Pakistan Daily Economy Update - 19 November

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1. Nov . 19, 2016 KCCI - eBulletin Current account deficit widens by 63% The current account deficit increased over 63% in the first 4MFY17 on an annual basis, making the management of the external sector more difficult for the government. SBP has reported that the deficit rose to $ 1.76Bn in 4MFY17 against $ 1.08Bn a year ago. “While low oil prices made it easier for the country to finance the import of industrial goods (particularly machinery and steel) to supplement higher economic activity, exports continued to cast a shadow on the external front; export receipts declined 8.8% in FY16 after falling 3.9% in FY15,” said the SBP. Dawn. Companies Bill to improve competitive legal framework Finance Minister has presented the Companies Bill 2016 in the National Assembly on 18th Nov‘16. The bill requires real-estate companies to provide enhanced protection to investors. It also has provisions for establishment agriculture companies and provides for Shariah certifications of companies. Besides, the Companies Bill 2016 has made it mandatory for foreign and offshore companies operating in the country to provide details of their directors and the investments made by them in other companies – locally or abroad. Under the new law the SECP will have the power to obtain complete information of directors, officers and beneficial owners of foreign and offshore companies operating in Pakistan. Dawn. Textile sector: manufacturers-cum-exporters allowed to avail 1% to 4% DLTL According to the order that is "Drawback of Local Taxes and Levies 2016-17" issued by the Ministry of Textile Industry; manufacturerscum-exporters of textile sector have been allowed to avail 1% to 4% Drawback Of Local Taxes And Levies (DLTL) on annual basis taking into account the freight on board (FOB)-realised values of enhanced exports for FY16 if increased beyond 10% over last year's exports i.e. FY15. 1% drawback would be available on eligible product lines of processed fabrics category, 2% eligible products of made-ups category and 4% drawback would be available to eligible products of garments category. The export performance will be analyzed separately for each category. The drawback shall be provided to manufacturing-cum exporting units on exports under specific tariff codes of the Pakistan Customs Tariff at rates specified. BR. National Logistic Cell to invest in auto sector with German collaboration NLC has decided to invest in auto sector in collaboration with a German company in order to cater the rising demand of heavy commercial vehicles following the commencement of CPEC. The NLC will initially be investing PKR 500Mn to PKR 700Mn to install a production plant in Pakistan in a bid to manufacture heavy commercial vehicles in collaboration with German MAN Truck and Bus Company. In the first phase, trucks will be produced to meet the requirements of Pakistan Army while in the second phase — keeping in view the rising demand under CEPC — heavy commercial vehicles will be produced as well. Around 700 to 1,000 heavy vehicles will be produced annually and later on the production capacity will be enhanced accordingly. Dawn. $ 24Bn loans taken in three years The govt. has taken $ 24Bn foreign loans during the last three years - $ 8.095Bn in FY14 followed by $ 7.92Bn in the subsequent fiscal year and $ 8.9Bn in FY16. These loans were taken from commercial banks and through issuance of bonds in international market as well as from bilateral and multilateral sources and IMF. The govt. has reportedly taken $ 1.8Bn commercial loans and issued $ 3.5Bn bonds while the amount does not include the latest Sukuk bonds. The present govt. has taken $ 9.7Bn loan from multilateral, $ 3.61Bn from bilateral and $ 6.2Bn from the IMF. These figures of borrowing were up to Jun.’16. An amount of $ 2.7Bn has been paid as mark-up during the aforementioned three years. BR. Economic ties with Pakistan beneficial for US: report The US State Department has said in a report that America’s economic partnership with Pakistan directly benefits the United States by creating well-paying jobs at home. The report has noted that Pakistan was a growing country of over 190Mn and a partnership with it promoted US businesses and exports, and advanced scientific progress in critical areas. Dawn. Pakistan to establish 29 special economic zones under CPEC In a bid to exploit full potential of CPEC, the federal government has planned to establish 29 special economic zones (SEZs) under the CPEC. SEZ Act 2012 provides the governing structure, which allows both the federal and provincial governments to set up economic zones under various administrative frameworks. Specifically, SEZ can be entirely