Pakistan textiles expect good gains after WTO trade waiver

 

It makes a change, but Pakistani textiles boss Asghar Hussain is pleased. A year ago, recession, power cuts and poor security forced him to sack most of his workers.

 

Now he s hoping for a major improvement in garment sales after the World Trade Organization approved unprecedented waivers allowing 75 Pakistani products duty free access to markets in Europe for two years.

 

The European Union is Pakistan s largest trading partner, receiving nearly 30 percent of its exports — worth almost 3 billion euros ($3.9 billion).

 

“It means we should expect good gains… as Europe is a huge market for Pakistani readymade garments,” said Hussain.

 

The signs are so good that Hussain has re-hired some workers, bringing his total staff to 50.

 

It is a fraction of the number he employed before devastating floods in 2010, but he expresses hope it could be a pointer to rosier times ahead.

 

The WTO passed the waivers as an unprecedented concession in order to help Pakistan recover from the floods, yet in 2011, the business climate had already started to improve.

 

Cotton prices rose to an all-time high of 229.67 cents a pound in March, and although they have since retreated to a modest 87 cents a pound, it is good news for Hussain, who says he exports 25 percent of his goods to Britain and Germany.

 

There was also a fall in Islamist and sectarian violence in the second half of 2011 and power cuts also diminished owing to priorities being given to industry.

 

“The situation isn t ideal. Cotton prices have decreased again, but power supply is better and industrial peace is there,” said Hussain.

 

Textiles dominate Pakistan s trade with the EU, accounting for more than 70 percent of its exports to the trading bloc.

 

The products chosen for the waiver, which needs to ratified at the WTO general council meeting on Tuesday and Wednesday, would amount to around 900 million euros in import value, about 27 percent of EU imports from Pakistan.

 

Pakistani textiles are currently hit with a 7.19 percent import duty in the European Union. If approved, the waiver will apply until end-2013.

 

“Such concessions will bring life to our dying industry,” said Shehzad Salim, Chairmen of Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), without providing precise figures.

 

“Our value-added textile industry s exports have suffered a lot because of electricity and gas shortages, devaluation of rupee and many other factors. The EU s package is promising and seems a breather for a choked economy.”

 

Mirza Ikhtiar Baig, textiles advisor to the prime minister, revised down an initial estimate that the EU package may increase exports by 400 million euros, agreeing with independent analysts who forecast a slightly lower figure.

 

Most believe the waiver will equate to a 0.7 percent increase in Pakistan s overall exports and a 1.5 percent increase in its textile exports.

 

“This package would increase Pakistan s exports by $175 million a year,” said Furqan Punjani of Equity Research, a market research firm.

 

The package includes over 30 products of non-value added textiles — items such as gray cloth, cotton yarn and fabric — 23 of textile garments and the rest made up of home textiles, value-added leather, footwear, raw leather and ethanol and vegetables.

 

“We estimate an increase of 0.7 percent in Pakistan s overall $25 billion exports for the year while it would contribute 1.26 percent to our $13.8 billion textile exports,” said Baig.

 

“The increase is a good positive for our economy, yet it should not be called significant given the fact that a ceiling has been imposed on our 15 quality products.”

 

A.B. Shahid, an independent analyst, was more cautious.

 

“The WTO waiver is a positive development, yet it is too little to handle the increasing negatives the economy is accumulating,” he told AFP.

 

That caution is something that skilled garment worker Mohammad Wahid understands only too well. When he was sacked two years ago, he struggled to feed his family of five until he was rehired 10 months later.

 

“Life is better now,” he said.

 

“Concessions in Europe are good, yet no-one knows how long this job lasts. In Pakistan, the feeling of insecurity never bites. It stings fatally.”
 

Strike to mark Egypt anniversary

 

Activists in Egypt are set to mark the anniversary of the overthrow of President Hosni Mubarak with a strike and day of civil disobedience.

 

Activists plan a day of civil disobedience in Egypt on Saturday to mark the first anniversary since they toppled Hosni Mubarak but left an increasingly unpopular but defiant military in charge.

 

The call for strikes in universities and workplaces comes after a series of protests pressuring the military to transfer power immediately to civilians, rather than wait for planned presidential elections later this year.

 

The military, headed by Mubarak s long-time defence minister Field Marshal Hussein Tantawi, has said it will deploy additional troops across the country in response to the calls for a day of disobedience.

 

On Friday, thousands of protesters snaked through Cairo s streets to bypass military cordons and reach the defence ministry, chanting “Down with military rule”

 

In a statement read out on state television late on Friday, the Supreme Council of the Armed Forces (SCAF) said it would not bow to threats or plots against the state.

