PAKLINKS BANNER EXCHANGE
Pakistan came into being on 14 August 1947 after a long struggle by Muslims of sub-continent for a separate homeland consisting of Muslim majority provinces of undivided India. The Islamic Republic of Pakistan comprises four provinces ,Punjab, Sind ,the North West Frontier Province (NWFP) and Baluchistan besides the Federal Capital and Federally Administered Tribal Areas.
The country has an area of 796.095 square Kilo meters The total cultivated area is 22.4 million hectares. The area under forest is 3.13 million hectares.
Pakistan is the ninth most populous in the world . The present population is estimated at 131.6 million (excluding 1.45 million Afghan refugees.) According to 1981 census, the density of population was 106 persons per square kilometer which is estimated to have risen to 161 persons.
The climate is generally classified as tropical. Rainfall is scarce except in riverain plain of the Punjab and adjoining hilly areas where the monsoon poses a seasonal danger of floods. The Southern and Western regions are relatively dry , whereas the northern and north-eastern parts receive greater rain fall averaging 762 Millie-meters per annum. The temperature varies greatly between seasons, and in the plains, it mostly ranges between 49' centigrade in the summer to a minimum 1' centigrade in the winter.
The national language is "URDU", which is gradually being introduced at all levels. It is written in the Persian Script. Regional languages are Punjabi, Sindhi, Baluchi, Pushto, etc. English is the official language and is widely spoken and understood in the country.
Pakistan's economy, since achieving independence on 14th August, 1947 has witnessed and impressive transformation from purely an agrarian character to a semi industrialized stage. Economic development since forties has taken place within the framework of successive Five Year Plans, which lays down the growth targets and sectional allocations for the period covered by each plan. In addition, annual development plans are also prepared indicating yearly break-up of investment and program for economic development in the public and private sector.
The estimated per capital Income of the country at current market prices is Rs. 16,646. In dollar terms, the per capital income at current market prices stands at US $495.0 per annum.
Gross Domestic Product (GDP) during 1995-96 grew at 6.12 percent to Rs. 2,174.9 billion as compared to growth rate of 4.42 percent during 1994-95.
The Pakistan Economy has shown a good performance specially over the last decade whereby GDP has increased on an average by 5.2% and the manufacturing sector has grown at an average of 6% per annum between 1985-86 and 1995-96.
The economy over the period has been predominantly reliant on agriculture, with income from this sector accounting for about 18% of export earning and 24.8% of GDP and more than 47% of the labor force is employed in this sector. The agricultural Sector has recorded a sharp revival in the growth of major crops from 0.3% in 1993-94 to 6.7% in 1995 -96 and a reduction in the growth of forests from 6.3% in 1994-95 to 4.8% in 1995-96.
At its inception, Pakistan 's industrial base was non-existent and value added in large scale manufacturing accounted for a mere 14% of the gross national product. Industrialization in Pakistan has passed from initial concentration on textiles and other agrobased industries to manufacturing of Cement, Engineering , Sugar and Steel Industries to substantial capacities in cotton textiles , Sugar Cement, Fertilizers leather and leather products carpets, vegetable ghee and some engineering goods. The sizable build up in this capacity has occurred largely due to strong incentives provided to the private sector along with a wide range of promotional activities undertaken by Government. In 1995-96 manufacturing growth rate was 6.1%.
Railway and Roads
The principal means of transportation is ' Railway ' which is spread over area covering 8.775 route kilometers with 808 stations and 45 halts. It carried 64.3 million passengers and 6.38 million tones of freight in 1995-96. Pakistan Railways has established a locomotive factory which produced 8 and 5 diesel electric locomotive in 1994-95 and 1995-96, respectively.
