cotton pricess

8/7/2019 cotton pricess

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Date: 04-02-2011 Page No:15

EU concessions to make Pakistanitextiles competitive: SBP

By our correspondent

KARACHI: The State Bankof Pakistan (SBP) has saidthat the trade concessions

provided by the EuropeanUnion (EU) would increaseprice competitiveness of

Pakistans textile products.

The concessions will begiven for a period of threeyears effective fromJanuary 1, 2011 after legalmodalities, ie, approval

from the EU governmentand Europeanparliaments, the SBP saidin its quarterly reportreleased a day earlier.

The 75-items account for

approximately 27 percentof Pakistans total exportsto the EU, the central banksaid. In 2009, exportearnings from thesetextile-related items were

around $1 billion. Averageexport earnings during thelast three years stood at$1.2 billion. Pakistansexport share of thesecommodities in the EUimports is approximatelythree percent, it said.

The direct benefit of this

package is that it will lowerthe prices of Pakistaniproducts in the EU, the SBPsaid. However, analysis ofthe EUs textile and apparelimports shows thatPakistans unit prices inmost of the categories arealready much lower thancompetitors, but still

Pakistans share in the EU

market is lower than itspeers, it said.

Anecdotal evidencesuggests that the lack ofmodern technology,

designing techniques andexporters inability to meetlarge orders are the major

impeding factors.

Furthermore, if low valueproducts are exported tothe EU to get benefit oftrade concessions, thendomestic availability of the

raw material would be aproblem and imports ofthese products couldincrease the cost ofproduction, the report said.

The shortage especially

hurt the production andexports of towels and bed-sheets, which have notbeen provided anyconcession, according tothe report.

However, the tariff ondifferent categories of yarnis already low, so a zerotariff on these categorieswould not drastically lowerthe unit prices.

On the other hand, a fewcategories of fabrics and

knit-clothing could benefitfrom the trade concessionsas the current average, thecentral bank said.

Pakistans exports posted agrowth of 17.9 percentduring July-November FY11in contrast to a fall of 8.3percent during the

corresponding period last

year.

The major contributor in

total exports is thetextile sector.

In case of textileexports, positivedevelopment was

improved performanceof the high valueproducts such asreadymade garments,knitwear, towels andbed-wear, the centralbank said.

High value sector wasfacing two majorproblems during the lasttwo years. Firstly,compressed externaldemand led to low

export orders. Secondly,supply-side issues suchas liquidity constraints,shortage of the rawmaterial, and prolongedpower crisis were

adversely impacting theproduction process, itsaid.

However, during Jul-NovFY11, boosted byincreased United Statestextile and apparelimports, Pakistansexports recorded a year

on year rise during theinitial months of FY11against a substantial fallduring the same periodlast year.

In the presence of toughcompetition fromregional competitors,Pakistans performance,

especially in the case of

apparel, is largely in linewith the export growthof competitors.


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Date: 04-02-2011 Page No:18

Raw cotton peaks at Rs12,500 permaundBy Gohar Ali Khan

KARACHI: Raw cotton surged by Rs500to hit the highest level of Rs12,500 permaund on Thursday, dealers said onThursday.

They attributed the surge in cotton ratesto record high prices in the international

market due to cotton export ban in India

and major crop loss in Pakistan, Chinaand Australia.

About 500 bales of raw cotton were soldat the peak level of Rs12,500 per maundon credit in Deharki and Ghotki,surpassing the previous high of Rs12,000per maund on January 28. Seedcotton(Phutti) rate increased by Rs100 to strike

an all-time of Rs5,500 per 40 kg,breaking the previous record of Rs5,400per 40 kg on February 2.

Amreen Hirani, a commodity analyst,

said the impact of international rally wasseen on local cotton prices as well, whendomestic cotton touched a record high.

On the International CommodityExchange (ICE), New York, the rawcotton contracts for March and May roseby 4 cents each to hit an all-time high of$1.76 and $1.71 per pound, respectively,amid rising demand for the commodity.

Hirani said the recent price hike waswitnessed due to the correlation with

international price that escalatedfollowed by major crop loss in Pakistanand China due to weather conditions,

export ban in India, active trading at theChina Cotton Exchange.

Cotton traders maintain that the non-delivery of cotton export contracts fromIndia has adversely affected the entirecotton chain in Pakistan.

A meeting that took place between thepresident of India Cotton Association andthe Adviser to the Prime Minister onTextiles concluded with proposal to sendPakistani importers delegation to Indiato straighten up the mechanism of cottonimports, they said.

Shakeel Ahmad, a leading cotton trader

on the Karachi Cotton Exchange said thatcotton ginners were holding back stocks. Soaring prices and short supplydampened local cotton buying andginners seem unwilling to sell the

commodity on hope for higher prices inupcoming days, he said.

Despite runaway prices, spot rates of theKarachi Cotton Association (KCA) heldsteady at Rs11,000 per maund andRs11,789 per 40 kg for average qualitylint.

The countrys cotton sales stood at10,200 bales of raw cotton (of 170 kgeach) varying between Rs10,400 andRs12,500 per maund depending on

staple length and grade.


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Date: 04-02-2011 Page No:3

Exports to Egypt and Tunisia

affected: Dr Baig

KARACHI: Adviser to Prime Minister on

Textiles Dr Mirza Ikhtiar Baig has saidthe textile products exports to Egypt andTunisia are on decline due to ongoingturmoil and political unrest in thesecountries.

In a statement here Thursday, IkhtiarBaig said he has received representationfrom various textile exporters expressingtheir concern on decline in exports of

their textile products to Egypt andTunisia.

Pakistan exports of textile to Turkey hasalready affected due to their proposal toimpose safeguard measures on export ofPakistan fabrics and garments andexpected a loss of about $400 million ifthe said protective duties are imposed.

America has signed Free Trade

Agreement (FTA) with Morocco and Egyptto export duty free textile products fromthese countries to US and Pakistanifabrics qualifies for exporting duty freegarments from Egypt and Morocco to US.

However, Dr Baig said that it is atemporary effect and with thestabilisation of the political situation inTunisia and Egypt the exports will

resume. Regarding Turkey he said thatgovernment of Pakistan is taking up thematter with Turkish authorities toexclude Pakistan from the list ofcountries proposed for imposition ofsafeguard measures and a delegation ledby CEO TDAP is already in Ankara to takeup this issue.


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February 2011 Page No:20

Lint prices soar to new highs on cottonmarket

RECORDER REPORTKARACHI (February 04, 2011): Rates hit the new high on thecotton market on Thursday as millsdid purchasing amid confusionsover the contracts of import ofIndian cotton, dealers said. TheKarachi Cotton Association (KCA)spot rate was unchanged at Rs11000, they said. Phutti prices inSindh and Punjab were unchangedat Rs 4300-5500, they said. In theready business, trading activityimproved as about 13,000 bales ofcotton changed hand between Rs10,400-12500 (credit), they said.

Market sources said that no respitewas seen in the price increasebecause the NY cotton futures isstill on surge and rates in the localmarket also hit the new high at Rs12500. Commenting on the highertrend in the prices, Naseem Usman

said that the price may show furtherrise in the coming days as it is notclear that what is next Indianmove? In the meantime,negotiations between India andPakistan may help in making anyprogress to import cotton , he said.

Besides, Pakistan Cotton GinnersAssociation (PCGA) fortnightlyreport issued, showing phutti arrivaltill January 31 was nearly 11.1

million bales, depicting sharp fallagainst the last year figure at 12.5million bales, brokers said.According to a report, India hasasked traders to apply for cottonyarn exports for unshippedquantities out of the 720 million kgallowed in the 2010/11 season, agovernment circular said late on

Tuesday.

Exporters must apply betweenFebruary 2 and February 7, thecircular said, and after gettingpermission have to export thequantity by March 31. OnWednesday the US cotton futures jumped for the third straight day,settling up the daily limit, as Asianmills fuelled the rally on averagevolume.

Cotton futures have rallied almost25 percent since the middle of

January, the latest wave of ahistoric run that began in 2010and sent cotton prices to theirloftiest levels in almost 150 years.The key March cotton contract onICE Futures US rose the four centlimit to conclude at $1.7622 perlb, with the session low at $1.73.Total volume stood around20,400 lots, just above the 30-daynorm, Thomson Reuterspreliminary data showed.

