Tuesday, September 08, 2009

Karachi Electric Supply Company (KESC) has paid Rs1.34 billion to Sui Southern Gas Company (SSGC), out of the total amount of Rs4 billion of the monthly bill charged for the month of August. The outstanding dues of Rs13.65 billion has yet to be paid by the KESC to SSGC, the source disclosed. “The KESC has the monthly gas bill of around Rs3 to Rs4 billion that is separate from the sum accumulated as liabilities, which is Rs13.65 billion.

During the month of August, the KESC has made payments twice, one on August 15 and the other on August 26. Nothing has been paid for the month of September, it was decided between the two utilities that the KESC will pay Rs550 million from the arrears along with the current bill. But the payments made in August are apt to explain the situation,” said the source. He added that the company understands that the KESC is facing financial crisis but at the same time it should be kept in mind that SSGC is also a utility, and if payments are not made on time, SSGC will also face financial problem. “The claim that the gas pressure is low is incorrect. SSGC has agreed to supply 256 MMCFD of gas to the KESC, but on Friday when the three units of Bin Qasim Power Plant and Korangi Thermal Power Plant went off, SSGC was supplying 270 MMCFD of natural gas. After those units were closed for maintenance, KESC is now receiving 235 MMCFD of gas for power generation. The SSGC is facilitating KESC as much as possible but the utility should also realize the situation,” he further added.

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Saturday, September 05, 2009

KARACHI: The National Investment Trust (NIT), a leading mutual fund company being managed by the government, formally announced plans on Friday to diversify its product base from a single equity fund to a bond and income fund. According to NIT Chairman and MD Tariq Iqbal Khan, the Trust was going to introduce two new mutual funds, but these would not be belonging to the equity segment this time. One of these would be a bond category fund while the other would be an income fund, he said. The difference among above mentioned three categories of funds is that the received money from unit holders in the equity fund is invested in the stock market; the bond funds are invested in bond markets, while income funds are invested in some fixed-income schemes. All the three categories have different level of risk and reward as well. Talking to a group of reporters in his office, Khan said the Securities & Exchange Commission of Pakistan (SECP) has given go-ahead single to the Trust to launch its bond fund, the NIT Government Bond Fund (NIT-GBF). Today in the afternoon, we are going to register NIT-GBF with the registrar and its Initial Public Offering (IPO) is expected to take place sometime after Eid. We, therefore, are trying our best to bring its prospectus in the market before Eid, he explained. As far as the introduction of another fund in the income segment i.e. NIT Income Fund (NIT-IF) is concerned, work on this product is also under way simultaneously and approval for the fund has also been sought from the SECP, which is expected any moment, he said. Since NIT was subject to be sold into the private sector in the near past so that it was not striving to expand operations at that juncture of business.

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Monday, June 15, 2009

Foreign direct investment in China fell for an eighth month from a year earlier as companies cut spending to weather the worst economic slump since the Great Depression.

Investment slid 17.8 percent in May to $6.38 billion, the commerce ministry said at a briefing in Beijing today, after falling 22.5 percent in April.

China is relying on government-led spending under a 4 trillion yuan ($586 billion) stimulus plan to revive growth. Investment from abroad may increase when the global economy recovers from what the World Bank forecasts will be a contraction of almost 3 percent this year.

“Companies have just been trying to survive the crisis, I don’t think they’re in the mood for aggressive overseas expansion,” said Wang Qing, chief Asia economist for Morgan Stanley in Hong Kong. “It’s too soon to see a pick-up.”

For the first five months of the year, foreign direct investment declined 20.4 percent.

Premier Wen Jiabao cautioned during a tour of Hunan province on June 12 and 13 that the world economic outlook remains unclear, the government said in a statement on its Web site yesterday. China has yet to establish solid foundations for a recovery, he added.

The Chinese economy expanded 6.1 percent in the first quarter from a year earlier, the slowest pace in almost a decade. Full-year growth may be 7.5 percent, according to a Bloomberg News survey of economists last month.

Overcapacity, Unemployment

The nation’s economic problems include slumping exports, falling profits, industrial overcapacity, unemployment and potential budget shortfalls, the premier said. Positive signs include a bumper summer harvest, gains in retail sales, rebounding industrial output, improving market confidence and faster growth in urban fixed-asset investment, Wen said.

