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Agriculture sector.

It is hoped that the production of cotton would be around 10.6 million bales - one million bales more than the target. The last year crop stood at 8.7 million bales. Area under cotton crop increased by 13 per cent from 2.65 million hectare in 1994-95 to 2.00 million hectare in 1995-96. Rice production recorded a rise of 35.9 per cent amid fluctuations during the last 10 years. The size of the 1995-96 rice crop has been provisionally estimated at 3.97 million tonnes.

The production of Basmati rice is estimated at 1.48 million tonnes and that of other varieties at 2.49 million tonnes, showing an increase of 9.6 per cent and 18.6 per cent respectively over the preceding year. Though rice output fell short of the target of 4.02 million tonnes by 1.2 per cent, it represented a rise of 15.1 per cent over 3.45 million tonnes produced in 1994-95. Rice production has never crossed four million tonnes mark since the independence.

Sugar Board

Government has decided to constitute sugarcane board to increase per acre yield, revamp sugar research stations and oversee their performance. The Board will also monitor the sugarcane cultivation and take steps to bring more areas under crop. At present, about 46 million tonnes sugarcane is produced, out of which 15 per cent goes for 'gur' production.

The country has 70 sugar mills with the production capacity of about 5 million tonnes of sugar - around double of the total sugar consumption in the country. All sugar-related issues, including supply and demand and import, would come under the jurisdiction of the proposed Sugarcane Board. Pakistan is expected to be self sufficient in sugar in 1996-97 with output likely to reach 2.8 million tonnes up from 2.4 million tonnes this season.

Wheat

Production of 1995-96 crop is provisionally estimated at 17.57 million tonnes. This is nearly one per cent more than the target of 17.5 million tonnes fixed for the year. It also represents an increase of 3.3% compared to 17.0 million tonnes produced in 1994-95. This was also the second consecutive year of bumper harvest. Production of wheat averaged 14.06 million tonnes per annum in the decade to 1993-94.

Industrial Sector

Industrial sector has registered a declining trend during 1995-96. During the first six months of 1996 major industries including cotton fabrics, sugar, jute goods, leather, phosphatic fertilizer, sulphuric acid, lubricating oil, paints and varnishes, pig iron, diesel engines, power looms, electric meters, switch gears, buses etc. In other sectors the production remain static or showed insignificant rise.

The dismal picture was due to influx of imported items under WTO. Another factor is the imposition of GST and excise which added to the problem of industrial sector. The declines in the production of blended tea and beverages have been attributed to large scale smuggling of these items via Afghanistan transit trade and legalized imports, specially in the case of beverages which are imported in tin packs.

Domestic electronic industry has large under-utilized capacity due to rise in imports of these items including the channel of smuggling. The target of growth for the industrial sector is 8 per cent in 1996-97 but it appears that this may not be achieved.

Sugar production has also shown a declining trend so much so that domestic shortfall is being made from India. A new sugar policy is reported to be on the anvil as disclosed by Shah Mahmood Qureshi, Minister of State for Parliamentary Affairs. It is hoped that the new policy would take the industry out of the woods. As a result of abundant availability of smuggled bicycle from China the bicycle industry is facing a serious crisis. Similarly plastic products manufacturing industry is in crisis due to imposition of sales tax and rise in the power tariffs as a result of which 350 small and medium sized units have been closed down.

It is also revealed that the prices of plastic grain, which till the middle of the last financial year were around Rs.2,000 per 25 kg bag depending upon the brand and quality have now escalated to between Rs.3,000 to Rs.3,500. Further, the availability of the majority of imported grains used in the manufacturing of household products and insulation of electric wires.

Mini Budget

A Mini-Budget appeared to be in the offing. The signs are very much there. It is going to be a mini-budget with a big difference, as under intense pressure from the IMF, the government is likely to effect downward adjustment in customs duties and ask Punjab to impose tax on farm incomes and further curtail the non-development budget further.

The government has prepared a new package of fiscal and other macroeconomic parameters which would provide a basis for a fresh round of negotiations with the IMF officials. A high powered delegation led by Mr. V.A. Jafarey is in Washington to strike a deal for a short-term loan of $600 million tranche out of which only one tranche of $72 million has so far been released while two tranches of about $80 million each due to be released in June and after remain withheld.

Pakistan has taken some stem action to recover the bank loans which now stand at Rs.130 billion. Business tycoons are now being rounded up. Directors of Tawakkal Group were arrested. They owed an amount of Rs.2.1 billion to the banks. Similarly Abid Saigol of Mohib Textile Mills was arrested. It is interesting to note that at least 53 of the top defaulters are textile mills and not less than 13 are sugar mills.