The following deals werereported: 500 bales of cottonfrom Rahim Yar Khan sold atRs 12000, 600 bales fromUpper Sindh at Rs 12200, 500bales from Ghariki and Ghotkiat Rs 12500, 400 bales ofcotton from Noabad at Rs

10800, 400 bales of cottonfrom Khadro at Rs 10800, 400bales from Mehrab Pur at10900, 800 bales from Kumbat Rs 10900, 1000 bales ofcotton from Upper Sindh at Rs11500, 600 bales of cottonfrom Faqir wali at Rs 10400,1200 bales of cotton fromHaroonabad 10400-10900,800 bales of cotton fromVehari at Rs 10725, 200 balesof cotton from Multan at Rs10500/11000, 800 bales ofcotton from Bahawal Pur at

Rs 10800/11000, 800 bales ofcotton from Pul Baghar at Rs10800, 400 bales of cottonfrom Duniya pur at Rs 11200,400 bales of cotton from KhanPur at Rs 11500, 800 bales ofcotton from Rahim Yar Khanat Rs 11500, 600 bales ofcotton from Lodhran at Rs11500, 1400 bales of cottonfrom Liaquat Pur at Rs 11500and 400 bales of cotton fromTounsa Sharif at Rs 11500.

The KCA Official Spot Rate for Local Dealings in Pak Rupees

----------------------------------------------------------------------------------------------------------------------------

FOR BASE GRADE 3 STAPLE LENGTH 1-1/32"-----------------------------------------------------------------------------------------------------------------------------

MICRONAIRE VALUE BETWEEN 3.8 TO 4.9 NCL

===========================================================================

Rate Ex-Gin Upcountry Spot Rate Spot Rate Difference

For Price Ex-Karachi Ex. KHI. As Ex-Karachi

on 02.02.2011

===========================================================================

37.324 Kgs 11,000 120 11,120 10,120 NIL

-----------------------------------------------------------------------------------------------------------------------------

Equivalent

-----------------------------------------------------------------------------------------------------------------------------

40 Kgs 11,789 120 11,909 11,909 NIL

===========================================================================


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Flood, diseases and pest attacks: cottonarrival declines by 11.26 percent

RECORDER REPORT

MULTAN (February 04, 2011): Chairman of Pakistan CottonGinners Association (PCGA),Masood A Majeed has saidthat shortfall of cotton arrivalwas 11.26 percent. He saidtotal 1,11,04,511 bales of

cotton were received duringthis season. It was 14,08,719bales less than last yearshowing a decline of 11.26percent in the production dueto flood, diseases and pestattacks.

While 3,44,259 bales werereceived during last fortnightfrom January 16th to February1st, 2011. He said that total641 ginning factories areoperational in Sindh andPunjab. Recent floods hadbadly hit the cotton crop in thedistricts of Muzaffargarh,Layyah, Rajanpur,Rahimyarkhan Multan andDera Ghazi Khan. They saidthat 38.50 percent cotton wasdestroyed in Muzaffargarh,57.92 percent in Rajanpur,8.19 percent in Dera GhaziKhan, 13.81 in Jhang, 19.61percent in Hyderabad and24.03 percent in Ghotki. Cottonproduction in the country hasdeclined by 11.26 percent as

the arrivals recorded at thegunneries as on February Ist,2011 stood at 1,11,04,511bales, showing a decrease of11.26 percent from 1,25,13,230bales received in thecorresponding period of lastyear.

The report reveals an increaseof 18.14 percent in cotton inLodhran district, 105.84

percent increase in Mianwalidistrict, and 9.46 percentincrease in Balochistan. Theunsold stock is 7,23,943 baleswhich is less than last year,when unsold stock was8,10,900 Chairman of Pakistan

Cotton Ginners Association(PCGA), Masood A Majeedbriefed reporters about thefortnightly report.

Punjab contributed 73,90,562bales, last year it contributed82,24,122 bales showing adecline of 11.22 percent,Similarly Sindh contributed37,13,945 bales against the lastyear production of 41,89,108bales showing a decrease of11.34 percent and Balochistan24,118 bales to take the total to1,11,04,511 bales.

District-wise production datashowed that Multan contributed4,03,193 bales, Lodhran2,30,722 bales, Khanewal7,28,142 bales, Muzaffargarh2,36,930 bales, Dera GhaziKhan 3,00,827 bales, Rajanpur1,95,047 bales, Layyah1,77,990 bales, Vehari 7,42,984bales, Sahiwal 5,25,553 bales,Pakpattan 2,60,337 bales,Okara 49,100 bales, Kasur

7,300 bales, Toba Tek Singh2,67,657 bales, Faisalabad1,12,100 bales, Jhang 1,55,124bales, Mianwali 1,57,900 bales,Bhakkar 93,500 bales,Sargodha 39,700, Rahim YarKhan 9,95,257 bales,Bahawalpur 8,20,424 bales,and Bahawalnagar 8,90,779bales.

Sindh's district-wise production

figures were: Hyderabad3,51,528 bales, Mirpurkhas3,94,651 bales, Sanghar15,69,036 bales,Nawabshah 3,43,912 bales,Naushero Feroze1,94,397bales, Khairpur

2,08,542 bales, Ghotki 2,16,418 bales, Sukkur 2,93,566bales, and Dadu 1,17,777bales.

Balochistan added 24,118bales to the total. Thearrivals figures recorded sofar are the lowest Pakistanever had. PCGA claimedthat 2 million bales weredestroyed in recent floods inPunjab and Sindh. Policy-makers may hope thatbumper cotton crop will helpthe government makedeficiency in other areas,taking the annual growthrates to over 7 percent.

The chairman PCGAreiterated demand to thegovernment to announcerelief and bail out packagefor cotton ginning factoriesof flood-hit areas and surveyof such areas should becompleted shortly. Thereport said that the ginners

pressed 1,09,74,860 bales.Only 4,73,656 bales wereexported by commercialexporters (who mostlypurchased from Sindh), andmerely 57,200 bales werepurchased from Punjab. Thetextile industry purchased99,06,912 bales and7,23,943 bales wereavailable with ginners asunsold stock.


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Cotton futures prices continue theirupward spiral with gusto

DR ZAFAR HASSAN

LAHORE (February 04, 2011): With several bullish factorsconglomerating to push up cottonprices across the world, NewYork fibre futures kept spiralingnorthwards at record pace andperformance. Indian refusal to

allow shipments of cotton againstexisting contracts on a vast scale,crop shortages in China, Pakistanand Australia, public disturbancesin West Africa and Egypt and netshort global supply position haveput cotton prices on anapparently unending spree.

The domestic seedcotton (kapas- phutti) prices have risen atmind-boggling speed to rangebetween an unprecedented rangeof Rs 4,300 to Rs 5,500 per 40Kgs in both Sindh and Punjab.Similarly lint prices have alsoshot up to a record range from Rs10,500 to Rs 12,200 per maund(37.32 Kgs) in Sindh and Rs10,500 to Rs 12,000 per maundin Punjab. Some sales of cottonwere also conducted at Rs12,500 per maund but on creditbasis. Tendency for cotton pricescontinued to be incline upwards.

In India also, cotton prices aresaid to have catapulted to rangebetween an unprecedented Rs

5,100 to Rs 5,200 per candy.Anyhow, the fact remains thatonly around 70,000 bales ofcotton have been shipped by theIndian exporters against theirreported sale of about one millionbales to Pakistan. Karachimerchants added that despitegenerous settlement rates offeredby importing Pakistani mills threeor four times for the same

transaction, Indian shippers areexpressing their inability todispatch the cotton.

It has been also reported thatseveral mills in Bangladesh,China and Pakistan have

approached the InternationalCotton Exchange in Liverpool toassist them in obliging Indianshippers to perform theircontracts. In another move, theIndian government is said tohave put a cap of 720 millionKgs on the export of yarn toassist the downstream industryin obtaining yarns at cheaperprices. Thus yarn stocks atIndian mills are piling up andthe mills are disturbed at thisdevelopment. However, thesemeasures have reportedlythrown the Indian cottoneconomy out of gear andcreated many imbalances dueto interference in free trademechanism.

