Day: November 26, 2021

The Advisor to the Prime Minister on Finance and Revenue, Shaukat Tarin, told the Media that the government does not plan on increasing taxes in the supplementary budget that is to be introduced in the National Assembly after the agreement with the International Monetary Fund (IMF).

Shaukat Tarin was questioned about the mini-budget by a reporter, to which he replied that there would be no increases in the taxes and only certain exemptions will be withdrawn. He further accused the reporter of creating sensationalism and said there was nothing to be worried about.

The advisor also told the media how he had worked to reduce taxes after coming into the government. He told Dawn, “When I came [as finance minister], I had said we will not allow an increase in taxes. We will not allow [the IMF] to impose more taxes on people who are already paying them.”

He claimed that the Ministry under his management has stood by their words and not increased any taxes during the negotiations with the IMF.

Tarin also revealed that the IMF had questioned why Pakistan was applying higher taxes on some sectors while other sectors were not paying any tax. IMF had also suggested that instead of letting specific sectors pay zero tax, give them targeted subsidies and take the sales tax.

The Finance Advisor also pointed out that the claims about further depreciation of the Pakistani Rupee were false, and according to the real effective rate, the Rupee should be around 165, 167, or 168 against the dollar.

He also denied the claims that the Rupee would be demonetized. On the contrary, he called out the speculators claiming that they will be disappointed when they see the Rupee moving in the opposite direction to their predictions.

Earlier this week, IMF had announced that they had reached an agreement with the government of Pakistan. They had further declared that the $6 billion program through the Extended Fund Facility (EFF) will be provided to Pakistan. The program had been “in recess” since April.

Source: Pro Pakistani

As Pakistan enters the second phase of the China-Pakistan Economic Corridor (CPEC), the Special Economic Zones (SEZs) can play a pivotal role in attracting investment and promoting industrialization, increased market accessibility, and regional connectivity, leading to robust economic growth.

A study by the State Bank of Pakistan (SBP) reveals that 22 SEZs have been approved, of which 21 have been notified. Thirteen of the approved SEZs previously existed as Industrial Estates and Industrial Parks, whereas nine SEZs have been approved under CPEC, of which four have been given priority status.

The latest available data suggests that the 22 approved SEZs cover more than 15,000 acres. The plot demarcation for 11 SEZs has been completed and more than 3,000 plots have been demarcated so far.

The per-acre price of industrial plots varies from Rs. 3.0 million (in Khairpur) to Rs. 65 million (in Korangi Creek IP). The per-acre price depends on the costs of land acquisition and development.

All the plots have been sold in three SEZs (Korangi Creek IP, M3-IC, and Value Addition City) and nearly 90 percent of the plots in Hattar and Khairpur SEZs have also been sold. Plots in other SEZs are at different stages of their sale.

Shedding light on the incentives for SEZs in Pakistan, the study reveals that SEZ Act 2012 spells out different incentives for developers and zone enterprises. The zone developers, co-developers, and zone enterprises have been exempted from paying income tax for 10 years from the date of signing their development agreement.

Developers and zone enterprises also have a one-time exemption from all customs duties and taxes on the import of capital goods. Compared to regional countries, the fiscal incentives for SEZs in Pakistan appear better on some parameters, such as the duration of corporate tax exemption. However, on other parameters, other countries offer better incentives, such as the duration of exemption on capital expenditures (CAPEX).

The zone enterprises applying for Sole SEZ Enterprise have to provide a host of undertakings. These include investing at least US$50 million in the project, of which at least 30 percent should be equity-financed, exporting at least US$75 million in the first five years of operations, ensuring net foreign exchange earnings after the third year of commencement, giving 50 percent jobs to those residing in the district in which the SEZ is located, registering at least 200 employees with the EOBI and providing entrepreneurship development training to locals under its vendor development plan.