China “mustn’t underestimate” the difficulties and needs to prepare to tackle them over “a long-term,” the premier said.

Foreign-invested businesses account for 30 percent of industrial output, 55 percent of trade and 11 percent of urban jobs, according to the commerce ministry.

China will further relax and streamline procedures for investment from abroad, commerce ministry spokesman Yao Jian said at today’s briefing. The nation wants to create jobs and to attract money for high-technology industries, backward regions, and environmental protection, Yao said.

Tesco Plc , the biggest U.K. retailer, is among foreign companies still expanding in China, saying it will spend an average of 500 million yuan ($73 million) on each of four new shopping centers.


(Bloomberg)

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Monday, June 15, 2009

CAPE TOWN: Companies from the United States and the United Arab Emirates are interested in establishing large farms in Zambia to grow sugar and grains, the southern African country’s agriculture minister said on Friday.

Although a growing number of such land investments elsewhere have proved controversial, Agriculture Minister Brian Chituwo told Reuters Zambia had so much land available there would not be opposition.

He said a US company had offered to invest as much as $200 million in sugar cane production to make ethanol, involving small-scale farmers, but was waiting for proper policies to be put in place.

Chituwo added Zambia had 115,000 hectares of prime land suitable for sugar cane production.

He said a Dubai company was keen to grow rice or wheat.

“They are looking at 200,000 hectares, but we have 900,000 hectares of prime land available so the issue of land really should not be a problem. It is just a question of the mechanics of implementing this,” he told Reuters on the sidelines of the World Economic Forum on Africa in Cape Town. He said Zambia’s lack of exchange controls and the fact that it had lots of land available made it an ideal place for agricultural investment.

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Friday, June 12, 2009

European stocks drifted between gains and losses as a rally in health-care shares offset concern the three-month surge by the Dow Jones Stoxx 600 Index has outpaced prospects for earnings. Asian shares climbed for a third straight day.

GlaxoSmithKline Plc led pharmaceutical stocks higher as the World Health Organization declared the first influenza pandemic since 1968. BT Group Plc increased 5.2 percent after Bank of America Corp. advised buying the shares. Total SA led a decline by commodity producers as oil and base metals slid. Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc., rose 6.2 percent on higher retail sales in China.

Europe’s Stoxx 600 slid 0.1 percent to 214.6 at 11:26 a.m. in London, trimming its fourth straight weekly gain to 1.9 percent. The gauge has surged 36 percent since March 9 on speculation the $12.8 trillion pledged by the U.S. government and Federal Reserve will end the first global recession since World War II.

“There are lots of people who have missed the upturn in equities and there is the end of the quarter looming so I think we’ll see some buying there,” Christian Gattiker, head of research and strategy at Bank Julius Baer & Co. in Zurich, said in a Bloomberg Television interview. We are likely to see “some more difficult markets during the summer lull in July.”

(Bloomberg)

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Thursday, June 11, 2009

DUBAI: The UAE’s Al Khaleej Sugar has sold several thousand tonnes of sugar to India after the country’s output fell due to weather conditions, an executive said on Wednesday.

“We sold containers with a few thousand tonnes of raw and white sugar to India last month,” Cyrus Raja, corporate affairs general manager at Dubai-based refinery told Reuters.

He declined to give further details about prices or quantities that were shipped.

“Depending on India’s needs for white and raw we are considering selling more sugar to them, but still have no estimates of how much we will sell,” said Raja.

Due to less rain this year traders forecast a 45 per cent drop in India’s sugar output to 14.7 million tonnes in the crop year to September, which has turned the country from an exporting nation to an importing one.

The fall in cane output has caused New York-traded raw sugar to rise by more than 30 per cent this year, striking a near 3-year peak of 16.05 cents/lb two weeks ago.

Al Khaleej, one of the world’s largest sugar refineries had sold 100,000 tonnes of white sugar to Pakistan this month.

In May Pakistan had purchased 50,000 tonnes of white sugar from Al Khaleej for $494.40 a tonne, traders in Pakistan said.