Due to record rise in cottonprices, mills in Pakistan aresuffering from acute cash crisiswith doubling of lint prices innearly on year's time. Thesedevelopments are giving anadvantage to India which havemade Indian textiles more

competitive in the exportmarkets. Now reports alsoindicate that polyester staplefiber (PSF) prices have alsorisen by almost Rs 4 perkilogram due to increase incrude oil prices to more thanDollar 100 per barrel. Thussome Pakistani mills maychange their fiber spinningblend but may also have to

close down temporarily inMay or June 2011. Due tothe government of Indiainterference in their cottonand textile sectors, someparts of the Indian textileindustry may also face

closure by the middle of thisyear.

With cotton prices havingrisen to dizzy heights andinterference of Indiangovernment in matters ofcotton and textile sales,manufacturing and exports, itis difficult to imagine thedamage which would occur incase the commodity pricesbegin to tumble.

In the evening (almost 5 pmPakistan time), New Yorkcotton futures prices (ICE)were lingering around 180cents per pound for theMarch 2011 contract. Nowtrade talk is also mulling atthe idea of cotton futuresprices at the level of USDollar two per pound. Thesqueeze nature of thiscontract may then attainfruition.

In ready sales of cotton as

per Karachi brokers, onetransaction of 600 bales ofcotton from Upper Sindh(Daharki and Ghotki) wasreported at Rs 12,200 permanud (37.32 Kgs), while400 blaes from RahimyarKhan in Punjab were sold atRs 12,000 per maund in avery tight market.


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Managing revenue shortfall: FBR shouldtax beneficiaries of loan write-offs: analysts

MUHAMMAD ALI

KARACHI (February 04, 2011): The Federal Board ofRevenue (FBR) can easilymanage its revenue shortfallfor annual budgetary target bycollecting income tax from thebeneficiaries of loan write-offs.

Although the Board has powersto charge income tax from thebeneficiaries.

The revenue body has put thisoption aside and contemplatingother resources includingimposition of RGST andbroadening tax base of salariedclass to enhance its revenuecollection, analysts said whiletalking to Business Recorderon Thursday.

They said every year banksprovided for non-performingloans and the interest relatedto such loans where the loanwas not paid by the loaneewithin a certain period of time.There are three categories ofloans, (i) sub-standard, (ii)doubtful, (iii) loss dependingupon the period of default.

In the Seventh Schedule to theIncome Tax Ordinance, 2001,the bad debts classified as'sub-standard' is not allowable

as an expense. However, thebad debts classified as'doubtful' and 'loss categories'are admissible as deductionsubject to one per cent of thetotal advances as per balancesheet date in case of corporateloans, and in case of SMEsand consumer loans suchdeduction is admissible up tofive per cent of the advanceswef Tax Year 2011.

They further said some of

these loans were subsequentlyrecovered and added back toincome wherever recovery was

affected. However, some ofthese loans and the amount ofinterest related to such loans isactually 'write-off' and in thisrespect the State Bank ofPakistan (SBP) has issued acircular No 29, dated October

15, 2002 wherein guidelines forwrite-off of irrecoverable loansand advances have beenissued.

Through Finance Act, 2004, theclause (3A) was alsoincorporated in Part-IV of theSecond Schedule to the IncomeTax Ordinance, 2001 whereineffect was also given to thecircular ibid where such loansand the interest related to suchloans is 'write-off' under thescheme of the SBP envisagedin the said circular.

Analysts said the principalamount of loan and the interestrelated to such loan, which waswritten off by a bank in the caseof a taxpayer, could bedisallowed by the department tothe extent of loss declared bysuch taxpayer and the additionon account of such loans wereto be resulted in income.Therefore, the same was to berestricted only to the extent of

loss declared for the year orbrought forward loss from theprevious years.

To a question, they said theprovisions of sub-section (5)and (5A) of section 34 andsection 70 of Income TaxOrdinance, 2001 would notapply to any benefit derived byway of waiver of profit on debtor the debt itself under the SBP,Banking Policy Department'sCircular No 29 of 2002, dated

October 15, 2002, to the extentnot set off against the lossesunder Part VII of Chapter III.

Furthermore, they said therestriction has been placedon the addition of section34(5), 34(5A) and section 70to the extent of lossdeclared for the year or loss

brought forward from theprevious years. They saidthe provisions of section34(5), 34(5A) and 70 dealonly with such situationwhere any expense hasbeen allowed for the past onaccrual basis or evenotherwise and subsequentlythe same expense isrecouped/recovered such asthe write-off of any interestor benefit as related to suchexpenses is subsequentlyaccrued to the taxpayer, thesame is to be added back.

They said the section 34(5),34(5A) and section 70 didnot cater for the principalamount of debt, which hasbeen written off becausethese sections deal onlywith the expense.

But there is no suchsituation with regard to theprincipal amount of debtbecause the principal

amount of loan has not beenrouted through the profit andloss account of thetaxpayer. Therefore sections34 & 70 are not applicableto the write-off of principalamount of loan. If at all, thisamount is liable to tax, theBoard has to look into someother provision of the law forits taxability, theymaintained.

Replying to a question, they

said several tax practitionerswere of the view that thisprincipal amount of written-


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10/27

BUSINESS


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Afghan Transit Trade Rules 2011: Pakistanicustoms to examine all containers with

broken sealsRECORDER REPORT

ISLAMABAD (February 04,2011) : Pakistani customsauthorities have beenempowered to examine 100percent containers with broken

seals carrying transit goods forAfghanistan to avert missingcontainers' scams in future underthe new Afghan Transit TradeRules 2011.

Sources told Business Recorderhere on Thursday that the newAfghan Transit Trade Rules 2011has issued a procedure forexamination of containers underthe Afghanistan Pakistan TransitTrade Agreement (APTTA). The100 percent containers arriving at

port of exit will be subject toexamination under the riskmanagement system in case ofany information or if the seals arenot intact. The examination shallbe carried out in presence of theconcerned Assistant/Deputycollector.

As per new rules, the triplicatecopy of goods declarationbearing mate receipt (MR)number, cross-border stamp andexamination endorsement shallbe treated as cross-bordercertificate to ensure thatcontainers actually reachAfghanistan.

According to the procedurerelated to the Afghan transitexport at Karachi, on arrival ofAfghan transit export cargo inAfghani standardised trucks andopen vehicles (in case ofperishable goods) at sea ports,the Afghan exporter or hisauthorised clearing agent shallpresent the customs staff the

duplicate and triplicate hardcopies of Goods declaration (GD)along with TAD if required in

some cases, and other relevantdocuments, marked as "InTransit from Afghanistan" torespective foreign countriesthrough sea.

On arrival of goods at port ofloading, the driver of the truckor the clearing agent shall getthe gate pass from thePreventive gate officer or sepoyposted at the gate. The gateofficer shall tally containernumber, vehicle number, GDnumber and shipping billnumber etc and allow thevehicle to enter the port area.

The Afghan Transit Trade Rules

2011 further stated that theclearing agent shall present GDand gate pass to the preventivestaff who along with the PRALstaff shall make entry in themanual register and feed thecontainer number, number ofcontainers, number ofcartons/packages in thecontainer, shipping bill numberas mentioned in the GD into thesystem. After feeding of all thedetails in the system, aregistration serial number shallbe generated which shall bemarked on the face of GD. ThePreventive gate staff shall signand stamp "Pass-in" bearingnumber of containers on thereverse of the GD beforeallowing the vehicle to enter theterminal area.

It said that after "pass-in" at theport area, the clearing agentshall go to port weigh scale forweighing the containers andshall get the weight slip. Aftergetting the slip, the vehicle will

move to the Afghan transit shedor the specified area for de-stuffing. The cargo shall be

unloaded in Afghan Shedsat Karachi port or PortMuhammad Bin Qasim,Gwadar or in case ofcontainerised cargo, the

container shall be unloadedat shipping line yard or theport/terminal.

The PCCSS staff shall dc-seal after verifying seal andrailways wagon/vehiclenumber. He will tally theparticulars of the documentswith that of the vehicle andinspect the seal beforeallowing entry to theconcerned Afghan cargoshed. The PCCSS staff shall

check and verify theparticulars fed in on-linecomputer system assubstantiated in sub-chapter5 of the rules.

The clearing Agent shallpresent the GD toexamination staff (Export)for registration. The detailedexamination of goods will bedispensed with if the sealsare intact. In case of shortshipment, the examinationstaff shall stamp the GDmentioning short-shippedcargo bearing number ofcontainers and number ofpackages and value of thegoods on the reverse of theGD.

