Negative impact: ‘Sit-ins disrupting government’s plans for the economy’

ISLAMABAD: The political impasse caused by the sit-ins of Pakistan Tehreek-e-Insaf and Pakistan Awami Tehreek, have caused a loss of Rs800 billion to the economy – a figure that may further unnerve the investors – said a government official.

Imran Khan-led PTI and Tahirul Qadri’s PAT have staged sit-ins since Independence Day in hopes of getting Prime Minister Nawaz Sharif to resign. However, so far, talks have remained deadlocked between the opposition and the government.

“The current protests have paralysed our economy. Direct losses to the economy have reached up to Rs800 billion while indirect losses have amounted to several hundred billions,” according to a statement of Commerce Minister Khurram Dastgir.

The Commerce Ministry has not attributed the estimates to any official source but said that these estimates were worked out by “experts”. Usually, the Ministry of Finance, Revenue and Economic Affairs is the responsible ministry to give such estimates.

The minister stated that the devaluation of rupee against the US dollar and the constantly fluctuating exchange rate have increased Pakistan’s external debt by Rs350 billion. Before the political crisis struck the country, the rupee-dollar parity was Rs98.7 to a dollar that has now gone over Rs 101 to a dollar.

As of end June, Pakistan’s external debt stood at Rs4.8 trillion or $48.6 billion, higher by Rs480 billion or 11.2% over the previous year’s Rs4.3 trillion. The rupee depreciated by Rs4.4 to a dollar. By this account, the country’s external debt in terms of rupee increased by Rs213 billion in the last two weeks –a figure that is Rs137 billion less than the official claim.

According to the commerce minister’s statement, the uncertainty caused by this political turmoil has made the investors skeptical.

Independent economists say that higher than the actual losses may further damage the economy. They feared further depreciation of the rupee and its adverse impact on the stock market.

The government is also responsible for causing indirect losses to the economy as it has positioned thousands of containers to seal Islamabad. This hampers the to-and-fro movement of goods from the country, say independent analysts.

The containers have been placed on roads and streets that connect various sectors of the federal capital. This is creating more problems for commuters. Supporters of both parties are already in the red zone –the nerve centre of the government.

Dastgir said the protestors’ unreasonable demands to assume power by hook or by crook have tarnished the image of the country.

He said the heads of states of China and Sri Lanka have already postponed their important visits due to the prevailing situation and the country could not hold important negotiations with these economic partners.

“The negative politics being played in the country is misleading the youth. The country will have to strive in erasing the harmful effects of this upheaval on the economy,” said the minister.

“Social stability and development issues are directly linked to the economic sustainability in the country,” he remarked.

Dollar gaining: Loss in rupee value continues, political gridlock continues

KARACHI: 

The rupee shed 70 paisa on Monday, closing at Rs101.20 to a dollar in the interbank market.

The decline in the rupee’s value was more pronounced in the open market where it lost Rs1 against the greenback.

According to Bloomberg, the rupee declined for the fifth consecutive day amid political gridlock in Islamabad, marking the biggest one-day fall since February 2009.

The rupee has faced volatility during the last one year partially because of varying levels of foreign exchange reserves held by the State Bank of Pakistan (SBP).

They currently stand at $8.9 billion, up a massive 192% from November 28, 2013, when the rupee-dollar parity stood at Rs107.80. The subsequent rise in foreign exchange reserves was followed by 8.8% appreciation of the rupee against the dollar between December and July.

But calls for civil disobedience at a sit-in being staged by two opposition parties outside parliament has already resulted in the rupee’s depreciation of 2.8% in the interbank market since the beginning of August.

What the central bank had to say

Last week, SBP Director Dr Hamza Malik told a news briefing the movement in the exchange rate was because of political uncertainty. Noting that the underlying fundamentals of the economy were strong, Malik had expressed hope that the drop in the rupee’s value would be a ‘short-term blip’ followed by a return to a ‘relatively normal’ exchange rate.

