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Economic forecast 1994-95.


The first population census was held in 1951. According to it the population of the country was about 40 million. In 1981, it was 80.42 million. Right now it is 117 million and by 1995 it will reach 150 million, by 2001 it will be 200 million. This does not include the 2.51 million refugees in Peshawar. There are 561 persons per km. which is already too much. It is not only Peshawar, in Karachi there are 2000 persons per sq. km.

Due to the rise in population the government will have to face the following problems:

* By the year 2000 there will be 3,450,558 school-age children in NWFP. But the schools will not be sufficient and the government will not be able to establish more schools as required. Therefore, many of these children will remain uneducated.

* According to the law of inheritance the land per acre is divided in the family. The land acreage decreases as the increasing uneducated people opt to farming. Hence the land production declines.

* Even at present the hospitals are also not enough to meet the requirement. With the population increase more doctors and health facilities will be required.

* The job opportunities will be lower and most of the people will be unemployed causing unrest in the country.

* The traffic problem will also be intensified. As the population increase, accidents and aerial population from the lead and carbon monoxide will also increase.

* Shelter will be another problem. Where will all these people go to?

Literacy rate is deplorably low. According to the new Education Policy literacy rate should be raised from the existing 34 per cent to 70 per cent by NGOs. Apart from the lack of authenticity of the benchmark itself, the question as to how would the NGOs be able to cope with this enormous challenge without any apparent incentive or reward for their labours, makes the concept look like a pipe-dream. In a population of roughly about 120 million, if between 80 to 85 million are illiterate (half of them women), adding about 3.4 per cent more illiterates annually to this daunting backlog, what NGO would be able to touch even the fringes of the problem? Pakistan today has one of the highest birth and lowest literacy rates in the world.

The only conclusion one can draw from the way the problem of literacy has been tackled in the present policy is that the Federal Ministry of Education hopes for these 80 to 85 million people to be wasted out in the next four or five decades - a cynical approach - and their off-springs to be brought into the net of primary education now being spread. To that end a force of 265,000 teachers is intended to be created.
Population of Pakistan
Year Million
1990-91 113.78
1991-92 117.30
1992-93 120.93
1993-94 124.67
1994-95 128.83
Source: State Bank Annual
Report 1991-92.

According to a recent report of the Population Communications International of the USA, Pakistan will become the 7th most populous state in next 30 years with the birth rate of over seven children per woman. This is a gloomy forecast for the country with inadequate resources and absence of a concrete plan to absorb the rapid expansion of manpower. This would certainly result in further worsening of the already poor living standards of the masses.

Pakistan would launch its Eighth Five Year Plan in July 1993. In the next 18 months intensive preparations would be made by the national planners to identify sectoral priorities and make national allocation of funds. The Seventh Plan has failed to achieve the targets in many sectors. Despite the rapid economic growth several intersectoral restorations were allowed to develop and have remained uncorrected so far.


The GDP growth rate will be around 6.5 per cent during the year 1992-93 as compared to 6.4 per cent attained in 1991-92. The reason of slow GDP growth was attributed to widespread floods in September last year. Possible growth targets up to 1994-95 have been indicated in the following table.
GDP Growth at Constant
Factor Cost
 Rs. % Increase
Year Billion
1987-88 385 6.2
1988-89 404 4.8
1989-90 422 4.6
1990-91 475 6.4
1991-92 505 6.5
1992-93 538 6.5
1993-94 573 6.5
1994-95 610 6.5


Agriculture production should grow by 6.5 per cent in 1992-93 as compared to 6.4 per cent during 1991-92 and 5.1 per cent in the preceding year. The production target for 1992-93 of wheat crop has been revised upward at 15.5 million tonnes which is 1.3 million tonnes more compared to the target of 15.2 million tonnes envisaged in the Annual Plan for 1992-93.
* Agriculture Production Target
 1991-92 1992-93
Wheat (Mln. tons) 15.50 16.50
Rice (Mln. tons) 3.24 3.48
Cotton (Mln. bales) 12.82 14.00
Sugarcane (Mln. tons) 34.21 39.70
Source: Monthly Economic Letter National Bank of Pakistan.

