Month: June 2021

The Overseas Investors Chamber of Commerce and Industry (OICCI) members have appreciated the significant improvement in the FX remittance processing time and growing engagement of the State Bank of Pakistan leadership with the key stakeholders.

OICCI released the results of their latest annual Remittance Survey 2021, conducted amongst foreign investors who are members of OICCI. This annual survey was conducted during May 2021 to measure the progress made during the past year in terms of facilitating foreign remittances.

A significant 94 percent of the survey respondents informed that Dividend remittances are now being approved by the Central Bank within 3 months of the applications, vs. 72 percent in the last survey conducted in 2019, whereas 90 percent of respondents indicated that Technical fee is also being remitted within three months vs. 47 percent in the last survey and likewise, 67 percent informed about similar timelines for Royalty remittance as opposed to a meager 28 percent in the last survey.

Commenting on the key findings of the survey, Irfan Siddiqui, OICCI President, highlighted that foreign investors have also highly appreciated the numerous Ease of Doing Business initiatives by SBP during the past year, considering the significant negative impact of COVID-19 on the business environment, especially for medium and small businesses, who were also the customers of many of OICCI members.

SBP’s modernization initiative, inter-alia, enabled over 2/3rd of the respondents to track online their remittance application, he said.

The foreign investors have also recommended few areas for further improvement by SBP, including giving more autonomy to authorized dealers in making routine remittances, allowing hedging of major FX payments like dividends, royalty, and technical fees, and further simplifying the Foreign Exchange manual by making it sector-wise.

OICCI is a research-based organization that conducts numerous surveys on matters affecting foreign investors in Pakistan and shares key findings with relevant Government authorities to facilitate existing and potential foreign investors.

Over 200 members of OICCI belong to 35 countries and collectively contribute about one-third of the tax revenue of the country and are the largest group of investors in Pakistan annually for the past many years. In the last nine years, OICCI members have invested over $18 billion in expanding their footprint in Pakistan.

This survey was initiated in 2018 following concerns raised by foreign investors about the delays in the remittances to different foreign parties, their HQ, and suppliers.

Source: Pro Pakistani

United Bank Limited (UBL) continues to scale back its international operations as part of its global realignment strategy in phases, and now plans to voluntarily wind up its wholly-owned subsidiary UBL (Switzerland) AG.

This decision is in line with UBL’s exit strategy from non-core markets. The winding-up is subject to relevant legal and regulatory approvals, including the approval of its shareholders.

In 2020, UBL has sold its subsidiary in Tanzania after ending its major operations in New York in 2018. It also liquidated its shareholding in the Oman United Exchange Company, Muscat over the last couple of years.

Besides UBL, other leading commercial Pakistani banks are also working on reducing the global footprint of their businesses through branches and subsidiaries while choosing to enhance their global businesses through partnership models and focusing on optimally consolidating their local operations simultaneously.

A notification issued to the Pakistan Stock Exchange detailed that UBL and UBL (Switzerland) AG will continue to work closely with all their stakeholders throughout the winding-up process to ensure that UBL (Switzerland) AG is closed down in an orderly manner, fulfilling all its obligations and complying with all the applicable laws, rules, and regulations.

The latest quarterly accounts showed that the carrying value of UBL (Switzerland) AG on the holding company’s balance sheet was only Rs. 590 million, or 0.05 percent of its total investments.

The notification also detailed that UBL’s decision to wind up UBL (Switzerland) AG will not have any material impact on the former’s overall operating and financial position.

Source: Pro Pakistani

The Competition Commission of Pakistan (CCP) has concluded an inquiry in the dairy sector, which has found the prima facie involvement of three leading dairy associations in cartelization and price-fixing of milk in the country’s largest metropolitan, Karachi.

The CCP initiated the inquiry after taking notice of the media reports and concerns raised in a letter received from a leading Consumer Association against the rise announced in the price of milk in Karachi and its adjacent areas by the dairy associations at the farm, wholesale and retail levels.