KASB Securities research analyst Sarah Mazher seems to be in agreement with Malik. In a research note issued to her clients on Monday, she said the volatility in the rupee-dollar exchange rates should be short-lived.

“Expected contributors of foreign exchange build-up in 2014-15 are privatisation plan, launch of Eurobond/Sukuk bonds of $500 million each, and the 4G licence auction. Timely materialisation of these plans remains contingent on the resolution of the political turmoil,” she stated.

Mazher also highlighted the fact that the seasonal demand for dollars is expected to remain high in August, as travellers prepare for upcoming Hajj.

“The worst case scenario of a change in government, though unlikely, will affect US support and the ongoing International Monetary Fund (IMF) programme, which will be seen negatively by international rating agencies,” she said, adding that her brokerage maintains its exchange rate forecast of 2% depreciation to Rs101 by June 2015.

Analysts believe the SBP is refraining from intervening in the foreign exchange market. They believe its refrain is a conscious attempt to let the dollar appreciate against the rupee.

The central bank had evidently played a role in strengthening the rupee against the dollar in March even though its foreign exchange reserves were only $5.3 billion. But it has shied away from injecting liquidity this time, giving rise to the speculation that policymakers are comfortable with the dip in the rupee’s value against the dollar.

Untapped reserves: Search for shale gas to start next year, says Abbasi

Minister for petroleum and natural resources Shahid Khaqan Abbasi (L) watches on as the agreement for exploration license and petroleum concession for Karak North Block is signed with Tallahassee Resources in Islamabad. PHOTO: PID

ISLAMABAD: 

Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi has announced that the government is working on a shale gas policy framework and drilling for this yet-to-be-explored energy source will start next year.

He was speaking at the signing of an exploration licence and petroleum concession agreement for the Karak North block with Tallahassee Resources Inc here on Monday.

Petroleum and Natural Resources Secretary Abid Saeed, Petroleum Concessions Director General Saeedullah Shah and Tallahassee Resources Director from Khyber-Pakhtunkhwa Wasim Ahmad put their signatures on the licence and agreement.

Abbasi, while boasting that government’s policies had remained stable in the oil and gas sector, told the audience that some energy companies were interested in venturing into the exploration of shale gas, which is natural gas found trapped within shale formations.

“Our policies are stable and long marches (by the Pakistan Tehreek-e-Insaf and Pakistan Awami Tehreek) would not have serious implications for investment,” he said.

The government is also working on a policy for flare gas, which would be siphoned to the power plants. “Flare gas is likely to generate 300 to 500 megawatts of electricity,” Abbasi said.

Speaking about the Karak North block, he said it was located in Karak district of Khyber-Pakhtunkhwa and covered an area of 99.14 square kilometres.

The company that has won the licence has made minimum work commitment of $3.07 million. Apart from this, it is required to spend a minimum of $30,000 per year in the block on social welfare schemes.

On the occasion, the minister asked the director general of petroleum concessions to facilitate exploration and production companies in accelerating the pace of work in order to boost oil and gas production in the country.

With growing focus on increasing the hydrocarbon output, the Ministry of Petroleum and Natural Resources, after taking all provinces on board while finalising the model of petroleum concession agreement and exploration licence, awarded provisional exploration rights for 50 blocks to nine companies in January this year.

Of these, 21 blocks were in Balochistan, 15 in Punjab, seven in Khyber-Pakhtunkhwa, six in Sindh and one in Federally Administered Tribal Areas (Fata). The ministry has already signed 43 exploration licences and petroleum concession agreements this year.

Tallahassee Resources is an exploration and production company based in Calgary, Canada. Established in 2007, it has core assets with stakes in more than 100 producing wells in British Columbia and Alberta, Canada.

According to the company, they are primarily focused on conventional and Montney shale gas play in British Columbia, and conventional light oil and Duverney shale play development in Alberta.

Moreover, it has exploration plans in Pakistan with current focus on light oil development in Kohat/Potwar belt with the acquisition of Karak North block. It intends to expand in the near future into Pakistan’s tight gas and shale oil development by utilising its existing technical expertise and North American assets.

