of Agriculture Faisalabad Entomology Department Chairman Dr Jalal Arif shared plans to organise a national level seminar on September 20 to uplift cotton sector.
The meeting would be chaired by Jahangir Tareen as well as progressive farmers.
In southern Punjab, Lodhran, Khanewal, Multan and Muzaffargarh are major cities of cotton production and in central Punjab, Faisalabad, Gujranwala and Sheikhupura are cotton producing areas.
Dr Jalal added that diseases caused by whitefly and bollworm were adversely affecting cotton production.
“These insects damage the yield every season,” he lamented. “Every year, nearly four million bales are destroyed by pink bollworm and white fly.”
He further expressed sorrow that country lacked adequate technology to deal with these pests
He added that low price and yield had forced growers to shift to maize and sugarcane crops.
According to him, this was the prime time for government to deal with falling cotton production.
Other News
Senior Vice President SAARC Chamber of Commerce and Industry Iftikhar Ali Malik on Monday said that sustainable and durable economic stability is prerequisite for survival of the country and strengthening of democracy. The SAARC Chamber’s senior vice president urged the PTI government to take all stakeholders into confidence to tailor a viable strategy to evolve new result and growth oriented judicious economic policies on war-footings for the revival of economy. Despite the categorical assurance of Prime Minister Imran Khan, Federation of Pakistan Chamber of Commerce and Industry and other top leaders of corporate sector are not being taken on board by all policy and decision makers, he said.
He said the entire business community stands united with Prime Minister Imran Khan in this crucial crisis in the walk of Indian Held Kashmir conflict but on the other hand his ministers, advisers, Federal Board of Revenue and State Bank of Pakistan must address the genuine grievances being confronted by traders from all sectors.
He stressed the urgent need for reshaping economic policy in line with global recession and help restore the confidence of foreign and local investors. At this point of critical juncture, the government must come to the rescue of the business community by timely providing oxygen to business community and offering a package of incentives to small and medium traders, he said adding that all developed and advanced countries including USA, Korea, China, France, Germany, Russia worldwide attached great importance to the promotion of SME which always play vital and significant role in strengthening of economy.
Iftikhar Malik said that our exports falling short of target which is not a good omen for the economy at all.
Iftikhar Malik who is also Chairman United Businessmen Group said majority of traders, businessmen and industrialists and exporters have voiced their concerns about slowing down the pace of wheels of economy and government must take cognizance to arrest the gradual decline to save the industry from total collapse. The entire business community is patriotic and paying taxes timely and wherever is taxation conflict that must be resolved amicably without effecting industrial growth,” he maintained.
LAHORE: The committee constituted last month to audit the country’s power sector, which was tasked to suggest ways for resolving the issue of growing circular debt and recommend a sustainable roadmap for future energy security, has initiated its inquiry.
The committee was notified by the Power Division of the energy ministry on Aug 7 but could not begin work until the end of last month.
“The committee will strive to produce its first report in one month. The final, consolidated report will take three months to finalise,” said Mohammad Ali, the committee’s chairman who is also former head of the Securities and Exchange Commission of Pakistan (SECP), recently told Dawn.
“We are reviewing the various power policies and studying the data on power sector; our objective is to find a positive solution (to the issues plaguing the power sector) and recommend a comprehensive policy for future,” Ali added.
The committee has been created with the objective of the ‘identification and examination of the causes of the high-cost electricity, including establishment of private power generation units under various power policies, and propose steps to rectify any wrongdoings of the past and ensure the future energy security of the country’.
The committee has also been mandated to look into the causes of circular (or inter-corporate) debt in the power sector, propose a way forward to resolve the issue and prevent its build-up in future to bring down the electricity prices.
The committee has been mandated to review matters relating to the cost of setting up public and private power generation projects under different power policies, identify any unethical or illegal practices, administrative or procedural weaknesses and any regulatory gaps that may have appeared.
The committee has also been empowered to assess if the independent power producers have complied with the their power purchase agreements and if any favours were allowed to any of them in matters related to tariff determination, financial close, construction period, capacity payment and merit order, plant efficiency, and so on to determine if any of them had received excessive payments.
Further, the committee will also study the policies and models of the power sector globally and recommend way forward for changes in power policies.
The committee draws its eight members from the power division, the SECP, National Electric Power Regulatory Authority, Central Power Purchasing Agency and National Power Control Centre and also has officials from the Federal Investigation Agency and Inter-Services Intelligence on it, according to the official notification.
Sindh Small Industries Corporation (SSIC) has issued fifteen days final notice to all allottees of industrial and commercial plots at Small Industrial Estates & Industrial Parks, asking them to establish their proposed units within prescribed period and pay the outstanding amount, otherwise their plots will be cancelled and deposited amount will be forfeited as per law.
The notices have been issued on the directives of Sindh Minister for Industries and Commerce and Cooperative Department, Jam Ikram Ullah Dharejo.
He directed the concerned officers to facilitate the businessmen and industrialists through one window operation.
He added, “industrialization in the province will reduce poverty and bring more opportunities of the employment”.
He asked the concerned authority to remove encroachments in industrial estates and lift the garbage as well and to develop and maintain good working relationship with industrialists.
KARACHI:
The recent monsoon rains have helped overcome the water shortfall for summer crops, aiding farmers in ensuring a good rice yield and preparing land for potato, gram and canola in Pakistan.
“The raining has proved to be a blessing upon us (farmers),” Sindh Abadgar Board President Abdul Majeed Nizamani said while talking to The Express Tribune.
“We could not sow the crop,” he said.
“Had it not rained for 15-20 days in the recent past, farmers would have missed the season to sow rice in over 30-35% targeted land in Sindh,” he said.
The farmers required full supply of water in April-May for the rice crop. However, the acute water shortfall had not allowed a large number of farmers to sow the crop on time. “The 15-20 days raining has overcome the shortfall for the crop,” he said.
Farmers sow rice on over 1.8-2.2 million acre land in the province. The average production stands at 40-46 maund (37.32 kilogram) per acre, he added
Rice is produced in both upper and lower Sindh. The land around the Kotri barrage remains rich for rice crop.
Farmers are still sowing rice in some of the areas in the province. It is a heavy water-consuming crop and takes around 90 days to be harvested from the time of sowing, he said.
Pakistan Agri Forum Chairman Ibrahim Mughal said the timing of the rain proved to be perfect. “Rains saved farmers Rs4-5 billion,” he estimated.
Had it not rained farmers would have to spend the amount on fuels to water the standing summer crops (cotton, pulses, rice, sugarcane and maize) through tube wells, he said.
The heavy monsoon spells also helped prepare the land and sowing oilseeds rape, mustard and canola on time in September throughout Pakistan.
Besides, it also allowed farmers to sow potato and gram on time in September in the Punjab province. “The gram is sown especially in four districts of the province, including Layyah, Bhakkar, Mianwali and Khushab,” he said.
It slightly causes a delay in picking cotton crop, but helped taking phutti (cotton-flower) price up to Rs4,100 per maund from Rs3,700 before the rain.
The country is estimated to produce 10.5 million bales of 170 kilogram each this year against the set target of 11 million bales.
He said the PTI government has allocated Rs30 billion to introduce technology-driven solutions in agriculture sector and help farmers in taking high production of crops including sugarcane, sunflower, rice and wheat.
“However, it did not allocate a single penny for cotton, which remains the bread and butter for a large number of farmers nationwide,” he said.
Agriculture remains one of the strong pillars of the domestic economy, as its share stands around one-fifth of gross domestic product (GDP).
KARACHI: The Trading Corporation of Pakistan (TCP) has planned to setup rice cleaning, processing and milling units in Karachi in partnership with the private sector, an official said.
“In this regard, TCP would provide cemented buildings and structures at National Highway and Landhi Industrial Area to the interested parties on rental basis,” the official said. Trading in rice both in domestic and international markets has become more quality conscious, even in the local markets buyers now demand quality rice.
“In order to meet the challenges under the WTO (World Trade Organisation) regime, it is now very essential for the country to put together its rice production and marketing strategies to match the demand of the international markets,” the official said.
According to the Pakistan Bureau of Statistics (PBS), the country’s overall rice exports in the year ended June 30, 2019 clocked in at $2.069 billion, up 1.67 percent against the exports of $2.035 billion in the previous year. Some 537,133 tons basmati rice and 3.545 million tons other varieties of rice were exported from the country. Pakistan earned $2.074 billion in FY19 up from $ 2.035 billion, showing 2 percent compared to last year.
Rice is Pakistan’s third largest crop in terms of area sown, after wheat and cotton. About 11 percent of Pakistan’s total agricultural area is under rice. Pakistan is a leading producer and exporter of Basmati and IRRI rice (white long grain rice). Rice ranks second among the staple food grain crops in Pakistan and exports are a major source of foreign exchange earnings.
The country grows a relatively high quality of rice to fulfil domestic and export demand. Traditionally, 40 to 45 percent of the crop is used for local consumption, with the balance exported.
According to a report issued by the Trade Development Authority of Pakistan (TDAP), the milling industry made significant investments in state-of-the art processing machinery, but Pakistan exports most of its rice in bulk with no modern packaging and branding.
“Export companies could be doing more to develop brands and a more significant presence in foreign markets,” the TDAP report said. The export industry was comprised of a large number of relatively small firms which were often family-run and accustomed to traditional trading practices.
“However, that is changing and Pakistan’s rice exporters are becoming increasingly active advocates for their industry and their trade interests. With time, the industry is expected to adopt more strategic and brand-based approaches to rice exporting,” it concluded.
The insurance industry’s asset base is expected to expand further in CY19; however insurance sector regulator’s capital requirements may lead to consolidation in the insurance industry with some insurers expected to merge or acquire smaller insurers. According to a recent report issued by the State Bank of Pakistan (SBP), the main drivers of growth include the increasing purchasing power of the middle class, the use of bancassurance, Window Takaful Operations, government’s health insurance expansion initiatives, launch of micro-insurance products, etc. may help to further increase the asset base of insurance sector.
As insurance premiums and economic growth have a positive correlation, it is expected that gross premium will increase at a decelerating pace in CY19. the merger and acquisitions in the insurance sector is expected to contribute to the stability of the industry.
The Health segment premiums are expected to receive a boost as the government plans to expand its National Health Insurance Program. The program is also expected to increase the share of dominant public life insurer in the Health segment as the government will provide national-level health coverage through the public life insurer; the government has previously used the public life insurer to launch a similar program in KPK. In addition, it is expected that overall claims for the public life insurer will rise as new business is underwritten for the Health Insurance Fund, which has a claims ratio of 83.78 percent in CY18.
According to report the Despite volatility in the domestic financial markets, which has affected investment income from equity securities, the insurance sector has performed well in CY18. The asset base for the insurance sector197 has been estimated to have grown by 10.88 percent to Rs 1.435 trillion as of December 31, 2018 mainly due to an increase in the Life Insurance business. Investments and properties have registered an increase of 12.11 percent to Rs 1.128 trillion as of December 31, 2018.
The asset base of the insurance sector has expanded by 10.88 percent in CY18, funded in part by 9.45 percent increase in gross premiums. However, the profitability indictors for the sector have slid down slightly owing to increase in net claims.
Further, the concentration remains a concern as the public sector insurers dominate the insurance industry. Some non-life insurers are also facing solvency issues. These insurers need to work on viable recovery plans or pursue possible consolidation avenues.