 

“We will never yield to threats, and we will never give in to pressure,” the SCAF said.

 

“We tell you quite frankly that our dear Egypt faces plans aimed at striking at the heart of our revolution.

 

“We are facing plots against the nation aiming to undermine the institutions of the Egyptian state, and to topple the state itself so that chaos reigns.”

 

The military, which has brutally quashed several protests in the past year, has played off the abundant suspicion in Egypt of foreign conspiracies.

 

Students in several universities have called for strikes for Saturday, with secular youth groups which spearheaded the revolt against Mubarak also taking part.

 

Tareq al-Khouly, an organiser of the April 6 youth group, said the plan was for a one-day strike which could be extended.
In a joint statement on Friday, the groups urged Egyptians “to support these strikes in order to end the unjust rule and build a nation in which justice, freedom and dignity prevail.”

 

The call for strikes and protests has divided the country s political forces, with the Muslim Brotherhood — the big winner in recent parliamentary elections — coming out against it.

 

Many Egyptians complain that the economy has been battered by the lack of security and deadly violence in the wake of the 18-day revolt that forced Mubarak to resign on February 11 last year.

 

Protests against the military, idolised immediately after the revolt for not siding with Mubarak, have heightened fears among many that the Arab world s most populous nation could veer towards chaos, as the military itself warns.

 

On Friday the SCAF said the nation was at “the most dangerous turning point on our road to liberty, democracy and social justice.”

 

Young activists who spearheaded the revolt against Mubarak believe the generals will try to exercise power through a pliant civilian government after presidential elections later this year.

 

The activists say the military should hand power to parliament, elected over three rounds in November and December, or to a civilian council ahead of presidential elections set to take place before the end of June.

 

The SCAF statement said it was determined to transfer power to an elected civilian body.

 

“We have kept the first promise and returned legislative power to the people s assembly,” it said, adding that the parliamentary election took place in an atmosphere of “liberty and integrity.”

 

“Presidential power will pass to the president of the republic after the election ending the period of transition, and your faithful army will revert to its original role,” the military statement said.

 

Chinas inflation rate hits 4.5 percent in January

 

China s annual inflation rate hit 4.5 percent in January, the highest level in three months, data showed Thursday, after consumers splashed out on food and gifts over the Lunar New Year holiday.

 

The country s consumer price index, a key gauge of inflation, was higher than the 4.1 percent in December and ended five straight months of easing price pressures caused by government restrictions on lending and property purchases.

 

Analysts said the holiday, also known as the Spring Festival, was unusually early this year and had distorted the monthly data.

 

Retail spending typically soars during the week-long festival, the most important celebration in the Chinese calendar, as consumers ramp up spending on food, wine and gifts for family and friends.

 

Before January, inflation had eased for five months in a row after hitting a more than three-year high of 6.5 percent in July and analysts said the downward trend would likely resume in February as the economy continued to slow.

 

“It was inevitable that we would see some impact of the Lunar New Year holidays, which were in January this year but February last year, but it seems that this impact was bigger than expected,” said Brian Jackson, a senior analyst at Royal Bank of Canada in Hong Kong.

 

Analysts had expected inflation to rise 4.1 percent, according to a Dow Jones Newswires survey.

 

The market barely reacted to the data, with the Shanghai Composite Index up 0.37 points, or 0.02 percent, at 2,347.90 in late morning trade.

 

The rebound in inflation was driven by food prices, which soared 10.5 percent year-on-year in January compared with 9.1 percent in December, the National Bureau of Statistics said in a statement.

 

The producer price index, which measures the cost of goods at the farm and factory gate, rose an anaemic 0.7 percent in January compared with 1.7 percent in December, the statement said.

 

Bank of America-Merrill Lynch economist Lu Ting said the data was “significantly distorted” by the holiday “so investors definitely should not read too much into the inflation”.

 

There is mounting evidence that China s growth is slowing as the ongoing debt crisis in Europe and weakness in the United States hurts demand for Chinese exports, a key driver of the world s second-largest economy.

 

The International Monetary Fund this week warned that an escalation of Europe s fiscal woes could slash China s economic growth by half this year, and it urged Beijing to prepare stimulus measures in response.

 

But Chinese leaders have been very cautious about opening the credit valves for fear of reigniting inflation, which has the historic potential to trigger social unrest in the country of more than 1.3 billion people.

 

Late last year the central bank eased lending restrictions on banks and analysts expect similar moves in the coming months as authorities try to spur economic activity and prevent a damaging collapse in the property market.

