Economic & Business Review [270709]
Transcript of Economic & Business Review [270709]
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Economic & Business Review
Managing exchange rate stability
By A.B. Shahid
BEGINNING 2008, the rupees exchange value
fell rapidly, by the third quarter it had dropped
by 33 per cent over its January level. It recovered
slightly but drifted again to its lowest level seen in
September 2008. Not good for anyone.
The decline in the exchange rate goes on in spite of
the fact that foreign exchange reserves have
almost doubled, (though partly by funds borrowed
from the IMF, ADB and China) over their mid-
2008 level. There has to be a plausible explanationfor this oddity. Interestingly enough it was neither
sought by the government, the business
community, nor given by those whose job is to
provide one.
Even analysts did not question this distortion
although, with Pakistans imports nearly twice itsexports, rupees depreciation at its current pace
will have damaging consequences for the
economy; in rupee terms, imports will become
unfairly expensive and preclude any possibility of
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further containing the inflation, which is
gradually contributing to public unrest at an
increasingly widespread level.
One major opportunity lost was that the benefit
accruing from a huge drop in the price of oil was
more than wiped out by the depreciation of the
rupee. To a lesser degree, the same applies to
many other imported items whose international
prices witnessed a fall as a result of the drop in
demand after the fallout from the global financial
crisis began to take its toll on major industrial
economies.
The argument that a weaker rupee will help
exports (i.e. give exporters more rupees per
dollar) doesnt hold water because, to begin with,imported inputs are a key item in manufacture of
textiles that make up over 53-54 per cent of
exports. Depreciation of the rupee is inflating the
cost component representing imported inputs, and
thus eroding the financial advantage (only in
rupee terms) provided by a weaker rupee.
In addition, exporters have been hit hard by the
unsatisfactory state of electricity supply. Because
factories cant operate at full capacity, higher
element of fixed costs must be allocated to each
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finished unit making it uncompetitive in the
traditional export markets that have become
overly competitive as a result of fall in demand
caused large scale lay-offs in the aftermath of theglobal financial crisis.
In this scenario, depreciation of the rupee at its
present pace wont push up exports but will
certainly inflate import bill and inflation that,
over the years, became closely linked to the
exchange rate because of Pakistans ever higher
reliance on imports, particularly of energy inputs.
Faster the depreciation of the rupee, higher will be
inflation and lower the competitiveness of
Pakistans business and industry.
Some bankers predict that the rupee could crossthe Rs85/$ level before the end of 2009, which
portrays a hands-off attitude. No one seems
bothered about arresting the rupees slide. The
explanation for this attitude is that since SBP
provides exchange cover only for import of crude
oil, banks buy from the open market and provide
foreign exchange for all other petroleum productimports, in particular, furnace oil.
With exports slowing, and proceeds of earlier
exports being realised with long delays, banks are
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routinely ending up with low stocks of foreign
exchange and the expanding demand-supply gap
is hastening the rupees fall. There can be no
logical correlation between the rupees real andmarket exchange rates, say the bankers. This
attitude to mend market trends continues to
corrupt the market psyche beyond repair.
Depreciation of the rupee at an illogical pace
primarily manifests loss of confidence in the
future and a rising tendency for maximising
benefits before it is too late to grab them. This is
the natural reaction of those who develop strong
reservations about the style of governance of
both-- the state and the markets. A perception
that reflects the remorseless conduct of the state
institutions and the market players.
Policy makers face a tough scenario but it doesnt
mean that markets be allowed to do what they
deem fit. Even if market players are adamant
about living in today, they must be made to see
reason; that life (and market players profit) have
to continue beyond today, and for that theeconomy must be stabilised to revive peoples
confidence and make them willingly sacrifice some
of todays gains for a better future.
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While the responsibility that must be shared
unconditionally by everyone, whatever his or her
capacity, banks and their regulator have a special
role therein. If Illustration by Abro
a central bank is prepared to buy banks foreign
exchange surplus at the price banks demand, it
sets the trend for trading on illogical rates, which
is hardly the way to go about regulating the
markets and stabilising price structures.
Banks pay high prices for buying foreign
exchange and then sell it to importers at illogical
prices which slowly but surely damage the
economy. It is this conduct that gradually erodes
public confidence in markets and convey the
message that almost anything is possible, nomatter how self-serving or damaging it might be.
It is high time this impression was removed.
As and when the government decides to shift the
burden of providing foreign exchange for the
import of crude oil as well on to commercial
banks, the rupee may slide more rapidly. It couldmake things tougher unless the foreign exchange
market is rationalised to deal on realistic exchange
rates. The root cause of the latest global financial
crisis was greed spurred by hasty deregulation
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and the sheer absence regulation.
Can we fix this crisis by staying on the sidelines
when better and stronger regulation is whatmarkets need to mend their ways? Regulators
need to think seriously about their role in this
regard.
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Energy shortage crippling industry
By Nasir Jamal
Monday, 27 Jul, 2009 | 02:06 AM PST |
The persistent energy shortages are crippling the
industry in Punjab, fast eroding its competitive
advantage, businessmen say.
In summers we dont have electricity and in
winters we do not get gas for weeks, says
chairman, All Pakistan Textile Mills Association,
Punjab Akber Sheikh. This energy crisis is adding
substantially to the cost of doing business and
making us uncompetitive in the international
market.
He claims that the industry in Sindh does not have
to face as acute an energy shortage as in Punjab
or the NWFP.
The energy situation there is much better: there
is no gas shortage management in Sindh duringthe winters. Barring disruptions in the Karachi
Electric Supply Companys system on account of
technical failures or rains, the industries in Sindh
do not even have to face regular loadshedding.
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That puts the industrial units in Karachi and
elsewhere in that province in an advantageous
position as compared to the manufacturers in
Punjab or in the NWFP, says Sheikh.
Add to it the comparative disadvantage of being
away from the port and the exporting industry,
particularly the textile sector, which is the largest
export revenue earner and job provider in
Punjab, is facing a cost disadvantage of seven to
eight per cent viz-a-viz the exporters from
Karachi, he claims.
The continuing energy crunch is crippling the
industry across the country, forcing
manufacturers to cut their output and jobs.
If the current frequent power cuts continue for
some more time, industry analysts say, the
country may miss the target of 1.8 per cent growth
in the manufacturing for this fiscal.
For the efforts to boost industrial output and
exports to succeed, they insist, the industry needsuninterrupted supply of gas and electricity.
The recent disruption in power supply caused by
monsoon rains in Karachi alone caused losses to
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the tune of billions of rupees to the industry. The
massive power failure that struck Karachi in the
aftermath of the rains, says a report, had a
disastrous effect on the industrial activity.
The report quoted Korangi Association of Trade
and Industry (KATI) chairman Mian Zahid
Hussain as claiming that 90 per cent small and
medium enterprise (SMEs) out of the total 4,000
units had suffered massive production losses
because of unavailability of power.
The larger units didnt fare any better in spite of
their alternate, in-house power generation
facilities.
The in-house generation capacity saves you fromcutting your production but it raises your cost of
doing business, particularly when the generators
are run on diesel instead of gas. That makes many
uncompetitive vis-a-vis their rivals, says an
industry analyst. He says the manufacturing has a
very bleak future in this country in the absence of
sufficient energy for the industry.
Last week saw eruption of nationwide violent
protests against loadshedding as power deficit
peaked to 4800 megawatts. People blocked
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highways, disrupted rail traffic, torched public
and private property and attacked the offices of
the distribution companies. The violence was more
intense in Punjab where the mobs burnt threecoaches of a train in Jhang and injured the driver
of another near Faisalabad. Traders have twice
observed shutter-down strike in Punjab in one
month against the governments failure to
improve power supply.