Wheat: The Federal Government is currently engaged in devising ways to boost wheat output after being forced to import 1.5 million tonnes of wheat this year to make up for flood damage to stocks and seed in Punjab. This would be in addition to already planned import of 1.5 million tonnes for the year. As a result, total wheat import during 1992-93 is expected to be 4 million tonnes.

The Federal as well as Provincial Government have chalked out a comprehensive plan to increase per hectare yield of wheat to achieve the production target. In Punjab, for the first time, a plan to cultivate standing cotton crop during TABULAR DATA OMITTED November in selected areas where the picking is in last stages has been prepared by the provincial Agriculture Department.

Rice: The production target of 3.48 million tonnes set for the 1992-93 crop is 7.4 per cent higher than the finally estimated crop of 3.24 million tonnes harvested last season. During the 1991-92 crop year, finally estimated output of 3.24 million tonnes represented a shortfall of nearly 7 per cent against the target set for that season. It was also 0.6 per cent below the crop of 3.26 million tonnes harvested a year earlier. In order to ensure fair return to farmers and to boost the production of 1992-93 crop, the government has enhanced the procurement prices for the 1992-93 crop.

The government has also fixed a target of 1.35 million tonnes for this year's rice exports. Last year, 1.51 million tonnes of rice was exported consisting of 0.558 million tonnes of basmati and 0.954 million tonnes of other varieties.

Cotton: A production target of 14 million bales has been proposed for the 1992-93 crop by the Ministry of Food and Agriculture, which is about 11 per cent higher than the target of 12.6 million bales envisaged in the Annual Plan and 9.2 per cent more than the crop of 12.82 million bales harvested last season. The market sources estimate that domestic mill consumption this year would be around 8.5 million bales. Keeping in view the current production estimate, only one million bales are expected to be available for exports from the new crop after allowing for 0.5 million bales for buffer stock for next year.

Sugarcane: The production target for the 1992-93 crop officially set at 39.7 million tonnes is some 16 per cent above the crop of 34.21 million tonnes produced last season. The 1991-92 crop fell short of the target for the season by 13.8 per cent. It was also lower by nearly 5 per cent from the year earlier harvest.

Cane crushing by sugar mills has commenced. Despite damage to crops due to heavy rains and floods in Sindh and Punjab sugar production during the current season is expected to surpass last season's level. The 1992-93 output is expected to be more than 2.5 million tonnes. During the last crushing season, sugar mills throughout the country produced 2.3 million tonnes of sugar.

Livestock: First ever livestock policy of the country is on the anvil and would be announced soon. Livestock is a neglected sector. For instance only 30 per cent cattle wealth of Sindh province is descriptive while 70 per cent is undescriptive. As a result the breeders get nothing from the 70 per cent of cattle growth and therefore it is necessary that the seedlings for artificial insemination should be imported to improve genetic values. Manila is keen to import TABULAR DATA OMITTED breed from Pakistan and has imposed conditions that only those breeds and cattle should be imported which had complete record of three generations.


Industrial production during 1992-93 should record a growth of 8.0 per cent as compared to 7.7 per cent in 1991-92 due to improvement in performance of large scale industries. Pakistan's two leading urea manufacturers i.e. Engro Chemical and Fauji Fertilizer will soon be able to double their production.


The completion of Engro Chemical Pakistan's plant at Daharki, Sind, will increase the urea production capacity from 268,000 million ton a year to 600,000 million ton a year, more than double the existing capacity. The Engro Chemical Pakistan's plant will be completed at an estimated cost of Rs. 3,000 million. It may be mentioned that Chinese firm China National Chemical has won a Rs. 50 million contract from the Engro Chemical Pakistan for the construction of Urea Prill Tower at Daharki.

Fauji Fertilizer, one of the biggest producer of urea in Pakistan, will enhance its production from 600,000 million ton to 1,300,000 million ton after its expansion by June, 1993. Sources said that by the end of June 1993 Pakistan would be achieving the target of total requirement in the country i.e. around 2.8 million tonnes. The achievement will save at least 140 million dollars a year in foreign exchange.


