Pakistan Daily Economy Update - 18 November

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1. Nov . 18, 2016 KCCI - eBulletin FTA with Turkey by next year: Prime Minister Prime Minister Nawaz Sharif has said that Free Trade Agreement (FTA) between Pakistan and Turkey would be finalized by 2017 and it would further enhance bilateral trade between the two countries. The two countries have also agreed to increase trade, investment and commercial cooperation as Pakistan and Turkey are indispensable partners. BR. Turkish businessmen urged to invest in CPEC projects In a Pakistan-Turkey Investment Round Table, organized by the Board of Investment (BoI), Chairman BoI has said that Pakistan is offering a very liberal investment regime in the region with diverse and business friendly incentives. The round table was attended by President and CEO's of 30 multinational Pakistani business circles and around 20 prominent business delegations from Turkey along with Pakistan Prime Minister Nawaz Sharif and Turkish President Recep Tayyip Erdogan. In the conference; the Turkish President also urged the Turkish businessmen to invest in CPEC projects of Pakistan. BR. Pakistan seeks Turkey’s help for tax reforms Finance Minister Ishaq Dar said during a meeting with the visiting Turkish deputy prime ministers that Pakistan is seeking Turkey’s assistance to improve the country’s tax system and address low tax-to-GDP ratio. He said that cooperation efforts are already being undertaken at the appropriate level to draw lessons from the Turkish taxation model. Deputy Prime Minister Yildirim Tugrul Turkes said that Turkey has undertaken tax reforms in a business-friendly manner and they will be happy to assist Pakistan in any way possible with its tax reforms. The News. Low private sector investments, savings: SBP report sets off alarm bells In its annual report on the State of the Economy 2015-16, the State Bank of Pakistan has suggested that higher private sector investments and savings are needed to be accelerate "to keep pace with required investible resources. In its report; the SBP has stated that public sector investment is increasing despite resource constraints, investment by the private sector has not increased sufficiently. This has inhibited the country's potential growth. This situation cannot be remedied, unless private sector comes up with attractive savings schemes in the areas of pensions, provident funds, gratuity, and old age benefit schemes. Targeted marketing of such schemes particularly in rural areas is also interpretative, says the report. BR. $ 118.3Bn lost to war on terror in 14 years: SBP The State Bank of Pakistan (SBP), in its annual report “State of Pakistan's Economy” has said that the country suffered direct and indirect losses from terrorism to the tune of $ 118.3Bn during 14 years (FY02 to FY16). The report states that due to terrorism, foreign investors shied away from the country, while domestic investors adopted a wait and see stance. In addition, exporters were unable to fulfil their orders due to disruptions in supply chains, among other reasons and a general slowdown in intra-country trade was also witnessed. It has been further stated in the report that losses due to war on terror are almost double the level of Pakistan's external public debt. BR. Economy faces serious challenges: SBP Pakistan has been facing serious challenges, including low savings and investment levels, falling exports, poor spending on the social sector and reliance of the tax structure on stopgap measures that have created distortions in the economy, according to the State of the Economy 2015-16 report released by the SBP. The report further highlighted that Pakistan needs to increase its savings and investment levels. Although public investment is increasing despite resource constraints, investment by the private sector has not increased sufficiently, adding that this has inhibited the country’s potential growth. Dawn. SBP projects growth at 5-6% for 2016/17 SBP has projected the GDP growth at 5-6% for FY17, betting on an expected revival of agriculture and industrial sectors. The major contributions to this increase are expected to come from a recovery in agriculture sector and further increase in industrial activity, whilesl the services sector is to maintain the growth of the previous year, according to the annual report issued by SBP. The State Bank projected budget deficit in the range of 4 to 5% in FY17, higher than the govt’s target of 3.8%. Last year, the deficit was 4.6%. The News. Govt. snubs tax amnesty for real estate sector The govt. has ruled out a possibility of granting any tax amnesty to the real estate investors. However, the govt. is said to be weighing various proposals regarding tax amnesty forwarded by the realtors and lawmakers to bring undisclosed property