Pakistan among top three contributors in NEPA, Microsoft

“Pakistan is one of the top three countries [in NEPA] for Microsoft in terms of contribution to the business,” said Aamer Kaleem. PHOTO: AFP

KARACHI: 

Pakistan is among the top three contributors to Microsoft’s business in North Africa Eastern Mediterranean and Pakistan (NEPA) – one of 13 business regions for the company worldwide – according to a top official of the Washington-based technology giant.

“Pakistan is one of the top three countries [in NEPA] for Microsoft in terms of contribution to the business,” said Aamer Kaleem who is Chief Technology Officer (CTO) for Worldwide Communications Sales Team at Microsoft Corp and based in Chicago.

The CTO stated this during an interview with The Express Tribune earlier this month. He was in Karachi to address Pakistan’s corporate customers in an event about unified communications, which also featured their flagship enterprise solution ‘Lync’.

Kaleem’s visit endorses the company’s official stance that Pakistan is a growing market for the tech giant with a lot of business opportunities.

It is perhaps for the same reason that MS sent to the country the man who has global responsibilities to drive revenue and deployments for Lync business – the CTO along with his local team briefed corporate customers about worldwide enterprise communication trends and discussed how customers in Pakistan could benefit from Microsoft Lync.

Besides contribution to the business, there are several other trends that are driving the company’s interest in the market.

In the NEPA region, a cluster of up to 10 countries, Pakistan ranks very high in technology adoption and in solutions applied by the customers, Kaleem said.

“Pakistan is a new emerging market with a huge potential,” Kaleem said. Though it may sound strange but sometimes people here get the latest products first than the mature market, he added. “Pakistani customers are more nimble; they are more adaptive to technology [compared to the regional markets].”

Talking about market potential for Lync, Kaleem said Pakistanis are very hungry to consume more in communications “just like they have used WhatsApp and Viber”. In terms of enterprise, Lync is no different, he said drawing a contrast with such social media apps.

The CTO’s optimism about the Pakistani market is understandable as their enterprise solution is already getting some attention.

“In Pakistan, a majority of the top tier banks are using Lync,” Kaleem said. The customers who have adopted Lync as a collaboration platform include banks, telecommunication companies and educational institutes, he said – the customers are ready to take communication to the next level now, he said. For example, he said a provincial government in Pakistan was going for citizen connection and is using these communication platforms from Microsoft. “I have seen this happen in a developed country like Canada and USA,” Kaleem said.

Explaining the technology, Kaleem said Lync has multiple elements. “It has software element offering software to software or PC to PC collaboration and then there is telephony system, which is new to market,” he said. The purpose of this event was to introduce the telephony part to the customers, he said.

The software giant launched Lync in 2007 and rebranded it three years ago. With the acquisition of Skype, Microsoft now has 350 million active users. While Skype is a consumer product, the company is branding Lync as its enterprise product.

Lync can be used for the emergency services management, Kaleem said responding to the question how the country can benefit from the product. Secondly, he said, it can be used for good governance. Lync offers consumer solutions, which can benefit politicians, social institutions, healthcare institutions, education sector and law enforcement agencies, he said – these institutions can provide useful information to the public using this platform.

While the country remains on the radar of tech giants like MS for it forms a large customer base for technology products, its talented workforce also serves as a base to export bright minds these organizations.

“In Microsoft, there are a lot of Pakistanis on senior positions,” Kaleem said. “That’s mainly because they have proven their worth, and not because they are Pakistanis.”

Corporate results: PSO’s after-tax profit grows 150% in six months

Net sales rose 14% to Rs612 billion in July-December 2013-14 against Rs535 billion in the same period last year. CREATIVE COMMONS

KARACHI: 

After-tax earnings of Pakistan State Oil (PSO) rose 150% to Rs15.8 billion in the first half of current financial year compared to Rs6.31 billion in the corresponding period of previous year.