The capacity of Pakistan Steel is to be expanded to 5.0 million ton PC-1 for increasing the production to 1.3 million tons was prepared but analysis carried out indicated that by the turn of the century, the country would need three to four million ton of steel products annually. Hence a revised expansion plan is being prepared. China and Russian Republic have shown interest in the expansion project.
Units Privatised on January 5
(Rs. in million)
Name of the Unit Buyer Price
Naya Daur Motors Tawakkal Group 69.1
Khyber Veg. Ghee Sajjad Amjad 8.0
Mills Lahore (Ex-owner) (90%
 of Shares)
Crescent Factors S.J. Industries 63.0
Chichawatani (Ex-owner)
Asif Industries Mehran Oil Mills 22.5
Shikarpur Surar
Ghee Shikarpur Trade Liners 41.58
Source: The News Business January 13, 1993


A new unit is being set up in Khushab district, Punjab to undertake production of grey portland cement. The project would have a capacity to produce 2000 tonnes of grey portland cement daily. The project is estimated to cost about Rs. 2256.60 million, including a foreign exchange component of Rs. 855.60 million. The project is expected to commence commercial production from July next year, while production on trial basis will begin from May.

At present 23 units are operating in the country with an installed capacity of 5,135 thousand tonnes. Of the total installed capacity, 5,196 thousand tonnes is in public sector while 2966 thousand tonnes is in private sector. Domestic production over the past five years has averaged 7,553 thousand tonnes. Last year, 8,31 6 thousand tonnes of cement was produced.


Pakistan's sugar industry is passing through an unprecedented tempo of growth. As of 1991-92 there were 53 sugar mills already operating in the country with a total installed TCD of about 172,200 which produced 2.33 million tonnes of Sugar. With the advent of 1992-93 season so far five new sugar mills have come into operation up to the month of December 1992.

Out of another eight new units under erection at least three will go into production in the coming months bringing the total number of operational mills to at least 60 by the end of the current season and the overall installed capacity to 199,200 TCD. Besides, a number of existing sugar mills are working on the expansion programme of their existing capacities as well.

During the 1st year of the present decade two more units came into production namely Ramzan in Punjab and Chashma in NWFP. The later one i.e. Chashma is the first sugar project in Dera Ismail Khan, a new promising area. There are 23 more new projects in line with a total combined capacity of approximately 89,000 TCD, of which 14 are proposed to be located in the Punjab and nine in Sindh. Out of these 23 units 19 are expected to be on the ground by 1994-95.

Total number of sugar mills operating in 1993-94 will be 55. By 1994-95 the number of sugar mills are expected to increase up to 72. In Punjab, out of about 14 new proposals on list so far five units have gone into production during the current year and two more may follow in the coming months. Another three four units will be commissioned during 1993-94 whereas a couple of other will be still in line.

In Sindh province there are at least nine new proposed sugar units at various stages, of which one project is likely to be commissioned during the current season and other five are expected to be commissioned during 1993-94 and 1994-95 crushing season 1993-94 and a couple of more to follow. Some of the existing sugar mills are actively working on the expansion of their present capacities. The total addition in the capacities through BMR and expansion would be equivalent to five new sugar mills.


The experience of selling the cement units have largely been matter of concern for the public because there appeared no hard and fast rules for fixation of their ever rising product prices. The Government has been ensuring in the past that whatever units were being privatised, prices of their products did not increase unreasonably. But now the authorities have refused to accept any responsibility for checking the prices of cement.

The same is the case with ghee units which were privatised by the Privatisation Commission. Ghee prices have been shooting up without reason and the Government has failed to control it. Admittedly, that this is not the role of the Government, but it can definitely supervise their operations in such a manner that the common man does not suffer.

The Government received total cash receipt as a result of privatisation Rs. 4.40 billion. Almost 70 units have already been privatised out of which the transfer of management have taken place in 54 units. The rest 16 are in pipeline.

Pakistan Tele-Communication Corporation

With the decision of the Government to privatised the Pakistan Telecommunication Corporation and the overcoming of differences with the army, many local and foreign businessmen have jumped into the fray to get this prestigious PTC.

