South Pars platform ready for gas extraction

Iranian Oil Minister Javad Oji said South Pars phase-13 Alpha platform was ready to start gas extraction, Shana reported. He was speaking on the sidelines of the weekly meeting of cabinet on June 11, 2024. Gas extraction from the platform will start with five to six million cubic meters per day (mcm/d) and will rise to 22 mcm/d in the future.

The platform, which was damaged heavily due to hitting by a Bahraini commercial ship, has been repaired and renovated, now ready for gas extraction, Oji said. 

“This is the second platform starting operation in the South Pars gas field during the 13th administration", the minister said, adding “The issue of launching the platform was raised today in the cabinet meeting and we invited acting president Mohammad Mokhber to take part in its opening ceremony.”

Elsewhere in his remarks he said, up to now, we have managed to put an end to burning of 11.5 million cubic meters of associated gases per day while the installed facilities are ready to increase the figure by another 4.5 million cubic meters per day.

According to him, the Changuleh oil field development plan is ready for signing the contract and implementation by domestic investors and contractors.

With regard to the development of the second phase of the Yadavaran shared oil field, we decided not to wait for foreign companies and will start executive operations for its development next week, the Minister of Petroleum concluded.

South Pars gas field, which Iran shares with Qatar in the Persian Gulf, is estimated to contain a significant amount of natural gas, accounting for about eight percent of the world’s reserves, and approximately 18 billion barrels of condensate. The field is divided into 24 standard phases.

The huge offshore field covers an area of 9,700 square kilometers, 3,700 square kilometers of which are in Iran’s territorial waters in the Persian Gulf. The remaining 6,000 square kilometers, called North Dome, are situated in Qatar’s territorial waters.

Bangladesh: Textile units suffering from financial crunch

According to a report by The Business Standard, Bangladesh’s textile sector is going through a financial crisis as banks are delaying payments amounting to Tk420 crore against letters of credit (LC), even after more than six months of maturity.

The issue has plunged 52 textile mills in a difficult situation, prompting urgent appeals for intervention from the central bank. A letter has been sent to the Bangladesh Bank governor on June 13, 2024 in this regard by the Bangladesh Textile Mills Association (BTMA).

The letter signed by Mohammad Ali Khokon, president of BTMA, cited instances where banks have failed to release payments even six months past the maturity date of an LC. The letter said, “Despite providing goods on back-to-back LCs, some banks are not settling the bills promptly.”

According to BTMA sources, after a meeting with the Bangladesh Bank governor on June 11, a list of affected mills was submitted as per his instructions, highlighting instances where banks failed to clear bills even after the maturity dates of nearly US$36 million dollars in LCs for about 52 mills.

NZ Tex Group, one of the country’s largest textile mills, faced a payment delay of around US$2 million after supplying goods.

Saleudh Zaman Khan, managing director of NZ Tex Group, told The Business Standard, “Some of our LCs against bills are already overdue with banks. LCs are supposed to mitigate risks, yet banks charge commissions without ensuring timely payments.”

He further added, “If banks cannot disburse payments on time, why issue LCs and charge commissions? I can directly supply goods by managing risks myself.”

Basically, when an exporter receives a Letter of Credit (LC) against a foreign order, they can purchase goods from the local market on credit using that LC. This process is known as a back-to-back LC.

Local raw material suppliers are supposed to receive payment from the bank within 90 to 120 days after accepting the back-to-back LC from the local buyer. This period is known as the maturity date. If this time frame is exceeded, it is considered overdue. Currently, in some cases, the maturity date has been surpassed by anywhere from one month to even over a year.

Given the situation, stakeholders have expressed concerns over potential shutdowns if the current crisis persists.

A textile mill entrepreneur, requesting anonymity, told TBS, “Production is severely affected due to a twofold increase in gas prices. Combined with unpaid payments from banks, it’s becoming increasingly difficult to pay employees’ salaries and bonuses before Eid.”

Syed Mahbubur Rahman, managing director of Mutual Trust Bank Limited, told TBS, “This problem has existed for a long time. Often, this happens because the textile millers who supply the products face delays in receiving their payments.”

“While bills from foreign buyers (typically RMG entrepreneurs) for imported raw materials are settled promptly, local textile mills often face delays in LC payments from banks and garment owners,” he added.