At the terminal, afterinspection, Afghan cargoshall be off loaded in thepresence of Customs officerand representative of theowner of the goods. AOprocessing (Export) shall

cross check the particularsof the GD and send it to theconcerned Principal


11/27

BUSINESS

RECORDERAppraiser. After the GD is out ofcustoms charge, the PA AfghanTransit Export shall "allowshipment" and the Preventivestaff shall "allow loading" in thesystem and the goods shall beloaded on vessel for foreigncountry.

The customs officer will enteracknowledgement of transitgoods in the 'One Customs'clearance system. The triplicate

copy of GD bearing MRnumber, cross-border stampand examination endorsementshall be sent back to theCustoms Station at Torkham orChaman from where the goodshave entered Pakistan while theCustoms authorities at Karachishall retain duplicate copy forrecord in MCD section. Thistriplicate copy shall be treatedas cross-border certificate.

If the Appraising/ExaminingOfficer points out anydifference in marks andnumber of the containers orin case of any discrepancyin weighing or unusualdetection in the scanning ofthe cargo, the violation willattract the penal provisionsembodied in these rules,Customs Rules 2011 added.


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February 2011 Page No:

APTTA to be functional from February 12:no 'side letter' for India

MUSHTAQ GHUMMAN

ISLAMABAD (February 04,2011) : Federal government onThursday announced that theWashington-backed AfghanistanPakistan Transit Trade

Agreement (APTTA) will befunctional from February 12 or13, 2011 without any 'side letter'for India.

"Implementation on APTTA willcommence from February 12 or13 but we have neither given aside letter to Afghanistan for Indianor Kabul made any suchdemand so far," CommerceSecretary Zafar Mahmood saidwhile replying to a question at apress conference convened tobrief media about the amendmentto the Strategic Trade PolicyFramework (STPF).

Commerce Minister MakhdoomAmin Fahim, AdditionalSecretary, Shahid Rahim Shaikhand Joint Secretary Export AzharAli Chaudhry were also presentat the press conference. PrimeMinister Syed Yousuf Raza Gilaniapproved the amendments inSTPF on Wednesday in principleand desired that theseamendments may be cleared by

the Economic Co-ordinationCommittee (ECC) of the Cabinet.

According to SecretaryCommerce, Afghanistan hadinsisted on allowing import ofIndian goods through Wagahborder but Pakistan regretted toaccept this demand, saying thatPakistan cannot allow transportof Indian goods to Afghanistanthrough Wagah until bilateralissues such as Kashmir areresolved.

Official sources told BusinessRecorder that the Prime Minister

has agreed to allow import ofraw jute, Mono Ethylene Glycol(MEG), Pure Terephthalic Acid(PTA), polypropylene,polyethylene, spare parts of

weaving machines andvaccines from India.

"We are allowing of import ofseven more items from India tobe announced after formalapproval of the ECC," theSecretary Commerce added.Commerce Minister andCommerce Secretary dispelledthe impression that ExportDevelopment Fund (EDF) isbeing misused as all theprojects are approved inconsultation with the privatesector, which has duerepresentation on the board.

Answering another question, hesaid that Federal ExportDevelopment and PromotionBoard (FEDPB) will be a policyboard to be led by the PrimeMinister which will meet twice ayear to review export policy.The board will be dulyrepresented by the public andprivate sector stakeholders.This proposal will be submitted

to the Cabinet in its meeting onFebruary 9, to be presided overby the Prime Minister.

Secretary Commerce clarifiedthat FEDPB will not replaceTDAP as the latter is animplementing agency. In replyto a question regarding thecurrent status of ChairmanNational Insurance CompanyLimited (NICL), Ayaz KhanNiazi, the principal accused inRs 6 billion financial scam, he

said that first Niazi was sent onforced leave but later on he wassuspended. His two-year

contract is going to expireduring the second week ofcurrent month, he added.

Replying to another

question, the CommerceMinister said that theFinance Ministry had agreedto extend Rs 27 billion inthree years to implementSTPF 2009-12 but failed torelease a single penny tilltoday. Sitting on the rightside of the Minister,Secretary Commerceclarified that Rs 5 billionliabilities of exporters haveaccumulated as result ofincentives announced in theSTPF which the CommerceMinistry has to pay.

"We have requested theFinance Ministry to releasewhatever amount they caneasily arrange to clear thebacklog of claims submittedby the exporters, he added.In reply to a question, theCommerce Minister saidthat the import of five-yearold reconditioned cars willnot have any impact on thelocal auto assemblers as

these would be less than1300 CC. He said,notification in this regard willbe issued soon but he didnot give any specific date forissuance of SRO. SecretaryCommerce said PrimeMinister has declared 2011as 'Year of Export' duringwhich Pakistan will focus onChina for expandingexports.

Zafar Mahmood stated that

the Prime Minister hasreviewed the CommerceMinistry's performance of


13/27

BUSINESS

RECORDERthe last six months. Last year, theCommerce Ministry had projected6 percent growth in exports butachieved above 9 percent. Thisyear, the Commerce Ministry ispursuing 10 percent growth asprojected in STPF.

He appreciated the role ofprovincial governments in growth

of exports. The CommerceMinistry had identified 22-23items for inclusion in thepresent list of tradable items,but he cleared only 17items.With regard to EuropeanUnion (EU) package, theSecretary Commerce statedthat this time the WTO meetinghas been postponed on the

request of the EU. Themeeting is expected to beconvened in March 2011.On ReconstructionOpportunity Zones (ROZs),he said David Lipton, USPresident Barack Obama'sSenior Adviser, has assuredthat the bill is in Congressand will be passed soon.


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Remaining five months: FBR chalks outnew plan to increase revenue

SOHAIL SARFRAZ

ISLAMABAD (February 04,2011) : The Federal Board ofRevenue has chalked out anew plan to increase revenuecollection in the remaining fivemonths (February-June) of2010-11 by taking strict

enforcement action against thewithholding agents, who deducttaxes, but fail to deposit thesame in the nationalexchequer.

Sources told BusinessRecorder here on Thursdaythat the decision has beentaken in the first Board-in-Council meeting chaired byFBR Chairman SalmanSiddiqui at the FBR House.The restructuring of the InlandRevenue has also beenconsidered during the meetingto empower the AdditionalCommissioners of InlandRevenue under the functionallevel for separately dealing withenforcement, audit and legalareas of taxpayers. The newteam of tax managers includingFBR Member Inland RevenueKhawar Khurshid Butt andAsrar Raouf AdditionalSecretary, Revenue Divisionwas also present in themeeting.

On the conclusion of Board-in-Council meeting, Minister ofFinance Abdul Hafiz Sheikhvisited the FBR Headquartersin the evening and met theFBR Chairman SalmanSiddiqui. FBR Chairman alsointroduced the FBR MemberCustoms and FBR Member IRwith the Finance Ministerduring the meeting.

Board-in-Council considered

that the FBR in consultationwith the Director GeneralWithholding Tax would initiate

action against all personswhere withholding of taxes hasbeen done, but the deductedamount has not been depositedin the national kitty. There aredifferent forms of withholding oftaxes where withholding agents

have shown high level of non-compliance. It has beendecided to strictly monitor thisarea and final action plan wouldbe implemented after obtaininginput from the Director GeneralWithholding Tax in the nextBoard-in-Council meeting to beconvened shortly. In the next 4-5 months, the withholding oftaxes would be the key focusunder the enforcement plan ofthe Board.

Under the re-organisationalstructure of the Inland Revenue,sources said that the Board-in-Council considered theproposals of the AdditionalSecretary Revenue Division. Ithas been proposed that thefunctional level should betransferred to the AdditionalCommissioners of InlandRevenue. Under the proposedstructure, every Commissionerof Inland Revenue would befully equipped with theAdditional Commissioners for

dealing with the issues of Audit,Enforcement and legal. As perproposal, each Commissionerof Inland Revenue would havea complete setup of Audit,Enforcement and Legal.