The government is giving high priority to tapping hydrocarbon resources to bridge the demand and supply gap. Since it took power in June last year, 120 wells have been drilled and 30 discoveries made.

Oil production in the country has crossed 98,980 barrels per day, the highest output level achieved so far.

Canadian firm awarded exploration licence in KP

ISLAMABAD: The government on Monday awarded a licence to Tallah­assee Resources Inc of Canada for exploration of oil and gas resources in Karak district of Khyber Pakhtunkhwa (KP).

The exploration licence and petroleum concession agreement (PCA) was signed for Karak North Block by Secretary Petroleum Abid Saeed, Director General Petroleum Concessions Saeedullah Shah and the representatives of KP government and Tallahassee Resources.

Federal Minister for Petroleum Shahid Khaqan Abbasi witnessed the signing ceremony. He said the Karak North block spread over a total area of 99.14 sq km for which the Canadian firm had made a minimum firm work commitment of $3.07 million.

Apart from minimum work commitment, the company was also obligated to spend a minimum of $30,000 every year in the block on social welfare schemes. The minister directed the Director General Petroleum Concessions to facilitate exploration and production companies to expedite the exploration process to boost domestic oil and gas production.

The minister said that after taking all provinces on board, the federal government had been able to finalise a Model Petroleum Concession Agreement (MP­CA) and Model Exploration Licence.

As a result, it had awarded 50 blocks on provisional basis to nine exploration and production companies early this year.

These included 21 blocks in Balochistan, 15 in Punjab, six in Sindh and seven blocks in KP and one in Fata. The ministry has already signed 43 exploration licences and PCAs so far this year.

Tallahassee Resources Inc is a Calgary-Canada based exploration and production company that was established in 2007. It has its core assets with stakes in more than 100 producing wells in British Columbia and Alberta, Canada.

The company is primarily focused on conventional and Montney shale gas play in British Columbia, and conventional light oil and Duverney shale play development in Alberta.

The company said it has its international exploration plans in Pakistan with a current focus on light oil development in Kohat and Potwar belts and intends to expand in the near future into Pakistan’s tight gas and shale oil development by utilising its existing technical expertise and resources of North American assets.

Hot business: Tapping beans for a tasty profit

LAHORE: Considered as “fuel” in their daily routine, coffee has become the way of life for many in Pakistan. The rapidly expanding coffee culture has paved the way for various foreign and local coffee shops to invest and take advantage of this lucrative market.

Coffee shops and cafes have now become a common feature of the country’s urban centres and are the preferred “hangouts”.

While the market has been ripe for investment, increased competition also means businesses need to maintain their quality to retain the customers.

Coffee Planet Chief Executive Officer Kashif Anwar has been part of this sector for the last two years but still struggles for profits. The reason is not low sales or lack of investment.

“Majority are not aware of what high-quality coffee tastes like,” Anwar said. “There are several global standards that need to be followed.”

Coffee Planet – a franchise of Dubai-based Roaster – started its operation in Pakistan in 2012. The Pakistani chain is operating under the cover of FAS corporations and has invested around Rs70 million for its 4 outlets – two in Lahore and two in Islamabad – to date.

According to Anwar, majority of the coffee outlets in the country fail to acknowledge the various types of coffees. “People stick to a couple of types and know relatively little about the wide range available.”

To run the business more efficiently, coffee shops have to offer other beverage categories, snacks and other food items. “Coffee shops are rapidly growing but the actual coffee culture will take time to form a consumer base.”

The sales of such coffee shops, according to an estimate, are growing in between 20-26% annually. The surprising bit is actual coffee sales constitute less than 50% of the total. Anwar said Coffee Planet witnesses the same trend.

Anwar has to follow specific standards of their parent company, adding that it pushes their cost higher than their competitors as he pinpointed a reason behind the lack of huge profits.