Noting that local textile millers are always on the back foot, he said, “Due to payment delays, their loans sometimes become classified as well.”

 

US approves mammoth annual defense bill

The House approved its version of the annual defense policy bill Friday, which includes a number of controversial culture war amendments, setting the stage for a showdown with the Democratic-controlled Senate over legislation that typically enjoys bipartisan support, reports The Hill.

The US$883.7 billion measure — known as the National Defense Authorization Act (NDAA) — were approved in a largely party-line 217-199 vote. Six Democrats voted in favor of the measure, while three Republicans opposed it.

The House edition of the legislation is all but certain to languish in the Senate where Democrats, who hold the majority, abhor many of the amendments Republicans added, including those pertaining to abortion, transgender rights and diversity, equity and inclusion (DEI) initiatives.

The Senate Armed Services Committee this week held a markup for its version of the NDAA, the text of which is not expected to be released until July, a spokesperson for the panel told The Hill.

Leaders in both chambers will then craft a compromise version of the legislation, which has been voted on and signed into law every year for the past six decades.

Top Republicans, nonetheless, touted their bill as a strong measure that will back US troops, empower the National Guard to crack down on the southern border and provide American forces with innovative technologies.

At the top of the list of culture war amendments added to the House’s NDAA was a provision spearheaded by Rep. Beth Van Duyne that seeks to block a Biden administration policy that reimburses service members for the travel costs incurred when receiving an abortion.

It zeroes in on the same Pentagon policy that Sen. Tommy Tuberville targeted through his months-long blockade on military promotions last year.

Ahead of Thursday’s votes, Democrats warned GOP leaders against loading the bill with so-called poison pills — Rep. Mikie Sherrill, a Navy veteran, argued that the conservative amendments “cheapen” the defense bill. 

The GOP strategy of embracing culture war issues in the NDAA is not new. Then-Speaker Kevin McCarthy did the same last year, relying on a united GOP as almost all Democrats opposed the bill after Republicans loaded it with similar amendments attacking Pentagon policies on abortion access, medical care for transgender service members, and DEI initiatives.

Similar to last year, Republican leaders this time around had little room for error when it came to the final vote on the NDAA. Republicans have a razor-thin majority in the House, allowing them to lose just two GOP votes on any party-line measures, assuming all lawmakers are present.

The House-passed NDAA abides by the spending caps laid out in last year’s debt limit agreement, imposing one percent increase over the fiscal 2024 defense policy bill. The legislation, however, reshuffles billions of dollars proposed by the Pentagon, increasing funds for submarines, paring down money for fighter jets and delaying the retirement of dozens of aircraft.

The bill also has a provision that would rehire service members kicked out for refusing the COVID-19 vaccine.

In addition, the House NDAA contains widely supported quality of life initiatives for service members, such as a roughly 20% pay boost for junior enlisted members and increases to housing allowances.

 

China and Iran to strengthen BRICS

This year is the first year that Iran has formally joined the BRICS mechanism, which provides a new platform for China-Iran cooperation and enriches the vision and potential of the China-Iran comprehensive strategic partnership.

BRICS Foreign Ministers' meeting was held in Nizhny Novgorod, Russia on June 10 and 11.

 Member of the Political Bureau of the CPC Central Committee and Foreign Minister Wang Yi, attended the meeting and met with Iranian Acting Foreign Minister Bagheri. Wang expressed warm congratulations for Iran’s participation in the BRICS Foreign Ministers' Meeting for the first time as a formal member.

Nowadays, the world has entered a new period of turbulence and transformation. It is undergoing major shifts, division and regrouping, leading to more uncertain, unstable and unpredictable developments. BRICS is an important force in shaping the international landscape.

BRICS' expansion has ushered in a new era for the Global South to gain strength through unity, and the appeal and attractiveness of BRICS has been continuously increasing.

In terms of scale, the BRICS countries account for nearly half of the world's population, and the BRICS has already surpassed the G7 in purchasing power parity.

In terms of economy and trade, the BRICS countries' goods trade accounts for about 20% of the world's total, but the trade volume between them only accounts for about 10% of their respective foreign trade, and there is still great potential for growth.