The technical committee headed by Deputy Chairman, Planning Commission, has given its report to the Prime Minister urging him to allow the privatisation of PTC. The Privatisation Commission has not been allowed to sell PTC because of various reasons. Officials said that since it involves five to six billion dollars the matter should be handled by a high-level committee instead of the Privatisation Commission whose credibility is being openly challenged by the business community.

France Telecom Group, the French firm which is setting up a telecommunication institute in Pakistan and advising Pakistan Telecommunication Corporation (PTC) for making improvement in its customer management services, has indicated that it would make a bid if PTC is offered for privatisation. The indication came from a two member team of the Group, which is here to see investment climate in Pakistan.

The team comprising Claudine Biquillion and David Florentine, said France Telecom would be interested in bidding for PTC provided they could find some local partners. The team further said if PTC was not offered for privatisation, then the Group would be interested in bidding for its international operations. The French experts said their Group would be interested in offering consultancy and operation of value-added services like electronic mail and transmission.

Pakistan National Shipping Corporation

The Government has received 18 pre-qualification bids from Pakistani and overseas business groups interested in taking over Pakistan National Shipping Corporation (PNSC) and its subsidiary National Tanker Company (NTC). Among the interested bidders are the group of the executives and employees of the PNSC and NTC who have applied under the name PANSEB and claim they represent about 1,700 employees of the two organizations.

Other bidders include the ABN Amro Bank of the Netherlands, the UCC Group of companies based in London, Ideal shipping Line of Karachi, Millwala Group in collaboration with the Baharia Foundation (foundation of the navy employees), Tawakkal group, Pan-Islamic Group of the veteran shipping man, Mr. A.D. Ahmad Pan-Islamic, Banda Nawaz Rahimtoola Group, Wak Private Limited, of Lahore, Mountfield Maritime London, Polembross Maritime based in Greece, Port Services, Palme Lemberg, Lafayette Capital based in Washington, Hegge and Company and Chartwell Maritime.

Total assets of the PNSC are said to be worth about 150 million dollars or about Rs. 4.5 billion Pakistani rupees. There are 23 ships of which nine have already outlived their useful life and are about to be scrapped. After major financial restructuring about two years ago in which about Rs. 4 billion losses were wipped off, PNSC is an attractive investing proposition.

Dr. Mahbubul Haq, former Minister for Finance, Planning and Economic Affairs has suggested that the money coming out of privatisation of the public sector units should be used for reducing burden of debt instead of meeting the budgetary deficit. Basing his experience in various countries following the path of privatisation. Dr. Haq enunciated what he termed as seven golden lessons.

Firstly, he said, that a very clear object of privatisation and liberalisation is to build efficiency and not pursue a policy revenue maximization as it is not meant to be a garbage sale. Clear targets must be established to reduce the unit cost, achieve greater productivity of labour and also ensure effective monitoring of these targets.

The second lesson in the process of privatisation is to have rule of law and providing a framework in which the private sector can flourish. Business must be provided access to credit and a user friendly market.

Thirdly, the privatisation process should be extremely transparent where small lots of shares are sold through the stock exchange as transparency and openness are important ingredients. He said countries like Czechoslovakia where no stock exchange exists have introduced voucher scheme to ensure transparency in the privatisation process.

Fourthly, it must be ensured that there should be competition and we must avoid concentrating of wealth in few hands. For this purpose, he said we need to encourage as many as new entrants as possible. Public enterprises should not be disinvested to just a few parties and defusion of ownership should be ensured.

Fifthly, open and candid dialogue with labour should be undertaken said Dr. Haq, adding we must be careful that golden handshake schemes are not drawn up in a manner that the payout under this scheme exceeds the value of enterprise.

Sixthly, he said never use the money from privatisation to balance the budget. It is the same as selling your property and not retiring the debt and just passing the debt on to the children.

Lastly, he cautioned that privatisation should not be pursued through executive orders but instead the bill should be passed through parliament with a national and political consensus. He pointed out that the government could raise between 6 to 7 billion dollars through privatisation of Pakistan Telecommunication Corporation.


The ECC decided to increase import duty of palm oil from Rs. 1500 to Rs. 3000 per ton and duty on soyabean from Rs. 1000 to Rs. 2000 per ton with immediate effect. It was also decided to allow a rebate of Rs. 500 per ton on tin plate used in the manufacture of containers for vegetable ghee.