 

Policymakers are also easing taxes and improving funding channels for small and medium-sized businesses which are huge employers but are often shunned by the major banks.

 

“There remains plenty of downward momentum in China, despite a moderation in the slowdown,” said Alistair Thornton, a Beijing-based analyst for IHS Global Insight.

 

“The property market remains in the throes of a correction, which is dragging down investment spending and spreading deflationary pressure (and) the eurozone will act as a drag on export growth this year.” 

 

Greek austerity talks stalled, minister heads to Brussels

 

Greek leaders failed on Thursday to agree on a reform and austerity program, the price of a financial bailout to avoid a messy default, forcing Finance Minister Evangelos Venizelos to go to the country s financial backers with an incomplete deal.

 

Venizelos will travel to Brussels later on Thursday, where his fellow euro zone finance ministers had hoped he would present a commitment to make budget savings worth 3.3 billion euros ($4.4 billion) this year.

 

But after all-night talks with leaders of the three parties in the Greek coalition and with officials from the EU and IMF, Venizelos emerged shortly before dawn to say that one issue remained unresolved.

 

“I am leaving for Brussels in a short while with the hope that the Eurogroup meeting will be held, and a positive decision on the new program will be taken,” he told reporters.

 

“The financial survival of the country in the coming years depends on the new program … It is time of responsibility for everyone.”

 

Venizelos did not say what the problem was or why he was not certain the Brussels meeting on the 130 billion euro bailout would go ahead.

 

A spokesman for the socialist PASOK party said disagreement over pension reform had been the stumbling block.
A senior government official said the party chiefs had agreed on how to make about 90 percent of the promised savings, leaving a relatively small hole in the calculations.

 

Athens had to close this gap quickly, said the official. “Greece has another 15 days to specify fiscal savings worth 300 million euros,” he said on condition of anonymity.

 

PM HOPES

 

Earlier, Prime Minister Lucas Papademos said he hoped the party leaders could sort out their differences before the euro zone finance ministers meet at 1700 GMT.

 

Prospects for a long-awaited deal on Greece s second bailout since 2010 appeared to brighten when the finance ministers  chairman Jean-Claude Juncker called the Brussels meeting – which IMF managing director Christine Lagarde will also attend – to examine the bailout and accompanying bond swap.

 

On offer from the European Union and International Monetary Fund is a package involving the new rescue funds – which Greece needs to avoid a chaotic default when big debt repayments fall due on March 20 – and a bond swap with private creditors to ease the nation s huge debt burden.

 

In return, Athens must accept conditions requiring big cuts in many Greeks  living standards. The smallest member of the coalition, the far-right LAOS party, was particularly uncomfortable with the measures.

 

“The president of LAOS George Karatzaferis expressed serious reservations,” said Papademos, a former central banker brought in when a PASOK government collapsed last November.

 

Panos Beglitis, spokesman for PASOK which is in the coalition along with LAOS and the conservative New Democracy party, said they had disagreed over the level of cuts to supplementary pensions needed to safeguard the pension system.

 

However, Beglitis told reporters the leaders had agreed to cut the minimum wage by 22 percent as part of efforts to make the economy more competitive. Plans to scrap bonuses paid to private sector workers at Christmas, Easter and in the summer had been dropped.

 

Two sources close to the Athens talks said the government would promise spending cuts and tax rises totaling 13 billion euros from 2012 to 2015, almost double the seven billion it originally pledged.
 

FY12 growth estimated at 6.9 pct, slowest in 3 years

NEW DEHLI; India’s economic growth may dip below 7 percent in the current fiscal year, the slowest pace since the 2008 financial crisis, restrained by the Reserve Bank’s inflation-fighting campaign and government gridlock.

The government forecast 6.9 percent annual growth for the fiscal year that ends in March, a tad below the 7 percent to 7.5 percent growth predicted by several government officials.

It would mark a sharp decline from the prior year’s 8.4 percent growth rate, and a reversal of fortune for a country that until recently aspired to double-digit growth like China.

The Indian economy has slowed as the euro zone crisis combined with tight monetary policy and political paralysis at home have discouraged investment.

There is little hope for a quick turnaround. Although the Reserve Bank of India is widely expected to begin cutting interest rates after an aggressive 18-month tightening campaign came to an end in October, domestic growth still looks shaky and the global outlook uncertain.

Inflation also remains elevated, making it tougher for the central bank to prop up growth.