investments into the tax net. It was proposed that an investor might pay 2 to 3% taxes on the amount of difference between declared cost and actual cost. And, that would be so only if a property is sold within 5 years. Another proposal suggested a 3% fixed tax on amount of difference between collector and market values on property sale every time. The News. Pakistan eyes $ 150Mn after direct-to-home broadcast license bidding Pakistan is expected to attract direct investment of at least $ 150Mn after bidding for three direct-to-home (DTH) broadcast licenses. PEMRA has disclosed that 12 companies, including three foreign operators as part of local consortiums, have been shortlisted to bid for three DTH licenses. The licenses would be valid for 15 years. Terming DTH a game-changer for the electronic media industry in Pakistan, the official said it would offer quality services and a wider range of choice to consumers and a lucrative revenue source to the economy’s managers. Dawn. Railways acquires 71 acres of land in Gwadar to expand operations The Pakistan Railways has acquired 71 acres of land in Gwadar from the Balochistan government to expand its operations to the port city with emphasis on projects under the China-Pakistan Economic Corridor (CPEC). Minister for Railways has informed that arrangements were being made to pay PKR 130Mn dues to the Balochistan government for the purchase of 71 acres of land. He further said that the feasibility study on laying tracks between Gwadar and Bisma would be finalized by Feb‘17 when a technical report on the alignment of tracks would be ready. Dawn. Technology transfer: Chinese make way for new construction technology Chinese investors have expressed keen interest in building a mega mall that will house modern construction equipment and enable transfer of modern construction technology to Pakistan. The investors have said they were utilizing solar and geothermal energy in building structures that maintain comfortable temperatures, both in summer and winter seasons. Tribune. Govt. paid PKR 65Bn in markup on financing for power firms The govt. has paid PKR 65Bn in markup on the PKR 136.45Bn syndicated term financing facility taken to repay debt of state-owned power distribution companies. The interest was paid from the revenues collected by the distribution companies from power consumers in the shape of debt servicing surcharge. The MoF would provide govt. guarantees for repayment of the loan as well as bearing interest expenses. Tribune. Forex reserves drop to $ 24Bn Pakistan’s foreign exchange reserves declined by $ 58Mn to $24.09Bn during the week ended on 11th Nov’16, down from $ 24.15Bn a week ago. The foreign exchange reserves held by the SBP fell to $ 19.02Bn from $19.07Bn in the previous week. The reserves of commercial banks stood at $ 5.06Bn against $ 5.07Bn during last week. The News. Economic Indicators Date / Period Unit Value USD-Interbank List of Indicators 17-Nov PKR 104.84 Change Daily 0.03% USD-Open MKT 17-Nov PKR 106.30 -0.28% KSE-100 index FIPI 17-Nov 17-Nov Pts. $ Mn 42,412 -12.68 0.02% NM** Crude (DE'16) 17-Nov $/bbl 45.57 -0.93% Gold (DE'16) 17-Nov $/oz 1,216 -1.02% Gold (10g) Local 17-Nov PKR 43,800 0.20% Silver (DE'16) 17-Nov $/oz 16.65 -1.72% Cotton(KHI)-40 kg 17-Nov PKR 6,682 1.63% Kibor-6M 17-Nov % 6.09% -0.01% Forex Reserves 11-Nov $ Bn 24.09 -0.26% Remittances Jul-Oct 16 $ Bn 6.26 -3.82% Exports* Jul-Oct 16 $ Bn 6.43 -6.60% Imports* Jul-Oct 16 $ Bn 15.75 8.01% Trade Balance* Jul-Oct 16 $ Bn -9.32 -21.07% Current Account Avg. CPI-FY17* Jul-Sep 16 Jul-Oct 16 $ Mn % -1,368 3.95 -136.27% WoW YoY Oct-16 Discount Rate % 5.75 Sources: KCCI Research, PMEX , NCCPL, KSE, SBP, PBS* ** Not Meaningful WoW= week on week; YoY=Year on Year Major Currencies 175 165 155 145 GBP, 17-Nov-16, 130.4 135 125 115 EUR, 17-Nov-16, 112.0 USD, 17-Nov-16, 104.8 105 95 85 75 Nov-15 Feb-16 USD May-16 GBP Aug-16 Nov-16 Source: KCCI Research ; Oanda.com EUR Quote of the Day "You cannot have a positive life and a negative mind." Joyce Meyer Chart of the Day Net FDI Received in Pakistan's Top 10 Sectors (4MFY17) Power 254.96 Financial Business 112.70 Oil & Gas Explorations 84.23 Communications 81.05 Tobacco & Cigarettes 39.73 Transport 32.87 Electronics 26.35 Chemicals 24.08 Construction 18.00 Textiles 15.31 0.00 50.00 100.00 150.00 Value in $ Mn 200.00 250.00 300.00 Source: KCCI Research, SBP Disclaimer This report has been prepared by KCCI Research & Development Cell. The information contained herein have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith. Such information has not been independently verified. icon represents the sole viewpoint of the KCCI R&D Cell, and is stated to enrich the readers' understanding of the news item. The R&D Dept. bears no responsibility for its correctness or accuracy. Contact: res@kcci.com.pk