What do you expect people to do when their
livelihoods are at stake -- sit home when electricity
is not available for eight to 10 hours a day? What
business can operate in such conditions?, asked a
leading garment maker in Lahore, who refused to
give his name. He said he had fired half of his
workers over the last one year due to cancellationof export orders.
Millions have lost jobs during the last one year or
more. Most jobs are lost because of power
shortages than due to economic downturn, he
contends.
Sheikh says at least 30 per cent spinning units and
70 per cent looms in Faisalabad and elsewhere in
Punjab had gone out of business due to power
crisis.
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The industrial closures are adding massively to
unemployment. If the government carries out an
honest labour force survey our unemploymentrate would be close to 14 per cent or more, he
says, adding that the jobless are ready to work for
less than the minimum wages if some one is
prepared to employ them.
Analysts agree that the continuation of energy
crisis could offset the recent macroIllustration by
Abro
economic gains. Macroeconomic stabilisation will
not to work unless we have gas and power to run
our plants, says an economist who teaches at the
prestigious Lahore University of ManagementSciences. The industry is suffering losses to the
tune of billions of rupees due to gas and power
shortages, hounding throughout the year, he
says.
But that is not the only problem. The rising cost
of electricity and gas will also cripple the industry.We need energy, and that too at low prices to
compete internationally, he adds.
Insufficient generation capacity because of the
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delays in expansion of power generation,
unsustainable system losses, reliance on thermal
generation, the non-implementation of such low
cost, large-scale power sources as coal andabolition of energy subsidies, has pushed
electricity tariffs exponentially in the recent years.
Former chairman of Pakistan Hosiery
Manufacturers Association, Shahzad Azam Khan
says Pakistan has huge untapped resources of coal
to produce cheap electricity, and lots of it. But, he
laments, no one has ever cared to exploit them.
Sheikh insists that the provincial governments in
Punjab and the NWFP must step forward to help
their export-oriented industries and mitigate theeffects of additional cost borne by exporters due to
energy shortages and high freight charges.
The provision of equalisation assistance to the
export-oriented industrial units in Punjab and the
NWFP would be quite in place. Governments
around the globe compensate their industriesthrough equalisation assistance to make up for
their losses on account of their comparative
disadvantages, he argues. After all, he says, it is
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one of the important jobs of governments to
protect employment.
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Unexplained suspension of SRO 198
By Afshan Subohi
The government can generate an estimated Rs400-
500 million extra if it promptly re-activates the
suspended SRO 198 of the Customs Act. That
would also lend some support to distressed
manufacturers in the domestic market.
The Federal Board of Revenue amended the
Customs Act through SRO 198 in February 2005.
The SRO mandated all import cargo entering
customs area for clearance to be accompanied
with a copy of packing list, a valuation invoice and
a consignment note. The liability of placing thesedocuments was assigned to the supplier of
consignment as well as the carrier of the cargo.
The aim of the amendment was to curb the
rampant practice of under-invoicing and mis-
declaration by some elements in the trading
community. Under invoicing and mis-declarationof goods in containers incurs loss of revenue to the
government, increase possibility of smuggling of
banned items and leads to dumping of goods in the
domestic market. The slipping of imported items
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duty free hurt the interests of local manufacturers
driven to wall for a variety of factors.
Currently, the SRO 198 is suspended as confirmedby senior custom officers in Islamabad. The
hierarchy in the Federal Board of Revenue and
Customs were not able to give the date and
reasons of its suspension. According to sources in
the relevant quarters, the piece of legislation was
suspended in 2007 but someone forgot to
reactivate it even after expiry of the designated
period.
After initial hiccups when there were a few
problems being faced by certain sectors, the new
system (in which document of valuation was
placed by suppliers) was working fine. It didimprove duty collection. As documents start
arriving with the consignment, the discrepancy in
the valuation was easily detectable. It did act as
deterrent and people became cautious in
submitting invoices, a retired customs official
told Dawn.
Any one who has anything to do with clearing
and forwarding business knows that fake invoices
are made in lanes and bylanes near Custom
House. For a price, you can get whatever you
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need. With connivance of some customs and port
officials, the rogue elements have played havoc
with the country, another insider said.
Munir Qureshi, member Customs FBR who
assumed office a few months back told Dawn from
Islamabad that the department is striving hard to
plug holes and improve duty collections. I am
looking into all avenues to improve our
contribution to the national kitty and hopeful that
during the current year the performance of the
department will improve.
Many other officers contacted were not ready to
go on record. They, however, pointed a finger at
the business class but by manipulation. They
(businessmen) are the real culprits who do not leta fair system work. We have yet to develop a class
of entrepreneurs. The current band of so-called
businessmen do not earn by competing in the
market. As soon as SRO 198 came into effect, they
started campaigning against it and finally got it
suspended.
It was the Federation of Pakistan Chamber of
Commerce and Industry (FPCCI) and Karachi
Chamber of Commerce and Industry that
campaigned against the amended Customs Act.
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These organisations are dominated by traders as
opposed to manufacturers, a senior custom
officer said.
This cannot be true. Why would KCCI oppose
measures that discourage dumping in the local
market?. Our members are manufacturers with
huge investments. Free flow of cheap imported
items hurt their interest in the local market. It is
but logical that KCCI would support better
management of trade and support rules that make
it possible. Moreover, we believe that regulations
must not be selective to rule out discrimination,
said Shmim A Shamsi past president of the KCCI.
Anjum Nisar the current president of KCCI was
not available for his views.
It is unfair to blame the trade bodies for the
wrongdoings of the policy makers and their
administrative machinery. Just visit residences of
customs officers and try to match their lifestyle
with the pay package of their grade and you
would get some indication as to who would like the
current corruption riddled system to continue, abusiness leader retorted.
Farhat Ali,president Swiss Business Council
supported consistent and transparent taxation
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policies. We (multinationals) pay our taxes. We
contribute 13 per cent to GNP but our share in
total revenue is as high as 34 per cent. It is in our
business interest that others do the same otherwisethe market tilts and becomes unfair.
Khawaja Shahab, federal secretary, ministry of
industries was not aware of the details but
favoured duty framework that discourages
dumping by competitors in the local market.
In Pakistan, the government seems to posses a
peculiar talent of matching wrong decisions with
worst times. How else would you explain dropping
a revenue generating clause of the Customs Act at
a time when the government was going bonkers to
improve tax to GDP ratio, an analystcommented.
The suspension of SRO 198 not only deprives the
government of revenue, it reflects the clout of the
corrupt among the elite. They wait for a weaker
moment and make governments agree to their
demand, said another observer.
Instead of preaching endurance to masses the
representative government should focus on
putting its house in order. Two years is a long
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period time for a government to settle down. It
needs to resist moves of vested interests of
backtracking reforms that promote transparency
and efficiency.
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Small dams for Sindhs remote areas
By Saleem Shaikh
Monday, 27 Jul, 2009 | 02:
THE Sindh government is building small dams to
meet water needs in far-flung areas of the
province.
According to water and irrigation department
officials, various potential sites have been
identified for small water reservoirs, particularly
along the Kirthar Mountain on the western side of
the province.
There are strong opportunities for storing rain
water in natural catchments of the Kirthar hillswhich can be used for cultivation, livestock and
human consumption on sustainable basis, says a
water expert of the provincial planning and
development department.
The Kirthar mountain range, shared by
Balochistan and Sindh, extends southward forabout 300 km from the Mula River in east-central
Balochistan to the Cape Muari west of Karachi on
the Arabian Sea.
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Additional Secretary (Technical) Sindh Irrigation
and Power, Syed Mazhar Ali Shah, said the areas
identified for small dams include upper Kohistan,
lower Kohistan, central Kohistan, Nagarparkarand Khairpur.