“We are not expecting any sudden reversal in economic growth. Global growth remains weak. Things on the domestic front have not improved either,” said Indranil Pan, chief economist at Kotak Mahindra Bank, who expects the economy to grow 6.7 percent this fiscal year and 6.6 percent in the following year.

Unlike most of its Asian peers, India runs fiscal and current account deficits, leaving it reliant on notoriously fickle foreign investors for financing. Investment has been flowing back into India so far in 2012, after outflows in 2011, but that could change if the euro zone crisis deteriorates.

The government’s advance estimate for the fiscal year 2011/12 shows that farm output is expected to grow 2.5 percent, while the manufacturing sector is likely to grow 3.9 percent.

Indian shares and bonds remained unchanged following the release of the growth estimate.

The RBI last month cut the current fiscal year growth forecast to 7 percent from 7.6 percent and warned of rising risks to economic growth.

“From the monetary policy point of view, signals are very clear that policy will remain accommodative,” said Sujan Hajra, chief economist at Anand Rathi Securities

He predicted the central bank would cut both interest rates and banks’ reserve requirements by as much as one full percentage point by October.

With inflation showing signs of finally easing and risks to growth on the rise the RBI is widely expected to cut interest rates by the end of June, if not sooner. It has already signalled it is finished raising rates after 13 increases between March 2010 and October 2011.

Headline inflation slowed down to a two-year low of 7.47 percent in December, but that was due almost entirely to a drop in food inflation that is widely seen as unsustainable.

Also, non-food manufactured inflation at 7.7 percent in December remained way above the central bank’s comfort zone. The next monetary policy review is due on March 15.

“We don’t think the RBI will cut rates in March. They will wait for the federal budget that is scheduled in mid-March,” said Pan, who expects a 25 basis point rate cut in April.

In his January policy review, the RBI governor flagged the inflationary risks stemming from the government’s failure to contain its fiscal deficit and had said a lack of credible fiscal consolidation would constrain him from lowering rates.

He had urged the government to use the March budget to signal fiscal consolidation. AGENCIES

Pakistan, Iran boost economic ties with 3 MoUs

 

The MoUs were signed by Iran’s Vice President for International Affairs Ali Seedlou and Pakistani advisor to the Prime Minister on finance Abdul Hafeez Sheikh, at the conclusion of bilateral consultations in Islamabad.

 

Abdul Hafeez Sheikh on the occasion said that the MoUs related to timely completion of Iran-Pakistan gas pipeline project, import of electricity from Iran and encouraging private sector of the two countries.

 

“Both sides also agreed to explore more avenues to increase bilateral trade to $ 5 billion mark,” the adviser said.

 

Iranian delegation was led by Iran’s Vice President for International Affairs Ali Seedlou while Pakistani side was led by Dr Abdul Hafeez Shaikh.

 

A number of Deputy Ministers from different sectors represented the Iranian side.

 

Abdul Hafeez Sheikh said that Iran and Pakistan have expressed the resolve to remove obstacles impeding trade.

 

He added that the two sides reviewed bilateral economic relations including commerce, transport and communication, energy, railways and oil and gas sectors.

 

Abdul Hafeez Sheikh said that President Asif Ali Zardari and Prime Minister Yousaf Raza Gillani are committed to bringing Iran and Pakistan closer. “Our trade volume will cross 5 billion dollars benchmark in times to come,” said the advisor.

 

Iran’s Vice President for International Affairs Ali Seedlou expressed gratitude for the hospitality of Pakistan.

 

He stressed the need for enhancing the cooperation between Iran and Pakistan in the fields of economy and development.

 

He said that Iran and Pakistan are bonded in the eternal ties of religion, culture and history. Two great nations are capable and have the capacity to work for the well being of the region.

 

Ali Seedlou added that Iran has already completed its portion of gas pipeline project and is also ready to assist Pakistan in building Pakistani part of the project.

 

“The project will bring prosperity in the region and would further strengthen Iran-Pakistan ties,” he noted.

 

He said Iran had extended 100-million-dollar assistance to Pakistan’s flood-stricken people and is ready to start more projects for the welfare of the Pakistan people.

 

Pointing to the upcoming visit to Pakistan of the Iranian President Mahmoud Ahmadinejad, he said Tehran has no restrictions for expansion of ties with Islamabad.–Online
 

Restructuring pushes ArcelorMittal into deep loss

 

Several large charges for taxes and restructuring pushed ArcelorMittal into a deep loss in the fourth quarter and the steel maker warned Tuesday that concerns over Europe s economy had hit demand.