According to the proposal, theexisting setup of CommissionerLegal, CommissionerEnforcement andCommissioner Audit under theChief Commissioner may beabolished. The Commissioner

of Inland Revenue would beassisted by AdditionalCommissioner Audit, Additional

Commissioner Enforcementand AdditionalCommissioner Legal. Thesethree AdditionalCommissioners woulddirectly report to theconcerned Commissioner of

the RTO. These AdditionalCommissioners would workdirectly under thesupervision of theCommissioner IR. In thisway, the audit, enforcementand legal maters of aspecific unit would besimultaneously deal by theconcerned Commissioner.Under the new setup, eachCommissioner would havefull information about theaudit, enforcement and legalrelated issues of a taxpayerthrough the respectiveAdditional CommissionerAudit, AdditionalCommissioner Enforcementand AdditionalCommissioner Legal. Thenew setup seemed to beclose to the old circle-basedsystem where all functionswere separately performedby the income tax officials.Under the proposedrestructuring, the functionsof IT and Human Resource

Management (HRM) wouldcontinue to directly report tothe Chief CommissionerInland Revenue of theconcerned RTO.

If a Commissioner InlandRevenue has beenempowered to deal with10,000 cases, he would beresponsible for handling allaudit, enforcement and legalissues of these taxpayersthrough their respective

Additional CommissionerAudit, AdditionalCommissioner Enforcement


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RECORDERand Additional CommissionerLegal.

Under the new structure of theBoard, the FBR is expected tocreate new posts of Chief-I,Chief-II and Chief-III to directlyinteract pertaining tooperations with theCommissioners InlandRevenue in the fieldformations. The new setup ofChief-I, Chief-II and Chief-IIIwould operate within the FBRMember IR empowered tohandle all domestic taxesincluding sales tax, income taxand federal excise duty. Thenew setup of Chief-I, Chief-IIand Chief-III is likely to replaceto abolished posts of FBRMember Domestic OperationsNorth and South.

Sources stated that the FBRdiscussed various options toincrease revenue collection inthe remaining months ofcurrent fiscal. The FBR

Members gave differentsuggestions to improverevenue collection. It wasagreed to focus on recovery ofarrears and expedite pendingcases at the level of judicialfora including Tribunals, HighCourt and Supreme Court ofPakistan. It has been furtherdecided that strict monitoringand enforcement of sales tax isvery important for increasingrevenue collection.

The Board-in-Council alsodecided to take action againstover 10 lakh non-filers of

income tax returns under theIncome Tax Ordinance 2001.The FBR has decided to givemonthly targets to the RegionalTax Offices (RTOs) to enforcefiling of returns. This would notonly result in broadening thetax-base, but also beinstrumental in improvingrevenue collection.

The Board-in-Council alsodecided to take action againstaround 40,000 non-compliantwithholding agents who havefailed to file their returns orstatements. The FBR will assigntargets to the field formationsand failure would result inaction against the concernedofficials in the RTOs. The FBRhas also decided to take actionagainst the non-filers of salestax return (December 2010),who failed to file returns inJanuary 2011. The FBR willissue e-intimations to the non-filers for legal action againstthem by the respective RTO.

Sources said that the Board-in-Council meeting chaired byFBR Chairman Salman Siddiquishowed its commitment toreach the original budgetaryrevenue collection target of Rs1667 billion. It has beencommitted to surpass thedownward revised revenuecollection target of Rs 1604billion and efforts would bemade to achieve the originaltarget of Rs 1667 billion for

2010-2011.

During Board-in-Council

meeting, FBR MemberLegal gave an in-depthanalysis on the restructuringof the Legal Wing. Thepresentation focused onproblems in dealing withdifferent issues under theexisting structure of theLegal Wing of the FBR. Ithas been proposed to equipthe legal Wing with two FBRChief Legal to exclusivelydeal with the cases of theFederal Tax Ombudsman(FTO) and other cases atthe level of courts. In theabsence of necessaryworkforce under the FBRLegal Wing, the departmentis facing problems ineffectively dealing with thelegal issues. In case FBRwill provide Chief Legal tothe Wing, Secretaries andSecond Secretaries wouldalso be provided to the FBRLegal Wing for properworking of the Board.

The Board-in-Council alsoappointed Riffat ShaheenQazi, Member Facilitationand Taxpayer Education(FATE) of FBR as officialspokesperson of the FBR.At the same time, the FBRhas also appointed AsrarRaouf Additional Secretary,Revenue Division as officialspokesman of RevenueDivision. The Boar-in-Council also authorised theFBR Member IR and FBR

Member Customs to interactwith the media in relation tothe respective field/area.


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Automatic clearance of ST refund: FBRintroduces new provision in ERS

RECORDER REPORT

ISLAMABAD (February 04, 2011) : TheFederal Board of Revenue (FBR) hasintroduced a new provision in the ExpeditiousRefund System (ERS) for automatic clearanceof sales tax refund under no objection to avoidblockage of claims under the electronic system.In this regard, the FBR has amended the Sales

Tax Rules 2006 through an SRO.82(I)/2011here on Thursday.

According to the notification, the refund claims

shall be processed by Risk ManagementSystem (RMS) of FBR IT system within twoworking days of electronic submission of refundclaim in the 'RCPS format'. The system willautomatically clear the amount under noobjection. The electronic advice will be issuedto the Centralised Sales Tax Refund Office

(CSTRO) and the registered person about therefund amount cleared by the RMS forpayment.


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Pakistan's foreign exchange reserves riseto record $17.38 billion level

RECORDER REPORT

KARACHI (February 04, 2011) : The country'stotal liquid foreign reserves reached at highestever level of 17.38 billion dollars because ofhuge remittances sent by overseas Pakistanis.According to the State Bank of Pakistan (SBP)that country's total liquid foreign reserves haveposted an increase of 86.1 million dollars to

17.386 billion dollars on week ended January29, 2011 from 17.30 billion dollars a weekearlier.

The raise was witnessed in the reserves held

by SBP, which have reached about 14 billiondollars level. Reserves held by SBP increasedby 112.2 million dollars to 13.85 billion dollarsduring the last week as compared to 13.739billion dollars a week earlier. However, foreignexchange reserves held by banks havewitnessed a decline and were down by 26.1

million dollars during the last week. Withcurrent decline, overall foreign reserves held bybanks declined to 3.534 billion dollars ascompared to 3.561 billion dollars last week.


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SBP report confirms fearsEDITORIAL (February 04,2011) : State Bank's quarterlyreport released on 2ndFebruary, 2011 has confirmedonce again fears thatPakistan's economy continuesto be in a very poor shape andany "further delay inimplementing critical structuraladjustments risks significantly

increasing the future costs tothe economy."

Persistent energy shortages,growing arrears of energypayments together with weakconsumer and businessconfidence have taken their tollon the domestic economy,which is now projected to growonly in the range of 2 to 3percent, as compared to theannual plan target of 4.5percent and actual growth of4.1 percent during FY10.

Given the outstanding issueswith expenditure managementand revenue shortfall, fiscalperformance also continues toremain a source of concern. Alarge part of increase in thefiscal deficit was explainable,being a consequence of highersecurity-related expendituresand the floods, but a largercontribution to the fiscalweakness came fromsignificant weaknesses in

revenues.

A variety of tax reforms havebeen suggested to improve thefiscal situation, including themuch-maligned RGST, wealthtax, agri-income tax, capitalgains tax and improved taxgovernance but, according tothe SBP, such a controversywas unnecessary "as arguablyall of these proposals shouldbe implemented to ensurewidening of the tax base."

These reforms will induce cost-push inflationary pressures in

the economy in the short run,but would help sustain highgrowth in the long run. A majorworry for the State Bank wasthat larger fiscal deficit, non-availability of non-bank financeand a reluctance to borrow fromthe market by the governmentwas contributing to themagnetisation of deficit.

As a result, it was thegovernment sector that haddominated the 15.94 percentYOY M2 growth during thecurrent year so far. Growingexposure of banks togovernment-related lending hasalso led to a downgrading offive major banks by Moody's.

Inflationary pressures too havestrengthened more thananticipated during the first halfof FY11. Although post-flood

shocks will fade away, "thefiscal expansion, proposedreduction in energy subsidiesand prospects of rising importedinflation will continue to driveinflationary expectations.

Consequently, SBP estimatesfor FY11 have been revisedupwards from 13.5-14.5 percentto 15.0-16.0 percent."Nonetheless, the State Bankwas not in favour of directgovernment intervention as it

would lead to marketdistortions. The external sectorsituation also looks grimmerdue mainly to an expected fallin flood-related receipts,increase in internationalcommodity prices, especially forenergy and uncertainty aboutcapital and financial accountreceipts.

Financing problem of ananticipated current accountdeficit will put pressure on thecountry's forex reserves andcould increase volatility in theexchange rate. We feel that a

pessimistic view of theeconomy, as projected bythe State Bank, is a truereflection of the unfoldingsituation that is really direand should serve as awarning to the authorities tomake extra efforts to stopthe rot before the gatheringstorm becomes a deadly

tornado.