Tax Exemption for Water & Sewerage Plants: The Central Board of Revenue has issued a notification exempting equipment and machinery required for water supply and sewerage projects from payment of Customs Duty and Sales tax, in order to improve water supply and sanitation conditions in the country. This exemption is, however not available on machinery and equipment which is manufactured in the country. This exemption is available if the equipment and machinery is imported by local council and government departments.

Tax Exemption to Five Categories of Industries: The Government has exempted five categories of industries from all taxes including import license fee, Customs Duty and Iqra surcharge etc. to promote industrial investment in the country. These industries include shuttleless looms: textile made-ups, garments, hosiery, towels, textile processing industry, leather manufacturing and leather finishing industry. In a further amendment in the relevant SRO footwear and sports goods industry have also been added to the list. These industries have been exempted because they give quick production yields, produce value-added products as well as consume local raw materials.

For import of machinery against BMR (balancing modernization and replacement) if all formalities are complete permission is given within a week. However, replacement to machinery is allowed after 12 years, balancing after 3 years and modernisation any time. The cash import of spinning machinery except combers is not allowed. It can only be imported through the firm's own foreign currency account.


The stock market showed a down-turn during the year under review. State Bank adopted a new base of index from July 1, 1992. Since then the index dipped low from 186.11 on July 2, to 160.08 on December 1992, indicating a fall of 26.03 points. Constitutional protection to all capital formation has been sought by the Islamabad Stock Exchange while presenting its proposal for the next budget. The foremost demand is to exempt the capital gains tax from stocks business for five more years so that investment climate gets promoted in the country. The exemption granted earlier is due to expire in June 1994. It has further been proposed that the exemption from tax on Bonus shares already in place till 1993 be extended till 1998.


Heavy Electrical Complex: While production of thermal power plants and other equipment has already been undertaken by the units of State Engineering Corporation, Heavy Electrical Complex will produce power transformers up to the capacity of 40 mv. The project, on completion, will be the first unit of its kind in Pakistan. The project is located at Hattar Industrial Estate in NWFP province.

The project is being established with the technical and economic assistance from Peoples Republic of China at a cost of Rs. 918 million with a foreign exchange component of Rs. 364 million. A team of Chinese engineers is presently stationed at site and extending technical assistance on various matters related to the factory. During his stay at site, the minister for production met with the Chinese engineers and appreciated their contribution towards achieving extraordinary progress during the last months. It may be recalled that the civil contractors of the project had abandoned, resulting in a delay of more than six months. The thus incurred loss of time has been made up by the dedicated efforts of Pakistani and Chinese engineers working at the site.

WAPDA is extending cooperation by agreeing to purchase 80 percent of Heavy Electrical Complex production. Till now, these transformers are imported, putting heavy drain on government's restricted resources of foreign exchange. After three years of going into production, the factory would be able to meet 100 per cent demand of transformers of WAPDA and KESC. Thus there would be not only major savings of foreign exchange, but the foreign aid can also be utilized to other important projects in future. The project will provide additional job opportunities for about 600 engineers and technicians besides developing others socio-economic benefits.

ICI Soda Ash Expansion Project: The Chief Executive of the Imperial Chemical Industries (ICI) Naseem S. Mirza performed the ground breaking ceremony of the soda ash expansion project at Khewra on January 5. The increase in soda ash production capacity from 150,000 to 200,000 tons per year is estimated to cost Rs. 800 million. The project is expected to be completed by 1994 will be financed by further equity from ICI PLC and Pakistani shareholders. The design, specifications, engineering consultancy and manufacture of equipments will be undertaken in Pakistan as done in the case of the expansion completed in June 1991. Services of Heavy mechanical Complex (HMC), Heavy Forge and Foundry, Karachih Shipyard Engineering and Works (KSEW) and Descon Engineering have been acquired to provide equipments and the plant.

Attock Industrial Products Limited: A subsidiary of Pakistan Oil Fields Limited, Rawalpindi, is also planning to manufacture Chromium Sulphate, a chemical used as a tannin agent in modern leather processing. The plant will be fabricated by Heavy Mechanical Complex, Taxila, using latest technology with the help of foreign consultants. The plant is expected to be installed in Attock and will start production within the period of two years. The installed capacity of the plant will be around 6,000 metric tons of chromium sulphate annually.