This record six-month profit eclipsed earnings of Rs12.6 billion in the entire financial year 2012-13, said PSO in a statement on Friday.

PSO’s board of management, which met at the company’s headquarters to review its performance, declared a dividend of Rs4 per share and 10% bonus shares.

Net sales rose 14% to Rs612 billion in July-December 2013-14 against Rs535 billion in the same period last year. “We believe higher sales of furnace oil and motor spirit are the key drivers of topline growth,” said Topline Securities in a report.

The main factor behind the earnings was huge other income, which grew to Rs14.7 billion compared to Rs3.3 billion in the first half of 2012-13.

According to the statement, PSO led the market with a share of 63% while its share in black oil and white oil stood at 75% and 53% respectively during the six-month period.

Sales of furnace oil and motor gasoline grew 13% and 15% respectively. A decline of 6.4% in sales of high-speed diesel in the first quarter was followed by a growth of 3.5% in the second quarter, resulting in 1% decline over the six-month period.

PSO said it achieved substantial cost efficiencies as distribution and marketing expenses rose only 4%.

The positive impact of sales and cost efficiency was partially offset by depreciation of the rupee against the dollar by about 6.5%. This resulted in an exchange loss of Rs2.2 billion compared to Rs0.96 billion in the same period last year.

Huawei anticipates arrival of 3G to unlock further growth

45,000 is the number of cellphones per month currently imported by Huawei. PHOTO: consumer.huawei.com/en/

LAHORE: 

Recent developments in the spectrum auction process have charged up smartphone producers.

One such producer, Huawei Technologies Pakistan (HTP), is looking to increase its footprint in the market, which it believes will start maturing only after it incorporates third generation (3G) technology.

“People believe the smartphone market in Pakistan has already matured,” said Fraz Malik Khan, head of marketing at HTP, in an interview with The Express Tribune. “I believe this is not the scenario as 3G is yet to come, which, if incorporated as scheduled, would approximately double the number of smartphone users in Pakistan.”

The claim regarding smartphone penetration in Pakistan is a healthy sign for the overall market. Pakistan currently has 15 million smartphone users and Khan intends to make HTP the market leader.

HTP started its operations in Pakistan back in June 2012 by launching its first smartphone P-1. After a lack of initial success, the company revamped its strategy a year later to align with the marketing strategy. This was the time when the company’s flagship product, the P-6, was launched globally. The product helped the company grab a foothold in the market against competitors like QMobile and Samsung.

The company claims that before the re-launch, its sales graph was hovering around 4,000 units per month, which then peaked to around 40,000 as of January. “Our flagship product is extremely popular and as of today we are unable to meet the demand for this product,” Khan said. “With the arrival of 3G services, we will be in a position to be number one selling brand in Pakistan as our research and development infrastructure supports this technology, and this will eventually boost our sales graph,” he added.

Huawei is currently importing around 45,000 units per month, while Samsung imports between 50,000 to 60,000. According to Khan, sales of their high-end products are higher than their low-end products. The price factor of their flagship product allows the company to be more competitive compared to Samsung.

Commenting on the company’s future plans, Khan said that they cannot rule out infrastructural investments by Huawei in Pakistan. “Though I cannot confirm anything at this point, I believe that the country’s premier has already communicated to Huawei to make a resource centre in Pakistan.

Oil, gas firms win eight more exploration licences

Of the total, 21 blocks are in Balochistan, 15 in Punjab, six in Sindh and eight in Khyber-Pakhtunkhwa. PHOTO: FILE

ISLAMABAD / KARACHI: 

The government on Friday signed eight petroleum concession agreements and granted exploration licences to oil and gas companies, which will attract a minimum investment commitment of $60.73 million.

Apart from the work commitment, the companies will spend a minimum of $30,000 a year on social welfare schemes in each of the awarded blocks. The blocks are located in all four provinces of the country.

