Newsletter - Publication 86

01st Sep 2020

Port Operation Karach

The recent torrential rains and unprecedented urban flooding in Karachi have adversely disturbed port operations, causing problems for Pakistan’s international trade. Activity at the city’s two ports has either slowed down or has been suspended because of heavy monsoon showers over the last several days, creating challenges for safe operations and bringing cargo/shipping handling to a halt. Neither port officials nor labour could reach the ports after the city went under water, leading to delays in the provision of services such as cargo scanning, deliveries and cargo loading. Since there has been very limited activity, consignments have piled up, causing congestion. Exporters have been facing shipment delays for the last 10 days even before the city was submerged under rainwater and the situation has spawned concerns that the country may not be able to maintain the export growth momentum seen in the last couple of months after the government reopened the economy amid declining Covid-19 infections. The gravity of the situation and its potential impact on the nation’s foreign trade was also acknowledged by the adviser on commerce Abdul Razzak Dawood when he tweeted, that “it appears that because of heavy rains, particularly in Karachi, our export consignments are being delayed and, hence, exports may be affected in August”. At the same time, he advised exporters to bring any difficulties they faced to the notice of the commerce ministry.

Pakistan’s current account posts 3rd monthly surplus in 11 months

Pakistan’s current account swung back to surplus for the third time since October 2019, the State Bank of Pakistan said. An important gauge to measure the health of our economy, the current account records our dollar transactions with the rest of the world. In Pakistan’s case, it is usually in deficit or loss because it spends more dollars than it earns. As per latest data, the country recorded a surplus of $424 million in July, a turnaround from a deficit of $100 million the preceding month. Last time surplus of $344 million was recorded in May 2020. Pakistanis abroad sent home remittances worth $2.77 billion in July, which was the highest amount of dollars Pakistanis overseas have ever sent back to their families. Another factor that helped improve the current account situation was exports. Exports went up 19.7 per cent in July, after a 25.5 per cent growth in June. This happened because coronavirus cases dropped in Pakistan and many countries such the UAE started importing from us again.

Virgin Atlantic to begin flights to Pakistan in Dec

Virgin Atlantic has announced that it will launch flights to Pakistan from December this year in a bid to facilitate Pakistani diaspora in the UK and the US, who want to visit the country. In a statement, the airline said Pakistan had the seventh largest diaspora in the world and the new services were aimed at assisting overseas Pakistanis in the UK and the US desiring to visit friends and relatives back in Pakistan. According to the statement, the airline aims to capture the demand for business travel to the region through its latest move as global economies gradually recover from the impact of Covid-19 pandemic. In the UK, customers can book flights to Pakistan from London or Manchester while in the US, the airline will operate flights to Pakistan from New York, Los Angeles, Washington, Boston and San Francisco via London. The airline has announced three routes to Pakistan from the UK ie London-Lahore, London-Islamabad and Manchester-Islamabad. “These direct flights and new services will go on sale in September 2020 subject to applicable regulatory approvals,” the statement said. “Connections from European destinations will also be available through codeshare and interline partners.” Alongside passenger flights, the airline has also announced cargo service to facilitate companies intending to export and import goods between Pakistan and markets of the UK and the US.

Electric vehicles to hit roads ‘this year’

Federal Minister for Science and Technology said Pakistan would be the first country of South Asia to have electric vehicles on its roads this year, citing it as a matter of pride. The announcement was made at the signing ceremony of Strategic Alliance Agreement for setting up of electric vehicles value chain in Pakistan between the Daewoo Pakistan Express bus service in Pakistan and the Skywell Automobile China. According to the MoU, the project would be launched in two phases. In the initial phase, $50 million worth of investment would be made while in the second phase manufacturing of the electric buses would be started. The private sectors of Pakistan and China would have a partnership in view of the China Pakistan Economic Corridor. The work on electric bikes and three-wheelers vehicles was on the cards while the four-wheelers policy would also be finalised within 20 days, the minister said, adding that such modes of transport would help cut pollution, which poses severe health hazards for the people especially of Lahore and Karachi in the winter season.