Road transport consists of an expanding fleet of buses and trucks which supplement the railway net work. The country has approximately 205,304 kilometers (km.) of roads including both low & high type roads. The road density is 0.23km/sq.km. which is very low and needs to be increased. National Highway Authority (NHA) was established in 1991 to plan, promote, organize and implement programs for construction development ,operation, repair and maintenance of national highway and major roads. The NHA has undertaken various major projects of national importance and some of these projects are:
The Federal Government has also constituted a National Mass Transit Authority (NMTA) on the line of NHA, which has been entrusted with the job of planning and implementation of mass transit projects in major cities of Pakistan. The NMTA has devised plans and entered into agreement with private sector for establishment of Light Rail Transit Lines (LRT) in Karachi. The contract for establishment of first Phase of LRT Lines in Karachi has been awarded to a joint venture between a Canadian company, a Trukish Company and a Pakistani company , on Built Own, Operate and Transfer basis. The offers for establishment of LRT in Lahore are also currently under consideration of NMTA. The Japanese Government has sanctioned loan facility for the project at concessional rates.
Air and Sea
Karachi , the gateway of Pakistan, is an important port of call on the world air and sea routes. Karachi's airport has been expanded by the construction of most modern Jinnah Terminal, which will cater to the passenger requirements well into the 21st century. The work on construction of modern airport in Lahore and Islamabad are also under progress.
Most cities and big towns of Pakistan are connected by air. Pakistan International Airlines Corporation. The national airline with a fleet of 47 Aircraft and a route of 262,983 Kilometers provides domestic and international, Passenger and Cargo Services. Three private sector airlines operating on domestic routes are as follows:
The two important seaports of the country are, Karachi and Port Mohammed Bin Qasim, the latter been constructed to meet the special requirements of a large steel mill set up in the vicinity. In addition two deep sea ports at Gawader and Pasni are also under construction, with a view to cater to the needs of land locked Central Asian Republics. The Karachi Ports is undergoing a massive program for its modernization and up-lift. The program envisages a most modern Container Handling Terminal in private sector. A three tier circular bridge is under construction to ease the traffic congestion around the port and to provide access to the Southern by-pass to be constructed in near future. In addition, some of the existing berths are also being re-constructed.
The Pakistan National Shipping Corporation is a government managed shipping corporation with a fleet comprising 16 vessels of 280,388 tones dead weight. A private sector shipping line M/s Tri-Star Shipping Company Limited has also commenced operations with two vessels of 90,000 tones dead weight. In addition several other private sector entrepreneurs have also been granted licenses for operating shipping lines.
The Government has declared that the private sector investment in ports will be treated as investment in industries. The investment will enjoy the facility of repatriation of profits at the exchange rate prevalent at the time of repatriation and will be treated at par with investment in industries in the matter of taxes and duties.
The main source of energy in Pakistan i.e. approximately 80% is obtained oil and gas, electric power and coal constitute 13 percent and 7 percent respectively.
The recoverable reserves of crude oil as on 01 January 1996 were estimated at 230 million barrels. The average production of oil during 1993-94, 1994-95 (July - March) and 1995-96 (July - March) were 56,645,48369 and 57,606 BOPD. The recoverable gas reserves as at 31 January 1996 were estimated at 21 trillion cubic feet. The average production of gas during 1994-95 and 1995-96 was 1,630 and 1,806 MMCFD. During 1995-96, 30 wells were drilled of which 14 were drilled by public sector and 16 by private sector. The discoveries during the period were 3 oil and 4 gas, of which 2 and 3 of oil and gas respectively, were by private sector. The petroleum policy of 1994 is geared towards further promotion and regulation of exploration and production activity of oil and gas and salient features of the policy are given later.
The total installed generating capacity of power in 1995-96 was 12,851 megawatts (MW) as compared to 8,928 MW in 1991- 92 .The production of oil and coal has decreased in recent years. Although the production in energy sector has increased, the gap between production and consumption has widened. Government is striving to remove this gap and electricity generation and transmission has been opened to private sector. Various incentives have been provided to the investors in this sector. Which have been described later in this booklet. In order to facilitate the local and foreign investors, the Government has formed a Private Power Board and has established a policy framework, which covers the procedural aspects and fiscal and monetary incentives available for investment in power generation and power transmission projects.