According to a statement issued by the Ministry of Petroleum and Natural Resources, before signing the fresh deals the government had inked 20 petroleum concession agreements and awarded exploration licences earlier in February.

The ministry said after taking all provinces on board for finalising model petroleum concession agreements and model exploration licences, it had provisionally awarded 50 blocks to nine exploration and production companies on January 21.

Of these, 21 blocks are in Balochistan, 15 in Punjab, six in Sindh and eight in Khyber-Pakhtunkhwa.

Petroleum and Natural Resources Secretary Abid Saeed, Director General Petroleum Concession Saeedullah Shah, OMV Senior Vice President Middle East and Caspian Region Erwin Kroll, Oil and Gas Development Company (OGDC) Managing Director Riaz Khan and Pakistan Petroleum Limited (PPL) MD Asim Murtaza signed the agreements. Petroleum Minister Shahid Khaqan Abbasi was also present.

PPL inks three accords

PPL signed three petroleum concession agreements with the government for blocks 2569-5 (Khipro East), 2866-4 (Margand) and 2867-5 (Kuhan).

Margand and Kuhan blocks would be explored in a joint venture with OMV (Pakistan), the Austrian petroleum exploration company, PPL said in a statement.

PPL will be the operator in Khipro East and Margand, located in Sindh and Balochistan, respectively. The two blocks together cover an area of approximately 4,900 square kilometres.

OMV would be the operator in Kuhan, also located in Balochistan, marking the first time in recent years that a multinational firm ventured as an operator, it said.

“The signing allays general apprehension regarding Balochistan’s security situation forestalling exploration activities in the province on the one hand and lack of interest by multinational companies to invest in Pakistan’s oil and gas sector on the other.”

Having played a key role in bringing the Austrian firm to Pakistan in 1990, PPL and OMV have since partnered in successful ventures, including Sawan, Miano, Latif and Tajjal fields.

PPL intends to make an estimated total investment of $50 million in Khipro East and Margand to discharge minimum work commitment, in processing and interpretation of 2D/3D seismic data and exploratory drilling during the first three years.

The signing of new agreements and licences, which is the third round held by the current government, concludes the grant of all the blocks won by PPL in the last bidding round in March 2013.

GDP increases 5%, shows SBP’s first quarterly report

The target set by the government in its Annual Plan for 2013-14 is 4.4% for the full fiscal year. DESIGN: CREATIVE COMMON

KARACHI: 

Pakistan’s gross domestic product (GDP) increased 5% in the first quarter of 2013-14 as opposed to 2.9% in the corresponding period of the preceding fiscal year, according to the State Bank of Pakistan’s (SBP) first quarterly report on the state of the economy released on Friday.

The target set by the government in its Annual Plan for 2013-14 is 4.4% for the full fiscal year.

The report stated that the industry and services sectors led growth while agriculture performed below target, mainly because of water shortages at sowing time, low agricultural prices globally that reduced the area under cultivation, pest attacks and heavy rains before the harvest season.

As for the improvement in the industrial sector, the SBP said better energy supplies and higher capacity utilisation played a key role in generating growth during the first quarter.

With the revival of the industrial sector, import pressures reappeared, especially for capital goods and raw materials. The import of petroleum, machinery and metal was particularly strong, which increased the trade deficit by $0.6 billion during the quarter.

Additional stress on the current account came from delayed inflows of coalition support fund (CSF). As a result, the current account posted a deficit of $1.2 billion in the first quarter against a surplus of $0.4 billion in the corresponding three-month period last year.

Forex fiasco

With regard to the country’s foreign exchange reserves, which dropped $1.2 billion during the quarter, the SBP said repayments on external debt exceeded fresh disbursements while foreign investments remained shy. Resultantly, the rupee lost 6% value against the dollar during the quarter as opposed to 0.3% in the first quarter of the preceding year.

