2.

Depreciation limit for import of used buses, trucks enhanced source The Nation Federal Board of Revenue (FBR) has enhanced the maximum limit of the depreciation to 60 per cent on the import of used/second-hand trucks, agricultural tractors, buses and vans, says a press release issued Saturday. The decision has been taken in line with a similar decision taken by the Economic Coordination Committee (ECC) of the Cabinet in its meeting held on 26.04.2011 when the apex body while considering the summary regarding Rationalizing the Prices of Locally Manufactured Cars decided to enhance the maximum limit of the depreciation to 60 per cent on the import of used / second-hand trucks, agricultural tractors, buses and vans. In order to implement ECCs said decision, the Revenue Division, Federal Board of Revenue has issued Customs General Order No. 04/2011, dated 19th May, 2011 amending the parent CGO 14/2005 dated 6th June, 2005. Thereby, the maximum limit of the depreciation has been enhanced to 60 per cent on the import of used / second hand trucks, agricultural tractors, buses and vans at the rate of 2 per cent per month.

3. Depreciation limit boosted to 60% for import of used trucks and buses source Daily Times Federal Board of Revenue (FBR) has enhanced the maximum limit of the depreciation from 50% to 60% on the import of old and used trucks, agricultural tractors, buses and vans. The decision has been taken in line with a similar decision taken by the Economic Coordination Committee (ECC) of the Cabinet in its meeting held on April 26, 2011 when the apex body while considering the summary regarding Rationalising the Prices of Locally Manufactured Cars decided vehicle to enhance the maximum limit of the depreciation to 60 percent on the import of used/secondhand trucks, agricultural tractors, buses and vans. In order to implement the ECCs said decision, the Revenue Division, Federal Board of Revenue has issued Customs General Order No 04/2011, amending the parent CGO 14/2005. Thereby, the maximum limit of the depreciation has been enhanced to 60 percent on the import of used/secondhand trucks, agricultural tractors, buses and vans at the rate of 2 percent per month. In the aforesaid CGO, after paragraph 2A, the following new paragraph shall be inserted, namely; 2B. Notwithstanding any thing contained in paragraphs 2 and 2A above, the depreciation in the assessable value, for the purpose of assessment on the import of used / secondhand vehicles i.e., trucks, agricultural tractors, buses and vans shall be allowed at the rate of 2% per month for each completed month, calculated from the date of first registration abroad up to the date of entry into Pakistan, subject to a maximum of 60%.

4. Used cars: Govt increases tax concession rate to 2% - source Express Tribune The federal government has increased the rate of tax concession from one per cent to two per cent per month on import of used vehicles under the gift and transfer of residency scheme. The decision will also be applicable on import of buses, trucks, agricultural tractors and wagons. The Federal Board of Revenue (FBR) in its notification also increased the maximum limit of relief from 50 per cent to 60 per cent. A senior officer from the FBR told that the bureau amended its earlier SRO No 1(2011)577 of June 6, 2005 and allowed import of five-year old vehicles. The duty or taxes on import of such vehicles is received in dollars or Pakistani currency. He said that on import of 800 cc cars under this scheme $4,400 are received as tax or duty, on 801 to 1,000 cc cars $4,500 are charged, on 1001 to 1,300 cc vehicles $11,000 are charged, on 1,301 to 1,500 cc $15,400 are charged, on 1,501 to 1,600 cc $18,700 are charged and on 1601 to 1,800 cc vehicles $23,100 or equal amount in Pakistani currency are charged as duty or taxes. A concession at 2 per cent per month on used vehicles will be allowed from these taxes. However, if the vehicle is between two-and-a-half years to five-years old, the limit of maximum relief of 60 per cent will be applied. The period will be counted from the date of the registration of the vehicle abroad to its entry in the country.

