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Giving fiscal incentives to develop a certain geographical under-developed area or attract investment in a desired sector have been a time-honoured tool. A five-year holiday or exemption from income tax as well as customs duty on imported machinery have been the means to achieve the desired objective. It does lead to the heart- burning of companies located in non-tax exempt areas or a sector having already established units. In order to create an even playing field the government of the day has had to play the role of a neutral umpire when competing interests agitate for and against it. There is no simple solution. However, clarity of purpose should be the motivating force for the decision rather than the clout of the investor which usually has been the norm so far.

Two developments in the realm of Pakistan-India relations grab the attention of people of the sub-continent in particular and the world at large in general: the attack in Indian Punjab's Gurdaspur district that left 10 people dead, and video clips retrieved from the Indian spy drone that Pakistan army downed earlier this month near the Line of Control. In Gurdaspur, according to media reports, Indian police overcame a group of gunmen dressed in military fatigues after a 12-hour battle that ended in a small town police station near the border with Pakistan. In the first such attack in Indian Punjab in more than a decade, unidentified gunmen shot dead a barber and tried to hijack a bus before rushing to the police station.
Pakistan's central bank has kept its policy rate unchanged at 6.5 percent, thereby maintaining its accommodative monetary policy stance for the next two months. This 'wait and see' attitude is based on some sound reasons. Banks on the other hand are making heavy investment in government papers and trades on the secondary market have resulted in an improvement in their yields in the short-term. And, banks continue to make handsome profits on their PIB holdings (held to maturity portfolios) as well and their advance to deposit ratio (ADR) keeps on declining despite a cut of 300 basis points in the SBP policy rate since November 2014 onwards. Even a raise in the recent budget in applicable tax rate plus a four percent super tax is of no consequence. If the return on equity (ROE) is good, their shareholders are happy; their investment in government paper is inching up because the federal government appears to be in a bind, ie, on a borrowing binge due to its continuous failure to achieve revenue targets.
Even when the second round of peace talks between representatives of Taliban and officials of Afghan government is almost certain and may take place by the end of July the situation on the battlefront remains fluid. Clashes between government troops and Taliban fighters remain a regular affair, periodically punctuated by the US drone strikes. And the battle lines keep moving back and forth. The Taliban scored their latest victory against the government in north-east Afghanistan over the weekend as they captured a large police base at Tirgaran in Badakhshan province. The 100 plus strong police force surrendered and handed over its weapons to the invaders. They did put up a brave fight but not for long enough as the awaited enforcements from Kabul did not reach. The Taliban took them into custody, but later on as the local elders intervened they were allowed to go home. On the face of it, it looks like a huge setback to the Ghani-Abdullah unity government in Kabul, but in reality it is not, as it is only a tactical victory of the Taliban and may not last long. The provincial police chief has promised to take back the base, and he may succeed - just as the government forces took back the two cities in Kunduz province that had fallen to the Taliban a week before last month. Given the remote location of the Tirgaran police base and inclement weather, the government could not fly in reinforcement in time. "We will launch an operation soon and take back control of the base," says provincial governor Shah Waliullah Adib. But quite a few of the vanquished policemen may not turn up for duty - they are said to have joined the Taliban. With the people in a war for forty years, loyalty remains enigmatic, especially at this juncture when the Taliban have been internationally declared as 'insurgents' and no more terrorists and their government has accepted them as stakeholders.
The state of affairs in the energy sector is getting messier and the country is digging itself into a deeper hole as the PML-N government has miserably failed to turn the corner by addressing the root causes. Private sector was expected to lead the way; however, a policy was needed to be framed to create an enabling environment. But, by the middle of this government's term in office, investors, domestic as well as foreign, are shy to invest in this country's future.
In Pakistan, for greater part of the year we are on leave from work. It is either a National Day or a Public Holiday. Or, it may just be a Regional Holiday to observe a 'Festival of Kites'. And then, there are 104-plus Saturdays and Sundays when the government offices remain closed. And often holiday spells are longer than justified as it was this past Eidul Fitr when holidays which lasted five days, an improvement of almost 100 percent over last year. How quickly one restarts work in full-gear is a moot point. But it is the man-days lost that really matter. Last year, the country lost exports worth around 356 million dollars due to that long holiday, says APTMA Chairman S M Tanveer. As Pakistan remained cut-off from rest of the world throughout that long period, he says, all kinds of export and manufacturing activities were stopped. Obviously, there is every reason for the business community to be greatly perturbed over this trend, that has called upon the government to rationalise the number of holidays in line with genuine occasions - unlike this Eid holiday spell that is perceived to have been extended just to escape public anger over power loadshedding and accommodate the babus in Islamabad and our top political leadership to spend Eid with their kith and kin who reside abroad. But, as electric power was transferred to domestic users the industrial production and export schedules were adversely affected. And when the external flows slow down meeting the fiscal-deficit targets becomes problematic. And how come what the government gives by one hand to the man in the street by diverting electric power from industry to him it takes away by the other hand by robbing the daily wager of work for the day.
The nuclear deal made between Iran and the P5+1 is a game changer for its ramifications on global security - never before a government did agree to be defanged of its nuclear teeth. But its implementation is beset with painful teething troubles, or so it seems. The governments both in Iran and the leader of the P5+1, the United States, are being accused of 'sell-out of national interest', albeit a bit less vociferously in Tehran than in Washington. In both the capitals there is one more hurdle to be crossed: the deal must win legislative approval in both the countries. In Tehran, it is no big issue given the Islamic Revolution's Supreme Leader Ali Khamenei's unstinted backing of the deal from the word go. But in Washington the Republican-dominated Congress is up in arms and is committed to denying the nuclear deal with Iran the needed legislative approval. Should President Obama veto the Congressional decision it is quite possible that his own party legislators join hands with Republicans and override the presidential veto. Should that be the case, says Secretary of State John Kerry, 'the greater likelihood is what President said the other day - you will have war'. Equally blunt in assertion is Ayatollah Ali Khamenei. On the review of the nuclear deal, he said: 'Do your job with care based on the country's expediencies and national interests ... not to create divisions among the people because it is being pursued by people who are seeking to preserve the national interests'. It's not that the deal is short on its weight and validity; it is being criticised for something else and that is the unfavourable reaction of regional and global allies of the signatory powers. While the United States principal regional allies, Israel and Saudi Arabia, are critical of the deal in Iran it is the hardliners who think in the wake of emerging bonhomie between Washington and Tehran would undermine their regional allies' standing as power contenders.


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Banking Review 2014

Foreign Debt $61.805bn
Per Cap Income $1,386
GDP Growth 4.14%
Average CPI 8.6%
Trade Balance $-2.378 bln
Exports $2.016 bln
Imports $4.394 bln
WeeklyJuly 23, 2015
Reserves $18.677 bln