The rainwater will be received by these five key
areas in recharge dams and detention weirs, he
elaborated and added, At present, however, work
continues on seven small water reservoirs worth
Rs259.3 million included in the provincial Annual
Development Programme 2009-10.
Sources in the P&D department told this scribe
that go-ahead signal had been given by the federal
government for preparing feasibility reports for
40 small dams in Kohistan and Nagarparkar.Earlier, the Central Development Working Party
(CDWP) on April 25, 2009, had approved a
proposal for building small water reservoirs in
Sindh.
The PC-II for hiring consultancy services was
being prepared under federal funding dulycleared by the CDWP for the seven dams, namely
Dao dam, Dillan dam, Khenji dam, Nali dam, Site
dam, Salari dam and Khadeji dam, the sources
said.
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China has agreed to provide some funding for the
construction of these small dams, while the Asian
Development Bank (ADB) has been convinced toextend financial help for building recharge dams
and detention weirs in Nagarparkar area.
If such initiatives become successful it will bring
thousands of acres arable land under cultivation
and increase underground water level.
Advisor to Sindh Chief Minister Sharmila
Farooqui told this scribe that to improve economic
life of the people, the Sindh government has
planned some 12 small and medium-sized water
reservoirs in different parts of the province.
She said: These water reservoirs will be build in
different phases and will help meet the increasing
water needs for integrated agriculture. It is
expected that once these reservoirs are built,
about 0.8 million acres could be brought under
cultivation.
Some environment and water experts, who oppose
construction of large dams, commend the Sindh
government for building small and medium water
reservoirs primarily aiming at harnessing
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rainwater for small scale farming and drinking
purposes.
Naseer Memon, a water expert, believes thatSindh has enormous potential for constructing
small dams, particularly in the arid areas such as
Thar desert and hilly tracks in the Kaachho area
along Balochistan border.
He said: This development initiative will boost
small scale agriculture in areas where small dams
are being built and alleviate poverty and increase
food security. Large scale agriculture in the
province will, however, still depend on due share
from the Indus under the 1991 Water Accord.
If small dams are being considered on the IndusRiver, then water sharing is critically important.
Unless Sindh receives it due share from the Indus,
even small dams may create local conflicts unless
clear regulation mechanism is developed and
implemented, he warned.
In Kaachho area, numerous hill torrents bringconsiderable amount of water throughout the year
which can be stored with proper planning. This
would, however, require involvement of local
communities to ensure proper maintenance and
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distribution of water, he pointed out.
Muhammad Idris Rajput, former secretary Sindh
Irrigation and Power Department, said if thesesmall dams were filled with water to their full
capacities, these would suffice for only an area of
about 10,000 to 20,000 acres, which in no way was
a bad idea.
These small reservoirs will be able to meet the
demand of the local people in a small way, he
remarked.
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An approach to inclusive growth
By Humair Ishtiaq
Monday, 27 Jul, 2009 | 02:03 AM PST |
INCOME disparity has often been described as a
major malaise afflicting the national economy.
One of the key factors on this count is the missing
institutional structure for inclusive growth. Once
it is there, the benefits can be spread across the
board.
The current recession having global dimensions
and implications aside, Pakistan has registered
decent growth rates in several patches. It also
underwent a structural transformation, havingmoved from a predominantly agrarian economy
to a more diversified industrial production base.
The pace of integration with global economy also
has not been particularly bad.
Unlike some countries where rapid growth has
been accompanied by a reduction in the incidenceof poverty and improved distribution of income,
rapid growth in Pakistan seems to have led to
some reduction in poverty, but it also promoted
greater income inequalities.
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Suggesting an alternative policy paradigm, the
recently-released Second Annual Report of the
Lahore-based Institute of Public Policy advocatesa new approach in line with global trends that
prefer to view and understand poverty within the
elitist structure in which it exists.
There is no debate on the basic goal of economic
governance, which is to fully harness the
productive potential of human, physical and
natural resources for broad-based, sustainable
and pro-poor growth. But the menace of
underdevelopment and poverty has increased
while governments have tried out various
prescriptions.
In the 1950s and 60s, the model developed by the
West focused primarily on enhancing growth, and
industrialisation was thought to be the mechanism
through which this enhanced growth was to take
place. By the end of the 1960s, the world realised
that while growth had taken place, development
had not followed. Over the next three decadescame various wealth re-distribution and growth
packages, including IMFs Poverty Reduction and
Growth Facility.
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Under all such programmes, huge amounts of
dollars made their way to the Third World where
the recipient countries struggled to repay and that
led to a crisis of debt that caused even moreproblems in the long run. The free market
capitalism that was promoted in the wake of the
Soviet disintegration has not been of much help
either.
The Inclusive Growth paradigm seems to have
based on a much better understanding of the
dynamics of poverty and underdevelopment than
was the case with strategies that preceded it. It
takes into consideration the fact that the poor
have insufficient access to productive assets and
skill development mechanisms through which they
could develop their human potential. It is only byconverting the poor from being mere recipients of
a debatable trickle-down effect of high economic
growth into active participants of economic
enterprise that the elusive dream of sustainable
growth could be materialised.
The literature on Inclusive Growth entails a four-pronged strategy: localised capital accumulation;
accelerated growth of small- and medium-scale
establishments aimed at exporting value-added
stuff; provision of productive assets to the poor
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through equity stakes; and institutional
arrangements for yield increase and ownership
diversification for small and medium farmers.
As noted by the IPP report, a substantial
proportion of the potential as well as actual
income of the poor farmers is lost to the
increasingly adverse tenancy arrangements and
the obligation to sell labour at less than market
wage rates to the landlords. Data shows that 50.8
per cent of the extremely poor peasants have
taken a loan from the landlord and of these 57.4
per cent worked for the landlord without wages
and 14 per cent worked at a daily wage rate of
only Rs28, compared to the typical market rate of
about Rs150.
Likewise, there is unequal access over both the
input and output markets. Poor peasants have to
pay a higher price on their inputs and get a lower
price on their outputs compared to the big
farmers. As a consequence, the poor lose 20.5 per
cent of their income in the major crops alone.
Between 1991 and 2001, 76.5 per cent of theextremely poor and 38.9 per cent of the poor
farmers were forced to sell their land to meet
urgent needs. The buyer usually happened to be
the area landlord.
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This, as one can see, is a typical characteristic of
an elitist economy. Traditionally, markets are
associated with efficiency and are believed to beimpervious to the considerations of equity and
distribution. The state is usually thought of in
terms of ensuring equity and access to
opportunities. However, under the elitist model,
the market is rigged, and the state is influenced in
order to deliver most of the benefits of economic
growth to a small group. The markets, therefore,
produce inefficient outcomes that are detrimental
to the long-term sustainability of growth, and the
state, through its actions, exacerbates the
inequities in the system.
The Inclusive Growth strategy is targeted towardsending this depletion of the productive assets of
the poor peasants and their counterparts in other
areas of economic activity through empowerment
and collective participation at the grassroots level.
Collective action assisted by the state is the most
likely way to provide a counterforce to the power
structure of local elite.
The transfer of state-owned land, for instance,
could provide land to 58 per cent of the existing
897,000 tenant farmers. To enable the rest to own
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at least five-acre farms and to enable all of them
to have an efficient cultivation of their land, a
consortium of government, donors and
commercial banks may be put in place to offsetthe disadvantage small farmers suffer in terms of
access to both input and output markets.
Similar strategies based on micro-credit and
institutional functioning can do the trick in urban
settings as well. The Inclusive Growth paradigm is
basically a bottom-up approach as against the
trickle-down expectations of the past decades that
have proved to be futile more than once.
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Trade policy: focus on product competitiveness
By Mahmud Ahmed
THE trade policy has been delayed for a few
weeks, possibly for valid reasons. The commerce
ministry is expected to spell out a strategic policy
framework for three years, for which more time is
needed than for an annual exercise.
