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Pakistan eyes $12b deals with Saudi Arabia

ISLAMABAD: After decades of dependence on Saudi grants, Pakistan is poised to sign billions of dollars of investment deals with the kingdom during an upcoming visit of Crown Prince Mohammad Bin Salman, including a multibillion dollar oil refinery in .

“Pakistan and Saudi Arabia will sign three memoranda of understanding for investment in oil, renewable energy and mineral sectors during the royal visit,” Prime Minister’s Adviser on Commerce and Investment Razak Dawood told a select group of journalists on Monday.
“It is very likely that an agreement for $3 billion oil facility on deferred payments will also be signed during the visit,” said Dawood, who was very upbeat about keen interest being shown by Saudi investors in Pakistan.Pakistan will also ask Saudi Arabia to take part in the privatisation of over $2 billion worth of LNG-fired two power plants, although the kingdom had earlier showed interest in buying those units only under a government-to-government deal.

Dawood did not put an exact investment figure by Saudi Arabia, as the precise size of the investment will be determined once a feasibility study of the oil refinery is ready.The adviser estimated minimum $10 billion to $12 billion Saudi investment in Pakistan in the medium term.“It will take about 15 months to 18 months to complete the feasibility study,” said Dawood.He said the cost of the oil refinery will be in the range of $5 billion to $6 billion but if the Saudis decide to build a petrochemical complex the cost would increase close to $10 billion.

A strong Saudi delegation comprising 600 to 700 delegates including 40 private investors would visit Pakistan, at the weekend, said Board of Investment Chairman Haroon Sharif.Prince Mohammed is expected to arrive in Pakistan this week, although an exact date of his arrival has not yet been officially disclosed. It is expected the crown prince would arrive on Saturday or Sunday.His security team, comprising 170 personnel, has already arrived in Pakistan and is visiting various places in Islamabad.
Two five-star hotels and couple of three-star hotels have been booked for the delegates. In addition, media reports suggested that the PM’s House that had earlier been converted into a university will be used to host the royal guests.
The investment deals with Saudi Arabia will mark a partial departure from Pakistan’s decades-old policy of begging from Saudi Arabia in difficult economic times.In 1998, after the nuclear explosions, Saudi Arabia had given free oil facility to Pakistan that continued for many years.In 2014, the then PML-N government had secured $1.5 billion “gift” from Saudi Arabia.

However, the government did not issue official statement regarding the purpose of the grant.This time also, Saudi Arabia has agreed to give $3 billion annual oil facility on deferred payments, which can be rolled over for three years period.
In addition, Pakistan has also obtained $3 billion Saudi loan at 3.18% interest rate to shore up official foreign currency reserves.At the heart of the investment is the multibillion dollar refinery and oil complex in the strategic Gwadar Port on the Arabian Sea, the ultimate destination for the massive multi-billion dollar China-Pakistan Economic Corridor.But Razak Dawood said Saudi Arabia never discussed with Pakistan whether the oil refinery will be part of CPEC. He, nonetheless, said that Saudis “will export refined oil to other destinations to which Pakistan has no objection”.The facility will have 250,000 to 300,000 barrel per day refining facility.
“We want that the refinery should be internationally competitive and is viable without the government support,” said Dawood.To a question, the adviser said that Pakistan will also extend tax incentive package, similar to one given for the UAE oil refinery project.
Former prime minister Shahid Khaqan Abbasi had approved $1.6 billion worth of incentives for the UAE-based Abu Dhabi Petroleum Investment Company to encourage it to establish an oil refinery along the coast in Hub.The incentives were given on a planned investment of $5 billion in the refinery a project of the Pak Arab Refinery Company (Parco).Dawood said that the UAE has given front-end engineering design contract for the construction of the refinery.
The BOI chairman said that during the crown prince visit a government-to-government deal for $2 billion investment in renewable energy projects will also be signed.“The third memorandum of understanding will be for minerals developments,” said the BOI chairman.He said the BOI has already taken the consent of the four provinces for signing the umbrella deal in the minerals sector

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Trade deficit shrinks $2.1b but exports fail to pick up pace