led by the government, or can work in collaboration with the private sector (under different modes of public-private partnership), or even operate exclusively through the private sector. Daily Times. Sales tax evasion: DGI&I IR compiles list of around 562 importers Seed cotton equivalent to over 8.78Mn bales of cotton have reached ginneries across Pakistan as on Nov. 15, showing an increase of 9.49% compared to corresponding period last year when ginneries received 8.02Mn bales. Ginneries in Punjab recorded arrival of 5.38Mn bales registering increase of 15.59%. Sindh ginneries recorded arrival of 3.4Mn bales while last year Sindh received 3.37Mn bales, indicating a slight increase of 1.05%. Textile mills have bought 6.58Mn bales while exporters bought 1.56Mn. BR. Closure of work at Gaddani: price of steel bars go up by PKR 15,000 per ton: ABAD The market price of steel bars, used in construction industry, has gone up by PKR 15,000 per ton, following the suspension of commercial activities at the Gaddani ship breaking yards after recent fire incident. In this regard, builders are facing hardship to continue work on their ongoing projects due to shortage of steel in local market and have expressed concern over the govt. decision of suspending all activities at the Gaddani ship breaking yards. BR. Nearly 8.78Mn bales of cotton reach ginneries Seed cotton equivalent to over 87,80,543 bales of cotton have reached ginneries across Pakistan as on Nov. 15, showing an increase of 9.49% compared to corresponding period last year when ginneries received 80,19,613 bales. Out of the total arrivals, 8.78Mn bales have been converted into cotton bales so far. Ginneries in Punjab recorded arrival of 53,79,571 bales registering increase of 15.59%. Sindh ginneries recorded arrival of 34,00,972 bales while last year Sindh received 33,65,756 bales, indicating a slight increase of 1.05%. Textile mills have bought 65,79,394 bales while exporters bought 1,55,544 bales. BR. Ban on imported coal for IPPs delays 350MW project The govt.’s ban on use of imported coal for power generation has delayed the commercial operation of a 350MWs private project by around two years. Siddiqsons Energy Limited (SEL) has agreed to use Thar coal as primary fuel for the project at Port Qasim instead of imported coal and expected to achieve commercial operation date (COD) by June 2020 after a technical review in line with the govt’s desire which earlier was Dec.’18. The News. Inventory mountain adds to pain for fertilser firms; price war fears Fertilizer manufacturers, piled into unsold stocks, have urged the govt. to immediately allow exports to clear their surplus as the industry feared a pricing war that would further squeeze its profit. The govt. lifted the export ban only from calcium ammonium nitrate on the condition that its price would not be increased in the local market. Fauji Fertilizer has already slashed urea prices by PKR 50 to PKR 1,310/bag. Engro Fertilizer and Fatima Fertilizer are also offering hefty discounts to balance the inventory level. The News. Over 20% smokers consume smuggled cigarettes Over 20% of smokers puff tax-evaded smuggled cigarettes in Pakistan as heavy taxes on locally manufactured products continue to hit the industry hard. “These LTE (local tax-evaded) cigarettes are extremely cheap,” said the SBP in the Annual Report on the State of Economy in FY16. SBP further said, “Average selling price of LTE brands in Pakistan is PKR 27 per pack, which is far below the minimum tax per pack of PKR 33.8,”. The number of illicit cigarette smokers is gradually expanding with the passage of time. “Nearly 1Bn cigarettes are added every year to the black market,” it added. Tribune. Economic Indicators Date / Period Unit Value Change Daily USD-Interbank List of Indicators 18-Nov PKR 104.85 0.01% USD-Open MKT 18-Nov PKR 106.50 0.19% KSE-100 index FIPI 18-Nov 18-Nov Pts. $ Mn 42,325 -12.86 -0.20% NM** Crude (DE'16) 18-Nov $/bbl 45.57 0.00% Gold (DE'16) 18-Nov $/oz 1,214 -0.12% Gold (10g) Local 18-Nov PKR 43,542 -0.59% Silver (DE'16) 18-Nov $/oz 16.62 -0.18% Cotton(KHI)-40 kg 18-Nov PKR 6,537 -2.17% Kibor-6M 18-Nov % 6.13% 0.04% 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-Oct 16 Jul-Oct 16 $ Mn % -1,762 3.95 -63.45% 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, 18-Nov-16, 130.6 135 125 115 EUR, 18-Nov-16, 111.9 USD, 18-Nov-16, 105.5 105 95 85 75 Nov-15 USD Feb-16 GBP May-16 Aug-16 Nov-16 Source: KCCI Research ; Oanda.com EUR Quote of the Day "Without deep reflection one knows from daily life that one exists for other people." Albert Einstein Chart of the Day KSE-100 Index 44,000 42,000 40,000 38,000 36,000 34,000 32,000 30,000 Source:KCCI Research, SCS Trade 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