It needs to be mentioned,nonetheless, that in theunique context of Pakistan,one could now also includethe leaders from theopposition parties in thecircle of authorities due totheir newly assumed powerof overruling thegovernment's policy plans,making the task of policy-making of the countrydoubly tedious and

cumbersome.

Anyhow, the State Bank hasrevealed nothingextraordinary in its quarterlyreport, but followed its scriptof analysing the economicparameters based onreasonable assumptions. Itsestimates, like most of theother analysts, indicate veryclearly that most of themacroeconomic targetsfixed in the beginning of the

year are likely to be missedby a sizeable margin.

At a projected growth rate ofonly between 2 and 3percent, the economy wouldnot be able to generate thelevel of employment neededto absorb the surplus labourforce and the standard ofliving of the ordinary peoplewould not improve due to astagnation in the per-capitaincome.

The rate of inflation, whichwas projected to be in single


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RECORDERdigit, is now estimated to bearound 16 percent. Althoughthe data on poverty is not yetavailable, it is definitely goingto increase since a largenumber of people in thecountry were already living onthe margin and factors likeincreasing inflation andunemployment would worsentheir plight further.

Regrettable though it may be,but a combination of suchnegative developments couldincrease the level of frustrationin the society and stokelawlessness and chaos in thecountry. Early signs of suchdisquieting events are alreadyvisible in some urban areas ofPakistan.

Unfortunately, the PSDP andincreased availability of privatesector credit, which could serveas a driving force to acceleratedevelopment and absorb theincreasing levels of the labour

force entering into the market,have both been direct victimsof a marked deterioration in thepublic finances of the country.Most of the ills of the economycould only be removed bypruning expenditures,increasing revenues andbridging the gap in the fiscalposition of the country to areasonable level, but it iseasier said than done.

One area, which was a source

of some comfort, was animprovement in the external

sector account during the firsthalf of FY11. Due to a variety offactors, such a turnaround,according to the State Bank,may also not be sustainable.Against this perspective, it isthe considered view of the SBPto continue with the structuralprogramme of the IMF to softenthe external financialconstraints, as well as toenhance the resilience androbustness of the economy.

This is a very well-judgedremark of the State Bank on thecurrent economic situation but,given the present level ofresentment against the IMF inthe country and a number ofviolations in the conditionalitiesunder the existing SBA,whether such a proposal wouldbe really implemented or usefulis anybody's guess.

Also, the State Bank has rightlylinked the manageability of thegrowing macroeconomic

imbalances with implementingthe agenda of critical structuraladjustment reforms. Such a linkis of course of paramountimportance but thedevelopments during the yearshow that it is nearly impossibleto tread such a path due toconsistent resistance by thegroups with vested interestsand the opposition parties, whoare bent upon browbeatinggovernment and preservingtheir own interests.

The imposition of the RGST,

which could have been avery useful tool to documentthe economy and broadenthe tax net, remains mired incontroversy and the practiceof fixing domestic oil pricesin line with the internationalprices, has been abandonedfor the time being. Nobodyis now talking about takingmeasures to raise revenuesor reduce subsidies.

On the other hand, thewhole emphasis seems tobe on getting more facilitiesor relief from the presentgovernment. Theparliamentaryrepresentatives, who weregiven the task of forging aconsensus on variouseconomic reforms are notmaking satisfactoryprogress, but only adding tothe fiscal problems of thecountry by postponingcertain crucial decisions.

In this kind of situation, wesee only little hope of thefaithful implementation ofthe necessary reformagenda, on which theimprovement in key areas ofthe economy depends. In allprobability, therefore, thenext quarterly report of theState Bank will also notreveal any good news. Thiswould, of course, be sad butthe destiny of nationsdepends on taking the right

decisions at the right time.


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Mounting debt burden and wastefulspending

HUZAIMA BUKHARI AND DR IKRAMUL HAQARTICLE (February 04,2011) : Ostentatiously lavishliving, wasting and plunderingpublic money, misuse ofpowers, disrespect towardsrule of law, insatiable greedcoupled with rampantcorruption, apathy towards thepoor and needy, inefficiencyand incompetence - just tomention a few-are the well-known traits of our rulers(both military and civilianalike) and governmentofficials - there could be somenotable exceptions.

The word 'austerity' is not inthe dictionary of our politicalleaders, high-level civilmilitary bureaucrats, publicoffice holders and evenprivate individuals, who areenjoying little affluence. The

habit of living beyond means -some called it our nationaladdiction - has made us anation with a beggar's bowl.When foreign lenders see thelifestyle of our ruling elite, theyimmediately show indignation- it is hard for them to believethat the rulers of a nation,living on borrowed funds,have such flamboyant ways ofspending.

The country's total foreign anddomestic debt at the

beginning of 2011 hastouched the dangerous markof almost Rs 11 trillion - thedebt-to-GDP ratio rising to 74percent from 64 percent inJanuary 2010. Thegovernment is continuouslyborrowing heavily to meet itsburgeoning budgetary deficit.According to the State Bankof Pakistan, domestic debtincreased to Rs 4.958 trillionby September 2010, from4.018 trillion in September2009.

The external debt of thegovernment increased to Rs

3.864 trillion in September2010 from Rs 3.656 trillion inSeptember 2009. BySeptember 2010, the foreigndebt was $58.41 billion asagainst $55.62 billion in June2010, showing an increase of$2.79 billion in three months.

By the end of 2010, ourdomestic debt went up to Rs5.50 trillion as a result of thegovernment's insatiableborrowing quest. InSeptember 2010, domesticdebt and liabilities were of Rs5.191 trillion, which registeredan increase of Rs 306 billionin just three months.

During 2009 to 2010,domestic debt showed analarming growth of Rs 1.05trillion. In December 2009,

domestic debt/liabilities stoodat Rs 4.447, trillion rupees,which increased to Rs 5.5trillion by December 2010.Today's Pakistan represents aState where a trio of corruptcivil-military bureaucrats,crooked politicians and profit-hungry businessmen is veryaffluent, but the Governmentis on the brink of bankruptcy.

This state of affairs is thedirect outcome of the state'spolicies of allowing a free

hand to forces of loot,corruption and terrorism. Noother state in the world hasundergone such a horribleexperience. Clearly, Pakistanirulers have destroyed theState through corruption andincompetence. Unfortunately,foreign-trained Pakistanieconomists (sic) have allalong been defending andserving political masters,instead of advising theconcerned quarters to enforcefinancial discipline and better

financial management.In our last week column, weraised the point why we have

failed on the economic frontdespite the many foreign-trained economists. We havereceived the following replyfrom a noted economistworking in Washington withthe US Treasury Department:

"Great economists and noprogress! What is missing?Perhaps you do not needeconomists like these butpolitical economists. Theseguys are technicians, morallybankrupt, and add numbers.Apply this in your microscopicanalysis. For example [nameis omitted by us] never paidback his scholarship dues tothe Pak government, which heowed, [name is omitted by us]struts around saying that hetaught at Harvard while it wasat Howard U at DC, no one

would hire him in the US.[Name is omitted by us] is aCPA not an economist, [nameis omitted by us] is anaccountant who sold his soulto the PML-N and on andon...[name is omitted by us] isa pedestrian".

One of the major weaknessesof governance in Pakistan isunchecked wasteful spendingand unwillingness to collecttaxes from the rich andmighty. The worsening plight

of the poor is not due toscarcity of resources-aspropagated by the rulers toshift the blame on to others -but is due to the wastefulexpenses on the part of therulers and their mediocrebureaucracy.

Wasteful spending out of thetaxes collected from the poorand unwillingness to harnessthe real potential of Rs 4trillion by taxing the rich isplaying havoc the with

economy as well as the socio-economic fabric of society.Behind the present chaotic


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RECORDERsocio-economic and politicalsituation in Pakistan, amongstother factors, is an ever-widening gulf between the richand the poor.

It is shocking that with everypassing day, more and morepeople are being pushedbelow the poverty line - theirtotal number is now not lessthat 45 million in a countrywhere rulers unashamedlywaste billions of rupees ontheir personal comfort and inthe name of security.