ISLAMABAD: The trade deficit in first seven months of the current fiscal year shrank one-tenth to $19.3 billion due to reduction in imports but exports again did not pick up pace despite steep currency depreciation of 33% in the past one year and grant …
3 billion due to reduction in imports but exports again did not pick up pace despite steep currency depreciation of 33% in the past one year and grant of massive subsidies in the last almost three years.
The trade deficit, which stood at $21.3 billion in July-January FY18, contracted 9.7% to $19.3 billion in the corresponding period of current fiscal year, according to the Pakistan Bureau of Statistics (PBS).In absolute terms, there was a decline of $2.1 billion in the deficit, which was a huge relief for the government.Imports during the July-January FY19 period dropped 5.2% or $1.8 billion to $32.5 billion.

However, the pace of increase in exports did not match the facilitation measures that the Pakistan Muslim League-Nawaz (PML-N) as well as the Pakistan Tehreek-e-Insaf (PTI) governments had taken since 2016.Exports in first seven months of FY19 amounted to only $13.2 billion, up 2.24% or $290 million.This came despite the fact that the central bank, in consultation with the finance ministry, let the currency depreciate 32.7% since December 2017. The rupee has weakened over 15% since the start of current fiscal year in July 2018.The PML-N government doled out a Rs180-billion package to the exporters.
The PTI administration has also offered an incentive package of over Rs30 billion in the shape of lower gas and electricity prices for export-focused industries. Exports were not picking up momentum due to the lag effect of currency devaluation, remarked Adviser to Prime Minister on Commerce and Investment Abdul Razak Dawood.
He voiced hope that exports would gain pace in the next couple of months once all the policy and administrative measures were fully in place. Dawood said because of the trade war between the US and China, US buyers were shifting towards Vietnam, Bangladesh and Pakistan, which would give a boost to Pakistan’s exports.Pakistan had closed the last fiscal year with a trade deficit of $37.6 billion, which became the key reason behind the highest-ever current account deficit of $18.9 billion. The PTI government wants to cut the trade deficit to about $26 billion, which seems highly unlikely now.

The value of exported goods was 245% less than the value of imports a ratio that was slightly better than the previous month.The trade balance in January 2019 compared to January last year significantly improved, again primarily because of contraction in imports.The trade deficit shrank 31.7% to $2.5 billion in January this year. In absolute terms, there was a reduction of $1.1 billion in the deficit.Trade deficit shrinks 5% to $16.8b as imports go down On a month-on-month basis, the exports contracted 1.8% in January over the preceding month.Exports decreased $37 million to $2 billion. Imports, however, rose 1.4% to $4.5 billion in January.

Resultantly, the trade deficit widened 4.1% to $2.5 billion in January over December.Exports rise 30% in rupee termsSpeaking at a press conference on Monday, Dawood said the trade deficit had been brought down by $2 billion in first seven months of the current financial year as runaway imports had been squeezed.“We are hopeful that the deficit will go down by $4-5 billion by the end of current financial year,” he said.Trade volume between Pakistan, Sri Lanka surges after FTAExports increased 4% in dollar terms in January 2019 compared to the corresponding month of previous year.

However, he said, the increase in exports was 30% in rupee terms due to depreciation of the rupee. In January 2019, imports came down 19% in dollars terms and 31..7% in rupee terms, the adviser said.He pointed out that the government had imposed regulatory duty on non-essential goods and imposed ban on furnace oil imports.“Imports were higher last year due to the import of machinery for power plants; the government’s policy of squeezing imports is yielding results,” he stressed.The PM adviser said domestic sale of cement had dropped 9% but its exports rose 50%, reaching $180 million in Jul-Jan FY19.Cement was mainly exported to Bangladesh and Sri Lanka. He pointed out that Pakistan was importing edible oil of over $3 billion per annum and the government wanted to curtail it by focusing on sunflower and canola crops in the country.
The adviser, however, emphasised that he was not satisfied with the current volume of exports, adding that textile units had the capacity to enhance shipments to overseas markets. Speaking on the occasion, Commerce Secretary Younus Dagha revealed that the government was focusing on exploring markets of African countries and would open trade offices in big countries of the continent with higher economic growth.

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