These conditions are relaxed for Sole SEZ Enterprises that invest in underdeveloped areas of the country or invest in the top five importing sectors, the lists of which are identified in the regulation

Challenges to SEZ Growth in Pakistan

According to the SBP study, Pakistan had a slow start to SEZs as most regulatory developments and notifications of SEZs happened six years after the passage of the SEZ Act 2012. Even to date, there is no fully operational, completely-colonized SEZ in the country, albeit the number of SEZs has started to grow since the amendment in the law and the rolling out of new regulations. It takes about two years from the conceptualization of an SEZ by a developer — public or private — to the preparation of its application documents (which includes market feasibility studies, master plans, development plans, and other documents etcetera) to its approval and official notification as an SEZ by the government.

It then takes about another two years for the developer to develop the zone as per the development agreement before it can admit zone enterprises. This entails both civil works (such as land leveling and provision of sewerage, roads) as well as supply of the utilities infrastructure. Once a zone enterprise is admitted, it may take another two and a half years for setting up an industrial unit, before the enterprise can commence operations. In total, it can take about six and a half years from the time an SEZ is conceptualized till it becomes fully colonized with operational zone enterprises.

The regulatory structure for SEZs involves several organizational layers. The SEZ regulatory framework is evolving, and the government continues to issue new regulations to deal with the emerging concerns and opportunities.

Reforms in SEZs

Regarding reforms in SEZs, the study explains that the two main rationales and conceptions of SEZs around the world are the islands of excellence and the laboratories for policy reforms. In both these conceptions, the SEZs in Pakistan have room for improvement. The current SEZ framework and the ensuing government decisions have envisioned SEZs as designated areas that offer a business-friendly environment, as per international best practices. There have recently been some positive developments, such as the passing of the SEZ MIS regulations, which prevent real estate speculation. However, that vision is yet to be fully implemented; the one-stop-shop has not been set up, whereas overlapping coordination functions have led to delays in the provision of infrastructure and utilities.

In addition, policy frameworks to ensure a business-friendly climate in SEZs with respect to skilled labor and a facilitative legal environment have not been announced. As far as policy reforms are concerned, the current SEZ framework does not envision SEZs in Pakistan as areas that offer a special policy and regulatory environment to businesses. Under the current SEZ framework, all the SEZ authorities, organizations, and persons engaged in the creation, development, operations, and management of an SEZ are required to follow respective applicable laws and standards of Pakistan including vis-à-vis environment, employment, procurement, and building code, unless specifically exempted, relaxed or otherwise provided in the SEZ Act.

However, as per the study, the current SEZ framework does not offer exemptions, with the exception of building codes. Here, Bangladesh’s SEZ Act offers some useful insights. Not only does it exempt the SEZs in Bangladesh from various national and local government laws, but it also allows the government to modify any other Act or do any other thing necessary to remove difficulties for the growth and development of SEZs.

In some countries, the role of the SEZ regulatory authority is performed by existing ministries, for example, in Kosovo, the Ministry for Trade and Industry acts as the regulator for all its free economic zones. In other countries, such as Uganda and Sri Lanka, the Investment Promotion Agencies control the SEZs.

The SBP asserts that a concerted effort is required to address the challenges to the growth of SEZs in Pakistan, by graduating the SEZ framework from one that focuses on first-time colonization to the one that also provides direction on operation and maintenance, financing, sustainability, monitoring and operation, and so forth.

This necessitates deliberations over the creation of a separate centralized autonomous SEZ authority that would perform several functions. In addition to approving zones and developers, these functions include providing and updating regulatory guidelines, coordinating with relevant government departments across different levels on SEZ related matters, continuously monitoring zone performance aimed at providing the best infrastructure and facilities within the SEZs and assessing the impact of various policy reforms on the business climate within the SEZs.

Instead, autonomous or separate bodies are established as an institutional structure, with the mandate to regulate and manage SEZs and act as principal interface with developers and zone enterprises, as is the case in Bangladesh, Jamaica, Kenya, and the Philippines.

Source: Pro Pakistani

Pakistan’s leading e-commerce retail platform Daraz expects to host 300,000 small to medium enterprises (SMEs) in the next two years as the company looks to strengthen its position in the domestic market in the face of prospective competition from the global powerhouse Amazon.

The CEO and founder of Daraz Group, Bjarke Mikkelsen, told Reuters that it wants to “get to 300,000 active and educated SMEs selling on our platform within the next two years, and that will basically create a million jobs”.