In the fiscal year 2009-10, thetotal tax revenue collected byFederal Board of Revenue(FBR) was around Rs 1300billion. The Federalgovernment showed totalreceipts (both tax and non-tax) at Rs 2426.7 billion.Expenditures - current plusdevelopment - were Rs 6040billion, out of which non-development outlays were tothe tune of Rs 3,746 billion.

Debt servicing alone has risento Rs 950 billion frombudgeted amount of Rs 780billion. For the financial year2009-10, a cursory look at theAnnual Budget Statementreveals a disturbing story.Analysis of two sizeablevolumes, prepared andpublished by FinanceDivision, Ministry of Finance,commonly called the "PinkBook", shows how publicmoney is wasted onunproductive, unnecessary

and monstrous federalgovernment offices whenmillions of people arehomeless and starving.

The details of the expenditureincluded in this publicationcaptioned "Details ofDemands for Grants andAppropriations" are simplyhorrifying. We have over 50Ministries and 135 Divisions,sub-Divisions, attachedoffices and allieddepartments.

In the budget 2009-10, thegovernment demanded just

Rs 400,000 for the adoption ofUrdu language as the officiallanguage [Page 11, Volume I,Pink Book], whereas for traveland transportation of FederalMinisters alone total allocationwas that of Rs 47,044,000[Page 10, Volume I, PinkBook]. Total money given tothe apex court was Rs354,500,000, whereas theentertainment the expenditureof the Prime Minister andPresident House was over Rs220,700,000!

The budget sanction of theMeteorology Department isRs 417,000,000, the Councilof Islamic Ideology Rs52,280,000 and the ModelDeeni Madaris Rs 29,287,000- their contribution towards thepublic hardly justifies suchspending. On the contrary, thetotal money spared for theScientific and TechnologicalDivision of Ministry of theScience and Technology is just Rs 298,838,000 and thattoo not for research but for

operational expenses. It is anational shame to the notethat total budget of this vitalMinistry is only Rs3,076,070,000, out of whichnot a single penny isearmarked for researchprojects.

Details for demands providedin 'Current Expenditure'(Volume I) and 'DevelopmentExpenditure' (Volume II) ofthe Pink Book confirm beyonddoubt that billions of rupees

are being wasted in the mostruthless manner. The thenSecretary to the Governmentof Pakistan, Salman Siddique[now Chairman FBR], in hispreface to this book observed:"For the day-to-day working ofthe ministries and theirdepartments, this documentbecomes the basic referencepoint for expendituremanagement and control."

In the name of "control" and"management", the Auditor

General of Pakistan observedin his annual report, all rulesand regulations were blatantly

violated and the nationalexchequer suffered the loss ofbillions of rupees. Yet nobodywas convicted - rather, theworst offenders got pardonunder the infamous NRO(National ReconciliationOrdinance - what a misnomerwherein cases of looters ofnational wealth werewithdrawn in the name ofpolitical expediency).

The following examples foradditional grants, taken fromthe Pink Book, are not only aneye-opener but also testify tothe wasting and plundering ofpublic money by politiciansand bureaucrats:

-- Prime Minister's Secretariatgot an additional grant of Rs76,656,000 for establishingcamp offices at Lahore andMultan for the Prime Minister.At both places, we alreadyhave palatial governmentbuildings, yet the PrimeMinister of this starving debt-enslaved nation wants to

spend millions more foraristocratic, high-born, grand,exclusive camp offices!!!

-- Special grant (in addition toregular budget) of Rs300,000,000 was given fortransfer of Special InitiativeWing to Cabinet Division - onewonders whatever is the needof this wing!

-- Cabinet Division gotsupplementary grant of Rs22,000,000 for the Central

Pool of Cars for Ministers,State Ministers etc. They arenot ready to improve and usethe public transport system.Further grant of Rs,21,063,000 was given toCabinet Division to meet theshortfall of funds in the MainSecretariat.

-- Rs 15,000,000 wassanctioned by the NationalAssembly as additional grantto the "publicity campaign" forthe Prime Minister's Special

Fund for victims of terrorism.Do we need publicity for sucha cause!!


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RECORDER-- The inefficient andincompetent NAB - asadjudged by the apex Court -has got Rs 55,804,000 inaddition to regular budgetgrant just to meet shortfall inbudget of NAB, Islamabad. Italso managed to getsupplementary grant of Rs22,064,000 to receive its"shares in recoveries"(Islamabad office alone). Thisis a unique governmentagency that gets a share inrecoveries - even though itsprime duty and function is torecoup such losses - whereasall its expenses are also metfrom the taxpayers' money.The extra grants that NAB hasextorted in budget 2009-10from taxpayers' money for itsmany other offices are: Sindh(Rs 35,094,000), Punjab (Rs34,997,000), NWFP (Rs23,967,000), Balochistan (Rs12,692,000), Rawalpindi (Rs23,020,000) and Gilgit (Rs687,000).

-- Under Demand No 025[Defence Services] a hugesum of Rs 13,612,717,000has been sanctioned underthe title "Essentialrequirement of DefenceServices" but no descriptionsin terms of items have beengiven.

-- Defence Production Unit(demand No 26) depictsadditional grant of Rs1,761,196,000 for debtservicing of a loan. The

details of loans, the purposefor which it was acquired etchave not been disclosed.

The above list, illustrative ofsome wasteful expenditure, isby no means exhaustive. It isindicative of the priorities ofour rulers. They are spendinglavishly by borrowing moreand more money.

The figure of foreign debt isgoing to be US $75 billion in2015 and that of domestic

debt Rs 8 trillion. Bothexternal and internal debtsare increasing at a frightening

rate. The way we aremanaging our resources (notexploiting them or wastingmercilessly those alreadyavailable) is criminal and isleading us to self-annihilation.

Fiscal deficit of over Rs onetrillion is expected during thecurrent fiscal year. Thistestifies to the bankruptcy ofour political leadership andthe IMF-imposed economicmanagers, who keep onrelying on an incompetent andcorrupt bureaucracy. Theyalways take the first flight toWashington when things goout of hand.

The policy of appeasementtowards tax evaders, moneylaunderers and plunderers ofnational wealth is showing itsimpact in all spheres: thepolitical culture of changingloyalties continues, the nationis in despair and all sectors ofthe economy are showinghorrible indicators. In thisbleak scenario, our political

leaders have no definitiveplans for coming out of thesecrises.

Nothing will change unlessrulers start living like commonpeople; within their means.They are not ready tosurrender the extraordinaryperks and privileges enjoyedby them at the cost of thetaxpayers' money. In ademocratic set-up,responsibility towards thepeople who voted for the

parliament and accountabilityare interconnected.

The concept of modernegalitarian state emergesfrom the sovereign right of theParliament to levy taxes[Article 77 of the Constitutionof Pakistan]. But at the sametime it has to spend the samefor public welfare rather thanfor personal comfort and self-aggrandisement. The secondpart of democracy iscompletely missing in

Pakistan.

When half of the population of

the country is facingmalnutrition, the shamelessindulgence of rulers andbureaucrats in wastefulexpenditure continuesunabated. Look at their gaudylifestyle when people arecommitting suicide due tostarvation.

The grim truth of Pakistan isthe habit on the part of therulers and their lackeys toindulge in self-deception byrelying on foreign masters,self-praise and self-perpetuation at time of criseswithout realising howdisastrous these acts can be.This is certainly a ruinous andsuicidal path. We cannotcome out of debt-enslavement, which is themain cause of oursubjugation, unless we firstbecome an economically self-reliant nation.