The policy will shift focus from comparative
advantage to improving competitiveness of
products, and for the first time, will include
domestic trade.
Competitiveness of products comes from higherlevels of productivity improvement in quality
and value-addition at economical cost--- and with
branded products. Required management and
trade skills are lacking for increasing industrial
productivity. Human resource development is a
low priority. Not much has been done to improve
labour skills.
Attempts have been made to boost exports more
often than not by depreciating the rupee to make
goods temporarily cheaper in the international
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market or through a web of subsidies. This has
not worked. In fiscal 2009, the exports were
$1billion less over the previous year despite a huge
depreciation of the exchange rate, particularlybecause of shrinking global trade.
The benefits of incentives (or crutches)
including the subsidy on research and
development have been passed on to foreign
buyers. This has not helped improve industrial
efficiency or competitiveness of the exportable
products. Competitiveness must come from
increased productivity and not through rupee
depreciation or subsidies.
The new policy, according to federal commerce
secretary Salman Bashir, would focus onincreasing competitiveness instead of comparative
advantage. The problem with policy makers over
the decades has been one-dimensional focus on
one or other aspect of trade, say on import
substitution or exports, or on a single industry like
textiles. There has been complete absence of an
integrated approach required to resolve issuesrelated to trade.
Trade deficit persists because the two-pronged
approach that combines export growth with
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import substitution has not been pursued
effectively. In recent years, an exaggerated
importance was given to export earnings but the
export strategy failed; and the import bill jumpedup to twice the. export earnings a year ago.
No doubt competitiveness is essential to have a
strong presence in the global market. But one has
also to look at comparative advantage of a range
of products that a country can offer in exchange of
goods and services to its trading partners. It
means a more diversified products and market..
Exports cannot be boosted significantly by
focusing on few products like textiles , leather
goods, rice etc .
Over the past few years, there has been a sharpfall in the share of textiles in the overall export
from the peak of over 70 per cent to 53-54 per cent
last year. The trend would be allowed to continue
and in fact be encouraged. The export markets are
not stable and foreign buyers shift from one
market to another for a variety of reasons
including political.. Competitiveness of existingindustries and products is not enough. New
products are equally important to boost exports.
A more diversified industrial base is necessary to
cater to the domestic market in the first stance
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before new products are sold in the export
market. This should be a major objective of the
domestic trade policy.
The policy makers need to monitor closely foreign
trade trends emerging from the deep and
prolonged global recession that originated from
the United States and, more importantly, its
consequences. Sooner or later the recession will go
away but not without some radical changes in the
world economic order. It is likely that global
trading pattern will change from producing for
exports to exchange of trade surpluses available
after domestic consumption.
The ongoing industrialisation in the developing
world will bring self-reliance and restrict exportand import to products of country- specific
comparative advantage.
The saturated markets of the West will not have
much to offer in respect of boosting imports from
developing states, particularly after the collapse of
the Anglo-Saxon global financial model -- the cashcow that kept the wheels of the US and British
economies moving for over the last three to four
decades .The over- leveraged financial system
must inevitably shrink. With western
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governments providing oxygen tent to crisis-
ridden corporates and banks from tax payers
money, they would have little to spare for
developing states to boost trade or providebalance of payments support. Fiscal deficits of
western governments will remain an
enormous problem even after the global economic
recovery. This is evident from the difficulties
Pakistan is facing in procuring pledged funds
from foot-dragging donors including the IMF.
Direct foreign investment is fast drying up.
Exports have run into problems. The immediate
option is to fall back on domestic market of 170
million, big enough to sustain rapid labour-
intensive industrialisation without foreign props.The fast rising remittances , now in the range of
$7-7.5 billion per annum are a good indicator that
overseas compatriots want their country to
progress. They need to be encouraged to invest.
To manage fiscal deficits, state enterprises were
recently sold to foreigners at distress priceswithout discriminating between strategic and non-
strategic assets.. Instead of creating new industrial
capacities or directing direct foreign investment
into export-oriented industrialisation, foreign
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money went into import substitution industries
like telecom or automobiles , inflating the import
bill. It is time to reverse these policies and
encourage investment in diversified export-oriented manufacturing.
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External sector vulnerable
By Adil Adenwala
THE external sector of the economy remains
vulnerable because of the falling demand in
recession-hit developed economies while further
decline in world trade is feared over the next two
years.
Analysts at J.S research house say access to credit
has diminished and export markets are shrinking.
Foreign trade deficit reduced by over 18 per cent
to $17 billion in fiscal year 2008-09 but exports
fetched $17.78 billion against the target of $22billion and were still short of $1 billion over the
figure for the previous year.
The government is still grappling with issues in
trade policy 2010 for whose announcement no
date has been set so far. The policy, normally
announced in the middle of July, is expected toinclude this time measures for boosting domestic
trade. But the focus will be on competitiveness..
The export target for merchandise this year is
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expected to be set at $19.9 billion against
estimated imports at $28.7 billion.
Members of the Karachi Chamber of Commerceand Industry argue that the deteriorating law
and order and lack of uninterrupted supply of
electricity have made it impossible for local
traders and industrialists to survive the global
trade tsunami as large-scale manufacturing
(LSM) sector dropped sharply in the outgoing
year.
Export strategy unveiled last year did not succeed
in the absence of many positive factors including
coordinated efforts of all relevant government
departments, enhanced competitiveness,
development of market intelligence and tradepromotion. But curbs on imports and lower
domestic demand did reduce the import bill.
Trade Development Authority of Pakistans
Chairman, Syed Mohibullah Shah says that,
major hurdle for decline in exports is due to
vertical integration of different ministries insteadof horizontal coordination a dispensation that
tends to shift shifts synergy and focus of the
government away from the planned development
for maximum optimisation. A Rs40 billion export
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investment fund is proposed to be set up by the
government this year.
Around Rs27 billion will go to main export earner- cotton and textiles - and Rs13 billion to other
sectors.
Statistics of the Trade Development Authority of
Pakistan (TDAP) reveal that textiles share
dropped from over 70 to 53.7 per cent of the
exports over the last three years.
Traditional sectors such as textiles were the worst
performers because of energy shortage and
slowdown in international demand while exports
of rice and fruits performed better.
TDAP economist, Amir says that exploring new
markets and experimenting new products with
proper branding is the key to increasing
exportable products as value addition in finished
food products, livestock, precious stones, sports
goods and surgical instruments is the need of the
hour. .
Efforts are underway to improve market access as
well as diversify products. Packed and branded
milk and meat have good export potential.
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According to the survey conducted by the Small
and Medium Enterprise Development Authority,
milk accounts for 51 per cent of the total value inthe livestock sector. Its farm gate value is
estimated to be more than Rs390 billion.
The growing world meat market is valued at
$81billion per annum, where Pakistan remains
miles away from this market primarily because of
weaknesses in the supply chain management.
However it is the second largest commodity after
milk and is the cheapest in terms of production of
beef in the world.
The volume of exports of gems and jewelry is not
significant. The members of Gems and JewelryExport Association say that in the total global
trade of $84.4 billion, countrys share is less than
five per cent while it produces over 20 per cent of
the world output.Exports can improve by
inducting latest technology and adding value to
the export products.
Even though production of sugarcane this year
was low compared to bumper crop last year,
molasses, a byproduct of sugar, has a global
market of over $50 billion that continues to be on
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the rise as dependence on fossil fuels is shifting to
bio-fuel, says a former president of Pakistan
Sugar Mills Association, Zaka Ashraf.
The government is reported to be mulling over
banning exports of ethanol which is now being
used domestically for mixing with petrol.
According to the World Economic Situation and
Prospects, world trade in services nearly tripled
between 1990 and 2005, reaching $2.4 trillion. The
share of services in gross domestic product grew
from 65 to 72 per cent in developed countries and
from 45 to 52 per cent in developing countries.