Media reports also highlighted the involvement of several other dairy associations in the price-fixing of milk. It was specifically mentioned that the Dairy Farmers Association (DFA) Karachi had raised the price of milk from Rs. 110 per liter to Rs. 120 per liter with immediate effect, whereas, the official government rate was Rs. 94 per liter.

Since the milk price set by the government was Rs. 94 per liter while the association collusively/collectively sold it at Rs. 120 per liter, it resulted in daily liability passed on to consumers to the tune of approximately Rs. 130 million and an annual impact of approximately Rs. 47 billion to the consumer of Karachi and its adjacent areas.

On the other hand, the market was distorted as there was no competition on prices, and consumers were made to pay unfair prices irrespective of the quality of milk.

Milk is an essential commodity and a key ingredient in desi ghee, butter, cheese, a variety of confectionaries, and several cosmetics. Therefore, a change in the price of milk affects the prices of all these and other products throughout the country.

Analysis of Karachi’s milk sector reveals that fresh milk in Karachi is supplied by five cattle colonies located on the outskirts of the city. The supply chain of milk consists of dairy farmers, wholesalers, and retailers, where milk is sold to retailers through an annual contract called ‘bandhi’ in which the rate and quantity for purchase of milk are fixed by various dairy and retailer associations. Karachi is also unique in the sense that their milk can also be purchased from the mandi located at Lee (Bolton) market.

As per the inquiry committee, the Commissioner Karachi Division notifies the prices at all tiers of the milk supply chain, and the last such notification was issued on March 14, 2018, fixing the prices per liter as Rs. 85 per liter for the dairy farmer, Rs. 88.75 for wholesalers, and Rs. 94 per liter for retailers.

However, the official data shows that the notified prices are not adhered to mainly due to the role of various associations involved in the milk supply chain.

There are three dairy farmers’ associations in Karachi namely:

• Dairy & Cattle Farmers Association Karachi (DCFAK);

• Dairy Farmers Association Karachi (DFAK);

• Karachi Dairy Farmers Association (KDFA).

In February 2021, an informant shared some video footage of representatives of DCFAK announcing the revised prices of milk in Karachi. This was followed by the President of DCFAK appearing on various TV programs stating that milk in Karachi would not be available to consumers at the old rate of Rs. 120 and that his association will not take back the increase in milk prices.

Similarly, the TV appearances of President DCFAK were presented in the inquiry report where he announces new rates of milk in July 2020.

Statements from various retailers’ representatives and a dairy farmer’s representative revealed that all the three dairy associations in Karachi had formed a cartel and were announcing the rates of bandhi. If a retailer refused to abide by the association’s set rates, his supply of milk would be stopped.

The inquiry committee after taking into account:

• Statements of retailers’ representatives, dairy farmers and

• The abovementioned video footage reached the conclusion that in July 2020 and February 2021, decisions to fix the prices of fresh milk in Karachi were primarily taken by DCFAK.

It also appears that the other two dairy farmers’ associations – DFAK and KDFA – followed suit as the prices of milk in the relevant market rose immediately after the announcement of new rates by DCFAK. It is observed that the rate rise could not have been possible without the collusion of all three dairy associations.

Price data shows that prices of milk in Karachi rose immediately after the rate announcement by the DCFAK. In July 2020, prices rose from an average of Rs. 110 per liter to Rs. 120 per liter, and in March 2021, prices rose from Rs. 120 to Rs. 130 per liter.

Once the rate of bandhi was increased by the dairy farmers, it would have an impact on prices at all other levels of the supply chain, including wholesalers and retailers.

A city-wise comparison among Karachi, Lahore, and Islamabad/Rawalpindi shows that only Karachi has a uniform milk price, whereas the prices vary in all other cities. Such uniformity in prices also points towards rate fixation by the various dairy associations.

Therefore, these decisions to fix the rate of bandhi in the relevant market are a prima facie violation of Section 4 of the Competition Act 2010.