Further potential for growth exists as the insurance penetration level in the country is less than 1 percent of GDP, which is well below the global average of 6.3 percent recorded in 2016. However, in the current macrofinancial environment, it is expected that the growth trajectory may decelerate in CY19.
In addition, the sector is exposed to concentration, market and geo-political risks; while limited domestic avenues for re-insurance can lead to exchange rate risk. The asset base for the Family Takaful segment (Full-Fledged and Window Takaful Operators (WTOs)] has expanded to Rs 42.564 billion as of December 31, 2018.
ISLAMABAD: The FATF’s Asia Pacific Group in its face-to-face meeting on Monday scrutinised Pakistan’s compliance report on supervision of regulatory regime and investigation against outfits and persons involved in offences of terror-financing.
Pakistan’s 15-member delegation led by Minister for Economic Affairs Hammad Azhar defended Pakistan’s compliance report on first day of the FATF’s Asia Pacific Group meeting in Bangkok on Monday in which the compliance on Immediate Outcomes of 3 and 9 were analysed and overall Pakistani delegation performance went very well.
“Now the FATF’s Asia Pacific Group will scrutinise Pakistan’s performance on key issues related to terrorists, terrorist organisations and financiers for preventing from raising, moving and using funds and form abusing the non-profit organisations (NPO) such as NGOs sector in today (Tuesday) meeting,” top official sources confirmed to The News here on Monday.
One top official, when contacted, said that Pakistan would tell all good things it had done in terms of taking over the assets and related investigation being carried out in case of terrorist outfits in last six months in order to ensure compliance on FATF requirements.
The FATF’s Asia Pacific Group face-to-face meeting is continuing in Bangkok from September 9 to 13 and in first two days Pakistan’s compliance report on 27-point action plan would come under discussion. Pakistani team led by Minister for Economic Affairs Hammad Aazhar attended the meeting and in his maiden speech, he made commitment that Pakistan would comply with all requirements of FATF.
The FATF’s Asia Pacific Group is comprised of 16 officials led by USA Ms Christine and India’s five delegates are part of the team. Pakistani side had compressed 27-point action plan and prepared 11 immediate outcomes (IOs) to ensure its compliance on FATF requirements. In Monday’s meeting Pakistan defended its stance on IO 3 and IO 9.
Under Immediate outcome 3, Pakistan is required to supervise, monitor and regulate financial institutions for compliance with AML/CFT requirements commensurate with their risks.
Under Immediate outcome 9, Pakistan is required to take action against terrorist financing offences and activities investigated and persons who finance terrorism are prosecuted and subjected to effective, proportionate and dissuasive sanctions.
In today’s meeting in Bangkok, the Immediate Outcome 8 related to proceeds and instrumentalities of crime are confiscated will come under discussion. Under Immediate Outcome 10, Pakistan will apprise about its action against terrorists, terrorist organisations and financiers who are prevented from raising, moving and using funds, and form abusing the non-profit organisations (NPO) such as NGOs sector.
The FATF placed Pakistan on grey list in June 2018 and came up 27-point action plan for graduating it within one-year period. Pakistan has been given deadline of October 2019 and now Islamabad had submitted its compliance report on 27-point action plan and is hoping that the FATF would not place it on blacklist in its upcoming meeting scheduled to be held in Paris from Oct 14 to 18, 2019.
In order to address challenges associated with the systems lacking digitization of urban land record, the Planning and Development Board Punjab is coming up with a project for Digitization of Urban Land Record Management. According to Chairman P&D Board, “Currently the systems involved for digitization of land records not include urban land. Recording of urban properties is being undertaken through registration of deeds which lacks spatial information and deed for registration of property is explicitly allowed without requiring any proof of ownership. In the absence of a standard system of recording land rights in urban, different agencies (both private and public sector) have devised their own individual system of recording these in areas of their respective jurisdiction and according their operational requirements. Resultantly, the system has failed in terms of quality of services provided to the people where lands have transformed into a metropolis. A new system, therefore, is under consideration which addresses all operational and administrative needs of the government.”
He further added, “The government has decided to move in the direction of a unified, formal system wherein, the individual rights will be made secured and certified copies be issued in favour of an individual and a clear distinction between rural and urban properties will be ensured”.
It is pertinent to mention here that final approval for digitization of Urban Land Record through technical and financial assistance of World Bank has already been accorded by Prime Minister of Pakistan, Chief Minister of Punjab and Standing Committee of Cabinet on Finance & Development for Punjab.
Executive Committee of National Economic Council (ECNEC) has approved the national programme worth Rs 2048.90 million for enhancing the productivity of sugarcane in the Punjab province. The programme named as ‘National Programme for enhancing profitability through increasing productivity of sugarcane’ will be launched in 13 main sugarcane growing districts of the Punjab province.
These districts include Sargodha, Bhakkar, Faisalabad, Toba Tek Singh, Jhang, Chiniot, Mandi Bahauddin, Kasur, Muzaffargarh, Layyah, Rajanpur, Bahawalpur and Rahim Yar Khan.
It is a financially shared project in which Punjab will contribute Rs 1737.70 million while Federation’s share is Rs 311.23 million, sources in the Punjab Agriculture Department told Business Recorder here on Monday. Objectives of the project are to enhance the profitability of sugarcane farming through increasing productivity of sugarcane to 200 maunds/acre and to allocate area retrieved (in the longer run) for oilseeds and high-value crops etc, sources added.
They further said that productivity enhancement will be achieved through promotion of mechanization under which the provincial agriculture department aims to distribute 2291 chisel ploughs, 1142 early hill-up implements, 1142 planters with band fertilizer, 7 billet planters, 1142 granular fertilizer applicators and demonstration of Good Agricultural Practices (GAP).
These include weed/pest management and nutritional management in line with latest practices at 2961 places in these 13 districts.
The department will also arrange 270 mega farmer gatherings in the main sugarcane hubs of the province besides holding of 986 farmer days to impart training and information to the sugarcane growers about the project and the machines.
Under this project around 210 Best Growers will also be recognized and appreciated through different means at District to provincial level while the government will share 50 percent cost on application of micronutrients on 297,010 acres, the sources added.
Sources said that the government also plans to extend subsidy for intercropping and September planting at 13,000 acres and strengthening of Bio-Labs by development of IPM techniques.
Regarding when the project is going to be launched, the sources said that now the project will come in discussion at the provincial development working party (PDWP) and then implemented after fine tuning according to the need of the province, the sources concluded.
ISLAMABAD: The government plans to increase the country’s power generation capacity by almost 300 per cent in next 20 years to 111,000 megawatts and phase out almost all of the existing thermal power plants to meet rising energy demand at affordable costs.
The move is part of the Indicative Generation Capacity Expansion Plan (IGCEP) 2018-40 finalised by the National Transmission and Despatch Company in consultation with all the federal and provincial agencies and private sector consultants to ensure low-cost development of future projects and to comply with regulator’s Grid Code obligations.
The IGCEP 2018-40 represents the first complete iteration of an integrated planning exercise for the power sector of the country and will be revised every year on the basis of ground realities including growth trajectory, consumption patterns and completion or delays in projects to ensure regulatory compliance.
The plan puts current total capacity at about 29,000MW even though total installed capacity stands at about 33,500MW including about 3,000MW of coal-based plants, 9,700MW of hydropower plants, 20,000MW of thermal plants besides 1,345MW of nuclear and 1,900MW of renewables. As such, 61pc contribution comes from all thermal sources, 29pc hydro, 6pc from renewables and 4pc nuclear. Power generation goes up to 153,000 Gigawatt Hour (GWh ) at present.
Thermal plants will be phased out in 20 years
The plan has been firmed up on basis of three different economic growth scenarios until 2040. At 4.5pc GDP growth rate, the government will have to increase its generation capacity to 65,100MW to generate 370,500GWh. In case of 5.5pc GDP growth rate, the capacity would need to be expanded to 80,500MW to generate 458,000GWh. In high growth rate of 7pc, the capacity will be increased to 111,000MW to make available about 630,500 GWh.
Under the plan, the government has firm plans for capacity addition of about 17,300MW by 2025 including 6,000MW in public sector and 11,300MW in the private sector. By the year 2030, another 8,600MW would be added to the system.
The IGCEP is targeting a total capacity addition of about 98,100MW by 2040. This would include about 29,000MW of hydropower plants followed by 20,000MW through local coal-based plants, mostly in Thar. The nuclear power generation capacity would go beyond 4,300MW as a series of large plants of 1,100MW each are completed. The plan envisages decreasing the capacity of Liquiefied Natural Gas-based plants while a total of about 9,000MW current oil-based plants would be phased out by 2040.
On the other hand, about 16,000MW capacity addition has been planned through renewable sources — wind, solar, baggasse etc — while imported coal-based generation capacity would increase to 5,000MW.
The plan is also based on existing policy limitations and system constraints. For example, 66pc energy for Regassified Liquid Natural (RLNG) projects is on ‘take or pay basis’. Although cheaper plants are available for dispatch but their generation has been curtailed to account for RLNG contractual obligations. There is a need to ponder, ascertain and establish how the fuel contracts will be negotiated in the renewal phase of these projects with respect to minimum take-or-pay fuel requirements, the plan advocates.
All strategic projects have been considered for the plan. In the long term, the policy will continue to focus on least cost generation options and on harnessing indigenous resources, particularly Thar coal and renewable in south and hydro potential in the north.
In this regard, a project is considered as committed provided the project is already under construction or has achieved financial close or has strategic importance i.e. China-Pakistan Economic Corridor (CPEC) Project or Public Sector Committed Projects. It also takes into account the commercial operation dates for committed and candidate power projects conveyed by project executing agencies and further rationalised by the Prime Minister’s Task Force for Energy Reforms.
Wind and solar power would be developed in the blocks of 500MW and and 400MW respectively, from the year 2021-22 and onward. Due to high-annualised cost, projects like Chiniot, Kaigah, Tungas, Yalbo and Basho have not been included for this report. Likewise, 1,320 MW Oracle Thar-Based plant, though being a CPEC project, has not been considered as a committed one because of its changing characteristics and completion timelines.
From year 2019, the gap between nominal capacity and the demand is steadily widening, and the same starts surpassing the peak load of the system. In the year 2032, the cumulative nominal capacity is estimated at 62,979MW whereas the peak load is projected at 50,306MW, thus a wide disparity of around 13,000MW exists between the two parameters and the capacity is in surplus as compared to demand.
In 2040, the last projected year for the IGCEP, the total nominal capacity in the system stands at 98,091MW against a peak load projected as 80,425MW. Therefore, a significant surplus of around 17,600MW has been estimated between the projected demand and the installed capacity, as a spinning reserve.
With the current costs of renewable energy, as well as the increase in costs for imported fuels and currency devaluation, the least cost generation plan utilises large quantities of hydro capacity, Thar Coal-based generation and renewable energy which is in line with the general policy view to reduce dependence on imported fuels from the perspective of energy security, sustainability and affordability ultimately yielding significant reduction in foreign reserve requirements pertaining to imported fuels.
The plan did not take into account the impact of demand side management and net-metering because of non-existent or ineffective policy direction.
ISLAMABAD: The government plans to increase the country’s power generation capacity by almost 300 per cent in the next 20 years to 111,000 megawatts, as part of the Indicative Generation Capacity Expansion Plan (IGCEP) 2018-40.
The plan was finalised by National Transmission and Despatch Company (NTDC) in consultation with all the federal and provincial agencies and private sector consultants to ensure low-cost development of future projects.