Pakistan was expected to buy up to 600,000 metric tonnes of sugar this year as the subcontinent ramps up imports of the sweetener to keep down prices and avoid dipping into stocks.

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Thursday, June 11, 2009

ISLAMABAD: The government has allocated Rs38 billion in the budget for 2009-10 for executing development projects in the Federally Administered Tribal Areas (FATA), Azad Jammu & Kashmir and Northern Areas.

According to the executive summary for the annual plan 2009-10, which will be released along with budget 2009-10 documents, the government has allocated Rs12.1 billion for ensuring good governance in 2009-10 against expenditures of Rs9.7 billion in the outgoing fiscal year.

“Funds have been allocated mainly for governance reform projects and programmes such as tax administration reforms, improvement in audit and accounts, public sector capacity building, access to justice, devolution and police reforms and public information and statistical management,” the document shows.

For special areas including the AJK, FATA and Northern Areas, Rs38 billion has been provided in the Public Sector Development Programme (PSDP) 2009-10 against expected utilisation of Rs23.3 billion in outgoing fiscal year 2008-09. For special programmes covering People’s Works Programme-1 and People’s Works Programme-II, Rs35 billion has been earmarked in the PSDP against Rs32.2 billion in 2008-09.

Water resource development: The government has allocated Rs57.8 billion for water resource development in 2009-10 against expected utilisation of Rs36.2 billion in 2008-09. Some important projects included resettlement, improvement of water courses, Thal, Katchi and Rainee canals, eight small and medium dams in each province, Mirani, Sabakzai, Satpara and Gomal dams, Khanki barrage, Right Bank Outfall Drainage (RBOD-II) and RBOD-III.

Power: In order to overcome energy shortages, Rs41.3 billion has been earmarked in 2009-10 against expected utilization of Rs18 billion in the outgoing fiscal year.

The portfolio of the power projects include Basha Dam, Guddu, Chicho Ki Malaian and Nandi Power Plants, Neelum Jhelum, Chashma 2, Chashma 3 and Chashma 4, Golan Gol, Khan Khawar, Dubair Khawar, Jinnah Hydro Power and Thar Coal.

Transport and Communication: The PSDP for 2009-10 provides Rs40 billion to highways against expected utilization of Rs26 billion in the outgoing fiscal year.


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Wednesday, 10 June 2009

China is “actively considering” buying up to $50bn of International Monetary Fund bonds, the country’s State Administration of Foreign Exchange has said.

John Lipsky, IMF first deputy managing director, confirmed the Chinese proposal, which follows one by Russia to buy $10bn (€7.1bn, £6.2bn) in IMF bonds.

Friday’s statement by China said any investment would be made according to its usual criteria of “safety and reasonable returns”, but made no mention of Beijing’s wish for more power in IMF decision-making, in return for financial support.

Safe, which controls almost $2,000bn of China’s foreign exchange reserves, added it was ready to help the IMF explore more ways to raise finance.

Mr Lipsky said the Chinese and Russian proposals were part of a commitment made during the London G20 summit in April to augment IMF resources by $500bn, and that the IMF “absolutely welcomes” the commitments.

The IMF expects to submit a proposal in the next few weeks that would allow it to raise money through issuing notes or bonds.

The pledges by both countries seem to have some political motivations – both China and Russia make no secret of their desire to have a greater say in how the IMF commits money.

Vladimir Putin, Russia’s prime minister, proposed the money from Russia, for example, should be earmarked to help Ukraine pay for Russian gas, avoiding a stand-off with Kiev over the issue of gas payments which crippled supplies to Europe in January.

Mr Lipsky said it would be against IMF guidelines to get involved. “The ongoing disputes between Ukraine and Russia are commercial issues,” he said.

“We wouldn’t enter directly into a commercial arrangement but of course our programme contemplates the external funding needs of Ukraine. Our programme is always predicated on helping our member countries meet balance of payments needs. But we would not be involved directly in a commercial transaction.”

Asked if the programme to Ukraine could be increased at all he said: “Never say never, but it would depend on the evolution of events.”