He added that Daraz has managed to penetrate just two percent of the South Asian eCommerce landscape so far, but he believes the platform can be expanded 10 to 20 times.

Data from the Ministry of Commerce shows that Pakistan’s eCommerce sector ascended 35 percent in the first quarter of 2021 to Rs. 96 billion ($548.89 million), up from Rs. 71 billion ($405.95 million) during the same period last year. Pakistanis accounted for 35 million of the 70 million people who visited Daraz’s website last month.

The CEO of Daraz remarked that more people in Pakistan are now willing to use digital services, and it is the right time for the company to address their needs.

Daraz currently employs nearly 10,000 people in four other South Asian countries — Sri Lanka, Bangladesh, Nepal, and Myanmar — and has access to 500 million clients. Mikkelsen claims that Daraz has invested $100 million in Pakistan and Bangladesh over the previous two years. He said the company is aiming for roughly $1 billion in sales this year through its platform which has had 100 percent year-over-year order growth in the last four years alone.

Pakistan’s fast thriving middle class with over 60 percent youth population and over 100 million broadband subscribers makes the region a huge market for e-commerce platforms and related businesses like Amazon, and possibly Walmart.

Retail heavyweights Amazon and Walmart both run large operations in neighboring India, a country that also has indigenous eCommerce platforms run by the highly popular Reliance and Tata groups.

Founded in 2012, Daraz was acquired by Chinese behemoth Alibaba in 2018 and has more than 100,000 SMEs running their supply chains through the platform. While the mostly Pakistani business is not as big as the ones running the money games in India, Daraz still plans to beef up in the next few years to offer competition at the highest level.

Source: Pro Pakistani

The Pakistani Rupee (PKR) has reported losses against the US Dollar (USD) once again and depreciated 48 paisas against the greenback in the interbank market. It hit an intra-day low of Rs. 176.55 against the USD during today’s open market session.

The local currency depreciated by 0.27 percent against the USD and closed at Rs. 175.46 today after it posted blanket gains of six paisas and closed at Rs. 174.98 in the inter-bank market on Thursday, 25 November.

The local currency has surpassed its former record low against the USD from 26 October when it closed at Rs. 175.27, and is only a touching distance away from its all-time low of Rs. 175.73 from 12 November.

Another Rupee Spillover

The Rupee ended this week with a bludgeoning as the foreign exchange reserves held by the State Bank of Pakistan (SBP) had a massive outflow of $691 million, dropping to a seven-month low.

The SBP’s data stated that the foreign exchange reserves declined by $1.25 billion over the last 15 days. On the other hand, the required inflows of foreign exchange have not arrived in Pakistan’s external account. This outflow of the reserves has put pressure on the value of the Rupee against the Dollar.

Although pressures continue to build from all sides as fiscal parities struggle to correlate, it is expected that over $1 billion tranches from the International Monetary Fund (IMF) coupled with the financial assistance of $3 billion from Saudi Arabia will improve the foreign exchange level in the next few weeks, and in extension, the Rupee as well.

The former Treasury Head of Chase Manhattan Bank, Asad Rizvi, discussed the Rupee’s interbank showing in a tweet earlier today. He discussed how the central bank’s net reserves have collapsed by $691.3 million to a seven-month low of $16.254 billion.

He remarked, “The drop since AUG is worrisome. Early S.A DEPO of $3bn may help, but will not be enough to attain [the] crucial $20bn number, unless IMF funding is released earlier, as higher imports will add pressure on Fx RESERVES & #PKR”.

The PKR showcased a mixed performance against other major currencies as well and posted losses against most of them in the interbank currency market today.

It gained 89 paisas against the Canadian Dollar (CAD), 92 paisas against the Australian Dollar (AUD), two paisas against the Pound Sterling (GBP), and blanket gains of four paisas against the Malaysian Ringgit (MYR).

In contrast, the Rupee re-entered its decrepit sway against the resurgent Euro (EUR) after it posted losses of Rs. 1.54 against the eurozone currency. It also posted blanket losses of five paisas against the Chinese Yuan (CNY).