Rate announcements or even recommendations by associations to fix the price of milk are decisions by an association in prima facie violation of Section 4(1) read with Section 4(2)(a) of the Competition Act, 2010. This rate acts as a benchmark, and the product would be priced at or near this level.

In light of the findings, the inquiry committee recommended the Commission consider initiating proceedings under Section 30 of the Act against DCFAK, DFAK, and KDFA.

Source: Pro Pakistani

Federal Minister for Finance and Revenue, Mr. Shaukat Tarin, presided over a meeting of the National Price Monitoring Committee (NPMC) held at the Finance Division.

He briefed the participants of the meeting that Prime Minister is determined to bring ease to the lives of the poor in Pakistan. A multi-pronged approach is being followed for this purpose. Different schemes and incentives have been rolled out, and many more are on the cards to uplift the lives of common people.

The recently presented Federal Budget 2021-2022 is a practical manifestation of the pro-poor approach of the government. All departments and organizations should contribute to uplift the lives of the underprivileged. Prices of commodities of daily use have a direct impact on the lives of common people. National Price Monitoring Committee is a forum that is actively monitoring the prices of essential items and ensuring its smooth supply. The difference between wholesale and retail prices of essential items is not only huge but also varies across different cities, which requires thorough analysis.

During the meeting, the Secretary of Finance briefed that the weekly SPI decreased by 0.59 percent during the last week. A week earlier, the weekly SPI declined by 0.61 percent. It is the third consecutive week that SPI is declining. He further briefed the meeting that the prices of 09 items declined during last week. The prices of 28 items remained stable while prices of 14 items saw a slight upward trend.

The meeting took stock of the strategic reserves of essential commodities, and the Federal Minister for Finance and Revenue issued directions to relevant departments to maintain the strategic reserves of essential commodities and ensure timely and appropriate measures to avoid any untoward situation.

Federal Minister for Finance and Revenue, Shaukat Tarin, during the meeting, said that National Price Monitoring Committee should adopt a comprehensive and proactive strategy to minimize the gap of prices between growers and retailers. This reduction in the gap will significantly lower the prices of essential commodities for end users.

He further said that the Federal Bureau of Statistics is an independent entity but a committee with SAPM on Finance and Revenue as chairman and consisting of representatives from all stakeholders, including representatives from provinces, should engage with the Federal Bureau of Statics to work out further perfection in data collection mechanism of PBS wherever required.

Federal Minister for Finance and Revenue, Mr. Shaukat Tarin, expressed these views while chairing the meeting of the National Price Monitoring Committee at Finance Ministry. The meeting was attended by SAPM on Finance and Revenue, Federal Minister for National Food Security and Research, Secretary Finance Division, all Chief Secretaries, Chief Commissioner Islamabad, representatives of Pakistan Bureau of Statistics, Ministry of Commerce, Ministry of Planning, Development, and Special Initiatives and other relevant departments.

Source: Pro Pakistani

The National Assembly has passed a legal amendment bill, ‘Financial Institutions (Secured Transactions) (Amendment) Bill, 2020,’ to improve access to loans for small and medium enterprises (SMEs).

For now, SMEs have access to less than 10 percent of private-sector credit, despite having nearly a 40 percent share in GDP, according to the central bank’s data. The amendment will also make transactions more secured for financial institutions.

The bill will bring the legal framework of secured transactions in line with the international best practices. It will also likely improve the country’s ranking on the World Bank’s Ease of Doing Business Index.

The bill will now be tabled at the upper house for its final approval. It entails a legal framework for the creation, perfection, and enforcement of security interests on movable assets. This is being done so the SMEs can better access finance through the use of their movable assets – receivables, intellectual property, inventory, negotiable instruments, agricultural produce, petroleum or minerals, motor vehicles – as security for loans, an official document showed.

Moreover, the security interests of SMEs will be regulated on the basis of their function and not their form or traditional terminology for security interests. This will also bring the regulatory laws in line with the international best practices on secured transactions laws, as well as at par with the World Bank’s requirements.