The BRICS New Development Bank supports nearly 100 projects, promoting the economic and social development of member countries.

In terms of international influence, the BRICS mechanism includes major emerging economies and major countries in all continents. After the expansion, the BRICS mechanism has more influence in international affairs and global governance to safeguard the common interests of developing countries.

The data released by the Iran Customs Administration (IRICA) indicated that the value of Iran’s non-oil trade with BRICS group of countries was close to US$40 billion in the 2022-2023 fiscal year, showing a 14% increase as compared to same period a year earlier.

Iran's BRICS story is inseparable from the background of China-Iran brotherhood, and will surely add bright BRICS colors to the picture of China-Iran friendship. Iran is one of the first countries to apply to join the BRICS mechanism.

In 2017, President Xi Jinping proposed the "BRICS Plus" cooperation concept and invited Iran to join. In 2022, China assumed the presidency of the BRICS and launched the expansion process. In 2023, with the support of China and other countries, Iran was accepted as a formal member of the BRICS.

Looking to the future, China and Iran have great potential for cooperation under the BRICS mechanism. Both sides should give priority to development, pool their efforts for progress, deepen pragmatic cooperation, enhance cultural exchanges, and promote the upgrading of China-Iran friendly relations in all fields.

Both sides should safeguard universal security, work together to meet challenges, stick to independence, objectivity and fairness, promote international consensus for peace, and provide new impetus for the political settlement of hot issues.

Both sides should uphold fairness and justice, improve global governance, continue to hold high the banner of multilateralism, work closely together in the BRICS mechanism, take the lead in upholding the UN-centered international system, and promote the realization of an equal and orderly multipolar world.

Thanks to the long-standing traditional friendship and high political mutual trust between the two sides, China-Iran relations have maintained healthy and stable development. China is willing to strengthen strategic coordination with Iran, adding BRICS color to the beautiful picture of China-Iran friendship.

 

Pakistan Stock Exchange Records Highest Gain

During this past week the market lost ground in the first two days amidst rumors about potential increases in the Capital Gains Tax (CGT) due to which KSE100 index stayed bearish and the index hit 72,589 level before showing signs of recovery on Wednesday. Market recovered swiftly after the announcement of Federal Budget for FY25. The taxation measures introduced in the budget weren't as adverse as originally anticipated. On Thursday the index gained 3,410 points, most in a single day and closed at 76,706 level on Friday reaching the highest ever closing, with a gain of 2,952 points, up 4%WoW.

Despite initial jitters over proposed tax changes, the market recovered, reflecting investors’ confidence amidst pre-budget uncertainty. The week also saw the State Bank of Pakistan (SBP) announcing a first token rate-cut of 150 bps, adding further to the positivity.

As inflation outlook eases, the cut-off yields in the latest T-Bills auction dropped.

Overall, average trading volumes decreased by 3.8%WoW to 409.6 million shares as compared to 423.3 million shares a week ago.

On the currency front, PPR depreciated by 0.11%WoW to close at 278.51/US$.

Other major news of the week included: 1) RPK9 billion approved for clearing OMCs’ PDCs, 2) ECC allowed conditional export of 0.15 million tons sugar, 3) In FY25 Budget government announced to raise tax to GDP ratio to 13%, 3) government also announced to float US$1 billion bonds and obtain US$4 billion loans from the foreign banks, 4) FY25 Budget aimed raising PKR3.8 trillion new taxes and , 5) World Bank projected Pakistan’s GDP growth at 2.3%.

According to AKD Securities Commercial Banks, Pharmaceuticals, Oil & Gas Exploration Companies, Oil & Gas marketing companies and Paper & Board were amongst the top performing sectors, while laggards included Textile composite, Woollen, Leasing companies, Food & Personal Care Products and Textile Spinning.

Major net selling was recorded by Individuals with a net sell of US$8.9 million. Mutual funds absorbed most of the selling with a net buy of US$11.1 million.

Top performing scrips of the week were: BAFL, MCB, NCPL, UBL and KOHC, while laggards included: ILP, PTC, YOUW, COLG and 5) PGLC.

The post-budget market has attained some certainty, particularly in sectors that benefitted from budgetary measures. With the start of monetary easing, optimism is expected to rise, particularly in cyclical sectors.