Anwar said the machinery is costly and skilled labour is hard to find. “We have to take the help of foreigners to train our local staff to provide a unique taste in all of our products,” Anwar said.

But despite the low profits, the future strategy Anwar has is quite aggressive. They are looking to launch two more shops in Lahore and Islamabad, whereas another eight coffee shops are planned in other cities. The approximate cost of a coffee shop, according to Anwar, is Rs15 million.

the writer is a staff correspodent

Entrepreneurs and small enterprises need help

KARACHI: 

How many times has one driven through Boulton Market and other areas in Karachi to find skilled labour sitting on the roadside with their tools. All these people – from painters with brushes to carpenters with saws – represent small enterprises.

They sit in hope that someone looking for maintenance or repair work would hire them. Unfortunately, anyone looking for skilled labour has no way to decide which one of the dozens sitting there, differentiated by very little, is experienced and more skilled.

To help them find a solution to their problem is not rocket science — especially in today’s tech-savvy world. All one really needs is a programme similar to the “Trip Advisor” where users, after checking out of a hotel or eating at a restaurant, go online and update their experience through a portal. It then rates these services on a five-star scale. When these people go on their next trip, they just search for places rated four-star or above. Why can’t the same method be applied here?

There is an urgent need for a similar portal, where people can go online and select a worker based on his rating. The workers in turn could register with the agency, give five percent as service charge to become part of the system and, instead of sitting on a street, wait in a hall with other workers for a telephone call. Their wages would also be set proportionally to their skill level. This way, better workers would earn higher wages and get hired more frequently.

Barriers in the way of small enterprises

However, there are still many other challenges and barriers facing these people.

Unfortunately, this section of society suffers from neglect. An organisation called, “SEEDS Venture” has carried out an in-depth research to identify operational difficulties facing these “small enterprises”, costs that could be avoided and how to enhance their sales and profitability.

As per their research, major obstacle to the growth of small entrepreneurs is inflation and instability in the city due to frequent strikes.  Intervention needed to enhance their sustainability and scalability include,

1. Training and mentoring sessions to enhance business acumen: Most have received no formal education but have good business acumen and any formal guidance and training will instigate growth and sustainability.

2. Interest-free loans to facilitate expansion: Lack of financing is the key reason for lack of growth and scalability. Banks and microfinance institutions must work with these small enterprises and create win-win situations.

3. Introduction of technological innovation: Using technology-based solutions such as mobile marketing and social media can provide new avenues for growth and sustainability.

4. Subsidising the cost of power: Rising fuel prices and erratic electricity is a barrier to growth. Government can provide creative solutions by offering subsidy to only those who agree to document their accounts.

5. Provision of licences for mobile vendors: Marginalised enterprises who cannot afford a shop are victims of extortion. Local authorities need to bring them under the fold of the formal economy by issuing area-specific licences.

6. Provision of better parking facilities: Areas without proper parking discourage customer visits. If older markets cannot be fixed, all parking at new places should be better planned.

7. Decreasing the tax burden on small-scale enterprises: Taxes are a part of life. Key would be to have tax polices that help reduce the burden during the early stages until they become stable.

8. Raising the profile of small-scale entrepreneurs: Being an integral part of the country’s economy, they need help to be portrayed as essential for the country’s growth.

If Pakistan is to eradicate poverty and strengthen itself economically, it cannot afford to ignore sustainability and scalability of small-enterprise entrepreneurs. These enterprises have the potential of crippling or stimulating the economy; they are a source of income for two-thirds of the population. Small enterprises represent the common man on the street trying to make a living and they need our help.

Mandzukic makes his mark as Lewandowski is left in the blocks

The Croatia striker scored the winning goal in the Supercopa de Espana as his replacement at Bayern Munich failed to find the net against Wolfsburg

COMMENT
By Stewart Weir

Someone will eventually switch off the accompaniment. Up until then, the transfer market’s version of musical chairs will continue apace, although some have already grabbed their seats.