Services account for over 70 per cent of
employment in developed countries and about 35
per cent in developing countries.
In case of Pakistan, the services sector has grown
rapidly in recent years to account for well over 50
per cent of the GDP but the country suffered a
deficit of $3.23 billion in services trade in fiscal
2008-09.
The exports of services amounted to$4.04 billion
against imports of $7.27 billion. There is room to
boost services exports.
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Travel and transportation continue to account for
the bulk of services exports by developing
countries, the UN report says. Business services,
including information and communicationtechnologies as well as financial and insurance
services, are also on the rise.
Pakistan has not been able to take any advantage
from this growing trend in services sector while
trade bodies claim to have taken many initiatives
to develop business relations across borders..
Traders hold government responsible for
continuation of EU ban on imports of fish from
Pakistan, for its failure to secure preferential
trade agreements with the European Union and
the US and lack of storage facilities inside thetrading hubs like Dubai.
Industrialists want government to focus on
increasing the rebate structure, research and
development subsidy and protecting local
industries from imports.
Diplomats from European and Far East countries
advise local businessmen to identify price
differences, quality standards and demand
forecasts to penetrate into new markets, establish
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a brand backed with fulfilling trade commitments
and positioning it to right target of consumers.
High cost of doing business including powershortage and restricted access to credit have
hampered the non-traditional sector hurting small
and medium exporting units of handicraft, sub-
sector of textiles, and petroleum products, etc.
Officials from ministry of commerce say that
proper investment and sound planning are
required to change the dynamics of energy,
transportation, utilities and marketing aspects of
all exportable sectors.
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Thar coal project and energy crisis
By Ashfak Bokhari
WHAT is conspicuously absent in the current
efforts to overcome the aggravating power crisis is
the coal factor. On July 5, Prime Minister Gilani
attended a presentation by the petroleum ministry
on an integrated energy plan to ensure energy
security.
The plan asked for developing and exploiting all
the resources such as oil, gas, LPG and LNG.
What was missing was coal. It seems the political
leadership has yet to realise how much difference
the exploitation of coal, already delayed for morethan a decade, can make to end power crisis.
On July 18, the chief minister of Sindh stated at a
meeting in Karachi that Thar coal reserves were
being utilised with a view to ridding the country of
loadshedding within the shortest possible time.
This was a mere rhetoric on his part for there isnothing to be seen on ground. In fact, he has been
more pre-occupied with seeking absolute control
of the Thar coal reserves from the Centre ever
since he assumed the office.
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It is evident from his remark at the same meeting
that his government would not compromise on
the rights of Sindh and he has taken a firmstand on the issue of ownership of Thar coal.
However, it was interesting to hear from the
KESC chief last week that our future generation
will never forgive us if we fail in utilising Thar
coal. His company, which is at the heart of the
current power crisis in Karachi for its worst
performance, plans to go for Thar coal in twoto
three years. He told an industrialists gathering
that KESC is already working on three coal power
plants to reduce dependence on furnace oil and
gas.
On June 17, the Sindh CM had said that the issue
of who owned the Thar coal has been resolved and
now the Thar Coal Energy Board, headed by him,
would work as one-window and all other
departments would function under it to grant
licenses to private companies for mining the
reserves and producing electricity. What he meantwas that Islamabad would have little role in
matters of the Thar coal project.
Earlier, in May, the dispute between federal
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government and the province of Sindh has led to
non-allocation of funds for development of mines
in the Thar Coal project in the Public Sector
Development Programme 2009-10. The AnnualPlan Coordination Committee (APCC) decided to
put on hold the allocation until the 16-year old
dispute was resolved.
On June 12, the federal government decided to
disband Thar Coal Company which was a thorn
in the side of Sindh government and hence
hampering the progress of the project. The
decision was taken at a specially convened meeting
of the Thar Coal Energy Board (TCEB), a
successor body formed by Sindh, to resolve the
issue of the ownership of the Thar Coal project
held at the Prime Ministers House with PrimeMinister Yousuf Raza Gilani in the chair.
As a corollary, the Thar Coal and Energy Board
(TCEB) emerged as the only legal and authorised
body to decide matters pertaining to mining and
power generation from Thar coal. It has the
blessings of President Asif Ali Zardari as well. Inother words, it was a hard-earned victory for
Sindh.
The power tussle between Islamabad and Sindh
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has an interesting history. Thar Coal Mining
Company was set up in October 2006 by the
federal government during Musharraf era. But
the then government of Sindh did not accept itand the mineral development minister raised
certain objections. The Planning Commission had
on February 15, 2005, recommended the
establishment of a National Integrated Coal
Mining and Power Generation Authority and a
Pakistan Coal Development Company, with an
investment of Rs2 billion from the federal
government, to create an initial framework to
attract foreign investment for coal.
The Sindh government saw these measures as
attempts by Islamabad bureaucrats to take over
the coal resources of Sindh. The Thar CoalMining Company had 80 per cent shares of the
federal government and only a 20 per cent share
of Sindh. In 2008, the federal government created
Thar Coal Authority and abolished the Thar Coal
Mining Company
Later, by a notification issued on October 11, 2008the federal government abolished the Thar Coal
Authority as well as Thar Coal Energy Board.
The Central Development Working Party had
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later approved two similar schemes of coal
gasification and revived TCMC without any
consultation with the provincial government.
However, the Sindh government opposed itsrevival and in May this year conveyed its
objections to the Planning Commission.
Now, it is the TCEB and its chairman (CM) who
preside over the fate of vast coal reserves in
Tharparkar region but when will the project come
to fruition is anybodys guess. The history of Thar
coal has been more of who controls the treasure-
trove of vast reserves than of how the country can
become self-sufficient in energy by utilising them.
The coal deposits were discovered by the
Geological Survey of Pakistan (GSP) in 1992. Thefind later turned out to be the second largest in
the world with confirmed reserves of 175.5 billion
tons of coal. The Thar coal is of lignite A-B quality
which contains very low quantities of ash and
sulphur and is suitable for power generation, with
relatively less adverse environmental and
ecological effects.
But the Planning Commission has its own
reservations and had recently recommended
against the mining of the coal deposits for it thinks
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that would have negative ecological impact on the
province. It proposed gasification of the reserves
which would not only be environment-friendly but
also cost-effective. But Pakistan contributes littleat this stage to global carbon footprint and
greenhouse emissions as measured under Kyoto
Protocal for it has yet to attain a reasonable
degree of industrialisation.
Various studies show that coal is a leading
component of the worlds electricity mix
contributing 40 per cent to the total power
generation. Other major components are nuclear
power (16 per cent), natural gas (15 per cent) and
hydro (19 per cent). By 2030, an EU estimate
shows, nearly 1400GW of new coal-fired capacity
will be built worldwide, with two-thirds of the newcapacity in the developing countries.
So, coal will continue to be a key player in energy
markets. Currently China produces 75 per cent of
its electricity from coal; India 55 per cent; US 50
per cent; Germany 48 per cent and UK 33 per
cent. Compared to that, Pakistan with its 175bntonnes of coal reserves is content with a share of
0.7 per cent in its electricity mix.
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Specialised bank assets drop
On July 22, the State Bank of Pakistan accepted
bids worth Rs18.4 billion during its Reverse Repo
Open Market Operation in governments T-bills.
According to the weekly statement of position of
all scheduled banks for the week ended July 18,
2009, deposits and other accounts of the scheduled
banks increased in the current week and stood at
Rs4,129.580 billion, higher by Rs2.62 billion over
preceding weeks figure of Rs4,126.960 billion.
