Pakistan Daily Economy Update - 27 September

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1. Sep . 27, 2016 KCCI - eBulletin DLTL, LTF: Up to 6% rebate on machinery envisaged Prime Minister Nawaz Sharif is likely to announce a package for exporters envisaging up to 6% rebate of Drawback of Local Taxes and Levy (DLTL), Long-Term Financing (LTF) facility on machinery import for five export-oriented sectors and sales tax refund of packing material for zero-rated sectors. Currently, exporters are paying 10% local taxes at different stages out of which 6% would be refunded under the DLTL scheme. The interest rate of 3% under LTF for direct exporters would also be given to the indirect exporters. In case of federal taxes, the government would allow refund on packing material for five leading export oriented sectors, i.e., textile, leather surgical, carpets and sports goods. BR. Issuance of Sukuk: pressure on forex reserves led to decision The Economic Co-ordination Committee (ECC) has approved issuance of Sukuk Bonds to raise foreign inflows from international debt market against Islamabad-Lahore Motorway (M-2). The ECC also approved exemption of duties and taxes on the proposed bonds for making transaction attractive in the international market. For the proposed transaction, a special vehicle company, the Third Pakistan International Sukuk Company Limited has been incorporated by the Finance Division. The essential structure of a Sukuk issue necessitates an underlying asset which involves sales, purchase and transfer of the asset from one entity to another. BR. FDI from China: no appreciable increase in inflow There has been no appreciable increase in the inflow of foreign direct investment (FDI) from China under the CPEC in the current financial year 2016-17. Pakistan has received $ 50.25Mn from China in the 2MFY17 as against $ 209.73Mn during the same period of last year. The country has budgeted $ 572.3Mn from China for the current financial year. BR. Economic corridor: China has so far poured $ 14Bn into CPEC projects China has so far invested $ 14Bn in 30 early harvest projects to be completed under the CPEC, a flagship project of the “One Belt One Road” initiative launched by Chinese President Xi Jinping. Out of the 30 projects, 16 were under construction. Some early harvest projects would be completed by early 2018 while hydroelectric power projects would be ready in 2020. Tribune. ADB’s road map to help attract investment in mineral sector ADB has finalized a road map for attracting private-sector investment from both domestic and international investors in the mineral sector of Pakistan, especially in Balochistan. The road map, contained in the final report which has been prepared at the completion of a small-scale policy and advisory assistance, has been designed to help the federal government and Balochistan manage and address issues relating to mining leases and mine development. It will also guide the government in resolving ongoing and avoiding future disputes in large-scale mining transactions, and other immediate barriers to attracting investment into the mineral sector of the country. Dawn. Adequate supply: Regulator puts curbs on new coal-power projects The power sector regulator has put an embargo on establishing new coal-fired power projects believing that the schemes approved and initiated over the last two years will be enough to overcome the immediate electricity shortages. The National Electric Power Regulatory Authority (Nepra) and the Private Power Infrastructure Board (PPIB) have so far approved nine coal-power projects of 8,433MW cumulative capacity over the last two years. The first imported coal-fired project of 1,320MW at Qadarabad, Sahiwal district is expected to start production in Dec 2017. Tribune. Economic Indicators Date / Period Unit Value USD-Interbank List of Indicators 26-Sep PKR 104.84 0.00% USD-Open MKT 26-Sep PKR 104.30 -0.95% KSE-100 index FIPI 26-Sep 26-Sep Pts. $ Mn 40,221 -0.14 1.10% NM** Crude (JU'16) 26-Sep $/bbl 45.61 2.04% Gold (MY'16) 26-Sep $/oz 1,337.6 0.01% Gold (10g) Local 26-Sep PKR 45,666 -0.23% Silver (MY'16) 26-Sep $/oz 19.41 -1.33% Cotton(KHI)-40 kg 26-Sep PKR 6,629 -3.13% Kibor-6M 26-Sep % 6.05% -0.01% 9-Sep $ Bn 22.86 -0.54% Remittances Jul-Aug 16 $ Bn 3.09 -3.17% Exports* Jul-Aug 16 $ Bn 3.14 -8.19% Imports* Jul-Aug 16 $ Bn 7.88 10.21% Trade Balance* Jul-Aug 16 $ Bn -4.74 -27.06% Current Account Avg. CPI-FY17* Jul-Aug 16 Jul-Aug 16 $ Mn % -1,316 3.84 -91.84% WoW Forex Reserves YoY Sep-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 Stronger ties: Pakistan, Bahrain to set up Investment Company Pakistan and Bahrain have decided to establish a joint investment company in an effort to enhance economic cooperation. The decision was taken at the Pakistan-Bahrain Business Conference held in Manama where two memoranda of understanding (MoUs) were also signed. Tribune. 