The SBP claimed that the rupee came under pressure due to adverse market sentiments, particularly when the IMF released the detailed letter of intent in September. The market focused on future foreign exchange purchases by the SBP, which caused the interbank rate of the dollar to touch a record high of Rs110.5 on September 26 before closing at Rs105.35 on the same day. “This unprecedented movement in a single day was triggered by the settlement of a large oil payment, which caused some misperception in the foreign exchange market… The fact that the interbank rate settled so quickly reflects how adverse market sentiments can trigger exaggerated movements in the rupee,” it said.

Inflation

The headline inflation figure increased to 8.1% in the first quarter of 2013-14 compared to 5.6% in the preceding quarter.

The SBP said the rupee depreciation against the dollar depreciation was ‘partially responsible’ for the increase in inflationary pressures. “Weaker rupee not only triggered inflation expectations, but also pushed up prices of imported items, like petroleum products,” the SBP said, adding that the impact on the headline inflation was exacerbated by liberal export of onions, lower wheat stocks, and the collusive behavior of traders and distributors, which pushed food inflation into double-digits.

Government borrowing

Government borrowing from the central bank was more pronounced in the first quarter of 2013-14, as commercial banks did not participate actively in T-bill auctions held during the quarter. As a result, the government could not meet the limit of zero quarterly borrowing from the SBP, though its borrowings were well below the limit agreed with the IMF.

Thus, the fiscal deficit fell to 1.1% of GDP in the quarter from 1.2% in the corresponding quarter of the preceding fiscal year. Saying that the improvement occurred on both revenue and expenditure sides, the report stated it was the increase in tax rates and not the base which resulted in higher collection during the quarter. As for the expenditure side, a major role was played by the reduction in interest payments following the interest rate cuts in 2012-13.

Public debt posted a record increase of Rs1 trillion during the quarter, which can primarily be traced to large revaluation losses associated with the external debt stock due to adverse exchange rate movements

Capacity tax: FBR increases tax burden on beverage industry

Officials voiced concerns that three bottlers of a multinational brand were calling the shots. PHOTO: FILE

ISLAMABAD: 

The dispute over capacity tax deepened on Friday after the federal government increased tax rates on production capacity of aerated water in the range of 60% to 70% succumbing to pressure from three manufacturers.

The rates of capacity tax on production of aerated water were increased for all the three categories, according to a notification issued by the Federal Board of Revenue (FBR). This has increased the burden not only on small manufacturers that have already gone to court but also on major players except for the three.

The FBR increased the tax rates despite the fact that Finance Minister Ishaq Dar and FBR Chairman Tariq Bajwa had reservations over the capacity tax regime, said sources.

These three were allegedly being given benefits for being financiers of the ruling party, the sources added.

According to industry sources, other main bottlers having manufacturing licences for Lahore and surrounding areas, Karachi and allied territories, Sukkur and Islamabad-Peshawar have decided to knock the door of courts. There is a possibility that the manufacturer covering Islamabad and Peshawar may go to court in the second phase.

According to the notification, the tax rate of Rs4.7 million per filling valve or spout on factories, which only have foreign-origin filling machines or a mix of foreign and local-origin machines, has been increased 60% to Rs7.5 million.

Tax rate for the second category, which includes factories using local machinery, has been increased from Rs3.76 million per filling valve to Rs6 million, an increase of 61.2%.

For the third category, which includes factories with less than 40 filling valves or spouts, the rate has been increased from Rs1.2 million per filling valve to Rs2 million, up 70%.

The system was highly unfair as the tax rate on higher-speed filling valve and lower-speed filling valve was the same, giving benefit to major players, said a small manufacturer whose company has already gone to court.

The increase in tax rates left the manufacturers with no option but to increase prices of aerated waters, said a big manufacturer, who has decided to file a petition against the government.

The change in the mode of taxation from percentage to fixed amount has already made many small and medium-sized players uncompetitive. In current year’s budget, the PML-N government increased the federal excise duty on aerated water from 6% to 9%. However, on the recommendation of the three players, the capacity tax was introduced.