Compared with last years corresponding figure
of Rs3,783.937 billion, the current weeks figure is
larger by Rs345.643 billion. During the currentweek, commercial banks deposits showed a rise of
Rs4.766 billion over the week to Rs4,116.713
billion, against preceding weeks Rs4,111.947
billion. Specialized banks deposits stood at
Rs12.867 billion, against preceding weeks
Rs15.014 billion, a fall of Rs2.147 billion.
Borrowings by all scheduled banks increased in
the week. It rose to Rs509.764 billion over
preceding weeks figure of Rs492.717 billion, a
rise of Rs17.047 billion. Compared to last years
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corresponding figure of Rs363.284 billion, current
weeks figure is higher by Rs146.48 billion.
Commercial banks borrowings rose to Rs428.607
billion against previous weeks Rs411.742 billion,or by Rs16.865 billion. Borrowings by specialised
banks stood at Rs81.157 billion, against preceding
weeks figure of Rs80.975 billion, higher by
Rs0.182 billion.
Gross advances stood at Rs3,156.686 billion in the
week under review, a rise of Rs1.974 billion over
preceding weeks figure of Rs3,154.712 billion.
Compared to last years corresponding figure of
Rs2,853.211 billion, current weeks figure is larger
by Rs303.475 billion. In the week under review,
advances by commercial banks rose to
Rs3,050.696 billion against earlier weeks figure ofRs3,049.185 billion, or by Rs1.511 billion.
Advances of specialised banks stood at Rs105.990
billion, higher by Rs0.463 billion over earlier
weeks figure of Rs105.527 billion.
Investments of all scheduled banks increased in
the week by Rs41.701 billion to Rs1,374.666 billionagainst preceding weeks figure of Rs1,332.965
billion. Compared to last years corresponding
figure of Rs1,054.403 billion, current weeks
figure is larger by Rs320.263 billion. In the
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over previous weeks figure of Rs5,486.497 billion.
Specialized banks assets declined to Rs131.417
billion, or by Rs2.215 billion over previous weeks
Rs133.632 billion.
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Drip irrigation for overcoming water shortage
By Khuram Mubeen and Dr M. Ather Nadeem
IN case of irrigation water shortage, every drop
counts. Various methods can be used to economise
on water use, one among them is the drip
irrigation, which is the most efficient system.
Modern drip irrigation has become the most
valued innovation which minimises the use of
water and fertiliser by allowing water to drip
slowly to the plant roots, either onto the soil
surface or directly onto the root zone, through
network of valves, pipes, tubings, and emitters etc.
If properly designed, installed, and managed, drip
irrigation, also called trickle irrigation, conserves
water by reducing evaporation and deep drainage
compared to other types of irrigation since water
can be precisely applied to the roots zone.
Drip irrigation is mainly adopted in areas facing
acute water shortage and especially for crops such
as cotton, maize, sugarcane, coconuts, grapes,
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bananas, citrus, straw berries, and tomatoes.
Proven yield and crop quality responses to drip
irrigation have been observed in onion,
cauliflower, lettuce, melon and tomato etc. It iseasy to install and design drip irrigation system
which can reduce disease problems associated
with high levels of moisture on some plants.
The efficiency of drip irrigation results from two
primary factors. The first is that water soaks into
the soil before it can evaporate or run off. The
second is that water is only applied where it is
needed (at roots).
If water conservation methods such as drip
irrigation are not adopted, Balochistan will face
serious water shortage by the next 15 years. Dripirrigation not only saves 40-60 per cent of water
but also increases yield of crops up to 20 per cent
per hectare.
Sub-surface drip irrigation (SDI) is preferred by
growers. In this system drip tapes are
permanently or temporarily buried at or belowplant roots. It is becoming popular for row crop
irrigation, especially in areas where water is
scarce or recycled water is used for irrigation.
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Water use can be managed efficiently with SDI
without water losses due to evaporation, runoff,
and only wetting the soil under the root zone.
Agricultural chemicals can be used efficiently withdrip irrigation. Timely application of herbicides,
insecticides and fungicides are possible. Where
insecticides are labeled for application through
drip irrigation, less insecticide may be required to
control pests. Fertiliser savings is about 95 per
cent in drip irrigation system.
Other advantages of this system are that it does
not need leveling of the field and has the ability to
irrigate irregular-shaped fields, allowing safe use
of recycled water. Moisture within the root zone
can be maintained at field capacity. Soil type plays
less important role in frequency of irrigation andminimises soil erosion and labour cost.
Drip is adaptable to fields with odd shapes or
uneven topography. This system works well where
other systems are inefficient because parts of the
field have excessive infiltration, water puddling,
or runoff. The system can be designed andmanaged so that the wheel rows are sufficiently
dry so that tractor operation is possible at any
time at the convenience of the growers.
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Initial cost may be a bit more than overhead
systems. Sunlight can affect the tubes used for
drip irrigation, shortening their usable life. If
water is not properly filtered and the equipmentnot properly maintained, it can result in clogging.
Drip irrigation might be unsatisfactory if
herbicides or top dressed fertilisers need sprinkler
irrigation for activation.
In lighter soils subsurface drip may be unable to
wet the soil surface for germination. The system
requires careful consideration of the installation
depth. It can also enhance weed control in arid
climates by keeping much of the soil surface dry.
Ultimately, there must be an economic advantage
to drip irrigation to make it worthwhile. The tubes
need to be saved from insects, and animals andfarming tools to avoid leakages.
Various management practices are needed to get
maximum benefit from drip irrigation for a longer
time. Chlorine or other chemicals can be used in
the drip line periodically to kill bacteria and algae.
Acid might also be needed to dissolve calciumcarbonates. Filters must be managed and changed
as needed. The frequency of flushing depends on
the amount and kinds of sedimentation in the
tape. Root intrusion needs to be controlled for
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some crops. Rodents must be controlled, especially
where drip tape is buried.
The drip tape needs to be sufficiently near thesurface to germinate the seed if necessary. For
example, SDI with tape tube 4-5 inches deep has
been used successfully to germinate onion seeds in
silt loam soil.
Drip irrigation with more water than a plants
requirement will result in the loss of most of drip
irrigation benefits. The soil will be excessively wet
promoting disease, weed growth and nitrate
leaching. Irrigate to replace soil moisture deficit in
the top 12 inches of soil.
Since only the crop root zone is irrigated, nitrogenalready in the soil is less subject to leaching losses.
Total nitrogen requirements are reduced using
drip irrigation and less nitrogen should be applied
in each application. Chemical analyses of the
irrigation water and competent technical advice
are needed before injecting chemical fertilisers
into drip tape. Again, there is a need to improvewater rotation programme to ensure timely
irrigation. It happens that there is excessive
availability of irrigation water when crop doesnt
need it and the result is loss of water.
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Growers are suggested to irrigate crops optimally
because over and under-irrigation is detrimental
for crop growth. To cope with water shortage,reorganisation of water sector institutions for
economic utilisation of water resources, building
storage structures to overcome droughts and to
develop comprehensive water and hydro resource,
a new policy is necessary.
The government should give priority to drip
irrigation as the system conserves water
significantly. The drip irrigation has great
potential in our desert regions of Thal, Cholistan
and Thar. Since water is a limiting factor in sandy
deserts, it should not be applied by flood irrigation
as most of it will percolate down the root systemthrough sandy soils. It should be applied by drip
irrigation using local PVC pipes.
A well-designed drip irrigation system or
subsurface drip irrigation system will lose
practically no water to runoff, deep percolation or
evaporation. Irrigation scheduling can beprecisely managed to meet crop demands, holding
the promise of increased crop yields and quality.
Growers new to drip irrigation might want to
start with a relatively simple system on a small
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acreage.
Drip irrigation might be unsatisfactory if
herbicides need sprinkler irrigation for activation.Once the zones are assigned and the drip system is
designed, it is possible to schedule irrigations to
meet the unique needs of the crop in each zone.