The 20-year plan will gradually phase out almost all of the existing thermal power plants to meet rising energy demand at affordable costs.
Under the plan, the government has firm plans for capacity addition of about 17,300MW by 2025 including 6,000MW in public sector and 11,300MW in the private sector. By the year 2030, another 8,600MW would be added to the system.
Pakistan submitted on Monday a report on strengthening of its anti-money laundering and combating the financing of terrorism framework to the Financial Action Task Force, according to Aaj News. A 15-member Pakistani delegation submitted the report during the talks with FATF officials in Bangkok, the sources said. The negotiations between the two sides will continue until September 13.
Minister for Economic Affairs Hammad Azhar is leading the Pakistani side at the talks. Officials of the State Bank of Pakistan, ministries of Finance and Interior, Federal Investigation Agency, Securities and Exchange Commission of Pakistan (SECP), Federal Board of Revenue (FBR), National Counter Terrorism Authority and the Financial Monitoring Unit have also been part of the talks. The report submitted by Pakistani officials detailed the steps taken by Islamabad in the light of FATF’s recommendations.
During the ongoing negotiations, the FATF will be apprised of measures taken by Pakistan to prevent suspicious transactions. Officials will respond to FATF’s queries about restricting illegal activities and freezing the assets of proscribed organisations and groups. The officials will also brief the anti-money laundering watchdog on the legislation with regard to foreign currency regulations.
The FATF will evaluate the report submitted by Pakistani officials. It will make a final decision on whether to exclude Pakistan from its grey list, keep it or place it on the black list at a meeting in Paris on October 16-18.
LAHORE: There is polarity in views on the economic performance of the country under PTI’s 13 month rule, with only government functionaries claiming a turnaround in sight, while almost all economists see no light at the end of the tunnel.
Even economists in the government panel openly criticise state policies. Dr Ashfaque Hasan Khan is amongst them. Independent economists see the economy going down as a result of flawed policies, and Dr Hafeez Pasha, the veteran respected economist issues frequent warnings in this regard.
Businessmen in the government panel also wonder at what is happening on the economic front. The Pakistan Bureau of Statistics has held back the trade figure for the month of July even in the second week of September; probably waiting for the public to forget what Advisor to Prime Minister on Commerce Razzak Dawood boasted about exports in the second week of August.
The central Bank has finally come out with figures that are much lower than what the commerce advisor stated. The government side is playing politics on economic progress. For instance they insist that exports in terms of quantity have increased, but the unit value has declined.
They do not explain why the unit price has declined. If they analyse the performance of all subsectors of our textile (mainstay in exports), they will find that every time the rupee was devalued by 5-7 percent in one go, the unit value declined.
The imprudent manner in which the currency was devalued gave foreign buyers ammunition to force the exporters to pass on major share of increase to them. The unit price of textile products declined in other economies as well, but marginally, and much less than the decline in unit values in Pakistan.
The need of the hour is to increase our exports in terms of value. July was the first month in this regimes tenure when the exports in value increased by double digit. But this month alone cannot be taken as an indication that the exports are on rise. The performance of subsequent months (at least a quarter) would indicate the way exports are performing.
Opposition MNA Dr Ayesha Ghaus Pasha has rightly pointed out the increasing policy rates when the inflation cost push is further dampening demand. The Indian central bank has been easing its policy rate for over a year in order to increase demand.
The United States did so for over a decade to avoid recession. We were already in recession, and the higher policy rates are further drowning the economy. It seems to be a ploy to enrich the banks where the main client is the government. Higher interest rates increase the debt servicing of the government on domestic debt that is higher than foreign debt.
Debt service on foreign debt has already skyrocketed because of massive devaluation of rupee. The debt servicing expenditure would continue to grow as we are set to acquire billions of dollars of foreign loans and over trillion rupee domestic loans in foreseeable future. Only reduction in policy rates would provide any reprieve to the state.
Inflation has remained in double digit despite change of base year. The CPI basket has also been changed. Is it based on ground reality? The government has increased the weight of energy in the basket, but has not touched the weight of food that remains at 34 percent.
The minimum wage has been fixed this year at Rs17,500/month – up from Rs15,000/month. Can any economist make out a budget for households earning Rs17,500/month based on the CPI index.
Majority of the population earns this amount (approximately (60 percent) assuming that 40 percent live below poverty line. Around 30 percent middleclass earns from Rs25,000-Rs50,000/month.
The remaining 10 percent are from upper middle class (high salaried class) and rich industrialists or landlords. For the sixty percent of the population the cost of food is over 50 percent of their monthly income.
For poorer segments it may go up to 80 percent. Why was this aspect ignored in the CPI basket? Why we continue to twist statistics according to our wishes and not on ground realities. Pakistanis would continue to suffer until reality based statistics are released. This would facilitate planners to remove the deficiencies in planning and set priorities to help the poor.
Prime Minister Imran Khan has directed the Board of Investment (BoI) to issue provisional recommendation letters without security clearance to 2,511 Chinese citizens illegally working on projects and to convert their visas into work visas without any fee, sources close to Chairman BoI told Business Recorder. The Cabinet on June 3, 2019 considered a summary of the Ministry of Interior and granted approval “in principle” as one-time dispensation to Chinese nationals to change their visas into work visas in Pakistan free of charge.
According to the BoI, the processing fee for work visa of $ 25 (approved by the Prime Minister and decided during the 5th Board meeting) was increased to $ 100 during the 7th Board meeting held on September 1, 2016. However, as per the recent Cabinet decision, the visas of 2,511 Chinese citizens are to be issued free of charge. The total of BoI’s processing fee involved for issuance of work visa is $ 251,000 equivalent to over 40 million rupees.
As per revised visa policy shared by the Ministry of Interior on March 19, 2019, Pakistani Missions abroad are authorized to grant one year entry work visa with multiple entries to foreign expatriates on the recommendations of BoI which is extendable on yearly basis in Pakistan. Mandatory security clearance or otherwise is to be conveyed by the security agencies within four weeks positively. Ministry of Interior revealed that thousands of Chinese nationals working on China Pakistan Economic Corridor (CPEC)/non-CPEC projects enter Pakistan initially on visit visas and then get extensions instead of going back on the expiry of their visas and return on work visa.
As per passport and visa manual 2006, part-II, section-B paragraph-8, type/purpose of visa issued by the Missions cannot be changed for any reason in Pakistan except business to work visa or vice versa.
Chinese embassy in Islamabad through the Ministry of Foreign Affairs had revealed that there are 2511 Chinese technical and managerial personnel holding passports for public affairs in Pakistan. Most of them are for CPEC and non-CPEC projects invested by Chinese State Owned Enterprises (SoEs) and some are teachers from public universities. According to sources, Chinese embassy in Islamabad has approached the concerned authorities and requested for early issuance of work visas for the 2,511 Chinese citizens. The Board of Investment took up this matter with the office of Prime Minister.
The sources said, Prime Minister in his capacity as Minister-in-Charge of BoI has seen and approved the following proposals duly endorsed by Interior Division, with the direction to place the case before the federal cabinet in its next meeting: (i) processing fee amounting to $ 251,000(Rs 40.2 million) may be waived off in favour of 2,511 Chinese citizens as one-time dispensation; and (iii) BoI may issue work visa recommendation letter to 2,511 Chinese citizens without waiting for four weeks for mandatory security clearance, however, a copy of visa may be sent to the security agencies. Upon receipt of any adverse remarks from the security agencies the advice for cancellation of work visa may be issued, accordingly.
ISLAMABAD:
Two top global LNG suppliers have stayed away from participating in the bid to procure 200 million cubic feet per day (mmcfd), following a case taken by National Accountability Bureau (NAB) on LNG terminal and imports from Qatar.
Officials familiar with the development say that global investors were not taking interest in Pakistan’s LNG market following NAB’s activism regarding LNG projects. Pakistan LNG Limited (PLL) had invited bids for supply of 240 LNG cargoes over a period of 10 years with the arrival of two cargoes a month.
Only four companies participated in the tender as they had been qualified in technical bids. These companies included Italian energy giant Eni, Trafigura, Socar of Azerbaijan and Chinese firm PetroChina. “Two global LNG suppliers, who are also LNG producers, purchased tenders, however, the arrest of former prime minister Shahid Khaqan Abbasi raised fears among global LNG suppliers,” said officials, adding that these two global LNG suppliers stayed away from submitting bid documents to participate in the tender.
The Petroleum Division spokesman confirmed to The Express Tribune that there were four tender companies. Responding to a question, he said, “You would have to ask the bidders/suppliers about NAB fears.”
Officials said that out of these four companies, three were traders and only ENI was an LNG producer. Following the NAB cases regarding LNG terminal, two LNG traders were not taking interest in LNG contract. The officials remarked that the NAB cases had not only harassed local investors but foreign investors were also not willing now to invest in Pakistan. The foreign investment has taken a hit and has been declining during the Pakistan Tehreek-e-Insaf’s (PTI) tenure, raising serious concerns. In light of these, the government is now working to amend the NAB ordinance to protect businessmen. The NAB chairman has also announced not to take cases of taxes against businessmen.
Pakistan had been trying to set up an LNG terminal for decades, and it managed to set up two during the Pakistan Muslim League-Nawaz government’s rule. The LNG terminal was set up in 2015 and it was a pilot project that opened the LNG market of Pakistan for the global investors. However, the anti-corruption watchdog had taken the case against this terminal and an investigation was ongoing.
Keeping in view the energy woes of the country, the previous government started work on the first LNG terminal with a view to complete corporate formalities. The Inter State Gas Systems (ISGS) Board in its 76th meeting had authorised ISGS to assist the procurement process for the provision of LNG tolling services for and on behalf of Sui Southern Gas Company (SSGC) and utilise consultancy services arranged by the USAID.
Given the availability of technical assistance through USAID and following the decision of ISGS Board that the LNG project related activities will be handled by ISGS, the Petroleum Division had advised the USAID mission of Pakistan to advise the consultant (QED) to coordinate/interact with ISGS instead of SSGC for development of RFP and other LNG related activities.
After the opening of bid, technical bids were handed over to the consultant for technical evaluation, while the financial bids were retained in the safe custody of ISGS. The consultant concluded that the proposal submitted by Elengy Terminal Pakistan Limited (ETPL) for the Fast Track Project is competitive.
The officials said that since it was a pilot project there could be some procedural flaws but the intention was not bad. Hence, in the proposed amendment of the NAB Act, it has been proposed to focus on financial benefits rather than procedural flaws, the officials added.
The Federal Cabinet is all set to approve the establishment of a CPEC Authority on September 12, 2019 through an Ordinance already cleared by Cabinet Committee for Disposal of Legislative Cases (CCLC). According to the Ministry of Planning, Development and Reform, CPEC is now entering its next phase with the incorporation of additional areas, including trade and market access, industrial cooperation, socio-economic development, poverty alleviation, agriculture, Gwadar development and blue economy, regional connectivity and third country participation. Hence, a new management entity is needed.
In a meeting held on held on May 20, 2019 chaired by the Prime Minister it was decided to establish the CPEC Authority. On August 26, 2019, during a meeting of Cabinet Committee on CPEC (CCoCPEC), Advisor to the Prime Minister on Institutional Reforms and Austerity, Dr Ishrat Hussain supported the idea of setting up an Authority, however, he expressed concerns over the massive size of the Authority and suggested that a smaller Authority can be more effective and manageable. And services of thorough professionals, well-experienced and qualified personnel may be acquired for smooth functioning of the Authority.