Urea Plant: Second urea plant of Fauji Fertilizer Company (FFC) with the capacity of 635,000 million tonnes at Goth Macchi, (Rahimyar Khan) is expected to come into production next year (1993). The project costing over Rs. 7 billion will enable the company to market over 45 per cent of the total urea consumed in the country. With the coming into production of second urea plant, the Fauji Fertilizer Company would become the largest urea producing company in Pakistan with a total urea production capacity of over 1.3 million tons and will once again make the country self-sufficient in urea production. The Fauji Fertilizer Company saved over dollars 800 million as foreign exchange through import substitution over the last 10 years.

Artillery Ammunition Technology: POF invited bids for a Rs. 2 billion project for the transfer of artillery ammunition technology and supply of plant and equipment for the manufacture of 155mm howitzer extended - range full-bore base bleed ammunition and 130mm extended range base bleed projectiles. The induction of this state-of-the art artillery ammunition would substantially increase the range of Pakistan's artillery. The American-built howitzer in use by the Pakistan Army fires the standard high explosive shell 27.5 km.; the base-bleed has a range of 37 km. Similarly, while the 155mm standard ammo has a range of 23.7 km, the base-bleed is accurate to 39 km. India is currently in the final stages of purchasing the very same ammunition from Bofors for the ill-famed guns purchased by the Rajiv Gandhi administration. Therefore, Pakistan would stand at a distinct disadvantage if it does not take final decision on this three-year project for the induction of base-bleed ammo technology. The adoption of base-bleed ammo was recommended by the school of artillery after comparative trials on 155mm funds were carried out in November 1983 with in-service standard rounds and base-bleed rounds supplied by PRB of Belgium.

Daewoo Car Plant: Daewoo Motor company, a unit of the Daewoo Group of South Korea will set up a car plant in the TABULAR DATA OMITTED special industrial zone to be developed by the South Korean multinational. The car assembly project is among the 23 units that various South Korean firms have undertaken to set up in the 500 acre plot being leased to Daewoo in the Bin Qasim special industrial zone. Under the plan submitted by Daewoo Motor Company, 10,000 units are proposed to be built during the first year on a semi-knocked-down condition (CKD) basis. The company is planning to go into partial production during 1993. It may be pointed out that a 1600 cc car being manufactured by South Korea is already being imported under Prime Minister's self-employment scheme for the transport sector. Daewoo would be third car manufacturer to set up an assembly-cum-manufacturing plant in Pakistan, along with Suzuki and Toyota of Japan.

Pak Chromical Limited: I-D First Floor, Sunset Towers, Sunset Boulevard, DHA Karachi. This project is being set up at Dhabeji (Sindh) to produce Chromium Sulphate having a capacity of 7000 tons at an estimated cost of Rs. 187.086 million. Technical Know-how will be provided by CES Kalthof of Germany. Foreign partner will 'have a equity of 25 per cent in the project. The project is likely to be commissioned in 1994.

The present demand of chromium sulphate is estimated at 18,000 tonnes increasing at the rate of 10 to 15 per cent. The capacity of chromium sulphate after the commissioning of three projects would be about 20,000 tonnes. Bayer of Germany is the main supplier of chromium sulphate to leather industry in Pakistan and almost 90% of the demand is imported to meet the local requirements for chromium sulphate.


An action plan for power generation is in the offing. The plan should look at the growing need of electricity both in the short term and long term and suggest a package of incentives to attract private sector investment in the power sector. Presently, the total power generation capacity is estimated at around 8900 MW. The government had approved several oil-fired, gas-fired and thermal power plants of different capacities ranging from 115 MW to 1292 MW with an aggregate of 2800 MW. Among these the 1292 MW Hub Power plant is a major project and has been described as the largest private sector power generation enterprise in this part of the world. Since about 3000 MW of the existing capacity is hydel-based, it is heavily dependent on the vagaries of the weather and on the level of water in the rivers.