The three had assured the government that with the change in tax regime, the FBR’s collection from the beverages industry will rise 25% compared to previous year. In the last fiscal year, the FBR had collected Rs30 billion.

However, in the first half of current year, the results were dismal, proving the three players wrong, according to FBR officials. Now, tax rates have been revised to prove that their claims were achievable.

Despite a significant increase in the tax rates, the obligations of the three players were not likely to go up, as they were under-declaring their capacity to evade taxes, said sources in the beverages industry.

Through the same notification, the government has capped tax refunds of the beverages industry at 72% of payable gross amount. This will also increase the cost of doing business.

For instance, on a payment of Rs37.5 million, the FBR will hold Rs3 million in refund. This will block working capital of the manufacturers, as the FBR has had a bad track record in paying the taxpayers’ rightful refunds

Energy import: LNG terminal case referred to prime minister

Finance minister Ishaq Dar presides over the ECC meeting on Wednesday. PHOTO: PID

ISLAMABAD: 

After opposition from the Law ministry, the apex economic decision making body on Friday could not decide the fate of the $1.4 billion Liquefied Natural Gas Services Terminal project, and referred it to Prime Minister Nawaz Sharif for approval. 

Headed by Finance Minister Ishaq Dar, the Economic Coordination Committee (ECC) of the Cabinet had been convened to consider a proposal of awarding the contract of setting up a terminal for import of liquid natural gas (LNG) for a period of 15 years. Last Wednesday, the ECC had deferred the summary approval after the Law secretary disclosed that the Petroleum Ministry did not send a summary to his ministry.

The Ministry of Petroleum and Natural Resources had proposed to award the contract to Elengy Terminal Pakistan Limited (ETPL) – a company owned by the Engro Group. ETPL had been selected through a competitive process, during which the bid by Pakistan Gas Port Limited (PGPL) had been knocked out at the technical stage.

The Secretary Ministry of Law and Justice, Barrister Zafarullah Khan, questioned the authority of the ECC in taking decisions on matters which are purely commercial in nature, according to officials. He also highlighted that after the 18th Amendment in the constitution, the ECC cannot direct the Oil and Gas Regulatory Authority to give policy guidelines on any matter. Such powers rest with the prime minister, he told the ECC.

“In light of the detailed discussion, the ECC decided to approve the proposal in principle, subject to completion of all formalities as indicated by the Law Division and thereafter approval of the Prime Minister,” said a statement issued by the Ministry of Finance.

It added that the Law secretary informed the ECC that in light of the 18th Amendment, Article 90(1) of the constitution lays down that the Executive Authority of the Federation shall be exercised in the name of the President by the federal government, consisting of the Prime Minister and the federal ministers, which will act through the Prime Minister.

Since 2006, Pakistan has been making unsuccessful attempts to import LNG. The country has already entered into negotiations with Qatar to import LNG but before that it needs to set up a terminal. Sui Southern Gas Company (SSGC) and ETPL have already negotiated LNG Services Agreement under which the SSGC will pay $0.66 per million British thermal unit charges to the ETPL. The contract will be awarded for a period of 15 years and on the basis of ensured import volumes, the country will pay $1.4 billion to the company in 15 years, roughly $93 million per annum.

The company is supposed to set up the terminal within 335 days of the signing of the contract. It will have to pay $150,000 per day penalty if it fails to meet the deadline, according to an official of the company. However, if the government fails to bring supplies after the completion of the project, it will have to pay the ETPL the guaranteed amount.

Regarding the approval of the contract as agreed by SSGC and ETPL, the Secretary Law opined that it was a commercial contract between the two commercial entities and their respective Board of Directors are competent enough to grant approval in respect of LNG Service Agreement.

After the Law secretary’s opinion, the ECC did not agree with the Petroleum secretary’s plea to approve the project as it was of paramount importance to meet the urgent energy needs of the country.