Meanwhile, earlier this year, China’s central bank governor caused a stir in global currency markets when he proposed replacing the US dollar as the world’s reserve currency with Special Drawing Rights, the IMF’s unit of account.

Zhou Xiaochuan also said SDRs should be based on a basket of currencies, including China’s renminbi.

Chinese officials have indicated that at least some of the IMF bonds it will buy will be in SDRs, which would help to diversify its US dollar-dominated foreign exchange reserves.

Courtesy: Financial Times

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Wednesday, 10 June 2009


The eurozone needs to do more to shore up its banking system in the wake of the financial crisis, the International Monetary Fund has warned in its annual health check of the European economy .

Whereas the US and UK governments have run stress tests and pushed banks to clear up their balance sheets, in the euro area authorities are criticised for failing to tackle blockages in the financial system.

“To secure recovery and a return to self-sustaining growth, policymakers need to take further decisive action, especially in the financial sector,” the IMF said in its Article IV assessment.

“A key missing element is a proactive strategy to deal with a weakened financial system, involving a review of capital needs to manage the recession, a cleansing of the financial system of its impaired assets, and a restructuring of weakened institutions.”

The Washington-based agency said economic data suggested a moderate decline in the eurozone economy that would give way to a “modest recovery” in the first half of next year.

However, it warned that the rebound “is likely to be slow and its shape and timing highly uncertain”. Unresolved financial problems, the solvency of some countries and the threat of negative feedback effects between economies could all present a drag to the recovery.

Analysts have been concerned that because bank lending is more important to the economies in the euro area than in the US and UK, which have been more dependant on the capital markets, a paralysed banking system could lead to a deeper credit crunch on the Continent.

Although eurozone countries had made strides towards dealing with their financial systems, the IMF said that “sizeable losses lie ahead as the recession unfolds.”

It criticised the “piecemeal approach” to the clean up and said that banks need to undergo stress tests that would assess their capital needs and viability, force them to reveal their impaired assets and restructure if necessary.

The IMF’s warning comes after members of the French Council of Economic Analysis and the German Council of Economic Experts warned in an article in the FT that the reluctance of European governments to conduct harmonised stress tests of their banks and publish the results is delaying economic recovery

On monetary policy, the IMF congratulated the European Central Bank for its “impressive response to the financial crisis” but said that “the supportive monetary stance now needs to be sustained”. In particular, it provided a counterweight to the harsh criticisms by Angela Merkel, the German chancellor, of loose and unconventional monetary policy at the ECB. “To deal with contingencies, all unconventional options ... will need to remain under consideration,” the IMF said.

But it warned of the need to make sure that fiscal policy returned to a sustainable path over the medium term. Proposed levels of discretionary spending were “broadly appropriate” in addition to the fiscal stimulus delivered by automatic rises in welfare spending and falls in tax revenies. However, “to address solvency concerns, short-term actions need to be embedded in credible medium-term consolidation programs,” the IMF said.


Courtesy: Financial Times

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Wednesday, 10 June 2009

Moscow threw its 16-year campaign for World Trade Organisation membership into doubt on Tuesday when Vladimir Putin said Russia would only join as part of a trade bloc with Kazakhstan and Belarus.

Mr Putin, Russia’s prime minister, said in a joint statement that negotiations for all three countries would begin anew on the basis of the customs zone.

“Our priority remains WTO entry, we confirm this, but already as a customs union and not as separate countries.”

The turnround could add another significant delay to Russia’s entry into the 153-member global trade body just as the European Union had said accession was near after more than a decade of stop-start negotiations. Russia is the largest country outside the trading body.

The WTO said it had not received any notification from Russia or its partners of their wish to change the basis of membership talks.

There are no precedents for negotiating the simultaneous WTO accession of all members of a customs union. It would be within the rules, trade officials say, but the three countries would have to agree a common negotiating position in advance and decide who would speak for the customs union.

“The three countries referred to are at very different stages in accession negotiations. It is difficult to see how the negotiation process can be harmonised,” said one EU source. One person close to another large western WTO member said: “We are in deep shock. It looks like they are trying to brake the process.”

Mr Putin’s announcement that Russia was scrapping talks as an individual nation came days after senior EU and US trade officials held top-level talks at the St Petersburg investment forum in which Russian officials said they were committed to ironing out differences to ensure Russia’s soonest possible entry.

