Pakistan Daily Economy Update 9 May

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1. May 8-9 , 2016 KCCI - eBulletin Karachi Chamber assured of incorporating proposals in budget 2016-17 The government has assured the business community of incorporating proposals in the upcoming budget 2016-17, which aimed at economic growth and encourage investment. Haroon Akhtar Khan, adviser to the PM on revenue, discussing budget proposals for the fiscal year 2016-2017 with a delegation of the Karachi Chamber of Commerce and Industry (KCCI), assured that the KCCI’s proposals had received serious consideration by the FBR and the Ministry of Finance, which would be incorporated in the budgetary measures as far as possible. Chariman FBR, who was also present in the meeting, also assured the KCCI delegation that the proposals are receiving due consideration and importance they deserve because they represent the views and feedback of the largest taxpayers body in Pakistan. Siraj Kassam Teli, Chairman of the Businessmen Group and former president of the KCCI, who was leading the delegation, also highlighted the issues and problems being faced by trade and industry due to the unfettered discretionary powers conferred in the taxation laws. The News-Sun. WTO chief advises Pakistan to devise business-friendly border rules At a time when each province is bargaining to secure a larger share in the $ 46Bn China-Pakistan Economic Corridor, the World Trade Organisation’s (WTO) Director-General Roberto Azevedo has cautioned that Pakistan can only reap benefits from the physical infrastructure by enacting efficient business-friendly rules, regulations and procedures at the borders. The CPEC is not just about hardware or mega projects in terms of infrastructure, improving roads and fixing energy problems, he said. It does not help to have the physical infrastructure if rules, regulations and procedures at the border are inefficient. To maximise the project’s benefits, he suggested the Pakistani government to also focus on capacity-building of human resources, build institutional capacity and business-friendly regulations so that regional integration could take place in the most expedited fashion. Dawn-Sun. Five major sectors: FBR revising ST structure FBR is revising sales tax structure on five major export-oriented sectors, i.e., textile, leather, carpets, surgical and sports goods under SRO.1125 during the ongoing budget exercise for FY17. The SRO.1125 has been repeatedly amended through SRO154/2013, SRO682/2013, SRO221/2013, SRO504/2013, SRO898/2013 and SRO486/2015. The sales tax on these five exportoriented sectors was declared zero-rated first time through Finance Bill 2005. FBR intends to tap sales tax on local/domestic consumption of textile goods and therefore in a view that entire textile regime should kept in sales tax regime, so that govt. can retain portion of sales tax after payment of sales tax consumed in exports. BR – Sun. Economic Indicators Date / Period Unit Value Change Daily USD-Interbank List of Indicators 5-May PKR 104.69 -0.09% USD-Open MKT 5-May PKR 104.85 -0.05% KSE-100 index FIPI 5-May 5-May Pts. $ Mn 35,941 -4.39 2.99% NM** Crude (JU'16) 5-May $/bbl 44.01 0.05% Gold (MY'16) 5-May $/oz 1,283.2 -0.40% Gold (10g) Local 5-May PKR 42,385 -0.70% Silver (MY'16) 5-May $/oz 17.39 -0.41% Cotton(KHI)-40 kg 5-May PKR 6,028 0.43% Kibor-6M 5-May % 6.36% 0.00% Forex Reserves 29-Apr $ Bn 20.79 -0.01% Remittances Jul-Mar 16 $ Bn 14.16 4.14% Exports* Jul-Mar 16 $ Bn 15.61 -12.92% Imports* Jul-Mar 16 $ Bn 32.52 -4.22% Trade Balance* Jul-Mar 16 $ Bn -16.91 -5.50% Current Account Avg. CPI-FY16* Jul-Mar 16 Jul-Apr 16 $ Mn % -1,606 2.79 18.52% WoW YoY Apr-16 Discount Rate % 6.00 Sources: KCCI Research, PMEX, NCCPL, KSE, SBP, PBS* ** Not Meaningful WoW= week on week; YoY=Year on Year Major Currencies HSFO import: Dar reluctant to withdraw 3% raise in GST Finance Minister is reluctant to withdraw 3% increase in General Sales Tax (GST) on import of High Sulphur Furnace Oil (HSFO) notified in Sept.’15 which is being passed on to consumers. The issue came under discussion in the Economic Co-ordination Committee (ECC) on Apr. 11, 2016 wherein Water and Power Ministry argued that increase of GST rate from 17% to 20% on HSFO will hit consumers as many IPPs are generating HSFO. Previously, under the Sales Tax 1990 (STA), HSFO was subject to a levy of 17% GST which is adjustable against GST payable on electricity sale, while any excess balance is recoverable from the FBR. BR – Sun. 175 