Oil & Gas Kohat block

Oil and Gas Development Company Limited (OGDCL) announced to discover new reserves of oil and gas in Pakistan. According to sources privy to the details, the new discoveries of oil and gas reverses have been made in Kohat district of the Khyber Pakhtunkhwa (KP) province.“Nine mmcfd gas and 125 barrel oil will be obtained daily from well number 1 in Togh Bala, an administrative unit of Kohat district,” the sources said. The OGDCL officials involved in the exploration process said that it was the second consecutive successful exploration in the Kohat block. The new discovery will improve the oil and gas reserves held by the OGDCL.In July 2020, the OGDCL claimed that it has discovered five new reserves in Pakistan. According to details, the five new oil and gas deposits were discovered in Kohat, Sukkur, Shakardara and adjoining areas in one month. 1040 barrels of crude oil, 47 million cubic feet of gas per day were extracted from the new reserves and the newly discovered reserves have been added to the national supply network.

Consumption of oil products fell by 21pc in FY2018-19: Ogra

The consumption of oil products and domestic refining dropped by 21 per cent and 9pc, respectively, while the share of imported liquefied natural gas (LNG) surged to 20pc during the fiscal year 2018-19. In its “State of the Regulated Petroleum Industry” report 2018-19 released, the Oil and Gas Regulatory Authority (Ogra) noted that gas shortages were increasing due to rising demand from various sectors of the economy, particularly power, domestic, fertiliser, captive power and industry. “The demand supply gap during FY2018-19 was 1,440 MMCFD, which is expected to rise to 3,684 MMCFD, up 156pc, by FY2024-25,” the regulator said, adding the gap would further surge by 275pc to 5,389 MMCFD by FY2029-30. The report said natural gas was presently contributing nearly 45pc to Pakistan’s primary energy supply mix. With the anticipated shortfall in indigenous reserves of natural gas compared to fast growing demand, LNG is one of the preferred short to mid-term alternatives to bridge the supply-demand gap. LNG imports were 901MMCFD during FY2018-19 as compared to 754 MMCFD in FY2017-18, up by about 20pc. Its share in overall natural gas supplies has increased from 24pc of the previous year to 27pc in FY2018-19.

Spike in cotton prices helps raise Pakistan's textile exports

Following improvement in economic indicators of the country coupled with enhanced demand for Pakistan’s textile products in western nations, textile exports surged 33% to $1.27 billion in July 2020. According to the Pakistan Bureau of Statistics, the country exported $959 million worth of textile merchandise in June 2020. The rise in textile exports from Pakistan was mainly led by higher cotton prices in the international market, which translated into higher sales revenue. Pakistan’s textile exports surged 14.4% on a year-on-year basis as exports stood at $1.11 billion in July 2019.

S&P affirms Pakistan’s long-term rating at B

S&P Global Ratings has affirmed Pakistan’s long-term sovereign credit rating at ‘B-’ and short-term rating at ‘B’ with a stable outlook, meaning that Covid-19 has temporarily disrupted government’s aim of economic balancing as the need for foreign and local financing to meet expenditure may remain high with likely drop in the tax-to-GDP ratio in FY21. However, Islamabad faces no imminent shortfall in financing to meet the budgeted expenditure nor does it encounter a situation that can lead to default on foreign debt repayment since it is under the International Monetary Fund (IMF) programme worth $6 billion since July 2019. “The government had made solid progress towards important fiscal and economic reforms prior to the start of the global coronavirus outbreak and reform momentum should return once the pandemic is better contained,” Standard & Poor’s Global Ratings said in its commentary. “Multilateral and official funding will remain critical to Pakistan’s external debt sustainability.” “The stable outlook reflects our expectations that donor and partner financing will ensure that Pakistan can meet its external obligations over the next 12 months and that the country will continue to roll over its commercial credit lines,” it said. S&P has anticipated that Pakistan would achieve economic growth of 1.3% in the current fiscal year compared to a contraction of 0.4% in the previous fiscal year ended June 30, 2020. In real terms, however, Pakistan’s economic growth would remain negative for the third consecutive year, it said.