Catherine Ashton, EU trade commissioner, had said Russia and the EU had agreed its WTO accession should be completed by the end of the year. Russia’s accession had long been dogged by issues over EU objections to import duties on timber and cars, while talks with the US had stalled after Russia’s war with Georgia last year.

Mr Putin was speaking after the three former Soviet states agreed to create a long-planned customs zone by January 1 2010.

Dmitry Medvedev, the Russian president, said the creation of the customs union did not mean Russia was rejecting membership of the WTO “even though the process dragged out and in recent years was more like a feast of promises”.

Igor Shuvalov, the first deputy prime minister, said joining the WTO as a customs zone would speed the process up rather than slow it down.

The EU trade commission said the EU wanted to probe the comments before drawing conclusions, but a spokesman added that during the talks in St Petersburg “the Russian side said it was committed to WTO accession by the end of the year”.

“But should the basic parameters of these negotiations be changed this would create a new situation,” he said.

Sergei Markov, a member of the ruling United Russia party, said that Russia had grown tired of the repeated delays on accession talks which he said were being caused by politicking by Russia’s western partners.

Courtesy: Financial Times

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Wednesday, 10 June 2009 11:38

ISLAMABAD: The government has decided to impose 5 per cent central excise duty on equipment for call centres and CNG kits and other related equipment in the coming budget.

Moreover, 5 per cent duty will also be placed on equipment relating to civil aviation. “Earlier the said two items were expected from the central excise duty and now the government has decided to take back the exemptions by levying CED by 5 per cent,” said a document obtained from the FBR containing the agreed tax budget’s proposals.

It said the FBR also recommended the imposition of 15 per cent customs duty on tufted carpets and needles pinches in addition, the 5 per cent duty have been recommended, as per the document, on machinery and equipment for balancing modernization and replacement (BMR) purposes and one per cent on machinery and equipment for hotel industry and 5 per cent on industrial related equipment.

However, the government is to erase the 15 per cent customs duty on fully dedicated CNG buses to encourage the CNG run vehicles in the country to make environment of the country clean. In addition, the government is to levy 5 per cent CED on cryogenic tank and 20 per cent on iron, steel, and compressed LPG gases. The CED is also being increased by 25 per cent on led panels, which are used in the advertising industry.

However, the customs duty on dyes have been reduced by 5 per cent from 10 to 5 per cent and chemicals from 25 to 20 per cent and other related items from 16 per cent to 10 per cent, but duty on spin finish oil will be increased to 5 per cent.


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Wednesday, 10 June 2009

LAHORE: Exports of leather sector have dropped 20.42 per cent in 10 months (July-April) of fiscal year 2008-09 and the lost market has been captured by Indian and Bangladeshi leather producers.

According to official data, export of leather fell 26.76 per cent in terms of value and 8.41 per cent in terms of quantity. Pakistan exported $24.79 million worth of leather across the world in July-April 2008-09 compared to exports worth $33.86m in the corresponding period last year.

Export of leather apparel and clothing declined 27.22pc to $32.61m against exports of $44.81m last year. Export of leather gloves, which have a good share in the world market standing at second position due to their high quality, also fell 2.84pc to $12.29m compared to last year’s $12.65m.

However, export of footwear, an allied industry of leather, substantially rose by 12.41pc to $9.04m compared to $8.04m last year.

On the other hand, Indian leather and leather garment exports increased by 27pc during the period under review. Bangladesh also made record exports of leather products, especially footwear which rose by 30 per cent.


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Wednesday, 10 June 2009

ISLAMABAD: The state-run Pakistan State Oil may default on the letters of credit backed by sovereign guarantees and opened for the import of motor gasoline, furnace oil and diesel as the entity is in financial crisis because of circular debt in the energy sector. “Outstanding dues of Pakistan State Oil have swelled to Rs94 billion, which the power sector and the Pakistan International Airlines (PIA) owe

to the company,” a senior official at the Ministry of Petroleum and Natural Resources told The News.