Petrol, diesel sales remain strong in Apr.’16 The petrol and diesel sales during Apr.’16 remained strong, increasing by 12% and 6% to 0.5Mn and 0.7Mn tons, respectively. The Furnace Oil (FO) sales remained under pressure as they declined 24% YoY to 0.6Mn tons in Apr.’16. As a result, total oil sales of the country were down 5% YoY to 2Mn tons in Apr.’16. In 10MFY16, oil sales registered growth of 4% to 18.8Mn tons led by Petrol and Diesel sales which are up 25% and 4% respectively. FO sales were down 6% to 7Mn tons in the stated period. The Nation - Mon. 105 165 GBP, 6-May-16, 151.6 155 145 EUR, 6-May-16, 119.6 135 125 115 95 USD, 6-May-16, 104.8 85 75 May-15 Aug-15 USD Demand for petrol likely to cross 8Mn tons by 2020 The demand for petrol will witness a higher increase than that for high speed diesel (HSD) and furnace oil (FO) in the coming years. Demand for the petrol is expected to cross 8M tons by 2019-20 from the current 4.73Mn tons, said the CEO of Oil Companies Advisory Council (OCAC). Diesel growth remains 1-2% per annum and will reach 8Mn tons by 2019-20 from the current 7.41Mn tons. Furnace oil demand will continue to stand at 9.2Mn tons. It will marginally decline due to increase in the use of LNG. Talking about the environment friendly plant investments by the refineries, he said these projects had already cost the refineries close to $ 1Bn and that these projects do not attract any value addition and are not viable on a stand-alone basis, adding that incentives in duties and taxes as well as product pricing were given but later withdrawn, causing losses to refineries. Dawn-Sun. SNGPL enters loan agreement with consortium of banks The Sui Northern Gas Pipelines Limited (SNGPL) has entered into a mega loan agreement amounting to PKR 54.67Bn with a consortium of banks to finance the pipeline infrastructure development project Phase-II. The term loan is for a tenor of 10 years and is backed by the sovereign guarantee from the government. The project will allow for smooth transmission of imported RLNG and indigenous gas supply to its intended consumers. The consortium is led by Habib Bank Limited and includes United Bank Limited, National Bank of Pakistan, Allied Bank Limited, Bank Alfalah, Askari Bank, Dubai Islamic Bank, Meezan Bank and Faysal Bank. Under the project, 763Km of pipelines will be laid from Qadirpur-Bhong-Uch-Multan-Qadirpur-RawanSahiwal-Phool Nagar-Qilla Sattar Shah-Tatlayali and Khurrianwala to Shahkot. Dawn-Sun Korean team visits NARC for cooperation in agri development An eight-member delegation from Korea Rural Community Corporation (KRC), led by Korean National Committee on Irrigation and Drainage (KCID) Chairman Lee Bonghoon has visited the National Agricultural Research Centre (NARC) for cooperation in agriculture sector and rural development. Pakistan Agricultural Research Council (PARC) chairman and KRC Korea director general signed minutes of discussion (MoD) for cooperation between both organizations in manufacturing of high efficiency irrigation system for ground and flood water management, Korean assistance in developing small dams in Pakistan, soybean and strawberry production technologies. Daily Times – Mon. Feb-16 EUR May-16 Source: KCCI Research ; Oanda.com Quote of the Day "Ability has nothing to do with opportunity." Napoleon Bonaparte Chart of the Day Uphill revenue targets: RTO conducting raids on premises of commercial importers Regional Tax Offices (RTO), in order to meet uphill revenue targets, have started conducting raids at the premises of commercial importers to collect sales tax. In this regard, RTOs based in Karachi with the aim to meet its unprecedented revenue target, have started exercising the powers of section 38 of Sales Tax Act 1990. BR – Mon. Kapco: Divestment of government's residual shareholding approved by CCoP Cabinet Committee on Privatisation (CCoP) has approved divestment of government's residual shareholdings in Kot Adu Power Company Ltd (Kapco) and also approved sale of shares of Mari Petroleum Company Ltd through the domestic stock exchange or offering them to shareholders. The CCoP approved proposals to include the Industrial Development Bank and Telephone Industries of Pakistan in the priority list of entities for early privatisation. BR – Sun. Nov-15 GBP Pakistan's Total Exports & Imports 50 40.37 41.67 40.16 41.28 40 30 24.72 24.80 29.58 25.08 24.09 16.39 20 10 0 FY12 FY13 FY14 Pak. Exports (Bn $) FY15 9MFY16 Pak. Imports (Bn $) 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