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Letters To The Editor

Your efforts to highlight the mining sector are indeed worth appreciating.  It would be great, if you would also cover the Kalabagh iron refinery project. A steel mill was to be set up at Kalabagh.  Kalabagh has the largest reserves of iron ore in Pakistan. This proposed Steel Mill at Kalabagh should be given priority because it will not only provide job opportunities, but steel production within the country will also increase. The best thing about this project is its reliance on the local iron ore deposits. It allows this proposed Steel Mill to produce steel at cheaper rate than presently being produced by PSM due to its imported and expensive iron ore.

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Editorial

Dear Readers,
The Evaluation of goods has always been a thorn in the neck of importers. The process has been a cause of much debate and there have been various rules defined to streamline the procedure. An impartial and fair valuation system is necessary for smooth flow of goods. Considering Pakistan is a signatory to the WTO agreement on valuation of goods based on transactional value, but somehow the agreement has not been enforced in letter and spirit.
As the transaction value system promotes impartiality, it has always been highly recommended that it is implemented, simply because a transparent mechanism is a hindrance in the flow of kickbacks and commissions. To understand the riddle, we have covered the customs valuation process in detail.

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From Layllpur to Faisalabad and Back

Zunera Rais

This however, did not happen. With an electricity shortfall and a gas-shedding among other things, the year 2009 saw a huge recline in the exports of the textile sector. The shortage in power supply saw a number of small and large industrial units closing down. This has in turn affected at least 3000 laborers who have now been rendered jobless. The collapse of the textile industry of Faisalabad has come about due to multi-dimensional factors and needs a multi-faceted response to tackle it.
This is happening in an economy that was booming just about two years ago. From all accounts, Pakistan's was one of the few world economies that did not take a hit by the Global Financial Crisis, or by the national crises posed to it due to the economic sanctions put on it or by the four year drought or even by the massive earthquake that razed two of its cities to the ground. Pakistan's home grown economy turned out to be the least affected by the troubles surrounding it. In addition, the World Bank reported that Pakistan ranked 85th amongst the 181 countries on the Ease of doing Business Index, ranking the first in South Asia and above China, Russia and even India.
The end of the first decade of the twenty first century was about to witness an amazing boom in the industries of Pakistan, which was becoming more and more evident due to the rise in the demand for power, of electricity as well as natural gas. Officials claimed that this was a sure sign of the industrial boom in the country; ironically the fact that the industries are not being provided the power that they require is about to become the last nail in the coffin of the industrial sector of Pakistan. The economy of the country that successfully weathered international economic sanctions and the global financial crunches is about to be hit by the home grown disaster. The textile industry of Pakistan that constitutes more than 20% of the exports of Pakistan is taking the hardest blow. The Manchester of Pakistan is at the receiving end of these shock waves.
The end of the first decade of the twenty first century was about to witness an amazing boom in the industries of Pakistan, which was becoming more and more evident due to the rise in the demand for power, of electricity as well as natural gas. Officials claimed that this was a sure sign of the industrial boom in the country; ironically the fact that the industries are not being provided the power that they require is about to become the last nail in the coffin of the industrial sector of Pakistan. The economy of the country that successfully weathered international economic sanctions and the global financial crunches is about to be hit by the home grown disaster. The textile industry of Pakistan that constitutes more than 20% of the exports of Pakistan is taking the hardest blow. The Manchester of Pakistan is at the receiving end of these shock waves.
From the beginning of the year 2009, when the textile owners had set US$ 20 billion as their export target, the industries of Faisalabad started facing severe power outages. The industrial units as well as residential areas suffered from this problem. But, while the households can struggle to survive on firewood, industries cannot. The situation first ate the small industrial units and then started on the large ones. With the close of the year, most of the textile units were not able to meet their deadlines for supply of shipments before the Holiday/Christmas season to their clients internationally. While the country is facing this severe power shortage at large, the industries of Punjab have been targeted more severely.
The foremost problem that the country faces today is of power generation. When the boom in industries was being registered, power generation should have been ensured. Projects like IPI gas pipeline or the TAPI gas pipeline should have been started earlier, without India's consent, leaving India with the choice to join later. At the same time other areas for power generation should have been tapped so that the demands of the industrial sector could be met across Pakistan. The power sector was, however completely neglected with no plan conceived for the rising energy requirements of the country.
Presently, like most other issues, this one has also been brought into the political arena. Between the two major parties of today, the industries of Punjab have become the battlefield. Despite constant reminders of Punjab's Chief Minister and continuous promises by the Prime Minister of Pakistan, the gas outages of around five days continue for the industries of Punjab. The constant reminders by the industrialists and the looming threat of the foreign investment being withdrawn from the country are also not creating the desired effects.
The issue of CNG supply, however, is also embedded with the past. Pakistan is now ranked amongst the highest consumers of CNG, owing largely to it being used for automobiles. 2.4 million