For this, the President, PrimeMinister, ministers,parliamentarians, heads of

political parties and high-ranking government officialswould have to take the firststep by living at very modestlevels, start paying their taxes,bring all their foreign assetsback, and then mobilise themasses for struggle to take agreat economic leap forward.(The writers, tax lawyers,are Adjunct Professors atLahore University ofManagement Sciences)


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Friday, February 04, 2011Page No.17

Third picking may not resolve cotton

crisisBy Parvaiz Ishfaq RanaKARACHI, Feb 3: The unusual

sustained flow of phutti (seedcotton) from cotton fields into

ginneries during the ongoingthird and last picking may not

altogether resolve raw cottonshortage but to a greater extenthelp narrow down demand and

supply gap. Historically firstpicking results in harvesting of

around 60 per cent of cottoncrop but this season officialfigures disclose that the third

and the last picking is going onat much higher pace than

normally witnessed, cotton

analysts said.At the start of current cottonseason (2010-2011), theproduction gap stood at 22 percent over the corresponding periodlast year. However, on improvedarrival of phutti during last threeconsecutive fortnights it has nownarrowed down to 11.26pc.According to official figures,phutti arrivals during the lastfortnight ending February 1, 2011

was higher by 70,988 bales over

the corresponding period lastseason.In total, 344,259 bales of phutti arereported to have reached ginneriesduring this period as against273,271 bales in the same periodlast year.Even then the overall cottonproduction during period underreview stood less at 11.104 millionbales or 11.26 per cent comparedto 12.513 million bales produced inthe corresponding period last year.This means that the country is stillshort by 1.408 million bales against

last year production.Both the cotton producingprovinces Sindh and Punjabcontinue to show short crop by11.22 and 11.34 per cent at 7.390mand 3.713 million bales,respectively.Details of production figuresdisclosed that the Punjab has so farproduced 0.934 million less cottonover the corresponding period last

year when production stood at

8.324 million bales.Similarly, Sindh cotton cropharvesting stood short by476,163 bales over 4.198million bales produced in thesame period last year.Cotton analyst Naseem Usmansaid that spinners will have toget contracted Indian cotton ifthey want to see the currentseason through. He further saidthat around 2.5m bales will stillbe needed by spinners to keeptheir units running till thearrival of new crop.

Spinning industry haspurchased around 9.906million bales so far as against10.907 million bales lifted bythem in the same period lastyear. Exporters have purchased473,656 bales compared to794,348 bales last year.Ginners are currently holdingaround 723,943 bales of unsoldstocks compared 810,900 baleslast year.


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Soaring lint prices to benefit textile millsBy Our Equities CorrespondentKARACHI, Feb 3: In the off-market dealstowards evening on Thursday, prices of

cotton had soared to Rs12,200 per maund,while earlier in the day, the local cottonexchange posted day`s closing price at

Rs11,800 per maund. Either way the cottonis blowing up in the sky.Amreen Hirani, analyst at InvestFinance,observed that the price of cotton had breachedthe barrier of $2.12 per pound in theinternational market with Cot look-A indexclosing at $2.01 per lb. All of that representedhuge leap of 18 per cent in just over a monthsince start of 2011.In spite of local prices reaching for the skies,it still trades at discount of 21 per cent to theinternational prices, the analyst calculated.Major textile mills in the country were

enjoying inventory gains due to cottonpurchased earlier at almost 35 per cent cheaperprices than those prevailing at the moment.Another analyst observed that bigger millsprocure cotton in the months betweenSeptember and December. For such mills, hesaid, it was a win-win situation, for they couldspin yarn, make cloth or even sell the stock athigher prices and make windfall gains.Amreen reported that the recent price hike waswitnessed due to the correlation withinternational price that escalated on account ofhuge crop loss in Pakistan and China due toweather conditions; export ban in India andfinally, active trading at CNCE (China CottonExchange).

The analyst pointed out that for a long time thestory of India`s ban on exports was disturbingthe local spinners in Pakistan who had bookedcotton orders of one million bales but had onlyreceived a quarter of the order to date. In spite

of India having the potential to export 10million bales, delay in release led to assumethat India was waiting for still higher prices.The undecided exports of cotton from Indiawas pushing local merchants to wait for theraw material that was booked on cheaperprices earlier and letting the inventory gainthey could have earned go.Finally a meeting that took place between thepresident of India Cotton Association and theadvisor of Textile Ministry concluded onagreement to send Pakistani importers`delegation to the neighbouring country.

The analyst says that the profitability of thePakistani textile industry tends to improve withhigher cotton prices as operating marginsmove in lockstep with prices.However, the current sky high cotton pricerepresented a predicament for the industry asdespite enjoying robust margins and exports,total production of both cotton cloth and yarnhad slipped by two per cent and 12 per centyear-on-year respectively during 5MFY11,while reversal of the cotton price trend couldeasily result in significant inventory losses forthe sector.A cotton trader observed that the benefit ofbuying cheaper cotton a couple of monthsearlier by bigger textile mills could result inproviding them with a one-time inventory gain.


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Lint prices steady amid brisk buyingBy Our Staff ReporterKARACHI, Feb 3: The cotton market onThursday maintained a bullish outlook but

prices remained stable around the overnightlevels and did not follow the fresh speculativesurge in the New York future contracts.

About 15,000 bales changed hands in the readysection and most of them were sold around theprevious levels, while some inferior lots were tradedas lower as Rs10,200 and fine lots at Rs11,500 permaund.The New York futures for both the matured Marchand the ruling May contracts soared to their career-best level of 176.22 and 171.00 cents per lb, up withlimit-gain of four cents.Analysts said reports that the China was corneringall the floating stocks on the global marketsincluding New York futures, which continued tofuel price flare-ups elsewhere.China, they said, needs massive quantity of bothcotton yarn and lint to feed its large textile industry

and its entry into the foreign markets always causesprice flare-ups on the other markets.

The contributory factor is short crop in some of theleading cotton producers including Pakistan andsuspension of exports by India, they added.Therewas, therefore, official spot rates were firmly held atthe last level of Rs11,000 per maund.

The following are some of the deals reported by theKarachi Brokers Forum.SINDH TYPE: 1,000 bales, Upper Sindh atRs11,500, 400 bales 800 bales, Kumb andMehrabpur at Rs10,900, 400 bales each Khadro andNayabad at Rs10,800.PUNJAB VARIETY: 1,200 bales, Haroonabad atRs10,400 to Rs10,900, 600 bales, Faqirwali atRs10,400, 800 bales, Vehari at Rs10,500 toRs11,000, 200 bales, Multan at Rs10,725,800 bales,Bahawalpur at Rs10,800 to Rs11,000, 800 bales,Pul Baghar, at Rs10,800, 400 bales, Duyniapur atRs11,200, 400 bales each, Khanpur, Tounsa Sharif,800 bales, Rahimyar Khan, 600 bales, Lodhran and1,400 bales, Liaquatpur at Rs11,500.


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Date: 04-02-2011 Page No:16

$22b expor t tar get to be achievedBy: Imran Ali KundiISLAMAABD - Declaring 2011 as export year, Commerce Minister Makhdoom Amin Fahim Thursday said that thecountrys export would surpass the targetof 10 per cent increase and would go to $22 billion during the current fiscal year2010-11.Exports grew by 21 per cent in the first sixmonths (July-December) of this fiscal yearwith textile sector leading the growth withan increase of 25 per cent. We areexpecting that this trend will continue inthe following months and we will surpassthe export target of 10 per cent increase forthe year 2010-11, said Fahim whileaddressing a press conference on StrategicTrade Policy Framework 2009-2013.Secretary Commerce Zafar Mahmood onthe occasion said that the government would add further eight items for trade with India, and in this regard a list ofcommodities had been sent to theEconomic Coordination Committee (ECC)of the Cabinet for approval. However hedid not specify the eight items.Meanwhile, the government decided toinclude seventeen other items in the tradelist of the country. Zafar Mahmood saidthat Pakistan was in a position to exportwheat and the government would increasethe exports of vegetables, fruits, meat anddairy products after their value addition.The government decided to constituteFederal Export Development andPromotion Board, which would berepresented by the officials of provincialgovernments and private sector apart from

representatives of the federal agencies, hesaid and added that this board would giveproposals and suggestions to enhance theexports, and Trade Development Authorityof Pakistan (TDAP) would implement theproposals.The secretary commerce further said thatUS delegation had assured Pakistan that bill of Reconstruction Opportunity Zones(RoZs) would be approved from the American Congress this year. MeanwhilePak-Afghan Transit Trade would befunctional from February 12. Pakistan would mainly focus on trade with China,adding Beijing had agreed on the tariff lineconcession on 286 items for Pakistaniexporters. Amin Fahim said, The Prime Ministerassured us that finance ministry willrelease funds for commerce ministry toincrease the exports under Strategic TradePolicy Framework 2009-2013. The financeministry did not release a single penny while it had to give Rs 27 billion in three years. The secretary commerce on theoccasion said that commerce ministryneeded Rs 5 billion on urgent basis.On a question, the commerce minister saidthat decision of importing used cars wouldnot affect the local auto industry. Theprices of cars were enhanced becausespare parts prices went up in theinternational market, he further added.The ministry of commerce would also givea detailed briefing to the Cabinet on 9thFebruary 2011 regarding its future plan.

cotton pricess

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