5. Rs 200m approved for bus terminals in interior Sindh source Daily Times, Pakistan Observer 500 diesel buses to soon connect Interior Sindh cities with Karachi . 70,000 two-stroke rickshaws to be converted into four-stroke. Sindh Chief Minister Syed Qaim Ali Shah has approved Rs200 million for construction of bus terminals in Thatta & Badin and the PC-I has been submitted in the Planning & Development Department for approval. As many 500 Shaheed Mohtarma Benazir Bhutto diesel buses will connect big cities of Interior Sindh with Karachi and the project has been included in the Annual Development Programme (ADP) 2011-12, which is under process for its approval and is expected to start soon, according to a handout issued here on Saturday. A spokesman of the Transport Department Sindh informed that the transport was a basic requirement for the economic growth of the country. The department has always laid great emphasis on its vision to achieve a balanced, integrated and multi-purpose regional transportation system which could provide safe, economical and efficient movement of people and goods. The Provincial Transport Department is committed to play an important role for the province of Sindh in general and intercity as a whole for which various projects have been taken up in the ADP 2011-12, which is under process for its approval. About 70,000 two-stroke auto rickshaws will be converted into four-stroke CNG to reduce air and noise pollution as the project has been included in the ADP-2011-12. The Transport Department has also taken up the following various projects under Public Sector Development Program 2011-12 for approval which is under process. The projects are Shaheed Mohtarma Benazir Bhutto Bus Terminal & construction of truck terminal in Karachi and construction of truck terminals in Hyderabad, Sukkur & Larkana. Apart from the above schemes, the Transport Department has also entered into an agreement and commitment with the different government autonomous organisations and foreign agencies for launching following schemes in Karachi. Pakistan Sustainable Transport Project: The United Nations Development Programme (UNDP) has developed a four-year project on sustainable transport in Pakistan and in this

connection, a delegation of UNDP Pakistan held a course of meetings with Minister Transport and Secretary for launching of the above project. The Transport Department had agreed to provide a commitment of support for this project by providing required office space and other project management assistance in Karachi vide this departments letter dated 8th November 2010. The Hydrocarbon Development Institute of Pakistan (HDIP) was approached by the Sindh Transport Department for establishment of Mega CNG Station in Karachi under the Shaheed Benazir Bhutto CNG Bus Programme, which was approved by the Central Development Working Party (CDWP) at the cost of Rs150.6 million during 2009-10. The land for the project will be provided by the Sindh Transport Department.

6. Toyota has 45 days supply in US source Dawn, The News Toyota Motor Corp told its US dealers this week that the company had 45 days of inventory and was working hard to get the word out that it was "open for business." In a letter obtained by Reuters, US Toyota brand sales chief Bob Carter told dealers the company was in a "healthy position" as it moved toward a full production schedule. The company recently announced that eight of its North American-built models, including the Camry and Corolla, would return to 100 per cent production in June. "This is well ahead of our previously announced timeline of November/December," Carter said in the letter. The earthquake that rocked northeastern Japan on March 11 forced Toyota and other Japanese automakers to cut output at home and abroad as they struggled to secure vital auto parts. The subsequent nuclear disaster and power shortages further complicated

problems. But Toyota has moved to restore production more quickly than many analysts expected. In the letter, Carter reiterated that the automaker's US production would be 70 per cent of normal volume in June, up from 30 per cent in May. Toyota forecast a full return to production for all models and factory lines by November or December. At 45 days, Toyota's current inventory levels is just five days less than its May 2010 inventory level of 50 days. But Toyota's sales rate has dropped even more quickly than its inventory level, Edmunds.com Chief Executive Jeremy Anwyl said. He said data shows that Toyota's supply of vehicles is outpacing current demand. Analysts said Toyota's sales have been pinched because curbed auto production has pushed car prices higher at a time of rising fuel prices. The perception of low inventories has also dampened demand. "The thing that's happened for Toyota is that all the media coverage of shortages and higher prices has pushed demand down faster than reduction in supply," Anwyl said. Carter addressed this notion in his letter to dealers, "Our team has been working aggressively to spread the word that Toyota is 'open for business.'" US auto dealer groups as well as industry analysts have said June is expected to be the