Furthermore, the approval of the budget paves the way for the upcoming IMF program, which will likely become a significant market catalyst going forward.

 

Malaysia to build port near Kuala Lumpur

Malaysia intends to build a new container port along the western coast of the Malay Peninsula facing the Malacca Strait, one of the world's busiest sea lanes, as the country prepares to capture logistics demand created by global supply chain shifts.

The estimated 2 billion ringgit (US$425 million) port will utilize artificial intelligence to improve operational efficiency, becoming the first port in Malaysia to do so. Local property developer Tanco Holdings, through its subsidiary Midports Holdings, will lead the development in collaboration with China-based marine engineering company CCCC Dredging Co., a group company of state-owned China Communications Construction Co.

The parties signed a memorandum of understanding earlier this month.

According to an announcement, the port will be developed in the city of Port Dickson, in the state of Negeri Sembilan. Close to Kuala Lumpur and the midpoint of the Malacca Strait, it could benefit from high traffic and connectivity to key industrial regions in Malaysia.

"The construction of this port will contribute to Malaysia's goal of establishing a modern and efficient port hub, accelerating economic development in Negeri Sembilan, and bolstering Malaysia's global trade position," Tanco Group Managing Director Andrew Tan Juan Suan said in a statement.

"This collaboration with CCCC Dredging marks a pivotal step towards realizing our vision of a world-class port in Port Dickson. The expertise and resources brought by CCCC Dredging will ensure the successful implementation of this project, which is set to drive economic growth and create job opportunities in the region."

The proposed port will feature a 1.8-kilometer jetty, terminal and container operation area of approximately 809,300 sq. meters. It will be able to accommodate the largest container ships, according to Negeri Sembilan Chief Minister Aminuddin Harun, as cited in a report by Malaysian national news agency Bernama.

The companies have yet to announce an expected completion date.

As global companies diversify their supply chains, Malaysia has emerged as a beneficiary, attracting investments from electronics and other manufacturers. Klang Port, the country's largest, plans to double its capacity to capture demand, operator Westports Holdings recently told Nikkei Asia.

Aminuddin said the new port could greatly boost the nation's logistics and marine transport services industry, as a network of roads and highways will connect it to major industrial areas.

According to the announcement, AI technology will enhance the port's operational efficiency, reduce human error and lower the accident rate. The AI system will analyze traffic data, schedule ship movements, track marine operations around the port and manage automated logistics.

These advancements are anticipated to streamline processes, reduce operational costs and minimize environmental impact. The port will also feature automated cranes, self-driving trucks and top-tier cybersecurity measures with the capacity to receive large container ships, according to the announcement.

 

Pakistan: Meeting Ambitious Budget Targets

The FY25 Budget proposals are the initial steps to broaden the tax base in Pakistan (tax to GDP is still paltry 9%). It raises taxes on some key agriculture inputs (DAP fertilizer and tractors), strives to encourage tax filing, and does attempt to tax retailers and real estate, albeit with question marks over sustainability.

The Budget removes a concessionary tax regime for the exporters (barring the services export industry e.g. IT) and introduces hefty punitive measures for non-tax filers, including a restriction on foreign travel.

The key positive from the market’s standpoint is that the feared sharp increase in CGT on securities did not come through. The Budget has made CGT uniform for tax filers at 15%, but hikes to as high as 45% for non-filers. The market is likely to react positively to this.

The tax on exporters has been termed a negative. Business/ trade associations have taken sharp exception to this and significant pushback from them is anticipated to persuade the government to reverse this.

The budget proposals target a 40% increase in tax revenue. Achievement of targets depends a lot on how well the government is able to manage the pushback from exporters/ retailers.

If enforceability is an issue, then the IMF may demand additional tax measures before the Budget is passed in parliament, or there could be a mini budget by mid-year to fill any potential shortfall in tax collection.

An even higher petroleum development levy (PDL) and cuts in the development expenditure, as in the past few years, thus become very likely as well.

If the IMF accepts the budget at face value, it may be enough to secure the IMF program. In part, this may be because of the clear thrust to go after non-tax filers and some effort to bring retailers/ real estate in the tax net.

However, the IMF may wait to see the final approved budget first, and there may yet be changes given the PPP's show of reluctance ahead of the budget presentation.