 

ArcelorMittal posted a $1 billion net loss in the fourth quarter, compared to a $780 million loss in the same quarter of 2010. In the third quarter of 2011, it reported a profit of $659 million.

 

The loss was mostly due to $1.3 billion in charges for deferred taxes, restructuring and impairments, the Luxembourg-based company said. Sales were up 8.5 percent at $22.45 billion from the $20.7 billion in the fourth quarter of 2010, but fell 7.3 percent compared with the third quarter last year.

 

“The progressive recovery that we have been experiencing was impacted in the second half of the year by the growing uncertainty over the economic situation in Europe, which particularly affected sentiment and performance in the fourth quarter,” Chief Executive Lakshmi N. Mittal said in the earnings statement.

 

ArcelorMittal is particularly vulnerable to changes in economic sentiment, since much of the steel it makes is used in expensive items like cars, home appliances or buildings.

 

Concerns over how the debt crisis in the eurozone would affect the overall economy contributed to steel prices dropping 6.2 percent compared to the third quarter, while shipments fell 2.5 percent as buyers in Europe used up existing stock, the company said.

 

“Looking ahead to 2012, the situation in Europe remains a live concern,” Mittal said, but added that the company had seen some improvement in sentiment in the early weeks of this year compared with the end of 2011.

 

The CEO added that the steel maker s performance was helped by its presence all over the world and its growing mining business, which increased production of both iron ore and coal
two key ingredients for steel.

 

ArcelorMittal has been building up its own iron ore and coal production to become more independent from price changes in those two products.
 

Spain: Jobless claims up by 177,000

 

Spain s jobless rate stands at a 22.9 percent, the highest in the 17-nation eurozone. The economy posted negative growth in the fourth quarter of 2011 and is expected to enter recession this quarter.

 

The new right-leaning Popular Party government is promising a major labor reform next week in a desperate bid to reboot the economy.

 

Later Thursday, Spain tests investor sentiment again when it issues a range of bonds. There have been signs lately that investors are less concerned than they were at the end of last year. Its borrowing costs soared last year but have dropped sharply in recent weeks.
 

Dollar falls on strong US manufacturing data

 

Traders also bought euros after Portugal successfully raised 1.5 billion euros ($1.97 billion) in a debt auction, easing fears about its economic prospects.

 

A trade group of purchasing managers said that its manufacturing index rose in January to 54.1 from 53.1 in December. Readings above 50 indicate expansion. That s the fastest pace U.S. factories have grown in seven months.

 

China also said its manufacturing index grew in January.

 

“Investors remain optimistic because as long as there is evidence of growth in Asia, there will be hope that a sharp slowdown in the global economy will be avoided this year,” Kathy Lien, director of currency research for the currency trading company GFT, wrote in a note to clients.

 

The euro rose to $1.3188 in afternoon trading Wednesday from $1.3084 late Tuesday.

 

Traders tend to buy riskier currencies, such as the euro, when they perceive the global economy to be more stable.

 

In other trading, the British pound rose to $1.5846 from $1.5754. The dollar fell to 0.9136 Swiss franc from 0.9205 Swiss franc and to 0.9973 Canadian dollar from 1.0025 Canadian dollar.

 

The dollar rose to 76.33 Japanese yen from 76.20 yen.
 

Oil prices dip near $99 a barrel

 

Oil prices are down on concerns that the U.S. economy could slow and investors  worries eased about supply disruptions in the Persian Gulf.

 

Benchmark crude fell by 34 cents to $99.22 per barrel in New York on Monday. Brent crude, which is used to price foreign oils that are imported by U.S. refineries, lost 28 cents at $111.18 per barrel in London.

 

The Commerce Department said Americans kept a tighter grip on their wallets in December. Consumer spending was flat, even though incomes rose by the most in nine months. The economy relies heavily on consumer spending, and analysts say the economic recovery could stall and energy demand may stay weak if spending doesn t pick up.

 

Meanwhile, Iran welcomed international weapons experts into the country in hopes of refuting claims that it is building a nuclear weapon. That eased concerns about possible military action in the region. Still, Europe plans to embargo Iranian oil this summer to pressure Iran about its nuclear program. If that happens, Iran says it could retaliate by blocking passage through the Persian Gulf, where tankers carry one-sixth of the world s oil exports.

 

The U.S. is ready to implement sanctions on Iran s central bank that will make it harder for Iran to sell oil.
In other energy trading, heating oil was flat at $3.07 per gallon and gasoline futures fell 5 cents to $2.88 per gallon. Natural gas futures fell by 1 cent to $2.75 per 1,000 cubic feet.
 

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