thinnest month for Toyota inventories, and that lack of inventory in May and June will reduce sales. On Thursday, J.D. Power and Associates said May sales will be "dismal," down 10 per cent from April, in part because of the lack of inventory due to the March 11 earthquake in Japan. On Thursday, Honda Motor Co's US sales chief, John Mendel, sent a letter to Honda dealers, also assuring them that while June will see short supply of vehicles made in Japan and for the popular compact sedan Civic, July allotments will rise 11 percent from June. "We have all the confidence in our ability to increase our production in late summer," Mendel said in his letter to US Honda dealers. 7. Hafeez promises business-friendly budget source Business Recorder All major economic issues afflicting the economy will be addressed within the budgetary framework to reduce inflation and enhance growth, said Dr Abdul Hafeez Shaikh, Minister for Finance. Hafeez Shaikh, while addressing a press conference here on Saturday, said that Sales Tax was being further reformed and would be implemented from next fiscal year. However, he claimed that, next budget, would be business friendly and focused on revenue collection, private sector credit, fiscal deficit and energy crisis, besides tightened expenditure of government. "We will endeavour to enhance credit to private sector to create new job opportunities, while government expenditures will be further curtailed to reduce its dependence on the banking system", he added. He said that budget framework was being prepared through a consultation process with parliamentary groups, businessmen, trade bodies, academia, economic and taxation experts. For this purpose, government has constituted a Revenue Advisory Council, Economic Advisory Council and several sub-committees to gather input on economic issues and enhance revenue collection, the minister added. "Stabilising the economy, reducing government borrowing, creating new job opportunities, increasing exports, tackling energy crisis by sorting out the circular debt issue and tightening funding to public sector enterprises will be focused in the next budget," Hafeez said. Hafeez said the vision of the government is to get back to a higher growth path and reduce inflation along with protections of vulnerable sectors. "It is also our basic aim to tax the un-taxed sectors, broaden tax revenues and eliminate exemptions," he mentioned. Responding to a question about cut in defence budget, he said that in the current situation in the region as well as in the country, there was a need to further strengthen defence of the country. However, he said that, all decision in the budget would be balanced. He said that present government inherited economic problems, however, things were now being brought under control and economic indicators of past one year were better than previous years. "We can not say that economic situation is satisfactory but economy has shown resilience and is beginning to stabilise," he added. Minister said that in recent years the economy has faced severe turbulence like unprecedented floods and estimated damage is $10 million. Two million families were affected. Giving one lakh rupees to each family means Rs 200 billion. So far an amount of over Rs 40 billion has been distributed through Watan Cards. Briefing about the economic achievements in the fiscal year 2011, he said that the

government has taken several steps to reduce fiscal deficit and it would be 5.5 percent of GDP for the current fiscal year as against the economists' estimates of 8 percent. He said that external sector did well and GDP growth remained between 2.5 to 3 percent end of June this year. Exports will be all time high level of $24 billion with a historical growth of 28 percent. In addition, home remittances will cross $11 billion mark this year as foreign exchange reserves crossed $17 billion, he added.