Three who have already settled for the season ahead are Chelsea’s Diego Costa, the man who replaced him at Atletico, Mario Mandzukic, and in turn Robert Lewandowski, the latter replacing Mandzukic at the head of the Bayern attack.

Over the space of 24 hours, that triumvirate were collectively involved in serious competition for the first time this season, giving fans and pundits an opportunity to compare their respective strengths, styles and ultimately how they fit into their new surroundings.

Everyone will have their own take on who did best. But on goals scored, Costa and Mandzukic edged Round 1 thanks to hitting the back of the net.


MARIO OFF THE MARK | The Croatia star celebrates after firing Atletico in front
In in the case of Mandzukic, it was the solitary goal which gave Atleti a 1-0 win on the night and a 2-1 aggregate victory over arch-rivals Real Madrid to hand Diego Simeone’s team the first domestic silverware of the season, the Spanish Super Cup.

Simeone, unsurprisingly, was full of praise for the Croat. Then again, in heaping plaudits upon Mandzukic, Simeone was complimenting himself on what a good signing he’d made to replace Diego Costa.

Most experts believed Atletico had worked a good deal in selling Costa to Chelsea for 40m Euro, while spending 22m on hiring the services of the Croatian marksman.

Against Madrid, two minutes into his competitive derby at the Vicente Calderon, Mandzukic had won over the fans. The winning goal against Real Madrid has that effect on people. But it was the manner in which the 28-year-old scored that suggested he could come close matching Costa’s haul of 36 goals last term.

Mandzukic pressurised Raphael Varane, his wayward attempted clearance flicked on by Antione Griezmann who outjumped Sergio Ramos, enabling Mandzukic to latch on to the knock down. He will hit better shots, more powerful attempts: but such was a accuracy and direction of his low effort, it beat Iker Casillas’s right hand to hit the bottom corner. A goal, virtually from nothing, but a goal just the same.

However, just a pleasing for his coach and team-mates, was Mandzukic’s overall play up front, holding up possession, involving others breaking from midfield, and the ‘nuisance factor’ that kept Ramos and Verane occupied throughout.

Compare that to the man who took his place at the Allianz Arena, Robert Lewandowski.


TOO HEAVY FOR LEWY | The Pole's touch takes him too close to Max Grun's outstretched arms
The Polish international, a free agent when he departed Dortmund, did contribute, playing a neat one-two to set up Arjen Robben for Munich’s second in a 2-1 win over Wolfsburg.

But in the scoring stakes, Lewandowski - looking to achieve something like the strike rate Mandzukic achieved at Bayern (33 goals in 54 appearances) drew a blank. It wasn’t for the lack of trying or opportunities. As the saying goes, he did everything but score.

In the first half, Lewandowski, the Bundesliga’s leading scorer last term with 20 goals, missed one opportunity from close range, unable to get a shot off as the ball tangled beneath his feet. Later in the half, his acrobatic high-kicking volley produced and equally acrobatic stop from Wolfsburg keeper Max Grun. Close, but no Bundesliga debut goal for the German champions.

And what of Diego Costa. Having ended his time in La Liga injured, including an ineffective Champions League appearance, and an equally unproductive trip to the World Cup with Spain, many locals around Stamford Bridge pondered just how this same man could have scored all those goals for Atletico.

They did not have long to wait for the answer. Against Burnley in Chelsea’s opening league outing, Costa scored. Against Leicester City on Saturday, Costa doubled his tally for the campaign. Indeed, the OPTA statistics at the time showed he’d had two shots this season, and scored on both occasions. Efficiency or what?

Criticised while out in Brazil, again it was his soon-to-be former coach Simeone who defended the prolific front man. If the Spanish midfield didn’t pass through the channels that Costa ran, how was he supposed to score?

With either Hazard, Oscar, Willian, Matic, Schurrle, Ramires or Fabregas providing the supply chain at any given time for Chelsea, Costa isn’t going to be lacking in opportunity.

So, while Mandzukic and Costa have contributed, Lewandowski awaits his first goal. I think it can be confidently predicted however, that will change ...