If the indifference on the part of government continues, the fuel supply chain will experience an unprecedented stress, which will aggravate power crisis as 70 per cent electricity is generated from diesel-run powerhouses and in case the fuel supply chain gets disturbed the current power deficit will surge to about 3500 MW.

When contacted Dr Asim Hussain, Advisor to prime Minister on Petroleum confirmed that the PSO is running into massive financial miseries owing to which it is nearing collapse for which he is right now writing an SOS letter to Prime Minister and Finance Ministry seeking the immediate payment of outstanding amounting to Rs50 billion against the total dues of Rs94 billion piled up so far.

Dr Asim Hussain said that Finance Ministry’s chief is also well aware of the situation and is to release the required amount against the outstanding after the budget announcement. “We have 15 days left in being declared as default, but I am hopeful that after the budget some reasonable amount will be disbursed to cash stricken PSO.” To a question if the situation is not rectified then, PSO will be declared default, which will have very negative impact on country’s economy.


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Monday, June 8, 2009

HONG KONG -- Hong Kong shares started the week downbeat, as airline stocks retreated on an industry-wide forecast of losses that are double those previously expected. Investors awaited further details of Bain Capital's purchase of a stake in Chinese electronics retailer Gome, as well as a tie-up between Ping An Insurance and Shenzhen Development Bank. Japanese exporter stocks had a brighter Monday, as signs of stabilization in the U.S. job market encouraged a stronger dollar, beating back the yen.

Hong Kong's Hang Seng Index closed down 2.3%, to 18,253,39 points. Airlines stocks took a beating, after the International Air Transport Association estimated the global airline industry will post a loss of about $9 billion, double previous forecasts. China Southern Airlines plunged 4.0% to 2.16 Hong Kong dollars (28 cents).

The H-shares of China Eastern Airlines were put on a trading halt as the air carrier is said to be in merger talks with smaller Shanghai Airlines. The merger has reportedly received formal government approval.

Trading of Ping An Insurance and Shenzhen Development Bank shares were halted, pending an announcement of Ping An's possible purchase of U.S. private equity firm TPG's controlling stake in the Shenzhen bank.

Media reports floated widely Monday that Bain Capital will take a 16% to 18% stake in China's Gome Electrical Appliances Holdings. Gome shares have been suspended from trading since late last year when Gome founder Huang Guangyu was detained by authorities for alleged improper financial conduct. Huang, still in police custody, was once China's richest person.Banking stocks in Hong Kong mostly retreated after last week's rally. Bank of China declined 1.1% to 3.52 Hong Kong dollars (45 cents), while HSBC lost 2.6% to 64.10 Hong Kong dollars ($8.27).

The Shanghai Composite index rose 0.5% to 2,768.34. China Minsheng Banking jumped 5.8% to 7.69 yuan ($1.12), after the lender said over the weekend that it plans to sell up to 3.3 billion new shares in the Hong Kong market, representing about 15% of its enlarged share capital.

Courtesy: Forbes.com

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Courtesy: Associated Press

TOKYO -- Japanese stocks rose Monday as investors took heart from fewer-than-expected U.S. job cuts in May while chasing gains in exporters on the back of a weakening yen.

The benchmark Nikkei 225 stock average rose 97.62 points, or 1 percent, to 9,865.63, an eight-month high. The broader Topix index added 1.1 percent to 926.89.

"Sentiment was steady as export-linked shares climbed in line with a falling yen," said Yutaka Miura, senior strategist at Mizuho Security Co. Ltd.

A weakening yen helps Japanese exporters like Toyota Motor Corp. and Sony Corp. by inflating their overseas income. The yen stood at 98.51 to the dollar in Tokyo Monday afternoon trade from 98.61 in New York late Friday.

The market also rose on optimism over the U.S. economy, which recorded fewer-than-expected U.S. job losses in May.

The Labor Department said Friday U.S. employers cut 345,000 jobs last month, far less than the 520,000 that economists predicted, and the fewest since September.

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Monday, 08 June 2009 10:13

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has asked the Federal Board of Revenue (FBR) to apply reduced corporate tax rate on new listing of companies on stock exchanges in the 2009-10 budget. It is learnt that the SECP has proposed tax slabs for new listing of companies through amendment in the Schedule-I, Part I, Division II of Income Tax Ordinance, 2001.