Consequently it is expected that the availability of an additional 6,074 MW of electricity by the year 2000 will be form the private sector which is assumed to be sufficient to meet the demand at the close of the century. The construction of Hub Power Project - a private project would result in production of 1,292 MW of power, based on furnace oil. By the end of 1996, a total of four units with a generating capacity of 850 MW are expected to go into production, and by the turn of the century it is expected to be about 20 fully operative projects with power generation capacity of around 6,000 MW.
The estimated coal reserves of Pakistan are 184 billion tones, 95% of which are located in Tar Sind. The production of coal during 1994-95 was 2 million tones as against production of 2.4 million tones during preceding corresponding period. To enhance the production of coal and other minerals. The Government has framed a mineral policy, which covers the procedural aspects and fiscal and monetary incentives available for investment in mineral extraction projects.
The total investment for 1995-96 was about Rs. 425.2 billion including fixed investment at Rs. 390.0 billion which are respectively 21.8 and 21.5 percent higher than previous year. Private fixed investment in 1995-96 has registered a growth rate of 29.4 percent as compared to 13.1 percent in public fixed investment. The policy of the government in recent years have encouraged private sector to raise their share to 55% of the fixed investment in 1995-96.
The successive Governments in Pakistan have embarked on a wide ranging privatization program. In all approximately 160 public sector enterprises are intended to be privatized and of these approximately 71 public sectors units have been privatized and 51 have already been handed over yielding RS. 8.5 billion.
The privatization program also consists of privatization of Nationalized Commercial Banks (NCBs) and monopoly utilities. Two of the five nationalized commercial banks have already been privatized and two others are in the process of being privatized. The two privatized NCBs are Muslim Commercial Bank Limited and Allied Bank Limited. The Government has diluted its interest in the state owned Pakistan Tele-Communication Company Limited (previously Pakistan Tele Communication Corporation) and as a first step offered approximately 5% of capital for sale to general public. In addition, approximately 5% capital was also offered to foreigners through open book bidding process.
A number of thermal power generation units of Water and Power Development Authority (WAPDA) are also included in the privatization program. The management of first of these units situated in Kot Addu has been transferred along with approx. 36% equity stake to one of the leading international power generating company.
Further, the Government is in process of identifying strategic partners to whom 26°/o capital together with management will be transferred of:
Sui Northern Gas Pipeline Limited (gas distribution utility)
Karachi Electricity Supply Corporation Limited (electric generating and distributing utility)
Pakistan Tele-Communication Company Limited (Ground line based telecommunication monopoly)
Banker Equity Limited a Development Finance Institution has recently been privatized and the management been handed over to a group of local investors having experience of managing financial institutions
The privatization program is expected to have a major impact on the stock market as shares of some of the major state enterprises are expected to be sold to the general public through the stock market
The capital market in Pakistan consists of three stock exchanges located in three major cities. i.e.Karachi Lahore and Islamabad. The principle security traded on these exchange is the ordinance shares, however other securities such as mutual fund certificates. Modarba certificates, Government and corporate bonds. Foreign exchange bearer certificates etc. are also being traded. Recently couple of blue chip companies and a modarba, taking advantage of amendments in the corporate laws, respectively, offered to general public for subscription. Term Finance Certificates (TFC), a tradable non-interest bearing, non-convertible debt instrument and Redeemable Capital Certificates (RCC), a non-interest bearing convertible debt instrument.
The capital market in Pakistan has responded very positively to the various economic reforms measures, especially the liberalization of foreign exchange sector. A number of financial entities like modarabas. Leasing companies investment. It banks housing finance companies and commercial banks have been established in the last decade. The development of the Capital markets has also introduced a healtl1y trend of establishment of Corporate Brokerage Houses. Previously only sole proprietorships and partnerships were eligible for the stock exchange membership. The local corporate brokerage houses have attracted some of the leading international brokerage houses and investment banks and have established joint ventures and technical collaboration with them.