The Advisor to the Prime Minister on Commerce, Textile, Industry and Production and Investment, Abdul Razak Dawood also suggested a leaner set up for the Authority. The Authority will consist of a Chairman, two Executive Directors and six members for a period of four years to be appointed by the Prime Minister of Pakistan. The entire top team of the proposed Authority shall be eligible for re-appointment for similar term.
The powers and functions of the Authority are as follows: (i) in addition to such other powers and functions as may be assigned under this Ordinance and rules, the Authority shall be primarily responsible for coordination, monitoring, evaluation and ensuring implementation of CPEC related activities. The Authority shall exercise its powers and perform its functions in line with the framework and MOU signed between Pakistan and China, provided that the federal government may, from time to time, assign more functions and issue guidelines; (ii) the Authority will interface with China for identifying new areas of cooperation projects and organize meetings with Joint Cooperation Committee and Joint Working Groups (JWGs); and (iii) it will ensure inter-provincial and inter-ministerial coordination for CPEC activities, in addition to narrative building and communication about CPEC related activities and conduct sectoral research for informal decision making and long-term planning.
The Chairman, and Executive Director and a Member may resign from his office by writing under his hand addressed to the Prime Minister.
The Prime Minister may remove the Chairman, Executive Directors or Members from office, if on an inquiry conducted under the order of the Prime Minister, he is found inefficient or unable to perform the functions of his office due to mental or physical disability or to have committee misconduct.
LAHORE:
The technological landscape of the world is constantly changing with all the countries engaged in a war to outdo the other in terms of achievements in this arena. In this regard, China is leading the 5G race as it has launched the industry’s first full range of 5G end-to-end commercial products and solutions that comply with 3rd Generation Partnership Project (3GPP) standards.
For many Pakistanis, Huawei’s empire revolves around producing mobile phones, tablets, laptops, accessories and wearables besides working on the fifth generation cellular network technology but this is just a fraction of work for the Chinese telecommunication giant.
The company has made inroads not only in its consumer business department but also in other technological arenas like artificial intelligence, 5G, internet of things (IoT) and digital transformations.
Besides providing cloud based solutions, the tech giant’s major business revolves around manufacturing and selling telecommunication equipment.
CMPak Ltd, a sister concern of another Chinese government-owned company recently tested 5G spectrum in Pakistan. Besides this it has also conducted 5G tests with 182 carriers worldwide and has signed more than 30 commercial contracts for 5G while shipping more than 40,000 5G base stations to global markets.
Since Pakistan is engaging with China through the China-Pakistan Economic Corridor (CPEC), it can avail the fourth industrial revolution technologies that Huawei has already worked on. Nevertheless, the country needs to initiate some key measures in policymaking to better avail the benefits.
The government of Pakistan is aiming at digitising data and it has made reasonable success but still there are issues like multiple records and raw-form data, which need to be transformed into individual profiles and uploaded on a central depository system. In addition to this, Pakistan needs to draft strict privacy laws for data so it may not be misused.
The industry believes that Pakistan’s government should take crucial steps to reform its raw data base as fourth industrial revolution is knocking the door where big data would be the key.
In efforts to become a pioneer in the field, Huawei Technologies has set up a 3.5 square-mile Horn Research and Development campus somewhere in Dongguan, a first tier city of Guangdong province China. However, this technology hub is exclusively meant for company’s research and development wing, which is working to foster the company in general and China in particular to remain competitive or take one-step ahead in global information and communication technologies battle.
To take advantage of this opportunity, Pakistan can ink agreements with Huawei to use its expertise in different sectors like smart-grid solutions, smart transport, security, smart city, oil and gas and banking and finance. However, this should be done on an equal basis in terms of data sharing.
On the other hand, Pakistan should also focus on strengthening its own technology base as a long-term strategy. The country is blessed with youth, most of which is tech-savvy. There is a need to further strengthen the country’s IT sector with a special focus on start-ups by the government.
Besides, this measure is also needed to motivate public and private sector to invest in research and development to create Pakistan’s own identity in IT by promoting IT environment and creating IT parks.
Huawei has invested heavily in research and development to bring it at par with companies like Google and Apple. Recently, India launched a mission to land on the moon. Considering the advances in that our neighbouring countries are taking in this sector, the Pakistani government needs to get its act together. The government should take concrete steps at least for IT sector-led research and development to avoid foreign dependence and become self-sufficient in this particular sector.
DUBAI: Saudi Arabia’s economic reforms, including VAT and higher energy prices, have started to yield results, but more needs to be done to plug a chronic budget deficit, the IMF said on Monday.
After a crash in oil prices that shrank Saudi Arabia’s revenues and led to budget shortfalls for five years in a row, the world’s largest crude exporter imposed a raft of measures to diversify its economy.
“Reforms have started to yield results and… the outlook for the economy is positive,” the International Monetary Fund said in a regular report.
But it said the kingdom, where oil income still accounts for 70 per cent of public revenues, must extend adjustments in the price of utilities and fees levied on expatriates.
It also called on Saudi authorities to consider doubling value added tax (VAT) from five per cent to 10pc.
Saudi Arabia introduced the tax in 2018, a year in which its returns amounted to $12.5bn or 1.6pc of gross domestic product.
Commitment to the reform programme will be key to success in “promoting non-oil growth, creating jobs for nationals, and achieving the objectives of the authorities’ Vision 2030 agenda”, the IMF said.
“Vision 2030”, the brainchild of influential Crown Prince Mohammed bin Salman, is aimed at weaning the Saudi economy off its reliance on oil.
Saudi GDP grew by 2.4pc last year but the IMF said growth would fall to 1.9pc in 2019 due to substantial Opec oil output cuts aimed at addressing oversupplies and underpinning sagging prices.
The fiscal deficit is forecast to widen to 6.5pc of GDP this year, from 5.9pc in 2018, it said.
The global lender also called for greater diversification to create jobs for Saudis whose unemployment rate stands at 12.5pc.
One million new jobs are needed for citizens over the next five years, it said.
Oil directly accounts for more than 40pc of Saudi Arabia’s GDP, nearly 70pc of fiscal revenues and almost 80pc of exports, the IMF said.
Saudi Arabia has posted a budget deficit since 2014 and the total shortfalls until last year amounted to over $320bn. The kingdom is projecting another deficit this year.
The IMF said in the report that Saudi authorities have reiterated their commitment to balancing the budget in 2023.
ISLAMABAD:
The World Bank remains moderately satisfactory with progress on $4.1 billion Dasu hydropower project, as Pakistan struggles to end a five-year old dispute over land acquisition that has also put a $100 million tranche at stake.
In its 10th report on series of Implementation Status and Results Report of the 2,160-megawatts Dasu hydropower project, the Washington-based lender upgraded the project rating to ‘moderately satisfactory’ – a notch above from the last rating of moderately unsatisfactory.
However, it has linked the future ratings with Pakistan’s ability on how quickly it resolves a five-year old dispute over cost of land acquisition for the project. The lingering dispute has also put at stake the over $100 million World Bank loan for land acquisition whose extended deadline is going to expire by end November.
The total project cost is $4.1 billion and the World Bank has given $588.4 million loan for its construction, which is nearly 15% of the total cost. It has also extended guarantees to acquire another $460 million loan from commercial banks, which has increased its exposure in the project to $1.1 billion or one-fourth of the total cost.
The result report, released last month, stated that the project implementation progress has improved in the last six months. At site, progress has been seen in construction of river diversion tunnels and the access to the underground powerhouse. Planning of local area development projects is in advanced stage and bidding for priority schemes for water supply and street lights will soon commence.
Project implementation progress rating has therefore been upgraded to moderately satisfactory. “However, a pre-requisite for keeping this rating is that necessary clearance is given for the revised land compensation rates and that this leads to award of prioritised lands during the next six months,” according to the report.
Out of $588.4 million, the World Bank had given $111 million for land acquisition. Due to almost negligible disbursements, the World Bank gave one-year extension to utilise funds for land in November last year, which is also going to lapse in the next two months. It was the third extension, which this time had been taken by the government of Prime Minister Imran Khan.
In its extension report, the World Bank had noted that the continued slow progress of land acquisition is delaying project implementation. Land acquisition has still only reached 740 acres, out of 1,987 acres required for the construction areas, and a total of 9,135 acres including reservoir area needed for the project.
The frequent interruption of work by project affectees, delayed payments by the Water and Power Development Authority (Wapda) to revenue staff and to project affectees, lack of control on illegal construction, poor safety management by contractors, consultants and Wapda and delayed decisions by Wapda on procurement and contract management in particular local area development program have contributed to slow progress on land acquisition, according to a World Bank’s report of November last year.
The project had been planned to be completed by 2021 – a deadline that both the World Bank and Pakistan will miss. There is no possibility of taking any action against those who are responsible for the delayed completion of the project.
Snail-paced PTI governance
In July this year, the Executive Committee of National Economic Council (Ecnec) had taken a decision to upward revise the land cost to end the dispute, subject to no-objection certificate by Ministry of Law and Justice. The Ecnec is chaired by Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh.
The Ecnec had approved to increase the total project cost to Rs511 billion. The upward revision was primarily made in the land acquisition component, where the cost was conditionally approved to increase from Rs12 billion to Rs39.6 billion – a jump of Rs27.6 billion or 230%.
The Ecnec sought the Ministry of Law opinion on the revision of cost of land and build-up property after imposition of section four of Land acquisition Act of 1894. There was a view that cost cannot be revised after imposition of section four.
The law ministry had been given directions to inform about its decision within 15 days.
We have not received a report from the Ministry of Water Resources about the views of the law ministry despite lapse of almost two months, an official of the Ministry of Planning told The Express Tribune. He said that the Water Resources Ministry also did not present any report in the last Ecnec meeting, held in the last week of August.
The last Pakistan Muslim League-Nawaz (PML-N) government too had failed to resolve the dispute despite securing two extensions in timelines from the World Bank.
Owing to the slow physical progress, the World Bank released only $211.7 million or 43% of its loan component in the past almost five years, according to a project progress report of the lender.
The locals have demanded semi-urban property rates as against approved rural category rates. The commissioner of the Hazara division had recommended that either the locals’ demands be met or the land may be acquired through use of force.
The progress report stated that the preparatory work is only 26% finished compared to the expected 100% and main hydraulic structure works have reached less than 2% of the completion. Furthermore, poor safety management has resulted in accidents and fatalities associated with the construction work.
There is a plan to construct six power units of 360MW each but so far none has been completed. As of end July, there was also no progress on construction of 250 kilometre long transmission lines.
Power Division Minister Omar Ayub Khan said on Monday that Pakistan has decided to challenge the $6.2 billion penalty in the Reko Diq case, which was imposed by an international court.
Addressing a press conference, Omar Ayub said it was due to previous government’s policies that Pakistan faced penalties of $1.2 billion and $6.2 billion in Karkey and Reko Diq cases.
He also blamed the previous government for burdening the independent power producers (IPPs) with extra expenditures, which was why the IPPs moved to the court.
He said that an out of court settlement in GIDC case was made in the country’s interest but the matter was sent to court for transparency.
“If the court announced the verdict in favour of the Gas Infrastructure Development Cess (GIDC), the relief amount will be spent on the gas infrastructure,” he added.
On a query, he said the capacity charges on circular debt are being withdrawn.
On another question, he said the circular debt has been reduced to less than Rs10 billion and would be reduced to zero by December, adding that efficiency rate of feeders has reached 99pc.