Under the law, filing a security agreement is not required, and advance registration of security interest based on authorization by the entity is allowed. A charge/security interest may be registered for a period of up to 5 years, which is extendable if required, the document said.

Perfection of security interests may be achieved by registration in all types of security interests on movable property. However, in some cases, e.g., possession of tangible movable property or right on funds credited in a deposit account, perfection may also be achieved through possession or control, respectively. Earlier perfection by registration was not available for all types of security interest, it added.

Source: Pro Pakistani

The Punjab government presented the budget for the fiscal year 2021-22 with an estimated outlay of Rs. 2.653 trillion, including an Annual Development Program (ADP) worth Rs. 560 billion.

The budget session was held in the newly-constructed building of the Punjab Assembly, where Punjab Finance Minister, Hashim Jawan Bakht, presented the budget.

Like the Federal Government, the Punjab government has also announced that it is levying no new taxes. The total outlay of this budget is 18 percent higher than the current fiscal year’s budget.

Hashim said a target of Rs. 405 billion has been set for provincial tax collection, which is 28 percent more than the current fiscal year.

The government expected to get Rs. 5,829 billion from the Federal Divisible Pool and is expected to get Rs. 1,684 billion from the National Finance Commission (NFC) Award.

In line with the federal budget, the pay and pension have been increased by 10 percent, while the minimum wage has been increased from Rs. 17,500 to Rs. 20,000 per month.

The current expenditure estimates in the budget are around Rs. 1,428 billion. The government has increased the development budget by 66 percent.

All the expected revenue resources have been utilized in the budget, with an expected surplus at Rs. 125 billion. This increases the risk of the development budget being curtailed, in case of any unexpected major shortfall in federal transfers.

This would also mean that in case of the absence of funds, the development projects will be delayed, which not only increases the cost of the project but also disturbs the entire development planning.

Hashim said that 34 percent of the total annual development budget (Rs. 189 billion) has been allocated for South Punjab. A separate secretariat has also been established for South Punjab, and 55 administrative and 11 financial powers have been transferred to that secretariat. People of South Punjab will now get a 32 percent quota in government services as well.

Furthermore, Rs. 12 billion is allocated for industrial sector development, and over Rs. 28 billion has been earmarked for Lahore, considering its importance as a business hub, the minister said, adding that in view of water shortages in Lahore, the government is establishing a surface water treatment plant for which Rs. 15 million have been earmarked this year.

Moreover, Rs. 370 billion has been allocated for the health and education sector, and additional Rs. 96 billion for the development budget of the health sector, which is 182 percent more than the current fiscal year.

The government is also initiating a universal health insurance program with the allocation of Rs. 82 billion. Under this program, 100 percent population of Punjab will get free and quality health services. It is expected that government will issue health cards to 110 million people of the province.

The education sector gets Rs. 442 billion in this budget, which is Rs. 51 billion more than the current year. More than Rs. 54 billion has been earmarked for the development budget while Rs. 388 billion has been allocated for the current expenditure under this head.

The government has allocated Rs. 15 billion for higher education which is 285 percent more than the current fiscal year.

The budget for agriculture development projects has been increased three-fold to ensure food security and increase agricultural productivity, the minister said.

The provincial government has allocated more than Rs. 31 billion for the agriculture transformation and Rs. 100 billion for Agriculture Transmission Plan. Moreover, Rs. 55 billion has been set aside for the irrigation sector.

Additionally, Rs. 5 billion each is allocated for livestock and dairy development projects and the improvement of watercourses.

The government has also proposed tax concessions of Rs. 50 billion to provide relief to the public and to assist businesses. No change has been made in the rate of stamp duty, which will remain at 1 percent.

The ratio of sales tax on services will also remain at 5 percent, but the government has proposed a reduction of the tax ratio on call centers from 19 percent to 16 percent.

This is the fourth budget by the incumbent government. The first budget was presented by PTI for nine months in October 2018.

Source: Pro Pakistani