The performance of the stock market can be termed volatile during the period 1996. It touched its peak during 1994 and the share price index touched the mark of 200 during that year. Since then, the market has shown declining trend and the share price index fell to 1455 mark at the end of October 1996. The tota1 listed capital increased from Rs. 58.2 billion on 31 December 1992 to Rs. 199.59 billion at 31 October 1990 The aggregate market capitalization of ordinary shares of the companies increased from Rs. 203 billion in 1992 to 327.8 billion at 31 December 1995. The aggregate market capitalization at 31 October 1996 was Rs. 489.6 billion. The market suffered major blow during 1995 and lost Rs. 76 billion (Rs. 100 billion excluding new listings) in market capitalization as compared to Rs. 403 billion on 31 December 1994. The number of companies listed on the Karachi Stock Exchange has also increased from 600 at 31 December 1992 to 780 at 31 October 1996. The average daily volume of turnover increased from 6.5 million shares in 1994 to 12.6 million shares in 1995. The average daily volume of turnover since January 1996 to October 1996 was 28.13 million shares.
The development of Capital Markets was also hindered by the manual ‘scrip based' trading. The absence of Central Depository was being acutely felt. The stock exchanges, in collaboration with the Government controlled investment companies. Privatized commercial bank. Investment Finance Corporation (IFC) and Citibank have established a Central Depository Company (CDC). The CDC would not only computerized the stock trading but would also gradually minimize the scrip based trading. The CDC is expected to be fully operational in the near future.
The corporate entities are until now greatly dependent on the commercial banks and development financial institutions for financing of their projects. This dependence has led to a situation where these institutions are finding it hard to finance such large-scale growth in the private sector. Therefore, the need was felt for the ‘public debt financing ‘ for the corporate sector. In order to facilitate corporate financing the Government has taken a number of measures, among them the foremost being the framing of rules for the establishment of Credit Rating Agencies. The rules have facilitated the establishment of a Credit Rating Agency. i.e. Pakistan Credit Rating Agency (PACRA). A second Credit Rating Agency joint venture of stock exchanges and a leading international agency is also in the formative stages.
In recent years, the Government has enacted Rules for the formation and regulation of Asset Management Companies (open end mutual fund ) and Venture Capital Companies, to ensure the smooth growth of the capital markets. These rules are in addition to the Investment Companies (close end mutual fund) and Investment Advisors rules.
Secondary market for the debt instruments is emerging in the form of discount houses. At present, there are three discount houses in the country, in addition to investment banks and development financial institutions, providing secondary market for the debt instruments.
The Pakistan Economy showed an improvement during the fiscal year 1995-96. The economy a after having touched the through of growth cycle in 1992-93, when the economy grow only by 2.3% has embarked upon a faster track for the last three fiscal years. The growth rate of GDP was recorded at 6.12% in 1995-96 as compared to 4.7% in 1994-95. The inflationary pressure which had increase in 1994-95, subdued during 1995-96 as the annual inflation rate measured in terms of consumer price index, decreased to 10.5% as compared to 13% in 1994-95.
Foreign Exchange reserves decreased to $1,772 million at the end of March 1996 from $2,736.7 million at the end of 1994-954 after registering 18.7 percent increase during same period last year. The Foreign Exchange Reserves as at 30 June 1996 stood at US$ 2.1 billion.
The fiscal position remained weak in 1995-96. The Budget deficit at 5.8% of GDP (as against a target of 5.0% of GDP) remained high as a result of which the government had to borrow in excess of Rs. 53.6 billion for budgetary support compared to the target of Rs.28.1 billion in Credit Plan.
The country’s current account deficit increased from $ 2.2 billion in 1994-95 to $ 4.2 billion in 1995-96. This expansion in deficit was mainly on account of larger import bill due to monetary expansion and liberalization of trade policy. Although exports registered higher than expected growth and worker’s remittances increased considerably, increase in imports of food items and higher import prices widened the deficit.