The minister said that the wheel of business will move with the foreign investment and that the government is striving to resolve all bottlenecks in the way of power sector investment.
He said the Rousch power plant has been paid the Rs1.5 billion in a transparent manner and as per set procedure decided by the federal cabinet.
SAARC Chamber of Commerce and Industry Senior Vice President and Pak-US Business Council Chairman Iftikhar Ali Malik said on Monday that sustainable and durable economic stability is a prerequisite for the survival of the country and strengthening of democracy.
“The government should take all stakeholders into confidence so that a new result and growth-oriented judicious economic policies could be evolved,” he said in a press statement. “Despite the categorical assurance of Prime Minister Imran Khan, the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) and other top leaders of the corporate sector are not being taken on board by all policymakers.”
He urged the government to reshape its economic policies in view of the global recession trends, as that would help restore the confidence of foreign and local investors.
“At this critical juncture, the government must come to rescue the business community and immediately offer a package of incentives to small and medium traders,” the statement read. “All the developed and advanced countries, including USA, Korea, China, France, Germany and Russia, have attached great importance to the promotion of small and medium enterprises (SMEs) which are significant for the strengthening of the economy.”
Malik urged the government to conduct market research so as to find out new destinations for the Pakistani products, adding that Pakistani missions abroad should be duty-bound to introduce Pakistani products to foreign buyers.
He said the Pakistani missions must also ensure dissemination of trade-related information so that Pakistan entrepreneurs could avail trade opportunities to the maximum.
“It is time to diversify our businesses and add new products to attract maximum foreign buyers for Pakistani products,” he stressed.
The senior SAARC official noted that a majority of traders, businessmen, industrialists and exporters have voiced their concerns regarding the slow pace of economic growth, urging the government to take appropriate steps to arrest the gradual decline so as to save the industry from total collapse.
He maintained that the entire business community is paying taxes on time and that the issue of taxation must be resolved amicably without affecting industrial growth.
“The entire business community stands united with Prime Minister Imran Khan’s stance on India’s belligerence in the disputed valley,” he concluded.
PESHAWAR:
The Khyber-Pakthunkhwa government has approved a mega project worth Rs133.36 million to help women entrepreneurs associated with garments sector in the province.
The approval was given by Provincial Working Development Party (PWDP) after it was pending for the last three years. “PWDP has approved Rs133.36 million for this long-awaited project and hoped that the finance department would soon issue necessary funding for it,” official sources told APP.
During the previous fiscal year, Rs34.99 million was released for expenditure, whereas Rs30 million have been allocated in the current fiscal year.
Once completed, the project is set to benefit thousands of women besides alleviating poverty and generating employment opportunities, especially in the rural areas of the province.
ISLAMABAD:
With the completion of major infrastructure and energy projects, the first phase of the China-Pakistan Economic Corridor (CPEC), which has helped Pakistan manage huge deficits in the energy sector and transportation infrastructure, is coming to an end.
Before CPEC, Pakistan was going through the worst load on power management and according to the government of Pakistan, the country was losing $4-5 billion every year due to energy shortages, while the estimated cost did not include social costs to society.
On the other hand, the National Highway Authority (NHA) estimated that Pakistan needed $1.2 billion to rehabilitate the transportation infrastructure, which along with the energy shortage, was hindering the country’s fast economic growth.
Pakistan managed to address these major issues with the help of the first phase of CPEC, which is now entering the second phase. Once again, the time is critical as all economic indicators are painting a miserable picture – inflation is on the rise, the rupee has depreciated against the US dollar – and new opportunities are few.
The government is striving to reverse the order and is aggressively pursuing any available opportunity for investment and job creation. The second phase of the economic corridor can be the answer to that, but the question is what strategies and tools are required by Pakistan to benefit from the next phase. Moving forward, there are three points which need to be taken into consideration.
First, the initial phase of CPEC was dominated by infrastructure development. All these interventions needed the lead role of the government, although, with certain reservations, the government managed to play a good role. Secondly, Pakistan should keep in mind the economic and development status of the country before designing any intervention. The first point to recognise here is that Pakistan lies between the primary and secondary phase of economic development, which means the country has started to graduate from commodities or natural resource stage and is trying to enter the second phase.
Although the process is slow, the country is still making progress. Therefore, the future plan should be developed keeping in mind the current status of development.
The second phase is all about industrial cooperation, development of agriculture and trade, therefore, its needs and demands are entirely different from the first phase. The first required the leading role of the government, while the second phase requires a 180-degree change in management and roles of actors. It demands the leading role of industrialist, the private sector and the business community, while the government’s role would be only of a facilitator.
The government needs to start future planning and phasing of implementation for the second part of CPEC, accordingly. In this regard, the government has started to engage the business community of Pakistan by creating a ‘business council’ under the chairmanship of Abdul Razak Dawood. However, the direction of the business council is not clear yet and the terms of reference (ToRs) are not depicting the required changes and instruments for practical interventions.
Business council
It is feared that the council will prove to be just another talk shop without much delivery. For meaningful engagement of the business community, Pakistan will have to adopt a more practical approach and well-thought strategy for engagement.
First of all, the business council should be made an independent body and should have direct linkages with the Prime Minister’s Office and National Development Council. The main work of the council should be to design a comprehensive plan for intervention by the business community and propose a role for the government to accomplish it. Moreover, the council must have the power to monitor the implementation of proposed interventions and lastly, it should not be confused with other government bodies like the CPEC Authority, etc.
Promoting SMEs
Apart from the business council, the government should also design a pathway for the development of small and medium enterprises (SMEs), trade and job creation. This pathway should be developed by engaging the real actors of these sectors and should not be limited to the work of some consultants or bureaucrats.
Inclusion of SMEs would play a prominent role in reversing the economic downfall. Presently, Pakistan’s major exportable products, except textile products, come from SMEs. In the textile sector, Pakistan has already achieved the maximum level of exports, especially in the context of sheer competition from other countries, while the SMEs have a huge potential to exploit. Pakistan can prioritise its joint venture with Chinese or European counterparts. It will help the country attract good investment and give impetus to exports.
Tapping the food industry
In addition, the agriculture-based industry has the potential to immediately provide relief. Urgent steps can be taken to strengthen the supply chain of agriculture and livestock products. It is predicted that the halal food markets will reach the figure of $3 trillion in the coming years. Unfortunately, Pakistan’s share in the halal food market is very low or negligible. Recently, a report predicted that Pakistan can easily capture the $5-6-billion market with relevant strategies.
Moreover, China is also emerging as one of the major importers of food products. Pakistan can also benefit from the Chinese market. To exploit the market, the country needs the best supply chain, certification of products and maintenance of hygiene standards. Owing to limited resources and lack of capacity, the government cannot provide the required facilities except the legal cover.
Therefore, it is advisable that the government assign private sector a leading role and facilitate them. The private sector has resources and a will to invest if the government provides them with a good playing field. The second phase of CPEC provides a good opportunity to engage the private sector and business community to develop joint ventures in this sector.
Some companies from China want to work with Pakistani companies to build supply lines for halal food and export of food to China. These Chinese companies have good experience in maintaining hygiene and quarantine standards, but they need acceptable halal food certification. They also need to venture in new markets in order to build reliable international markets to meet the ever-increasing demand for food in China.
These companies are interested in working with the private sector and are looking to work in an atmosphere that encourages the private sector’s growth. Therefore, it is advisable for Pakistan to create an environment which encourages the lead role of the private sector.
ISLAMABAD:
Over time, over budget and little oversight; underperformance in the delivery of public sector megaprojects is becoming a ‘norm’ – indicating much deeper systemic problems in planning and execution. In view of that, the government has floated a proposal to establish the CPEC Authority – an action that is as vague as it can be.
It appears that the government is trying to treat the problem of bureaucratic red tape with even more red tape. Our history is full of organisations that were supposed to bring greater efficiency and transparency but they rather made great failure stories. The Board of Industrial Management and Pakistan Banking Council led to decades of financial repression till these holding companies were finally dissolved by the Musharraf regime.
Though the Parliamentary Committee on China-Pakistan Economic Corridor (CPEC) strongly opposed the executive’s proposal to set up a CPEC Authority, it was the chairperson of the Senate Standing Committee on CPEC, Sherry Rehman, herself in the first place who had been advocating the idea of a CPEC authority for streamlined implementation of CPEC projects.
Some quarters of bureaucracy have been pitching the idea since 2016, but it is the timing of the proposal to establish this new vehicle which is of considerable significance. At a time when P-block is reluctant even to approve new CPEC projects such as ML-1, not to speak of fast-tracking them amid constant probes by NAB; this seems to be a cleverly engineered plan by bureaucracy to evade ownership of CPEC projects.
A deep dive into ToRs of the CPEC Authority reveals a striking resemblance with ‘Sarmaya-e-Pakistan’ – a holding company project of the finance ministry that was sent to the backburner earlier this year.
The whole idea of CPEC Authority is against the spirit of the 18th amendment and will worsen the existing old Soviet-style excessive centralisation. What the government fails to understand is that CPEC requires dealing with complex interactions between myriad stakeholders, government bodies and private investors; and there is little room for a one-stop-shop or a central authority to control this organic process.
For example, if CPEC Joint Cooperation Committee (JCC) clears a particular motorway project, say M8, then Ministry of Planning will usually prioritise that project as part of its annual Public Sector Development Programme (PSDP) after the appropriate working-party clears its PC-1 project charter. Then after getting financial concurrence from the finance ministry, the National Highway Authority (NHA) will float a motorway tender(s) that might be won by the Frontier Works Organization (FWO). The Board of Investment (BoI), Public-Private Partnership Authority (PPPA) or Pakistan Development Fund (PDF) may also be involved in case of a need for viability gap funding or P3 deals. Monitoring and evaluation during project implementation are equally complex as different stakeholders have different reporting needs – not to mention different and conflicting agendas.
Not only that, the CPEC Authority will put duplicate structures in place but it will be totally ineffective due to conflict of powers with many institutions. In 2016, a Prime Minister’s Delivery Unit was set up in Islamabad that worked with the JCC of China’s National Development and Reform Commission (NDRC) and the Planning Commission. Though a multi-tier mechanism was in place comprising of five joint working groups, it used to be the Ministry of Finance that called all the shots. There is little chance that this situation will change even if a CPEC authority is set up vide an act of parliament.
It is the need of the hour that officials involved in the planning process move beyond the bureaucratic politics to reinvent CPEC in the face of the current economic crunch. The government in general and P-block, in particular, must come up with sustainable policies with a holistic approach and improve communications between stakeholders by establishing CPEC working groups at different levels.
A national transport policy framework could be a good start in this regard if consensus is achieved between all federal and provincial actors in view of the 18th amendment.
China News
Beijing: China´s data centres — the backbone of the country´s fast-growing digital economy — are on track to guzzle more electricity by 2023 than all of Australia last year, said a Greenpeace report published on Monday.
While China leads the world in renewable energy capacity, data centres in the country remain dependent on coal. Nearly three-quarters of the electricity used by data centres was sourced from coal in 2018, according to research by Greenpeace East Asia and the North China Electric Power University — emitting 99 million tonnes of carbon emissions.
By 2023, that number could jump to 163 million tonnes. The appetite for data storage and transmission in China has skyrocketed in recent years, with 800 million online users and a booming tech industry churning out photos, videos, and online transactions.
“While China´s data centre industry has made significant improvements in terms of energy efficiency, the industry´s massive carbon footprint is proof that much more action is needed,” said Ye Ruiqi, climate and energy campaigner at Greenpeace East Asia.