Minister said that the raise in revenue collection was big challenge for the government and recently Federal Board of Revenue (FBR) had identified 700,000 wealthy people, enjoying a luxurious life but not paying tax, out of these some 55,000 had been issued notices to pay taxes as they had cars, big houses and were enjoying foreign tours without paying a single penny tax. He said national growth policy has almost finalised and soon would be presented to President and Prime Minister for formal approval. "The economy has many challenges including energy and massive growth in population, government is struggling to overcome these challenges," he said. Under the new NFC award provinces share has been raised to 57 percent from 50 percent. As per new sharing formula, provinces have been provided an additional Rs 300 to Rs 330 billions this year to build roads, undertake new water supply schemes, improve policing and to improve social indicators. This has created some financial problems for the federal government, the minister said. Talking about the SBP's tight monetary policy, he said that State Bank is autonomous and government does not influence SBP's monetary policy decisions. Due to the flood, government's revenue and GDP growth target was disturbed and only 2.5 percent of GDP growth was achieved as against the target of 4.5 percent. Similarly, rising petroleum prices have also hurt the economic targets. Crude oil prices crossed $100 mark in the world market, which was unexpected, he added. "We have taken several tough decisions to provide maximum relief to the general masses," the minister said. The minister said government has also decided to enhance allocation under the relief schemes like Benazir Income Support Fund (BISF) to reduce poverty in the country. On the occasion Governor State Bank Dr Shahid Kardar, Chairman FBR Salman Siddique and Secretary General Finance Dr Waqar Masood were also present.

8. SBP leaves key policy rate at 14 percent source Business Recorder The State Bank of Pakistan held its policy rate unchanged at 14 percent, for two months, due to improvement in the external current account (surplus of $748 million in July-April) FY11 and expectations of exports to exceed $25 billion in current financial year. The Monetary Policy statement, issued by the Central Board of Directors of SBP, which met on Saturday, with Governor Shahid H. Kardar in the chair, stated that speculator rise in cotton prices coupled with consistently rising home remittances helped in neutralising imports and other payments. "More importantly, despite falling financial account inflows, $0.5 billion during July-April FY11 compared to $3.7 billion in the corresponding period of last year, SBP's foreign exchange reserves has increased to $13.7 billion by 18th May 2011 and are expected to increase further by end-June 2011". Nevertheless, SBP said, caution needs to be exercised while assessing the outlook of the overall balance of payment position. The main reasons for this prudence include the sharp decline in international cotton prices in the last two months, likely continuation of oil prices at around $100 per barrel, and debt obligations that are due in FY12. Barring any unforeseen developments, these factors together with the continued suspension of IMF's Stand-By Arrangement (SBA), which has implications for other financial inflows, imply that the stellar performance of the external account may be difficult to sustain. Therefore, maintaining the current upward trajectory of SBP's foreign exchange reserves would be a challenging task. SBP feels that the repercussions of uncertain foreign inflows may not be limited to the external sector. Deviations in the baseline estimates could affect the net external budgetary financing as well as the monetary projections. A similar scenario did play out in this fiscal year with implications for monetary management. For instance, government borrowings from the banking system have increased significantly, partly due to the shortfall in external financing and partly due to the increase in the fiscal deficit on account of security spending, the impact of unprecedented floods and the recent one-off adjustment of Rs 120 billion to address the issue of 'old stock' of the

circular debt of the power sector. During 1st July - 7th May, FY11 incremental government borrowing from the banking system, including SBP, for budgetary support was Rs 614 billion; a year-on-year growth of 28.3 percent. The borrowings from SBP explain almost 80 percent of the expansion in reserve money while total banking system budgetary borrowings explain 95 percent of the expansion in M2. SBP said demonstrating its commitment, the government retired its borrowings from the SBP in Q3-FY11 and by end-March 2011 the stock of these borrowings (on cash basis) had come down to Rs 1155 billion. The recent increase in these borrowings is temporary and a reflection of the government's efforts to internalise the growing quasi-fiscal expense related to the circular debt of the energy sector. The SBP has already shifted a portion of this borrowing, Rs 61 billion, to the market through an outright Open Market Operation (OMO) and expects that government borrowing will soon converge to the endSeptember 2010 level, Rs 1290 billion, as committed by the government.

