ISLAMABAD (February 25 2004): The Economic Co-ordination Committee (ECC) of the Cabinet has allowed 14 more items to pass through Pakistan under Afghan Transit Trade, approved 25 percent freight subsidy for potatoes, sanctioned one-window facility for investors under Board of Investment and slashed custom duty on import of phosphatic fertiliser plants from 10 percent to 5 percent.
It also extended government bank guarantee of Rs 2.5 billion for Pakistan Steel and removed vegetable ghee and cooking oil and their main raw materials from DTRE regime.
The ECC, which met here under chairmanship of Finance Minister Shaukat Aziz, pursuant to decisions taken in Afghanistan-Pakistan Joint Economic Commission to facilitate Afghan transit trade, decided to delete 14 items from the negative list, which are: razor and shaving blades, capacitors, video cassettes, vegetable ghee, cigar and cheroots, art silk fabrics, shampoo, refrigerator, air conditioners, PVC and PMC material, dyes and chemicals, yarns, soaps and black tea.
To facilitate export of surplus of potato crop for the year 2004, the meeting approved a 25 percent freight subsidy on export of potatoes on a quantity of 250,000 tonnes.
The decision would stabilise potato prices in the market, provide incentives to the farmers and create a healthy competition for producing export quality potatoes in the country.
The ECC noted with satisfaction that Pakistan Steel last year posted a profit of Rs 1.2 billion. This profit is likely to increase to Rs 2 billion this year.
Pakistan Steel has prepaid loans of around Rs 11 billion and its sales have increased to Rs 23 billion.
The meeting also noted that Pakistan Steel was in the process of negotiations to increase its production capacity to three million tonnes to meet local demand of steel.
To further improve financial position of Pakistan Steel, the ECC approved guarantees to bank for finance facility as well as the bridge financing of Rs 2.5 billion.
The ECC was informed that Pakistan Steel was in the process of finalising plans to be listed on the Stock Exchange, as this would create transparency and improve its corporate governance as a public corporation.
On recommendation of the Ministry of Industries, the establishment of Investment Facilitation Centres to provide one-window facility to investors was approved. Initially, the centres would be set up in Karachi, Lahore, Islamabad, Peshawar and Quetta.
It would reduce tension between BoI and Industries Ministry on handling various operations.
The centres would provide co-ordinated services under one roof for completing various formalities related to provincial and federal governments and would be undertaken by the Board of Investment.
The ECC approved proposal of the Planning and Development Division to participate in World Expo 2005 at Aichi, Japan. The Expo would provide an opportunity to Pakistan for image building; promote trade, investment and culture abroad. It also established a committee under the Secretary Planning for execution of the task.
To encourage production of fertiliser, the ECC, in principle, approved reduction of custom duty on import of phosphatic fertiliser plants from 10 percent to 5 percent.
The ECC also agreed to examine similar duty reduction for other capital equipment in the next budget.
To encourage investment, improve financial services and to create healthy competition in the financial sector, the ECC increased the limit on establishment of branches by foreign banks operating in Pakistan from 25 to 50.
To check illicit trade of vegetable ghee and cooking oil and their main raw materials, the meeting decided to delete these items from DTRE regime.
The decision would improve supply of vegetable ghee/cooking oil and stabilise their prices in the local market.
The ECC noted with satisfaction that the Gwadar Seaport Project was ahead of its construction schedule and would be completed soon. It endorsed the payment mechanism so far made and desired that the mechanism may continue till completion of the contract.
It was also briefed about the plans to effectively connect Gwadar Port through road network with the rest of Pakistan, Afghanistan and Central Asia.
The meeting also thanked the Chinese government for its technical and financial assistance for this major infrastructure project.
The meeting also allowed export of livestock to continue, subject to NOC from Ministry of Food and Agriculture.
The export of livestock will exclude poultry, and cattle for meat purposes only will be allowed to be exported.
The quota of export of cattle will be restricted to 10,000 heads of large animals each month, on first-come-first-served basis. At one time NOC will be issued for 500 large animals, 1500 sheep and goats and 50 camels per application or less as the case may be. Minfal will continue to monitor prices of mutton and beef to intervene in the export regime if the need arose.
INFLATION: The meeting noted that during the week ending February 19, SPI for the combined income group and the lowest income group decreased by 0.48 percent and 0.49 percent, respectively, over the last week. Similarly, the rate of inflation based on CPI during July-January 2003-04 over the corresponding period of last year stood at 3.38 percent.
The meeting also expressed satisfaction over sufficient stocks of oil, sugar, fertiliser, ghee and wheat. It noted that with arrival of the fresh crop of wheat in early March, the stock position would further improve.
FOREIGN TRADE: The ECC noted that exports during July-January 2003-04 stood at over $6.9 billion as against $6.1 billion during the corresponding period of last year registering an increase of 13.5 percent.
Imports during the same period were over $ 7.9 billion as compared to $ 6.8 billion in the corresponding period of last year registering an increase of 16.2 percent.
The import of machinery increased by 23.1 percent indicating increased industrial and economic activity in the country.
Imports excluding petroleum products and food group aggregated over $5.7 billion as against $4.5 billion during the corresponding period of last year showing an increase of 28.2 percent.
MACRO FIGURES: It also noted gross foreign exchange reserves are around $12.5 billion; the revenue collection from July to January 2003-04 increased 14.9 percent and was Rs 274 billion.
Revenue receipts under direct taxes registered an increase of 13 percent whereas indirect taxes increased by 15.5 percent.
The bank credit to the private companies during July-January 2003-04 was around Rs 215 billion, registering an increase of over 74 percent. It indicated increased domestic investment activity, which would generate economic activity and employment opportunities.
MANUFACTURING SECTOR GROWTH: The meeting noted the following group-wise growth in large scale manufacturing from July December 2003: a) food beverages and tobacco 17.5 percent, b) textile and apparel 4.7 percent, c) leather products 53.5 percent, d) paper and paper board 9.2 percent, e) chemical, rubber and plastic 12 percent, f) petroleum products 1.6 percent, g) tyres and tubes 11.4 percent, h) non-metallic mineral production 16.2 percent, I) basic metal industries 18.6 percent, j) metal products and machinery 37.5 percent and k) automobile 58.6 percent.
Overall growth recorded was 14.70 percent for July-December 2003 period. It also noted growth in services sector including telecommunications and IT.
The increase in manufacturing sector growth will enable the country to have GDP growth over the target of 5.3 percent set for the year.
The meeting was informed that offshore oil exploration was promising and would considerably increase production of local oil and reduce import bill.
The Finance Minister briefed the meeting about issue of Eurobonds. He said that its four times over-subscription indicated confidence in Pakistan's economic performance.
He said that it was being sold at a premium and would enhance Pakistan's image as an emerging economy and further improve its international credit rating.
The ECC appreciated the success of the Eurobonds issue and said that this would improve Pakistan's attractiveness as an investment destination and enable Pakistan to prepay relatively more expensive debt.
The savings in debt servicing will be diverted to social sector and infrastructure programmes.
Ministers for Commerce, Industries, Agriculture, Communications, Information Technology, Petroleum, Railways, and Privatisation, Chairman of BoI and Secretaries of respective divisions attended the meeting.