Currently, Chinese data centres lack awareness of their “responsibility to respond to climate change”, she told AFP. According to the Greenpeace report, electricity consumption from China´s data centre industry is projected to increase by 66 percent over the next five years.
By 2023, the industry will exceed Australia´s total electricity consumption in 2018, the report said. But by boosting the intake of renewable energy from its current 23 percent to 30 percent, Chinese tech companies could save roughly the equivalent of 10 million round-trip transatlantic flights in carbon emissions, according to Greenpeace East Asia.
China is not alone in grappling with surging demand for instant access to online data, and data centres expend large amounts of electricity to keep servers running and cool. Microsoft has a data centre submerged off northern Scotland, where the sea offers cooling for free.
Chinese e-commerce giant Alibaba hosts one of its data centres in a naturally cool area of northern Hebei province, with access to wind and solar power. But Greenpeace´s report, which studied 44 data centres in China, found that nearly 90 percent of facilities sourced power directly from the national grid.
While China leads the world in renewable energy capacity — it has more renewable energy capacity than all of the European Union, according to the International Renewable Energy Agency — the country is still dependent on coal.
In 2018, China´s coal consumption increased for the second year in a row, though coal accounted for less than two-thirds of national energy consumption, according to the country´s statistics bureau.
But the Chinese government has set ambitious targets for renewable energy — and aims to boost the proportion of non-fossil fuels in its total energy consumption to around 20 percent by 2030.
“It is just unfortunate that China´s rapid growth and the availability of coal have translated into a lot more coal power stations,” said Paul Mah, a Singapore-based correspondent for industry publication Datacenter Dynamics. “Fortunately, as China moves towards greater availability of green power, this should be reflected in a lower reliance of data centres on coal power.”
YOKOHAMA: Nissan’s CEO said on Monday he will step down next week, deepening the crisis at the Japanese car giant still reeling from the arrest and ouster of former chief Carlos Ghosn’s over alleged financial misconduct.
It is yet another blow for the firm that has seen sales plunge and been forced to slash jobs since Ghosn’s stunning arrest for allegedly hiding part of his salary from official documents to shareholders.
Hiroto Saikawa said he would leave the company on September 16, following the results of an investigation into excess pay he received after altering the terms of a bonus.
Saikawa is suspected of improperly adding 47 million yen ($440,000) to his compensation under a scheme in which directors can earn a bonus if their company’s share price rises above a certain level in a set period.
Nissan officials were keen to stress that there was no illegality but that he should not have delegated the task to a junior executive.
“At the end of the day, the operation which should have been carried out by the president himself was… delegated to others, which is a violation of the rules,” said Motoo Nagai, a board member.
Saikawa admitted handing the task to a company secretariat and said he was “not proud” of this but insisted it was not the same as the misconduct of which Ghosn is accused.
He was it was “totally different from the intentional wrongdoing that was uncovered” during the internal Nissan probe into Ghosn and his right-hand man, US executive Greg Kelly.
The controversial “share appreciation” scheme has now been scrapped, the Nissan board announced.
Current chief operating officer, Yasuhiro Yamauchi, will take over as acting CEO on September 16, when Saikawa officially leaves, and Nissan hopes to find a permanent replacement by the end of October.
Alleged overpayments
The carmaker is currently undergoing an overhaul intended to strengthen governance after the Ghosn scandal.
In June, Nissan shareholders voted in favour of various measures including the establishment of three new oversight committees responsible for the appointment of senior officials, pay issues and auditing.
They also approved the election of 11 directors as the firm restructures, among them two Renault executives as well as Saikawa.
The reforms were designed to put Nissan on a more stable footing after the arrest of Ghosn, who has been sacked from his leadership roles at the Japanese firm and others.
He is awaiting trial on charges of under-reporting millions of dollars in salary and of using company funds for personal expenses.
Ghosn has denied any wrongdoing and accuses Nissan executives opposed to his plans to further integrate the firm with France’s Renault of plotting against him.
Dark side
Saikawa, a one-time Ghosn protege, turned sharply against his former mentor after his arrest, referring to the “dark side” of the tycoon’s tenure and accusing him of accruing unchecked power that allowed his alleged wrongdoing to go undetected.
But the CEO himself came under pressure in the scandal’s wake, facing calls to resign from shareholders who view him as too heavily associated with the Ghosn era.
And while he resisted calls to step down immediately, he has always said he planned to hand over the reins after Nissan is back on track.
The Ghosn scandal has proved disastrous for Nissan, which in July announced that net profit plunged nearly 95 percent in the April-June quarter, and confirmed it would cut 12,500 jobs worldwide.
The Japanese firm has also struggled to steady its relationship with Renault as part of a tripartite alliance with Mitsubishi Motors that Ghosn founded and once led.
Asked how he felt towards his once-mentor Ghosn and Kelly, Saikawa said he believed their actions had put the company in the difficult position in which it now finds itself — with hardship for customers, staff and dealers.
“This is the biggest responsibility… and I think they should think about this, they should feel bad about this. But they haven’t expressed any apology for creating this situation,” said Saikawa.
BEIJING: China has expedited its initial work on the Matiari-Lahore high-voltage direct transmission line project valued at $1.7 billion.
To kick off the project, a Chinese company has shipped power equipment to Pakistan for the country’s first transmission project under the China-Pakistan Economic Corridor (CPEC) framework.
Fushun Electric Porcelain Manufacturing Company (FEPMC) shipped 30 tonnes of direct current (DC) and 660 kilovolts of Zinc Oxide Lightning Cooler to Pakistan for its grid project.
Wang Youxue, member of the Party Work Committee of the Shen Fu New District of China’s Liaoning province told Chinese daily that the Fushun Electric Porcelain Manufacturing Company participated in the project as it was one of the key cooperation projects of the Belt and Road Initiative.
Youxue said the DC transmission project is also the first landing project for Pakistan to open foreign investment in the field of power transmission and transformation.
Based on the technical advantages of its own ultra-high voltage products for many years, FEPMC successfully won the bid for the alternating current and DC pillar insulators and metal zinc oxide surge arresters of the project, with a total contract value of more than 57 million yuan. Shen Fu New District has been paying attention to and supporting the transformation and upgrading of traditional enterprises in the new district.
Youxue said FEPMC is actively responding to China’s BRI. “Shen Fu New District will serve the enterprise and help the rapid development of the enterprise.”
The enterprising spirit of struggle marked significant progress in the belt and road national grid project of FEPMC.
The total investment of the project is $1.658 billion and it will be officially put into operation in 2021.
The Matiari-Lahore high-voltage direct current transmission line project has already secured financing. This is the country’s first private sector transmission project under CPEC and will transmit more than 4,000 megawatts of coal-based electricity from projects in Sindh to Punjab’s main grid.
Besides the transmission project, the Private Power Infrastructure Board is currently facilitating the implementation of power projects having a cumulative capacity of 10,934 megawatts under CPEC, which include various hydel and coal-fired projects.
CPEC envisaged a capital investment of $60 billion to generate economic activities. Most of the committed investment is targeted at improving the generation capacity and transmission capability of Pakistan’s energy sector.
Apart from focusing on energy, infrastructure and Gwadar projects, nine special economic zones are being established under the CPEC portfolio to revive industrialisation.
YOKOHAMA: Nissan’s CEO said Monday he will step down next week, deepening the crisis at the Japanese car giant still reeling from the arrest and ouster of former chief Carlos Ghosn’s over alleged financial misconduct.
It is yet another blow for the firm that has seen sales plunge and been forced to slash jobs since Ghosn’s stunning arrest for allegedly hiding part of his salary from official documents to shareholders.
Hiroto Saikawa said he would leave the company on September 16, following the results of an investigation into excess pay he received after altering the terms of a bonus.
Saikawa is suspected of improperly adding 47 million yen ($440,000) to his compensation under a scheme in which directors can earn a bonus if their company’s share price rises above a certain level in a set period.
Nissan officials were keen to stress that there was no illegality but that he should not have delegated the task to a junior executive.
“At the end of the day, the operation which should have been carried out by the president himself was… delegated to others, which is a violation of the rules,” said Motoo Nagai, a board member.
Saikawa admitted handing the task to a company secretariat and said he was “not proud” of this but insisted it was not the same as the misconduct of which Ghosn is accused.
He was it was “totally different from the intentional wrongdoing that was uncovered” during the internal Nissan probe into Ghosn and his right-hand man, US executive Greg Kelly.
The controversial “share appreciation” scheme has now been scrapped, the Nissan board announced.
Current chief operating officer, Yasuhiro Yamauchi, will take over as acting CEO on September 16, when Saikawa officially leaves, and Nissan hopes to find a permanent replacement by the end of October.
ALLEGED OVERPAYMENTS
The carmaker is currently undergoing an overhaul intended to strengthen governance after the Ghosn scandal.
In June, Nissan shareholders voted in favour of various measures including the establishment of three new oversight committees responsible for the appointment of senior officials, pay issues and auditing.
They also approved the election of 11 directors as the firm restructures, among them two Renault executives as well as Saikawa.
The reforms were designed to put Nissan on a more stable footing after the arrest of Ghosn, who has been sacked from his leadership roles at the Japanese firm and others.
He is awaiting trial on charges of under-reporting millions of dollars in salary and of using company funds for personal expenses.
Ghosn has denied any wrongdoing and accuses Nissan executives opposed to his plans to further integrate the firm with France’s Renault of plotting against him.
‘DARK SIDE’
Saikawa, a one-time Ghosn protege, turned sharply against his former mentor after his arrest, referring to the “dark side” of the tycoon’s tenure and accusing him of accruing unchecked power that allowed his alleged wrongdoing to go undetected.
But the CEO himself came under pressure in the scandal’s wake, facing calls to resign from shareholders who view him as too heavily associated with the Ghosn era.
And while he resisted calls to step down immediately, he has always said he planned to hand over the reins after Nissan is back on track.
The Ghosn scandal has proved disastrous for Nissan, which in July announced that net profit plunged nearly 95pc in the April-June quarter, and confirmed it would cut 12,500 jobs worldwide.
The Japanese firm has also struggled to steady its relationship with Renault as part of a tripartite alliance with Mitsubishi Motors that Ghosn founded and once led.
Asked how he felt towards his once-mentor Ghosn and Kelly, Saikawa said he believed their actions had put the company in the difficult position in which it now finds itself — with hardship for customers, staff and dealers.
“This is the biggest responsibility… and I think they should think about this, they should feel bad about this. But they haven’t expressed any apology for creating this situation,” said Saikawa.
USA & UK News
WASHINGTON: US Treasury Secretary Steven Mnuchin on Monday said America’s economy was unscathed after more than a year of entrenched trade conflict with China and Europe.
The remarks brushed aside concerns prompted by recent economic data showing slower employment growth, falling business investment and a weakening manufacturing sector, which have intensified recession warnings.
“I don’t see in any way a recession,” Mnuchin told Fox Business.
“There’s no question there’s been a considerable slowdown in the world economy both in China and in Europe but as you look at the US, we continued to be the bright spot.” “We have not seen any impact on the US economy,” he added.
High-level trade negotiations are due to take place in Washington next month after a summer of acrimony and deteriorating US-China trade relations.
Months of negotiations have so far failed to achieve a bargain after talks verged on collapse in May, prompting observers to speculate the trade conflict may drag on far longer than expected with the two sides unable to reconcile their differences.