Monetary aggregates, show that the year-on-year growth in both reserve money and M2 remains close to 15.5 percent and may increase further by the end of FY11, which would be higher than SBP's earlier projections. The magnitude of such borrowings poses a challenge for effective liquidity management with implications for inflation in FY12. Though the CPI inflation of 13 percent in April 2011 is lower than the flood-induced peak of 15.7 percent in September 2010, its persistence is a source of concern. The 12-month moving average of 20-percent trimmed measure of core inflation has continued to move between 11.5 and 12.5 percent in the last one year. Nonetheless, the average CPI inflation for FY11 is likely to remain between 14 and 14.5 percent, which is lower than SBP's earlier projections. Further, says SBP, that another consequence of government's growing borrowing needs, both current and expected, is that the private sector credit has been squeezed out in terms of banks' allocation of system's deposits. By 7th May 2011, the year-on-year growth in private sector credit, which was mostly due to working capital needs, was 3.2 percent and that of total deposits was 15.3 percent. The basic intermediation function of scheduled banks is being constrained as the fiscal deficit and the commodity operations of the government are financed by deposits at the cost of declining private sector investment. The recently released provisional National Income Accounts reveal that real private investment expenditure registered a decline of 3.1 percent while real private consumption growth was 7 percent, leading to a growth of 5.9 percent in total domestic demand. SBP warned that these developments highlight a predicament faced by the economy. The rising total debt, Rsll.2 trillion by end-March 2011, and its servicing is demanding an increasing portion of fiscal revenues. At the same time, the GDP growth rate of below 4 percent over the past four years appears to be highly correlated with declining real private investment expenditures and driven by consumption demand. This coupled with severe energy shortages is negatively affecting the utilisation and expansion of the economy's productive capacity. This implies that the output gap - the difference between aggregate domestic demand and the supply - is perhaps widening again, making it difficult to bring inflation down. Thus, along with rising debt the economy seems to have settled at a low-growth-high inflation equilibrium. SBP feels that the solution to these outcomes rests with wide-ranging fiscal reforms that restore the economy back towards the requirements of the Fiscal Responsibility and Debt Limitation Act (2005). In particular, there is an urgent need to address the issue of

the falling and single-digit tax to GDP ratio. The Federal Board of Revenue's (FBR) tax collection was Rs 1156 billion during July-April, FY11 and it is confident that it will realise additional revenues from the measures announced in March 2011. Plans to consolidate them are being considered along with the announcement of new measures in the forthcoming budget. However, because of the recent adjustment of old dues reflected in the stock of the circular debt of the power sector, the fiscal deficit for FY11 is likely to increase by approximately 0.7 percent of GDP over the revised deficit target of 5.5 percent. The final outcome will depend upon the realisation of the targets of FBR revenues and provincial surpluses. SBP advocated that for a sustainable fiscal path revenue-enhancing measures need to be complemented with renewed efforts to stem the leakages in the tax system, bring a wider range of incomes in the tax net, and effective expenditure control measures, especially the removal of untargeted and distortionary subsidies. These initiatives will be critical for reducing the stress on the fiscal position and to encourage entrepreneurship in the economy.

In conclusion, says SBP, that for the economy to grow on sustainable basis, the debt burden to become manageable and inflation to come down to single digits, the private productive activity and investment will have to increase considerably and quickly. This will require government borrowings from the banking system to subside to create space for private sector credit, which in turn would need satisfactory implementation of the aforementioned fiscal reforms. The government is mindful of fiscal pressures and has expressed its resolve to address these issues, especially the containment of the fiscal deficit. The budget for FY12 is expected to reflect this commitment. A careful analysis of Pakistan's current economic conditions reveals a mixed situation. Led by strong export earnings and robust growth in remittances, the external current account position has surpassed all earlier projections. This has helped the SBP in building foreign exchange reserves and accumulating Net Foreign Assets (NEA), which contributed in keeping the foreign exchange market stable and provided rupee liquidity in the system. However, key challenges remain in the shape of persistent inflation, weak economic growth and private investment, and a large budget deficit. In such circumstances, SBP is endeavouring to strike a delicate balance to address the multiplicity of considerations in formulating the monetary policy stance such as containing inflation, promoting private productive economic activity, and keeping financial markets stable.

