South Korean Group, Lottee, has declined the offer of the federal government to invest in the construction of 720 mw Karot hydropower project on account of frequent changes in government's investment policies. A copy of the documents available with Business Recorder shows that the South Korean business group took this decision after the government failed to address some of its grievances regarding existing investment in some of the sectors in Pakistan.
In addition, the group has conveyed to the government that it would not invest in any of Pakistan's projects in future. Karot hydropower project, with generation capacity of 720 mw on Jehlum River, was commissioned in 2007. The estimated cost of the water project was $1.5 billion. Commencement of the project, which is expected in 2015, is in doldrums. The status of project is that a letter of interest (LoI) has been issued. Feasibility study has been completed. Two sponsor companies, Atl Pvt Ltd and Harbin Power China, are in the process of getting the tariff rate from Nepra and obtain generation licence.
In a desperate attempt, Chairman of BoI visited Korea recently to improve relations with South Korean Group, but was not successful.
The Lotte Group has an annual turnover of $40 billion and has recently acquired the "Pure Terepthalic Acid (PTA) Plant" of ICI Pakistan for $400 million. Besides, it planned to further invest $500 million in doubling the existing production capacity of the PTA plant.
The reservation of the company regarding the government's decision to withdraw fiscal incentives available to Pure Terephthalic Acid (PTA) from July 2010 after the European Union (EU) imposed 9 percent anti-subsidy duty on Pakistan Polyethylene Terephthalate (PET) is the bone of contention.
In June 2008, the tariff on PTA import was reduced to 7.5 percent. To offset the duty impact on polyester value chain, the government decided to zero-rate the PTA duty for user industries so that the downstream value-added exports may not suffer. The zero-rating was implemented through refund of duties paid on PTA inputs, which stood at 7.5 percent for 2008-09 and 2009-10.
Meanwhile, Plastic Europe, a manufacturer of PET in Europe, had lodged a complaint with the European Commission, alleging injurious subsidised imports of PET from three countries, namely Pakistan, Iran and UAE. The EU, thereafter, issued notice for initiation of investigations under provisions of the World Trade Organisation (WTO) Agreement on Subsidies and Countervailing Measures (ASCM).
The Ministry of Commerce and National Tariff Commission (NTC) have acquired services of a Brussels-based law firm to prepare and defend the case. During the initial consultations, the lawyers indicated that the SROs, giving effect to PTA monetisation may pose problems and the EU may impose countervailing duty (CVD) up to 2.5 percent of the import price. In addition, imposition of CVD on the basis of PTA monetisation may attract cases against Pakistan's textile sector as well as on SROs 1045(1)/2008 and 1299(1)/2008, which fall under the definition of subsidy being limited to a specific group of industries in terms of Articles 1 and 2 of the ASCM.
Pakistan's delegation during consultation with the European Commission (EC) officials indicated that the Government of Pakistan would withdraw the concerned SROs, thereby discontinuing monetisation of PTA and removing the cause of complaint. Thus, the government has brought PTA under normal tariff structure.