The defaulters list contains the names of the leaders from both sides of the fence along with the names of the most influential non-political businessmen and industrialists in the real as well as imaginary names. Several suggestions were put forward for the recovery of the loans Dr. Mahbubul Haq proposed setting up a high level judicial Commission to investigate into Cooperatives, Mehran Bank, Surrey Scandal and loan defaults. The Prime Minister, however, suggested that the list should be examined by the standing committee of the department of law and justice that should submit its report within three months. Mr. Iftikhar Gillani suggested a 5-point action plan against the defaulters as follows including the publication of the list of defaulters and referring it to the standing committee of the parliament.

Power Projects

As many as 19 power projects have completed their financial closure upto end of September 1996. These involve 4396 MW and an investment of $4.39 billion. Hub Power is also being constructed and would be delivering power by March 1997. Thus, 5.634 MW of private power is under construction in Pakistan. According to World Bank's view on the supply/demand is that Pakistan will be facing continual supply inadequacies in power for several years.

This is backed by exhaustive analysis done for the appraisal of the Ghazi Barotha Hydropower Project (GBHP). Government and WAPDA concurred with this appraisal's base load forecast, which estimates that by 2001, the earliest that GBHP can be operational, the country will require 19,000 MW of installed capacity, or 8000 MW more than was available in 1995. Since future power and infrastructure expansion in Pakistan is dependent on large inflows of foreign private investment, the Bank urges government to ensure that policy is implemented in a fair and transparent manner.

An official document prepared by the Board of Investment in consultation with the relevant ministries reveals that various ministries signed a total of 103 MoUs in more than 30 months involving a total Investment outlay of $24.08 billion. According to this document power generation project, AES Lalpir Limited being taken up at a cost of $375 million under an MoU signed in September 1994 by AES of USA, has shown overall progress of about 52 per cent.

Another power project by the same sponsor worth $349 million commenced work with the Lalpir project and is reported to have shown over 42 per cent progress so far. The sponsor is now sorting out issues with the finance ministry. Power generating projects showing satisfactory progress are Habibullah Energy Limited with an investment of $154 million, Fauji Kabirwala Power Company with $170 million, Wak Orient Power and Light Limited with $880 million, Altern Energy Limited with $9 million and Hub Power Company with $1.61 billion.
Production of Selected Items

 % In-
Items/Units 1994-95 1995-96 crease

Cotton Yarn (Mln. Kgs.) 1.37 1.45 + 5.8
Cotton Cloth (Mln. Sq.mt.) 321.8 328.9 + 2.2
Jute Goods (000 NT) 69.8 77.2 +10.6
Fertilizer (N) (Mln. NT) 1.54 1.73 +11.9
Sugar (Mln. MT) 2.96 2.50 -15.6
Cement (Mln. MT) 8.46 9.40 +11.2
Cigarettes (Bln. Nos.) 32.7 44.4 +35.9
Paper & Board (000 MT) 314.6 285.7 - 9.2
Soda Ash (000 MT) 196.1 214.3 + 9.3
Caustic Soda (000 MT) 92.7 117.0 +26.2
Truck & Buses (000 Nos.) 1.0 1.6 +60.0
Cars & Jeeps (000 Nos.) 26.7 27.0 + 1.1
Motor Tyres (000 Nos.) 910.0 936.4 + 2.9
Bicycles (000 Nos.) 474.5 579.8 +22.2
Sewing Machines (000 Nos.) 68.1 92.9 +36.4
Billets (000 MT) 343.5 305.4 -11.1
H&C. R. Sheets (000 MT) 701.2 746.8 + 6.5
Tractors (000 Nos.) 17.1 15.1 -11.6
Airconditioners (000 Nos.) 5.2 1.8 -64.9
Electric Motors (000 Nos.) 24.2 24.7 + 2.2
Transformers (000 Nos.) 23.0 25.2 + 9.4

Source: Monthly Economic Letter, National Bank of Pakistan


Scrapped power projects include Houston Industries C.C. Pace Resource International with Wiliams International, Ogden and PEVCO, Cogen Technologies with an investment of $120 million, Synergics Energy Development $300 million, K and M Engineering $500,000, G.E. Capital, Mission Energy Company, ABB Energy Ventures $234 million, Energy Power Group $38 million, Solar Turbines, Alpha-Gamma Technologies with Hydro Energy Development Co. and Southwestern Public Service, Coastal Power Production, Fulton Ferracute Industries International NRG Energy Inc. with $408.4 million, Arkel Pakistan, Smith Cogeneration with $500 million, Energy Resource International, Amoco/Enron Solar Power Development, Destec Energy, Tenaska International, Hawkins Oil and Gas, Goldberg, Allen, Lane and Lathrop, Southern Electric International, International Development and Energy Associates, USA International and Falcon Seaboard Power Corporation.
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Title Annotation:Pakistan
Author:Haidari, Iqbal
Publication:Economic Review
Article Type:Industry Overview
Date:Sep 1, 1996
Words:1758
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