Filters must be able to handle worst-case
scenarios. Finally, be sure to include both
injectors for chemigation and flow meters to
confirm system performance. Systematically
monitor the lines for physical damage.
Once a month, the drip lines may be flushed by
opening the far ends of a portion of the tubes at a
time and allowing high velocity water to rush out
the sediment. If drip lines become plugged in spiteof maintenance, many cleaning products are
available through irrigation systems suppliers.
The government should prepare an efficient water
conservation plan and monitor its effective
implementation at the field level. Under the
prevailing water scarce situation of the country,using drip irrigation is of great importance and is
a do or die situation for the nation and our future
generations.
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Lower targets for cash crops
By Ahmad Fraz Khan
TARGETS for two cash crops - cotton and rice -
have been fixed at less than what the country
achieved last year, leave alone bumper and record
yields of the past.
This year, cotton target has come down to 13.3
million bales against last seasons production of
14.1 million bales. Similarly, rice target has beenfixed at six million tons against 6.9 million tons
produced last year.
The agriculture planners defend these low targets
saying it was an extraordinary season last year
and its production cannot be taken as benchmark.
Thus, we have set targets, which are achievableand provide credible basis for next years
planning, they say.
The farmers, however, insist these targets are low
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enough to be achieved automatically, without
creating any hassle for agriculture bureaucracy.
They claim: Agricultural bureaucracy has even
stopped dreaming about higher goals.
The lower targets would translate into a
staggering cost to the economy. The country
would have to import huge quantity of cotton and
lose money on rice exports, creating a huge hole in
its finances. Where would it get the foreign
exchange from to bridge the gap, especially given
the financial crunch it is facing right now?
Last years trade deficit amounted to $17 billion.
If the gap has to narrow down, agriculture is
perhaps the only hope; the manufacturing sector
is in negative swing. Growth of services has sloweddown. This Kharif season assumes added
significance as it grows two major cash crops.
Around 53-54 per cent of export earnings come
only from cotton and cotton textiles. In order to
maintain that level of exports, the textile industry
needs around 15 million bales, but the target hasbeen set at 13.3 million bales. It means the country
is planning for an import of 1.7 million bales. The
planners have disregarded the fact that the
country had once produced 14.7 million bales.
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If Pakistans effort is put in the Indian context,
the target looks simply disappointing. During the
last 10 years, the Indian cotton production hasjumped from 17 million bales to 31 million bales.
Most of its yield is coming from non-traditional
(rain-fed) areas, where it is watered with
pressurised irrigation. Pakistans agriculture is in
the hands advocates of status quo, as the farmers
claim.
Rice, the second largest cash crop, presents the
same story. Last year, out of total production of
6.9 million tons, three million tons were exported
0.97 million tons basmati and the rest non-
basmati for about $2.2 billion. Had it not been
for gross under-invoicing keeping domesticmarket suppressed, less foreign exchange for
national exchequer and fewer taxes the figure
could have touched $3 billion.
This year, the agriculture planners seem to be
simply planning to reduce exportable surplus.
Instead of increasing surplus and finding newmarkets for it, rice import is being put on a
reverse path.
The country is spending nearly $4 billion on
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import of what the State Bank of Pakistan calls
food group wheat, edible fats, pulses and diary
products. All of it belongs to the agriculture sector
and its sub-sectors. Even these $4 billion could besaved though better planning to boost production
in the agriculture sector.
Planners need to think big and devise strategies
accordingly. It is, by all means, a gigantic task, but
has to be undertaken to prevent an economic
mess.
There are many states, endowed with much less
than Pakistans potential, which developed a
vision, set goals and targets and then achieved
these within a short span of time. Chile is one such
example; it raised its horticulture exports fromvirtual zero to $6 billion within a decade.
The Indian agricultural production is also
multiplying at a faster pace doubling of cotton
production in 10 years.
All major and minor crops and food group havetheir own set of problems and need careful
planning. But it is, by no means, an impossible
task; they rather need right steps to become basis
for higher targets.
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Pakistans cotton and rice crops are now
witnessing invasion by illegal varieties, and the
issue is snowballing every year. The country needsto ensure genetic purity of both crops as a first
step. Secondly, it must bring in new and better
yielding varieties, which are available all over the
world. Its 80 per cent cotton is under so-called BT
variety, and no one knows what is being sown in
the name of BT. Its rice has just started suffering
invasion of hybrid varieties, which are of
unknown origin and health. Its main (basmati)
variety, Super-96, is 13 years old and becoming
increasing susceptible to diseases.
All its coarse varieties are vulnerable to blight and
regularly fall victim to it. Both need replacement.These simple steps, along with better extension
service, would make huge difference in these
crops. But it needs some meticulous planning and
a set of objectives put in timeframe.
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Continuing economic trends
By Mohiuddin Aazim
Monday, 27 Jul, 2009 | 02:01 AM
THE trends that emerged in the economy in the
last fiscal year look set to continue through this
year. This is because most key trends were the
offshoots of structural weaknesses or strengths,
though they did reflect to some extent the effects
of global recession.
Fiscal year 2009 closed as one of the most troubled
years, dragging down the economic growth rate to
just two per cent from the revised 4.1 per cent in
FY08. Our external sector came under pressureright in the first quarter as an increase in world
fuel oil prices and a financial crisis in the US
exposed our structural weaknessese.g.
concentration of exports in little-diversified, low
value-added items and limited outreach to global
markets.
In the second quarter, we began experiencing an
overall economic slow down as by then the
American economy had plunged into a full-scale
recession, impacting on exports and foreign
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investments..
Fiscal deficit ballooned to 4.9 of GDP against the
revised target of 4.3 per cent. Pakistan has ahistory of its current expenses exceeding current
incomes due to a slow growth in tax revenue, not
well-targeted subsidies, ineffective controls,
oversized government, reckless spending,
corruption and lack of good governance. But in
FY09 the war against extremism in NWFP and
resultant displacement of 2.5 million people plus a
slow down in domestic economy made things
worse.
The government could have introduced
agricultural income tax in this years budget but it
failed to do so for political consideration for the63rd consecutive year. This is an example of how
structural issues remain unresolved.
Inflation remained high in the first half of the last
fiscal year making it difficult for the government
to offer fiscal stimuli to revive the economy as the
rest of the world was doing. The central bankfighting a double-digit inflation waited till the
second half of the fiscal year to soften its monetary
policy stance after noticing a gradual decline in
inflation. The government expects that CPI
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inflation, after peaking around 20.8 per cent in
FY09 would decline to 9.5 per cent this year.
But that seems a difficult task in view of the IMFpressure for eliminating power subsidies,
continuing business malpractices like hoarding,
cartel making broken supply chain of
commodities and the over-pricing.
A semi-regulated financial sector remained largely
unaffected by global financial crisis. But our
banking sector did see a fall in demand for
consumer credit and a buildup in non-performing
loans. The government continued to borrow
heavily from the central bank for most part of the
last fiscal year fuelling inflation but the trend
reversed towards the end of the year. Meanwhile,the private sectors bank borrowing slumped, due
to higher interest rates, a decline in foreign and
domestic demand and an acute shortage of
electricity that hit production activity.
In the ten months of FY09, large-scale industries
reported a decline of 8.24 per cent . In the currentfiscal year a moderate growth in LSM can be
expected due to low base effect, anticipated partial
revival of the global economy and the steps
announced in this years budget for boosting
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industrial activities. The trade policy for the
current fiscal year, likely to be announced shortly
is expected to provide some impetus.
Besides, a further easing of the SBP monetary
policy this month would address the issue of
costlier finance. However, the government must
ensure least-interrupted supply of electricity to
industrial units without which their production
levels would remain low.