9. ST exemption on machinery import withdrawn source Business Recorder The Federal Board of Revenue (FBR) has removed a major ambiguity in the tax law by withdrawing sales tax exemption on import of machinery, equipment and other related equipment imported by commercial and industrial units under customs SRO 575(I)/2006, as same exemption was earlier withdrawn through the sales tax notification. In this connection, the FBR has amended SRO 575(I)/2066 through SRO.448(I)/2011 issued here. According to SRO.448(I)/2011 dated May 21, sales tax exemption would not be applicable on the import of machinery, equipment and other capital goods imported by industrial undertakings and commercial importers. Sources told that a major tax dispute arose following imposition of the 17 percent sales tax on the import of plant, machinery and equipment through sales tax SRO.230(I)/2011, as the sales tax exemption was available on the import of plant/machinery under the customs notification ie SRO.575(I)/2006. Apparently, the FBR had forgotten to abolish sales tax exemption available on the import of machinery and equipment under serial number 21 and 23 of the customs SRO.575(I)/2006. Resultantly, the sales tax exemption was applicable on the import of machinery and equipment under SRO.575(I)/2006 despite imposition of 17 sales tax on the same items through the sales tax notification. Since March 15 2011, the importers were legally allowed to import sales tax free machinery/equipment even 17 percent sales tax was imposed through a sales tax SRO.230(I)/2011. This facility was available for the last 1-2 months for the importers to import exempted machinery under the customs notification.

10. MQM will oppose RGST, says Sattar source Daily Times Muttahida Qaumi Movement (MQM) Coordination Committees Deputy Convener Dr Farooq Sattar has hinted that his party would not support the imposition of Reformed General Sales Tax (RGST) in the upcoming budget 2011-12. He was addressing a press conference after a meeting with leading industrialists and businessmen here on Saturday. MQM will not support the imposition of any new tax on much suppressed middle and lower class, he remarked. The meeting was held to make an effort to take opinion of the business community for the upcoming federal budget. The party will present its budget policy before the government in light of the opinion of business leaders. We support the government with one agenda only and that is all taxable should be taxed, Sattar said. He said people friendly budget was the need of the hour, so the government should facilitate poor and middle class. Other MQM leaders, including Babar Ghauri, Haider Abbas Rizvi and Sardar Ahmed, were also present on the occasion. Traders urged the MQM leadership that an agricultural tax should be imposed in the upcoming budget. Sattar said that the real challenge being faced by the country was economic crisis. He said, Many concepts have changed, the economy now guides politics whereas previously it was believed to be vice-versa. The government acts as a facilitator and provides infrastructure and development to the businessmen, he said.

He said professionals should be appointed in the organisations that were at loss, including the Pakistan International Airlines, Pakistan Railways, PEPCO, WAPDA and others. He reiterated that his party will uphold all positive proposals of the business community in Parliament. MQM will support all steps being taken for the allotment of land to farmers as well as grant of loans for small industries, he concluded.

11. Awareness campaign by PSO source Pakistan Observer Pakistan State Oil (PSO), the largest energy sector company in Pakistan, is dedicated to promoting safe usage of CNG across the board. A statement here said that the PSO team interacted with the customers and provided safety precautions to be taken during CNG refueling and installation/ maintenance of CNG cylinders and kits. It said that the direct engagement of PSO with the customers at the retail outlets is another step to highlight safe usage of the product and to ensure that the masses are educated to safeguard against any harmful incident. The safety drives conducted in this regard are in addition to the CNG Customer Awareness Campaigns that PSO has been running for the general public over the past few years in both print and electronic media. The statement said that the PSO CNG stations are among the safest stations for customers as they are well equipped with state of the art Gas leakage Detection Systems which automatically shut off the gas supply upon incidents. PSO regards it obligatory to impart knowledge pertaining to the safety and technical aspects of CNG stations to its CNG business partners (CNG operators) and PSO Divisional Engineers.