Vehicles in Pakistan are being run on CNG today, which makes it the country with the highest number of consumers of CNG for automobiles. While this has saved the country from the distress of raised oil prices in 2004-05, it has created long term problems that should have been foreseen. Since, all the industrial units across Pakistan are run largely on natural gas, the government should have seen to the severe rise in demand and the supply of gas not being available, that this will create a huge power shortage.  
Also, coincidentally, Pakistan is one of the few countries that charge the commercial sector more for natural gas then the residential one. For a long time now, this has resulted in misuse of the energy source in the residential sector, at the same time reflecting the priority base of the successive governments.
The above is a commentary on how the planning is being done and executed in Pakistan. Over the years, the industry that grew in Pakistan was designed so that it could run on natural gas; at the same time, the automobiles users in Pakistan were also encouraged to use this as a fuel source. This however, was not a commodity being produced sufficiently in the country. Despite being aware of large coal deposits in the country, this was never tapped as a source of energy, neither were the industries developed so that they could change the power source. Without ever planning to create a supply chain, the demand for natural gas remained in the incline.
Adding to all this is the unavailability of raw material for the textile sector. Cotton and yarn were exported earlier last year and the industrialists are now facing not only a dearth of raw material but also a rise in prices that is adding to their already heaping loss statements.
Pakistan's industrial sector is also facing major problems today because governments in Pakistan have always looked for short term solution instead of seeking long term vision.The government finds it easier to have aid handed down instead of expanding the textile market for Pakistani producers. Just as it is easier to raise oil prices then to expand the tax base, so it is convenient to have power outages then generate power, or assuring its availability. While Pakistani industries can meet export targets and go even beyond, but the government fails to realize that with proper support, the exporters of Pakistan can increase the much needed foreign currency reserves and provide a stable budget with a decreased import deficit. Politics on the other hand is the only battle worth fighting for those in power, and hence the targeting of Punjab's textile industry, where there is an opponent party in power, instead of one in coalition.
The repercussions of this collapse will be felt internationally as well as locally. In the international market, Pakistan, which was about to replace China as the second largest exporter of textile will receive a severe set back. Since the industries of Pakistan were not able to meet their deadlines for delivery of shipments, this will also affect the reputation that the industrial community of Pakistan has garnered over decades.
With these huge problems being faced by the industrialists of a province, the investment of billions of dollars is at stake. This will in turn affect Pakistan's position in the list of the Ease of doing Business Index. It will also mar the country's reputation as one of the best textile goods manufacturing countries of the world. This situation will play havoc with the confidence of investors in Pakistan's markets, ultimately affecting the business communities across Pakistan.
But over an above all, in the dire straits that the country is in, it cannot afford the lack of direction and planning it is currently going through. Although the situation will affect business communities across the board, the political parties involved have made it into a battle of provinces over energy resources. Their own blunders of planning notwithstanding, the two major political parties have turned this into a competition between Punjab and Sindh. At a time of unprecedented political chaos and natural disasters, when the nation needs to be united against all odds, this will create a breach that will have calamitous consequences.
In the long run, if these problems are not resolved, the investors will take their investment out of Pakistan.  The shortage of natural gas has affected three thousand families so far and if the issues are not dealt with at his stage, it will later extend to other industries of the region. Pakistan will face an unprecedented budget deficit that will affect all aspects of its economy.
The Faisalabad Chamber of Commerce and Industry has in the past years proved its mettle and competency. Without much aid from the government, they set up their own Dry Port to facilitate their exports. In past, they also went to President Musharraf and offered to set-up their own power generation plants. With a little help from the government, the issue of power generation for these industries can be resolved. Investors can be lured to this prospective area since the booming Textile mills and other industries of the region will be able to return their investments with benefit.
With the implementation of the Eighteenth Amendment, provinces have also been given the authority to work in sync with the federal government to attract foreign investment and for this one dire and urgent need, the provincial government should also take a bold step and rescue the industrial units of Faisalabad. Either that or like the 45 days deadline that was extended to the ruling elite, the government of Punjab should take a stand on this, the most important issue being faced by the province, instead of continuing to play the political game.
There is still time to strengthen the confidence of the foreign investors and local entrepreneurs as well as provide some breathing space to the suffocating laborers. If there is power available for the industry in other parts of Pakistan, it should be the same for the industrial units of Punjab. And even if there is a dearth of power for all the industries across Pakistan, it is the responsibility of the federal and the provincial governments to ensure its availability. The infrastructure, which has been built over decades through hard work of generations of Pakistanis, should not be allowed to go waste. Nations move forward after achieving milestones, and only those who continue the forward stride survive the tests of time. If a nation can successfully fight the internal and external demons, they should be able to come through this quagmire as well. It will however need concerted efforts without any political and provincial bias, and by keeping in mind that the survival of one federating unit is intrinsically related to that of the other.

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