Moreover, it posted losses of 12 paisas against both the UAE Dirham (AED) and the Saudi Riyal (SAR) in the interbank currency market today.

Source: Pro Pakistani

The Single Country Exhibition under the “Look Africa Policy” of the Ministry of Commerce was organized in Lagos, Nigeria, from 24-25 November 2021. The Expo was jointly inaugurated by Governor of Lagos State, Babajide Sanwo-Olu, along with Federal Minister for Trade and Industry of Nigeria and Abdul Razak Dawood, Advisor Commerce.

More than 100 Pakistani companies from the Automotive, Engineering, Agro Food, Textile, Pharmaceuticals, Cosmetics, Kitchenware, Electrical, Surgical, Leather, Sports, and Information Technology/Services sectors put up stalls in the exhibition, which was organized by Trade Development Authority of Pakistan. Pakistan Software Export Board also participated, representing the Pakistani IT sector.

Buyers from Nigeria and ECOWAS member states of West Africa, particularly from Benin, Cabo Verde, Ivory Coast, Ghana, Niger, Senegal, Sierra Leone, and Togo, attended the event, and B2B meetings were organized.

Twelve Pakistani companies from the Pharmaceutical, Automotive, Leather, and Sports sectors signed MoUs, ranging from $250,000 to $9 million, and it is expected that the MoUs will result in the finalization of export orders worth millions of dollars in the coming months. Pakistan Trade Missions based in Senegal, Sudan, Algeria, and Kenya also brought business delegations.

More than 4,000 businesspersons from Nigeria and ECOWAS region attended the event. Pakistani companies generated a lot of leads, and TDAP also facilitated their visit to local markets for a more hands-on experience of the Nigerian market.

The Pakistani exhibitors appreciated the efforts of the Trade Development Authority of Pakistan and the Pakistan High Commission in Nigeria for organizing the event and facilitation for their visas and logistics. Pakistani companies suggested that such single country exhibitions may be held after every 6 months in Africa to get more traction, to increase Pakistan’s exports, and to explore joint ventures with African companies.

The event strengthened the footprint of Pakistan’s exports into Africa, especially in West Africa. The exhibition helped Pakistani companies to fortify their presence and to create deeper inroads into the African market.

Source: Pro Pakistani

In a landmark achievement in Pakistan’s capital market landscape, Adviser to the Prime Minister on Finance and Revenue Shaukat Tarin on Friday formally inaugurated the first Professional Clearing Member (PCM) at CDC House in Karachi.

Speaking at the occasion, Tarin said “It is the top priority of our Government to facilitate businesses and improve ease of doing business environment. This initiative of Professional Clearing Member (PCM) is a very significant and timely initiative by Securities & Exchange Commission of Pakistan (SECP) and very well executed by Central Depository Company (CDC).”

“It is very important for our Capital market that we introduce such novel concepts which will bring more transparency and efficiency in our market. CDC has won the trust and confidence of the investors, Regulator and all stakeholders in the market with its efforts of market development and investor facilitation”, he added.

The new PCM regime has been successfully implemented after the introduction of the relevant regulatory framework by SECP and capital market infrastructure entities, leading to the launch of EClear Services Limited (ESL) i.e. CDC, PSX, NCCPL, and Pakistan Kuwait Investment Company, with CDC playing the lead role of the project manager.

Speaking at the occasion, SECP Chairman Aamir Khan said “The PCM regime shall address two longstanding issues: risk of custody defaults by transferring custody to the PCM, and expanding the retail investor base by empowering small brokers.”

Tariq Rafi, a member of CDC’s Board of Directors, welcomed Tarin and others guests after which Chairman CDC Moin Fudda addressed the audience.

CEO CDC Badiuddin Akber presented a brief presentation to the audience explaining the working and benefits of the Professional Clearing Member.

He said, “The solution will provide investors with a completely new and digital experience of Pakistan’s capital market while giving them the confidence of asset protection by a reliable and independent third-party service provider.”

The event was well attended by Capital market representatives including Chairperson PSX – Dr. Shamshad Akhtar and CEO PSX Farrukh Khan.

Source: Pro Pakistani