Pakistan Navy inducts Chinese-made 054 frigate ship in fleet

The Pakistan Navy inducted the 054 frigate ship, manufactured in China, in its naval fleet. The launching ceremony for the ship was held at China's Hudong Zhonghua Shipyard. According to the Pakistan Navy's spokesperson, the 054 frigate ship will contain all kinds of advanced technology, military equipment, weapons and sensors. The spokesperson further added that the ship's inclusion in the naval fleet will improve efforts to maintain peace and stability in the region. In 2019, China began building the first of four 'most advanced' naval frigates for Pakistan as part of a major bilateral arms deal to ensure 'balance of power' in the Indian Ocean. Cao Weidong, a senior researcher at the PLA’s Naval Military Studies Research Institute, said in the past, the Pakistani Navy would ask its Chinese contractors to use Western radars or weapons on ships constructed by Chinese shipbuilders because it believed Western naval technologies were better than Chinese ones. “But it seems that all weapons and radars on the new ship will be Chinese products, which reflects our progress in the industry and the Pakistani Navy’s confidence in our technology and capability,” he said.

PIA to file appeal for resumption of flights to EU countries

The Pakistan International Airlines (PIA) is likely to lodge an appeal with the European Union Aviation Safety Agency (EASA)against suspension of its flight operations to and from European Union member states for six months. The decision to suspend the PIA’s flight operations — in the wake of Aviation Minister's disclouser durin a speech in the National Assembly about the grounding of 262 pilots whose commercial flying licences were found ‘suspicious’ — was enforced on July 1. According to sources, the appeal has been prepared by the PIA and the authorities concerned and it will be presented to the Aviation Division before lodging it with the EASA. The sources said that after the issue of pilots’ suspicious licences came to light and the EASA suspended authorisation of PIA flights to and from the EU member countries, the agency asked the Pakistani authorities to clarify 11 points — safety management system (SMS) being the most important one. Before the EASA suspended the PIA flights on July 1, the airline was given an opportunity to voice its opinion on the agency’s intentions to suspend the authorisation. The PIA provided its opinion, but it was declared insufficient by the EASA. The PIA hopes that with the reparative and swift actions taken by the government and the airline management, the suspension of flight operations to the EU member states is likely to be lifted soon.

China, Pakistan agree to strengthen cooperation in all areas

Foreign Minister Shah Mahmood Qureshi met with his Chinese counterpart on Aug 21 - Friday to hold the second round of the China-Pakistan Foreign Ministers’ Strategic Dialogue in the Chinese province of Hainan. Qureshi, who is accompanied on the two-day official visit by senior officials, led the Pakistani delegation in the strategic dialogue while the Chinese side was led by State Councilor and Foreign Minister Wang Yi. During the meeting, the two sides exchanged views on the coronavirus pandemic, bilateral relations and international and regional issues of mutual interest, according to a joint press release issued after the dialogue. They also "reached consensus to collectively take measures to safeguard their common interests and promote peace, prosperity, and development in the region", the statement said. While, President Xi, in a letter to President Dr Arif Alvi, said both Pakistan and China were working to maintain the “momentum of peace and development in the region”. Chinese President Xi Jinping said his country was ready to work with Pakistan to deepen the building of “China-Pakistan Community of Shared Future” and to jointly promote cooperation among regional countries.

Chinese company pledges to build ‘dynamic’ Gwadar Port

The newly constructed Pak-China Friendship Green Park in Gwadar would be gradually built into the most distinctive cultural landscape in the area, said Zhaang Baozhong, Chairman of China Overseas Port Holding Company (COPHC). He said the company will join hands with the local people of Gwadar to build a dynamic Gwadar Port with a stronger economy and a better environment. “I hope the whole city of Gwadar will benefit from the development of Gwadar Port and realize a "win-win" situation between economic and ecological development,” he said. According to a reported published by China Economic Net (CEN), named after Pak-China Friendship Green Park, this plantation was completed last week under the cooperation of the sister cities Gwadar and Puyang in Henan Province, China, as well as China Overseas Port Holding Company (COPHC). The park is located on the south side of China-Pakistan Friendship Road leading to the port and laid under Hill Koh-e-Batil, covering an area of 60 acres.Gwadar has a hot desert climate, characterized by little precipitation and high variation between summer and winter temperatures. Serious soil salinisation has led to a low survival rate of plants.Faced with these difficulties, COPHC has made great efforts to transform the ecological environment of Gwadar by improving the coverage of plantation in this area, and it has successfully planted hundreds of tropical economic tree species that can adapt to high temperature, salt and alkali, wind and sand, and draught.

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