The current production of oil varies between 55,000 to 63,000 barrels per day. The future plan envisages production of 123,000 bpd by 1998. Royalty payable to the government by the companies discovering oil is 12.5 per cent of the well-head value. Following companies are exploring oil in the country.

1. British Gas (UK) 2. OMV (Austria) 3. Texas (USA) 4. Tullow (Ireland) 5. Tuskar (Ireland) 6. Albion (USA) 7. Canadian Occidental (Canada) 8. Karak Petroleum (USA)


A target of $ 8 billion has been set for export to be attained in 1993. This indicates an increase of over $ 1 billion compared with last year's export proceeds of $ 6.9 billion. If accomplished this would give a growth of 14 per cent in the country's exports. Readymade garments and leather goods are rapidly increasing. Among the new developments fresh fruits and vegetables are expected to double next year due to increased use of the refrigerated containers and dispatch of consignment by sea. Similarly, Pakistan would be made export base for Honda Motorcycles in the near future. The decision has been taken by Honda Motor company Japan.

Imports to be contained at $ 10 billion during the year 1993 as against $ 9.095 billion during 1991-92. During 1991-92 Pakistan's trade volume was to the tune of $ 16.156 billion, of which 42.7 per cent was accounted for by exports. During 1991-92, Pakistan traded with over 165 countries, but major trading countries were few. Only 12 countries which had more than 2 per cent share in Pakistan's exports accounted for 65.1 per cent of Pakistan's exports.

The principal buyers of Pakistan's products were U.S.A., accounting for 12.8 per cent followed by Japan 8.3 per cent, Hong Kong 7.3 per cent, Federal Republic of German 7.1 per cent, U.K. 6.6 per cent, Dubai 4.4 per cent Saudi Arabia 4.3 per cent, France 3.9 per cent, Italy 3.2 per cent and south Korea 2.9 per cent. These 10 countries alone accounted for 60.8 per cent of Pakistan's exports.

The share of primary commodities increased to 19.0 per cent in 1991-92 from 18.7 per cent in 1990-91 due to increase in export of raw cotton. The share of semi-manufactured items decreased to 21.4 per cent in 1991-92 from 24.4 per cent in 1990-91, due to decrease in export of cotton yarn and leather. The share of manufactured items increased to 59.6 per cent in 1991-92 from 56.9 per cent in 1990-91.

At present Pakistan produces around 1.60 million tonnes of citrus fruit annually. It makes only 30 per cent of total produce available for export whereas through post harvest technology, Pakistan can earn foreign exchange up to Rs. 500 million per year. China is expected to be the main buyer of Pakistan's urea when Pakistan achieves self-sufficiency in urea by the middle of June 1993. The Government has decided to set up Export Development Bank with the assistance of private sector. A feasibility report is in progress which is being prepared by two senior bankers.


According to the actual official figures of foreign exchange receipts of 1991-92 available here, the account of remittances which was down by over 20 per cent over the previous years, neutralised the reduction in the trade deficit in the year due to higher exports. Exports went up in 1991-92 to $ 6848 million from the previous year's $ 5902 million, as against the increase in imports from $ 8385 million to $ 9095 million during this period, resulting in an improvement in the trade deficit from the previous year's $ 2483 million to $ 2211 million.

Home remittances from Pakistanis working abroad have been decreasing steadily during the last few years. The highest amount received during the boom years was $ 2885.67 million in 1982-83. These receipts came down to $ 2600 million in 1985-86 and since then, have been decreasing by 5 to 10 per cent yearly. But in 1991-92, the decrease was much sharp. Economic analysts ascribe this unprecedented falling remittances partly to the post-Gulf war slump and partly to diversion of funds.

According to this argument, some of these foreign exchange payments have been diverted to the foreign exchange accounts in Pakistani banks recently permitted to be opened by overseas Pakistanis under the foreign exchange reforms. The region-wise break-up of these foreign exchange receipts figures shows that the Middle East remained the main source of remittances, although with a declining trend.


As on January 1, 1993 the rupee depreciated to Rs. 25.93 as compared to Rs. 24.59 per dollar on November 30, 1991 showing a fall of 5.44 per cent of rupee against the dollar. Aid is not likely to be resumed in the near future. With widening balance of payment deficit the rupee may further depreciate by 10 per cent during the year 1993.