The amendment has been proposed to encourage new companies for listing on the stock exchanges, which would increase market capitalisation. According to the proposed amendment, the rate of tax imposed on the taxable income of a company for the tax year 2007 and onward shall be 35 percent.

Provided where a Company is listed on a stock exchange after June 30, 2009, the rate of tax on the taxable income of such company for a period of five years from the year of its listing subject to minimum free float as follows: Where paid-up capital is Rs 200 million to Rs 1 billion (free float 50 percent), the tax rate should be 30 percent; where paid-up capital is Rs 1 billion to Rs 5 billion (free float 30 percent), the tax rate should be 25 percent; and where paid-up capital is above Rs 5 billion (free float 20 percent), the tax rate should be 20 percent.

Sources said that the low corporate tax for newly listed companies would act as an incentive for such companies. Some countries have provided tax incentives to newly listed companies by lowering the corporate tax rate for a period of 5 years or more provided these companies offer a high amount of capital, say 40 percent to 50 percent of their shares to the general public.

The listed companies are required to adhere to the "Code of Corporate Governance" for greater transparency in the corporate sector. Listed companies follow improved reporting and disclosure standards by publishing and circulating their accounts on quarterly basis.

The proposed tax difference between listed and un-listed companies will serve as part of compensation for closely governed listed companies. The listing of new companies on the stock exchange will resultantly enhance revenue collection in the form of capital value tax (CVT) and withholding tax due to increased trading volume. The reduced rate of income tax will encourage new listing which will resultantly increase listed capital and market capitalisation, the SECP added.

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Monday, 08 June 2009 10:13

ISLAMABAD: The government is considering a proposal to circumvent any role of the government in fixing oil prices and, instead, to authorise the oil marketing companies (OMCs) to make automatic adjustment in oil prices in line with the global oil prices from the next fiscal year 2009-10. However, OMCs will follow the formula of oil pricing set by federal government.

At present, high speed diesel (HSD) price is de-regulated, based on a federal government formula, whereas the prices of other products, including light diesel oil (LDO), kerosene oil, motor spirit, JP-1, JP-4 and JP-8, are regulated and notified by the government at the end of every month.

Sources told Business Recorder that a meeting was held recently in Finance Ministry to consider the proposal. The meeting reviewed the current situation of oil price mechanism and considered a proposal to exclude the role of government, and authorise OMCs to automatically adjust oil prices in line with the global oil prices. This proposal was made in the aftermath of government decision to withdraw the subsidy on oil and products in the forthcoming budget.

Oil prices in the international market are on the rise and there is a possibility that petroleum development levy (PDL) on petroleum products, as is currently being levied, will automatically end after the global oil price exceeds $70 per barrel crude oil price.

The government continues to face the problem of circular debt and a major reason for this is the pending payment of price differential claims (PDC) to OMCs. State run Pakistan State Oil (PSO) is still facing the problem of circular debt and is in a critical condition in terms of running its operation of supplying oil to the power sector.

PSO's dues against different companies are piling up. PSO is to recover Rs 3 billion from Wapda, Rs 31 billion from Hubco, Rs 19 billion from Kapco, Rs 3.2 billion from PIA and Rs 5 billion PDCs from government. PSO is to pay Rs 28 billion to Parco, Rs 9.1 billion to PRL, Rs 7.6 billion to NRL, and Rs 3.7 billion to Bosicor oil refinery.

The government had announced 2.5 percent reduction in price of petrol, high speed diesel (HSD) and HOBC following the orders of Supreme Court, effective from May 22. Despite cut in POL prices, the government is still charging PDL of Rs 12.28 per litre on petrol, Rs 16.44 per litre on HOBC, Rs 6.88 per litre on kerosene oil, 3.95 per litre on light diesel oil, Rs 3 per litre on JP-4 and JP-8.

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Monday, 08 June 2009 10:13

RIYADH: Four members of the oil-rich Gulf Cooperation Council signed an accord in the Saudi capital on Sunday to create a monetary union, a GCC spokesman said. Foreign ministers from four of the six GCC countries - Bahrain, Kuwait, Qatar and Saudi Arabia - agreed to set up a monetary council in Riyadh this year as a precursor to the ultimate goal of establishing a common currency, the spokesman said.