In FY09, growing trade and current account
deficits had a draw down on foreign exchange
reserves that fell over 40 per cent within the first
quarter to $6.7 billion.. This compelled Pakistan
to seek a $7.6 billion IMF standby loan. A partial
release of this loan, cut in imports and billions ofdollars provided friendly countries brought back
the reserves to $11 billion plus towards the year-
end.
Now Pakistan has sought an additional $4 billion
from the IMF to use it if the Friends of Pakistan
fail to fulfill their promise of providing five billiondollars .Chances are that Pakistan would not only
secure the third tranche of the IMF standby loan
but the Fund would also make available the
requested additional $4 billion. However, the
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increase in foreign debt and the resultant rise in
foreign debt servicing would keep the external
sector under stress.
In the last fiscal year, trade deficit shrank
considerably but at $17 billion it was still very
high just a little less than the total export bill
for the year. (See chart). Exports declined 6.7 per
cent partly due to a narrow export base and partly
as a result of the recession. And imports fell 12.9
per cent as income levels of households and
corporates declined, slashing the domestic
demand.
Home remittances, however, grew 21 per cent to
$7.8 billion in continuation of the trend seen since
9/11. A close destination-wise study of remittancesremoves the fear that this high growth may be a
one-time phenomIndicators FY09 FY08
enon. It is true that a fraction of the Pakistanis
working in the UAE and Saudi Arabiamost of
them labourers did loose their jobs due to
slowdown of construction industry in thesecountries. But generally speaking, Pakistanis
abroad have braved the recession and the
remittances in this fiscal year are set to grow. The
growth rate, however, would depend on the pace
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of recovery taking place in the recession-hit
countries.
In the last fiscal year, the rupee depreciated 19.5per cent against the dollar making imports costlier
and thus stoking inflation and increasing the cost
of production. During the current fiscal year also,
the rupee may remain under pressure, senior
bankers say.
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Mixed price trends on lower demand
PRICES of some of essential items on the Karachiwholesale market showed modest decline owing
perhaps to falling consumer demand after heavy
downpour, which disrupted the city life, while
some others rose under the lead of sugar, which
was quoted higher by Rs200 per bag.
Dealers said although arrivals from upcountry
markets were far below the normal weekly figures
because of rain and there were expectations of
further increase in prices, but instead prices fell
for lack of demand rather than any other negative
factor.
Wheat prices, which had been rising for the last
couple of weeks after permission to export wheat-
based products, led the market decline, having
negative impact on some other essential items,
they said.
I dont think there was any other reason behindthe fall except falling demand both from
commercial traders and flour mills, said a
leading trader Haji Sulaiman.
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He said because of heavy rain in the city and
interior Sindh, normal business on the commodity
exchange could not be resumed as day traders and
commercial dealers just watched the situationkeeping off the market.
Some other commercial dealers said that being a
staple food, any fall and rise in wheat prices had a
chain negative and positive impact on the entire
commodity trade and that was why prices of some
essential items also fell in sympathy.
The notable feature of the week was that prices of
masoor imported type, which had been ruling
higher for the last about a year, suffered a sharp
fall of Rs600 per bag as some importers tried to
clear the backlog of unsold stocks amid fallingdemand.
Among other essentials, sugar prices did not show
any easing due to pressure on
ready supplies because of hoarding by some of
commercial dealers and stockists, dealers said.
Supplies from mills were also on lower side, which
were fuelling price flare-up for the last couple of
weeks, sustaining prices at the all-time peak levels.
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However, neither corrective step were taken by
the government nor the TCP was asked foremergency imports to ensure supplies at the pre-
price flare-up levels, market sources said.
Before last two weeks, sugar prices were stable
below Rs40 per kilo on wholesale market and
around Rs42-45 per kg on retail but now prices
seem to have stabilised at peak levels owing to
short supply, they added.
Wheat price led to the market decline for the
second week in a row as prices suffered fall
ranging from Rs60-75 per bag owing to
considerable fall in mills demand.
Gram whole and masoor followed them partly on
slack demand and partly to selling by some
dealers and were quoted lower by Rs50 and Rs600
per bag respectively. Beetle type fell by Rs300.
Among other essentials, basmati was marked upby Rs100 per bag, while Irri-6 and Irri broken
remained under pressure and fell by Rs50, with
fine varieties including sela and kernel remaining
pegged at the last closing rate.
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Sugar refined type were quoted higher by Rs200
per bag after early fall, while desi type fell by
Rs100, with gur showing no change.
The cereal sector again showed little changes as
supplies matched the demand. As a result, prices
of maize, bajra and barley were held unchanged
but guar seeds were traded higher by Rs50.
The oilseed sector, on the other hand, came in for
active support and prices of cotton, cottonseed,
and til were marked up by Rs35-50 but castor
seed came in for active selling and was quoted
lower by Rs50.
Rapeseed sector showed firm trend as prices werequoted higher by Rs25 per 40 kg followed by
reports of fresh rise in oil and cake prices.
Oilcakes on the other hand showed mixed trend
and while prices of cottonseed fell by Rs80 per
bag, rapeseed cakes rose by Rs10-15 amid active
trading.M.A.
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Shinghar: a treasure of chilghoza pine
By Nazar Khan Mandokhail
Monday, 27 Jul, 2009 | 02:04 AM PST |
SHINGHAR, one of the most beautiful and
important mountains is situated along Takht-i-
Sulaiman and Spera Ghar, 30 miles from Zhob
city at a height of 9,000 feet above sea level. The
mountain is located in the Shirani district.
Shinghar receives rain during the monsoon season
and snow during the winter.
During the British rule Shinghar was the summercamp for political agent. The government
abandoned it as it had the least interest in the site.
It appears as a ghost town where people
occasionally go for an adventurous over-night stay
or a picnic. But recently the Frontier Corps has
set up a post there and built a rest house.
Shinghar is important economically as it has
forests of edible pine chilghoza (Pinus gerardiana)
in Spera ghar, Qaisa ghar and Toor ghar of Zhob
district.
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Pine trees are 10-25 metres high with usually
deep, wide-open crown with long erect branches
with flaky bark revealing light grayish greenpatches when peeled. The leaves are needle-like 6-
10 cm long, glossy green on the outer surface with
blue green stomatal line on inner face. The cones
are 10-18 cm long and 9-11 cm wide.
The seeds are nuts, 17-23 mm long, 5-7 mm broad.
Chilghoza pine is well known for its edible seeds,
rich in oil (60 per cent), carbohydrate and
proteins. The seeds are eaten raw or baked, they
have pleasant flavour and can be used as a staple
food. Chilghoza is also the main source of income
for the natives of Zhob and Sherani district.
A group of biology students of a local college,
during its excursion trip to Shinghar to study the
ecology and flora and fauna, specially the pine
forest on the mountain, observed that a number of
pine trees had withered and dried because of age.
Some had shed with no indication of any external
pathogenic symptoms. On some slopes and onplains there were rare pine trees. However, there
were wide gaps among the trees. Efforts should be
made to fill these gaps by planting saplings by one
of the following methods:
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Propagation by seeds: Seeds can be sown in cold
frame in separate pots. A short stratification of six
weeks at four degrees centigrade can help in thegermination of seeds. The saplings then should be
planted at its proper place at the earliest and
protected during the first two winters. The size of
the saplings at the time of plantation should not be
more than 30-90cm in size.
Propagation through cutting: This method only
works when cuttings taken from very young trees
less than 10 years old, using single leaf fascicle
with a base of short shoot, disbudding the shoots
some weeks before taking the cuttings can help.
Cutting are normally slow to grow.
Shinghar is a beautiful gift of nature with pine
trees. It is the responsibility of all particularly the
government to ban hunting and grazing to
maintain the natural balance of ecosystem. A road
should be built up to the top crest and water
should