But on Monday Mnuchin held out hope for progress.
“They’re coming here. I take that as a sign of good faith that they want to negotiate,” he said.
American industry and agriculture leaders have denounced Trump’s trade wars but so far failed to block its steady escalation, with US duty rates on hundreds of billions in Chinese goods set to rise in stages through the end of the year.
Official job creation numbers released Friday showed employers across major industries slowed the pace of hiring, which economists took as another sign the world’s largest economy is cooling off.
The US military is likely to accelerate the pace of its operations in Afghanistan to counter an increase in Taliban attacks, a senior US general said on Monday following Washington’s suspension of peace talks with the insurgents. US Marine General Kenneth McKenzie, the head of US Central Command, said during a visit to Afghanistan that the Taliban overplayed its hand in peace negotiations by carrying out a spate of high profile attacks, including one that killed a US soldier last week.
McKenzie declined to comment on the Taliban statement. But he noted that US troops in Afghanistan were hardly “defenseless.” “We’re certainly not going to sit still and let them carry out some self-described race to victory. That’s not going to happen,” McKenzie told a group of reporters traveling with him during a stop at Bagram Airfield in northeastern Afghanistan.
Asked whether increasing operations against the Taliban could include airstrikes and raids by US and Afghan commandos, McKenzie responded: “I think we’re talking a total spectrum.” “And, again, whatever targets are available, whatever targets can be lawfully and ethically struck, I think we’re going to pursue those targets,” he said.
McKenzie said he believed the Taliban underestimated the delicate nature of the talks with Washington, even in their later stages. “I think they overplayed their hand,” McKenzie said. “They misjudged the character of the American people. I think they misjudged the character of the president of the United States.” The growing tension on the ground in Afghanistan adds to the uncertainty about the future course for American forces, many of whom must now simultaneously brace for an increase in fighting while also awaiting potential orders to withdraw.
The United States has about 14,000 troops in Afghanistan, a figure that Trump has said he would like to reduce to about 8,600. McKenzie declined to speculate on next steps even as he visited American troops at bases in Afghanistan, flying in from neighboring Pakistan over rugged, mountainous terrain. Asked what his message was in his talks on Monday with US special operations forces, medical teams and other personnel, McKenzie told reporters that they would need to keep fighting the “hard fight” for now.
“We just have to hold the line right now,” McKenzie said. “We’re going to make some decisions, I think, back in our nation’s capital over the next few days and that will give us increased guidance going ahead,” he added, without elaborating.
WASHINGTON: United States former Defence Secretary James Mattis said he supports efforts by the Trump administration to secure a diplomatic end to the 18-year conflict with Taliban militants in Afghanistan, but cautioned against a peace agreement that doesn’t prevent the country from becoming a safe haven for terrorist groups determined to harm the US, international media reported.
He said that when it comes to trying to negotiate an Afghanistan peace deal with the Taliban, the key question is whether or not they can be trusted. “I think you want to verify then trust. We’ve asked them, demanded that they break with al-Qaeda since the Bush administration. They’ve refused to do so,” Mattis said on “Face the Nation” Sunday, referring to the Taliban, which has mounted an insurgency in Afghanistan since it was ousted from power in 2001 by a US-led coalition.
Mattis, who served as President Trump’s first defense secretary before resigning over disagreements on foreign policy, said the US needs to remember the Taliban provided safe haven to al-Qaeda and refused to extradite its then-leader Osama bin Laden in the wake of the 9/11 terrorist attacks.
“We should never forget that, that the Taliban hid those people among them, refused to break with them and have refused to this day to break,” he added. Having led various military units during the early campaign in Afghanistan while serving in the Marines, Mattis said the US needs to ensure a peace agreement with the Taliban does not involve a rapid withdrawal of US troops. He warned that doing so may have similar repercussions as the drawdown of US forces from Iraq during the Obama administration, a decision many have said allowed the Islamic State of Iraq and Syria to capture vast swaths of land.
Mattis suggested there should be a substantial American military presence in Afghanistan until the government in Kabul can demonstrate it is willing and capable of denying safe haven to terrorist groups.
“I think the fundamentals of forcing al-Qaeda and terrorist groups out of those safe havens, ensuring that the Taliban do not give them safe havens, those goals should be foremost and any other goals we then attach to those should be secondary,” he said. “Don’t let them distract you from that primary goal.”
Mattis’ warnings came a day after the president publicly cancelled a previously secret meeting at his Camp David retreat in Maryland with Afghan President Ashraf Ghani and representatives of the Taliban, which has so far refused to negotiate directly with Ghani’s administration.
Trump said he scrapped the meeting, slated to take place Sunday, because the Taliban admitted to plotting a suicide bombing in Kabul on Thursday that killed 12 people, including a US service member and a member of the Nato mission in Afghanistan.
Despite being canceled, the meeting’s revelation elicited some condemnation from several Democrats and Republicans, who said members of the Taliban should not be invited to Camp David, especially just days before the 18th anniversary of the 9/11 attacks.
Mattis said he was surprised by the secret meeting and its cancelation. “It was a surprise,” he said Sunday. “But I would say that all wars eventually come to an end and I salute efforts to try to end that war. No doubt.”
WASHINGTON: A top executive at the World Bank, Kristalina Georgieva of Bulgaria, now faces no opposition in her candidacy to lead the International Monetary Fund, the fund announced on Monday.
Georgieva, currently the bank’s chief executive officer, is all but guaranteed to become the second woman ever to lead the fund.
Georgieva will replace former IMF chief Christine Lagarde, who has been named to lead the European Central Bank.
“The board’s goal is to complete the selection process as soon as possible and at the latest by Oct 4,” the IMF board said in a statement.
Under an unwritten rule, a European has always led the IMF since its creation in the aftermath of World War II while Washington has designated the leadership of the fund’s sister organisation, the World Bank.
LONDON: Britain is not ready for its next recession and must consider changes to the way it manages its economy to see off the downturn when it comes, Reuters quoted the Resolution Foundation, a think-tank, as saying, on Monday.
British gross domestic product shrank in the second quarter of this year and the economy is struggling to pick up momentum as Brexit approaches, meaning it could already be in a technical recession before it leaves the European Union.
The Resolution Foundation said the Bank of England could muster only a quarter of the firepower needed in a typical recession because its key interest rate is so low and its bond-buying program is likely to prove less effective now.
Therefore, the government should be more explicit about how it could pump money into the economy in a downturn and revisit its tax and benefit rules to cushion households against income shocks which have been weakened since the last slump.
The think-tank also called for a pipeline of shovel-ready infrastructure projects which could be sped up in a crisis and it said direct payments could be made to households if necessary.
“Now is the time to plan for the next recession – because the one thing we know for certain is that it will happen,” James Smith, Research Director at the Resolution Foundation, said. “The UK today faces the highest recession risk since the financial crisis, and lower-income households are now more exposed to a downturn than they were back then.”
The Resolution Foundation urged Britain to go beyond tweaking its existing toolkit and to consider the case for raising the BoE’s inflation target above its current level of 2% although it conceded such a move would be challenging to carry out.
Britain’s new finance minister Sajid Javid last week announced the biggest increase in day-to-day spending in 15 years, a move widely seen as part of Prime Minister Boris Johnson’s push for an early election. Javid has also said he will review the country’s fiscal rules which Johnson has suggested could be relaxed to take advantage of record-low borrowing costs.
British Airways pilots began a 48-hour strike on Monday, grounding nearly all its flights and disrupting thousands of travellers’ plans in unprecedented industrial action over a pay dispute.
The British Airline Pilots Association (BALPA) last month gave the airline notice of three days of industrial action in September, in the first-ever strike by BA pilots.
“We understand the frustration and disruption BALPA’s strike action has caused our customers. After many months of trying to resolve the pay dispute, we are extremely sorry that it has come to this,” BA said in a statement.
“Unfortunately, with no detail from BALPA on which pilots would strike, we had no way of predicting how many would come to work or which aircraft they are qualified to fly, so we had no option but to cancel nearly 100% of our flights.”
Following strikes on Monday and Tuesday, another day of industrial action is scheduled for Sept. 27.
Both sides say they are willing to hold further talks.
BALPA has said British Airways (BA) should share more of its profits with its pilots. BA has said the strike action is unjustifiable as its pay offer was fair.
Thousands of customers have had to seek alternative travel arrangements, and the airline has come in for criticism over how it handled communications with passengers before the strikes.
“We hope we can find a way of resolving this dispute. We’ve been trying very hard to do so for the best part of nine months now but here we are now sadly having to take industrial action,” BALPA General Secretary Brian Strutton told BBC radio.
He said they were willing to compromise but BA were not prepared to “budge”.
The airline dismissed a new offer by BALPA last week as an “eleventh hour inflated proposal” that was not made in good faith. BALPA had said it would have called off the strikes this week if BA had engaged with the offer.
A spokeswoman for Prime Minister Boris Johnson has urged both sides to end the dispute.
The UK Civil Aviation Authority (CAA) is investigating the airline after it enraged some travellers by wrongly telling them their flights had been cancelled.
The regulator also reminded the airline to tell customers their rights. During the strikes, BA must offer passengers reimbursement for cancelled flights, alternate travel arrangements under comparable conditions or a new flight at a later date.
Other International News
The UN rights chief on Monday voiced alarm over the situation in occupied Kashmir, following India’s decision to revoke the autonomous status of the Muslim-majority region last month. “I am deeply concerned about the impact of recent actions by the government of India on the human rights of Kashmiris,” Michelle Bachelet said in her opening statement to the UN Human Rights Council in Geneva. She pointed among other things to “restrictions on internet communications and peaceful assembly, and the detention of local political leaders and activists.”
Bachelet said she had urged both India and Pakistan to ensure that rights in the region are respected and protected. But she said she had “appealed particularly to India to ease the current lockdowns or curfews, to ensure people’s access to basic services, and that all due process rights are respected for those who have been detained.”
“It is important that the people of Kashmir are consulted and engaged in any decision-making processes that have an impact on their future,” she said. Her comments came as Indian authorities tightened the security lockdown in Indian occupied Kashmir on Sunday after breaking up religious processions by Shiite Muslims who defied a ban.
Foreign Minister Shah Mehmood Qureshi is scheduled to address the Human Rights Council on Tuesday, with a speech expected to focus heavily on the situation in Kashmir. Bachelet also voiced concern Monday over India’s controversial citizenship register in Assam state, which critics fear is a cover for the ruling Hindu-nationalist Bharatiya Janata Party to expel Muslims.
Pointing out that some 1.9 million people had been excluded from the final list, published on August 31, Bachelet lamented that the register has “caused great uncertainty and anxiety”. “I appeal to the government to ensure due process during the appeals process, prevent deportation or detention, and ensure people are protected from statelessness,” she said.
Mumbai: Passenger car sales in India plunged by 41 percent in their worst monthly fall on record, data showed on Monday, as the weakening economy hit demand and manufacturers called for government relief.
It was the tenth straight month of falls in car sales amid soft consumer demand in Asia´s third-largest economy, where growth slowed for the fifth straight quarter in the April-to-June period to 5.0 percent.
Figures from the Society of Indian Automobile Manufacturers showed that domestic sales tumbled to 115,957 in August from 196,847 a year ago, the sharpest fall since the organisation started recording data in 1997-98, a spokesman told AFP. Sales of commercial vehicles tumbled by 39 percent, while motorcycles and scooters dropped by 22 percent, the data showed.