155 Engro to set up 450MW RLNG power project Engro Powergen Limited has earmarked $ 405Mn in investment to set up 450MW of combined cycle power plant, primarily based on re-gasified liquefied natural gas (RLNG). Kolachi Portgen (Private) Limited, a subsidiary of Engro Powergen Limited, is developing the project at the Port Qasim. The electricity will be exported to K-Electric at 220kV via a power evacuation point, located within the project site. Engro’s plant will be the third major project after 3,600MW power plants being set up in the Punjab. The News. 125 Debt-equity combination: Rickshaw maker plans PKR 330Mn investment for expansion Sazgar Engineering Works Limited, the makers of Sazgar CNG auto rickshaws, has announced that it is going to invest PKR 330Mn in expanding its production capacity from 20,000 units to 30,000 units per year. The project would be financed through 80% equity and 20% debt and the equity would be arranged through internal cash generation by the company. It expects that the project will be completed by June 30, 2018. Tribune. Change Daily GBP, 26-Sep-16, 135.7 EUR, 26-Sep-16, 117.7 145 135 115 105 95 USD, 26-Sep-16, 104.7 85 75 Sep-15 USD Dec-15 Mar-16 GBP Jun-16 Sep-16 Source: KCCI Research ; Oanda.com EUR Quote of the Day Local group seeks licence to set up 330MW coal-fired plant A joint venture of Thal Group and Novatex Limited applied with the National Electric Power Regulatory Authority (NEPRA) for a license to set up a 330MW coal-fired power plant in the Thar coalfield of Sindh. The joint venture, Thal Nova Thar Pvt Ltd approached the NEPRA for the minemouth lignite-fired power plant license. The group will develop the proposed power plant at the Block-II of the desert. The plant will be fed with the lignite from the adjacent mine, owned and operated by Sindh Engro Coal Mining Company (SECMC). The News. "It does not matter how slowly you go as long as you do not stop." Businessmen asked to tap Czech Republic’s IT sector Czech Republic Confederation of Industry Vice President Frantisek Chaloupecky has said that the business community of his country is interested in promoting trade relations with Pakistan and will support every effort initiated in this regard. Information technology, telecom and software were the booming sectors in the Czech Republic and Pakistan could gain good benefits for its economy by promoting cooperation in these areas. Tribune. IT returns & statements: Malfunctioning of IRIS system causes difficulties for taxpayers Taxpayers are reportedly facing immense difficulties in preparing and e-filing of income tax returns and statements under sections 114 and 115(4) of the Income Tax Ordinance, 2001, due to malfunctioning of IRIS system. The final tax is being incorrectly worked out under the head of "Final/Fixed/Minimum/Average/Relevant/Reduced Rate". However, the liability against final tax is appearing as 'NIL' because the portal is not taking the impact of final tax receipts and the system instead of charging the tax under final tax, it is creating a 'Refund' of the amount of total tax deduction. BR. Irsa body to fix provincial water shares on 30th The Indus River System Authority (Irsa) has convened a meeting of its advisory committee on Sept 30 to finalize water availability estimates and set provincial water shares for the Rabi season starting October 1. This will be a rare meeting of the Irsa advisory committee because it will be held without prior estimates of water availability for the Rabi crops. The provinces have been asked to come up with their estimates that will be firmed up by the advisory committee. Dawn. Mobile phone imports down 12% Imports of mobile phones decreased 12% to $ 92.7Mn in Jul-Aug on a year-on-year basis, according to the Pakistan Bureau of Statistics (PBS). Mobile phone imports were $ 105.4Mn in the first two months of the preceding fiscal year. According to the PBS, imports in August decreased 22.5% to $ 46.5Mn compared to the same month a year ago. Dawn. CDNS collects PKR 38Bn by Sep 20, 2016 The Central Directorate of National Savings (CDNS) has collected PKR 38Bn by 20th Sep, 2016 during FY17. Whereas, the target for FY17 was set at PKR 228Bn, as the Directorate was able to achieve the target of PKR 218Bn for the previous fiscal year. The CDNS notified downward revision in the profit rates for various saving certificates, which would be applicable from 1st August, 2016. The News. Inflation Vs. Discount Rate (Jan.'12 - Aug.'16) 12.0 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 SSD ToRs: CPEC body for meeting of provinces Parliamentary Committee on the China-Pakistan Economic Corridor (CPEC) has called upon the govt. to immediately convene a meeting of all the provincial govts to finalise ToRs of Special Security Division (SSD). The committee has been informed that a 15,000 dedicated strong force, comprising over 9000 regular soldiers of the Pakistan Army plus 6000 personnel of the Para-Military Force would comprise the SSD that has been entrusted with the duty of protection of Chinese personnel and projects under the CPEC. BR. Confucius Chart of the Day Real Interest Rate(%) CPI (%) Discount Rate (%) Source: KCCI Research, SPB, PBS 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