Oman announced in 2007 that it would not join, while the United Arab Emirates, a key regional financial and commercial hub, pulled out last month after the GCC decided to base the future regional central bank in Riyadh. The UAE had expressed reservations over the monetary union after an informal GCC summit in Saudi Arabia on May 5 decided that Riyadh, which is home to the GCC headquarters, would host the future banking authority, while the UAE was the first member to request hosting the central bank.

The monetary union date was originally set for 2010 but analysts consider that unrealistic given the global economic slowdown. Reports suggest that 2013 is the new target.




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ISLAMABAD: The Private Power Infrastructure Board (PPIB) has warned the government to clear the outstanding receivables of independent power producers (IPPs) or face humiliation at every forum as the companies are threatening to call GoP guarantees, sources in PPIB told Business Recorder.

They said that letters from the Chief Executive Officer (CEO) of Hub Power Company (Hubco), Javed Mahmood, and CEO of Rousch (Pakistan) Power Limited, Fazal Hussain Asim, are tantamount to threats from these two very important IPPs.

"It is regrettable that after first tranche, promised payments are not being released and our total outstanding has reached Rs 41 billion. It is in the interest of all parties to reduce the burden and therefore we are requesting you to please direct Wapda and Pepco to clear our outstanding at the earliest because these are in clear violation of PPA and Implementation Agreement(IA)," sources quoted, Hubco CEO as having written to the Minister for Water and Power, Pervez Ashraf. He also held a meeting with the Minister and conveyed similar sentiments.

Hubco has also lodged a complaint against Wapda for not providing fully placed Letter of Credit (L/C) for the current fiscal year, sources added.

"We would also inform you that Wapda has not yet been able to provide us the fully placed L/C for 2008-09 which is presently short by over Rs 3 billion and in addition Wapda needs to ensure that it would provide Hubco with full L/C for 2009-10 latest by May 31, 2009. Keeping in view the fuel prices, the amount is expected to be greater than Rs 13 billion," said Hubco CEO. It is not clear whether Wapda met the deadline or not.

Sources said that PPIB Managing Director Fayyaz Elahi had apprised the decision makers that outstanding receivables of Hubco had reached a figure of Rs 36.2 billion by May 12, 2009 and due to nonpayments by Pepco/Wapda, the outstanding amount is snowballing once again towards gigantic proportions.

"Hubco has also agitated on the non-establishment of L/C by Pepco for the full amount ie Rs 13 billion for 2008-09," sources quoted PPIB MD as saying. Fayyaz is of the view that Hubco's role in power sector is of great significance and considered most reliable in view of power generation. The non-payment to Hubco would not only impair its financial capability to operate the plant but would also create a massive problem for GoP.


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ISLAMABAD: The government may levy 16 percent sales tax in coming 2009-10 budget on services provided by port/terminal operators on import cargo handling; banking companies and non-banking financial companies; insurance companies and professional service providers like legal/medial practitioners and a wide range of consultants through Provincial Sales Tax Ordinances. It is learnt that the Federal Board of Revenue (FBR) has proposed a comprehensive list of service providers to the Ministry of Finance for consideration under the Provincial Sales Tax Ordinances. The list also includes services provided by professional

service providers, like legal consultants and different categories of consultants operating in key potential sectors.

If the government levies 16 percent sales tax on these services through Provincial Sales Tax Ordinances, the FBR will have to withdraw excise duty from non-fund services provided by banking and non-banking financial companies, etc, and other services presently liable to excise duty.

According to sources, sales tax through Provincial Sales Tax Ordinances might replace the existing excise duty on some services. In this connection, the FBR has worked out the revenue implications, enforcement and compliance issues of the services for broadening the tax base.

The FBR has finalised the list of potential service providers for bringing them into the tax net. The FBR reviewed the list of services specified in the Chapter-98 of the Pakistan Customs Tariff (PCT) of the Customs Act, 1969. The definition, classification and nomenclature of services have been given in the Chapter-98 of the PCT.

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