Inflation rate is likely to be around 15 per cent. Withdrawal of subsidies on certain items such as wheat, fertilizer, railways fares etc. under the pressure of lending agencies such as IMF is causing inflation. Wheat prices are the most important determination of inflation in Pakistan. The official estimate suggests inflation around 12.5 per cent. Independent economists estimated the rate between 16 to 20%.
1989-90 6.0
1990-91 12.7
1991-92 9.6
1992-93 12.7
1993-94 15.0


Official statistics indicate an average increase of 12.08 per cent in prices of 46 essential items between December 26, 1991 and December 24, 1992 independent economists and businessmen, however put the rate between 16 to 20 per cent. Cement prices showed a undue rise. The Monopoly Control Authority's findings on the abnormal rise in prices from Rs. 115/- to Rs. 165 per bag endorsed the view that some industrial giants who recently got hold of a number of state-owned cement plants played a major role in the cement price hike. A study reveals that there are only five plants left in the public sector while another five out of 23 are owned by one group of companies closely linked with the ruling party. The increase in regulatory duty on the import of RBD palm oil has given an unprecedented push to the prices of vegetable ghee and cooking oil in the local market.

The Government's announcement of increasing regulatory duty on RBDPO by Rs. 500 and on soyabean oil by Rs. 1000 has been opposed by the ghee industry in particular and trade in general. According to the vanaspati manufacturers the sudden increase of duty is not only untimely but unrealistic as international market of RBDPO and soyabean oil is very firm.

Prior to the imposition of additional duty, ghee prices have already gone up in view of shortage of raw material because of cotton seed oil was not available and very high international market. The prices of ghee prior to the new duty structure had already reached a level of Rs. 23 per kg. Whereas it was in the range of Rs. 20/21 per kg only a month ago. After the denationalisation of GCP Units, there was already no control on end product price and ghee price was increasing. With the present duty structure ghee prices will further go up.

The government has been warned reportedly in unequivocal terms that all three variables, namely: Prices, balance of payment and rupee exchange rate are under pressure and the monetary financial instability is building up to a danger point. The decision to squeeze availability of credit has been debated upon at length in Islamabad. SBP's weekly reports believed to have been sounding their warning bells to the government for over a year. It has been pointed out that keeping rupee parity at this level with such high inflation would be suicidal for the economy. Keeping government expenditure in check in absence of a proper legislative cap is just not possible. Central Banks can only caution, warn and read just monetary policy. But fiscal policy and discipline is not in their domain. Only the political will and bureaucratic discipline can overcome this problem.


The government has decided to withdraw existing labour laws from at least nine industries and exempt two of these industries from customs duty, sales tax and Iqra surcharge, and the related gazette notification is expected to be issued. The incentive is being extended to the fish processing, surgical instruments and plastic goods industries, textiles and clothing (other than spinning), leather and leather goods industry, chemicals and pharmaceuticals, engineering and electronic goods, ceramics, furniture and sports related industries.

The labour regulations for these exempted industries will be similar to those which were earlier enforced only in units falling in the limits of the Export Processing Zone (EPZ) and the decision is being viewed as another step towards a completely unregulated free market policy being pursued the Nawaz Sharif Government.

The fish processing and surgical instruments and plastic goods industries have also been given exemption from the customs duty sales tax and Iqra surcharge. Under the new regulations, a minimum wage of Rs. 1500 per month has been set for unskilled workers. However, the wage of skilled and supervisory staff shall be determined by the employer himself commensurate with the employee's qualification and experience. Other allowances and perquisites shall be settled by mutual agreement. The duration of apprenticeship for every trade shall not be more than six months, depending on the nature of trade, expected degree of skill and minimum educational qualification laid down at the time of entrance.

For the termination of services, a minimum 30-day notice in writing or payment of equivalent pay or wages is required. Additionally, the new trade policy also envisages that all industries could on applying get registration of the Export Processing Zone if they can satisfy the authorities that they are exporting 70 per cent of their output. Thus, it is theoretically possible for many more industries to secure exemption from labour laws.
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Author:Haidari, Iqbal
Publication:Economic Review
Date:Jan 1, 1993
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