Indian auto manufacturing giants Tata Motors, Ashok Leyland and Mahindra & Mahindra have slashed production amid the slowdown. Thousands of jobs have also been lost across the sector. Finance minister Nirmala Sitharaman in August lifted a ban on purchasing new vehicles by government departments, but carmakers are calling for further support from New Delhi.
SIAM president Rajan Wadhera said last week the government needed to take “urgent” action such as cutting taxes on car sales to boost demand ahead of the busy festive season.
Frankfurt: German “flying taxi” developer Volocopter said on Monday it had raised 50 million euros ($55.1 million) from investors including automaker Geely, risking a revived debate about Chinese investments in EU firms.”The new funds will be used towards bringing the VoloCity aircraft to commercial launch within the next three years,” Volocopter said in a statement.
Small firms, including German contenders like Volocopter and Lilium, are in a race with established aircraft manufacturers like Airbus and billion-dollar tech giants like Uber to produce the first air taxis.
An array of 18 helicopter-style rotors powered by batteries heave the VoloCity into the sky, with the company saying it can carry two passengers with hand luggage up to 35 kilometres (22 miles), at speeds of up to 110 kilometres per hour.
The Financial Times reported that Geely´s stake in Volocopter will amount to around 10 percent of the firm.
Chairman Li Shufu said the investment underlines Geely´s “confidence in Volocopter air taxis as the next ambitious step in our wider expansion in both electrification and new mobility services”.
TOKYO: Japan’s economy grew at a slower pace than initially estimated in the second quarter as the U.S.-China trade war prompted a downward revision of business spending, intensifying calls for the central bank to deepen stimulus this month, Reuters reported.
Weakness in the global economy and worsening trade protectionism have emerged as risks to growth and added some pressure for the Bank of Japan (BOJ) to expand stimulus when it meets next week.
The economy grew an annualized 1.3% in April-June, revised Cabinet Office data showed Monday, weaker than the preliminary reading for 1.8% annualized growth and in line with economists’ median forecast.
The annualized growth rate translates into a quarter-on-quarter expansion of 0.3% from January-March, compared with a preliminary reading for a 0.4% gain. “There’s a possibility growth will turn negative in the October-December quarter,” said Izuru Kato, chief economist at Totan Research.
“If worries about such negative growth deepen (in the coming months), the Bank of Japan could consider lowering interest rates further into negative territory.” Capital spending rose just 0.2% from the previous quarter, much lower than a preliminary 1.5% rise and the median forecast for a 0.7% increase.
The capex downgrade was due to government statisticians including a demand-side survey of capex in the revised GDP data, which was not in the preliminary figures and showed weakness in the sector.
Stefan Angrick, senior economists at Oxford Economics, said manufacturers cut spending in the quarter amid a re-escalation in U.S.-China trade frictions. “While investment by non-manufacturers, particularly software-related, maintained robust growth, it was not enough to completely offset the contraction in spending by manufacturers,” Angrick said in a note.
A private sector business survey published last week showed Japanese manufacturing activity declining for a fourth straight month in August while export orders remained in contraction for a ninth month in a row.
Private consumption, which accounts for some 60% of gross domestic product, advanced 0.6% from the previous three months, matching the preliminary reading. Net exports – or exports minus imports – subtracted 0.3 percentage point from revised GDP growth, signaling the economy is feeling the pain from the global growth slowdown.
The outlook for the world’s third-largest economy remains clouded as risks from declining manufacturing overseas and at home hit exports.Analysts have also warned of a possible drop in domestic consumption after Japan raises its sales tax to 10% next month, which could hit one of the economy’s few growth drivers.
A separate Cabinet Office survey released on Monday pointed to a bleak outlook for consumption. The survey called the “economy watchers” sentiment index, which measures business confidence among workers such as taxi drivers, hotel workers and restaurant staff, was marginally higher than a more than three-year low hit in July.
The outlook index, indicating the level of confidence in future conditions, slipped to the lowest level since March 2014, the month before Japan’s last sales tax hike in April 2014.
Amid the risks to growth, BOJ Governor Haruhiko Kuroda has kept the door ajar for cutting interest rates further into negative territory, saying last week such move is among the bank’s policy options.
Speculation is growing that the BOJ could ease policy as early as this month to prevent the yen from spiking, an increasingly likely prospect if the U.S. Federal Reserve and the European Central Bank unveil new easing measures.
Growth is expected to hold up in the current quarter partly due to consumer front-loading their purchases ahead of next month’s tax rise, said Totan Research’s Kato. “But it’s unlikely the pent-up demand in the July-September quarter will be as strong as ahead of the previous consumption tax hike in April 2014,” he said.
The consumer sector has been one of the few bright spots for the economy, which has expanded for three straight quarters, although the pace of growth has slowed. Household spending rose for an eighth straight month in July, marking the longest run of expansion since comparable data became available in 2000. But that may not be enough to shield Japan’s service sector from a slump in exports, sagging business sentiment and a contraction in manufacturing.
Japan’s exports slipped for an eighth month in July, dragged down by China-bound shipments of car parts and semiconductor production equipment, while manufacturers’ confidence turned negative for the first time since April 2013.
TOKYO: Japan’s economy grew at a slower pace than initially estimated in the second quarter as the US-China trade war prompted a downward revision of business spending, intensifying calls for the central bank to deepen stimulus this month.
Weakness in the global economy and worsening trade protectionism have emerged as risks to growth and added some pressure for the Bank of Japan (BOJ) to expand stimulus when it meets next week.
The economy grew an annualized 1.3pc in April-June, revised Cabinet Office data showed Monday, weaker than the preliminary reading for 1.8pc annualized growth and in line with economists’ median forecast.
The annualized growth rate translates into quarter-on-quarter expansion of 0.3pc from January-March, compared with a preliminary reading for a 0.4pc gain.
“There’s a possibility growth will turn negative in the October-December quarter,” said Izuru Kato, chief economist at Totan Research. “If worries about such negative growth deepen (in the coming months), the Bank of Japan could consider lowering interest rates further into negative territory.”
Capital spending rose just 0.2pc from the previous quarter, much lower than a preliminary 1.5pc rise and the median forecast for a 0.7pc increase.
The capex downgrade was due to government statisticians including a demand-side survey of capex in the revised GDP data, which was not in the preliminary figures and showed weakness in the sector.
Stefan Angrick, senior economists at Oxford Economics, said manufacturers cut spending in the quarter amid a re-escalation in US-China trade frictions.
“While investment by non-manufacturers, particularly software-related, maintained robust growth, it was not enough to completely offset the contraction in spending by manufacturers,” Angrick said in a note.
A private sector business survey published last week showed Japanese manufacturing activity declining for a fourth straight month in August while export orders remained in contraction for a ninth month in a row.
Private consumption, which accounts for some 60pc of gross domestic product, advanced 0.6pc from the previous three months, matching the preliminary reading.
Net exports – or exports minus imports – subtracted 0.3 percentage point from revised GDP growth, signaling the economy is feeling the pain from the global growth slowdown.
MARANELLO: Italy’s Ferrari showed off two new cars on Monday as it pursues an aggressive roll-out of new premium models to sustain turbo-charged core earnings and share price growth.
A day after its Formula One team won the Italian Grand Prix for the first time since 2010, Ferrari took the covers off the F8 Spider and 812 GTS for customers and fans gathered at its historic base in Maranello, northern Italy.
The high-performance sports car and an easier-driving grand tourer (GT) are part of Ferrari Chief Executive Louis Camilleri’s plan to launch 15 new models between 2019 and 2022, and achieve a significant increase in average retail price.
“It is less extreme than the 488 Pista Spider, but sportier than the 488 Spider which it replaces in the range,” Ferrari said of the F8 Spider, with a 720-horse power 3.9 liter eight-cylinder mid-rear mounted engine and retractable hardtop.
Ferrari said the 812 GTS would be the most powerful production convertible on the market and mark the “return for a model type that has played a pivotal role in the marque’s history since its foundation”.
The GTS has a massive 800-horse power front-mounted 12-cylinder engine and will cost 336,000 euros ($370,742), while the F8 will be priced at 262,000 euros. The first deliveries are expected before summer 2020.
The average sales price for a Ferrari stood at around 274,000 euros last year, including spare parts, a calculation based on financial data from the company shows.
GRAND TOURING
One more launch is expected by the end of the year to take the total to five in 2019, including the F90 Stradale, Ferrari’s first hybrid car to be widely produced.
“We want to grow, not by increasing the volumes of existing models but by adding new members to the Ferrari family,” said Chief Marketing and Commercial Officer Enrico Galliera, adding it was the highest number of releases for Ferrari in a single year and marked one of its healthiest periods.
Ferrari has also promised several special edition hybrid cars and a utility vehicle, the Purosangue, which is expected by late 2022 as it seeks to almost double core earnings and boost margins to above 38pc without sacrificing exclusivity.
Chairman John Elkann hinted last month that the last release of 2019 could be another GT, more comfortable to drive on long journeys.
GTs from the 1960s, some seating four people, are among the most popular at auctions and enthusiast events and Ferrari has said previously that about 40pc of its total sales could come from them by 2022, up from 32pc now.
Elkann said that Ferrari, which shipped fewer than 10,000 cars last year, would not try to chase German rival Porsche which makes more than 250,000 sports cars and SUVs annually.
“We’ll remain consistent with our original philosophy, to always deliver one car less than the market demands,” Galliera said on Monday.
The ‘Cavallino Rampante’, or ‘Prancing Horse’, known for its racing pedigree and roaring combustion engines, wants 60pc of its cars sold by 2022 to be hybrids. Ferrari is also considering a full-electric model, but that will not hit the road before 2023.
PRICING
Ferrari is set to slow down the roll-out of new vehicles in the coming years and Mediobanca analyst Andrea Balloni predicts more moderate growth in deliveries after a 10.2pc increase in 2018 with a high single-digit figure expected in 2019.
“We’ll see more sustained growth in Ferrari average selling price,” the Milan-based analyst said.
“The real challenge for Ferrari is how far it will be able to push price increases in the coming years”.
Ferrari does not change the selling price during a model’s life-cycle, normally four to five years. Prices increase only through the introduction of new models, which, in Ferrari’s philosophy, always mean better performance than previous ones.
Waiting lists for a Ferrari may be up to 2-1/2 years.
Analysts at Morgan Stanley said last week that they saw Ferrari showing sustainable growth, especially in China, with strong pricing power driving higher average sales prices “and in turn support an increase in margins across its model launches”.
Ferrari would continue to return capital to shareholders, Morgan Stanley said, adding his might provide further support to its shares, which have more than tripled in value since they were listed in Milan in January 2016.
NEW DELHI: India’s monthly passenger vehicle and car sales recorded their steepest fall ever in August, according to data released by an industry body on Monday, highlighting the continued slowdown in the sector amid assurances by the government for revival.
Passenger vehicle sales plunged 31.57pc year-on-year to 196,524 units in August, falling for the 10th straight month, the Society of Indian Automobile Manufacturers (SIAM) data showed, while passenger car sales fell 41.09pc to 115,957 units.
This is the worst-ever fall for both the categories since SIAM started recording the data in 1997-98.
Auto companies’ heads urged New Delhi to revive the sector, crippled by sluggish demand resulting in hundreds of thousands of job cuts, at a conference last week.
Road and Transport minister Nitin Gadkari assured them that the government was working to help the sector and said he had asked the finance ministry to consider cutting taxes on petrol and diesel, as well as hybrid vehicles.
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