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SBP unveils the ‘master plan’ Reveals strategy for robust growth of financial system KARACHI
G
STAFF REPORT
ovERNoR State Bank of Pakistan (SBP) Yaseen Anwar Monday outlined the central bank’s 10point banking strategy for the growth of the country’s financial system. This strategy focuses on implementing a financial inclusion program for underserved economic sectors of the country, strengthening consumer protection through legislation and codes of conduct, strengthening competition and efficiency with greater transparency, consolidating the banking sector’s corporate governance and risk management practices,
strengthening prudential regulations & supervision of banks, introducing consolidated supervision frameworks that supervise financial groups and conglomerates, developing a safety nets for small depositors, unviable institutions and unforeseen market crises, strengthening the bank’s powers to maintain monetary and financial stability by updating the SBP Act regularly, deepening the financial sector by developing debt markets, stock markets and NBFIs and, lastly, developing the financial infrastructure, including payment systems and credit information systems to facilitate transactions. “I want to emphasize that all these measures are focused at creating an efficient, competitive, and robust financial system that can provide the impetus for faster economic growth, while guarding the interests of all stakeholders involved. That, in a nutshell, is all we seek to do,” the Governor told a gathering here at PAF Air War College Monday while speaking on “Role of Financial Institutions and Capital Markets in Pakistan’s Economy”. The State Bank has a dual mandate: it must tackle the issue of maintaining price stability, while also keeping an eye on economic growth, he said, adding that we need to pay close attention to both monetary stability and fuller utilization of the country’s resources. He said the State Bank’s constant monitoring of the banking sector’s portfolio has meant that today our banks
ages the overnight rate to keep it within a certain band. “The monetary policy rate that is announced in the press indicates the ceiling of this band,” said he. The overnight rate was linked to all other interest rates in the market. “By changing the ceiling of the band, which the overnight rate fluctuates in, the central bank is able to influence interest rates,” the said. The SBP Governor pointed out that Pakistan had never undergone a bout of hyperinflation but the past few years had seen higher than average inflation, the effects of which had been felt by every individual. Inflation, he said, had reduced markedly in the past few months. “It was because of this that the bank decided to reduce its interest rate as well. The benchmark rate now stands at 9.5 percent. We also expect that average inflation for the year would remain below 9.5 percent. A part of the reduction in inflation may be attributed to State Bank’s active monetary management policies,” said Anwar. He said the State Bank also ensured that the money market was never short of, or in excess of funds. This meant that monetary policy signals were transmitted efficiently, he added. The Governor recalled that Pakistan’s equity market had been a consistent feature in Asia’s best performing stock markets. “Since we established a secondary market that can buy and sell government debt, our financial markets have become a lot more agile and responsive to policy changes. That’s actually been one of the most important outcomes of the financial sector’s reformation”.
are profitable, extremely healthy and robust. He emphasized that a smooth, well-oiled financial system can ensure that monetary policy signals are transmitted effectively into the economy. Yaseen Anwar said the World Bank, and renowned publications, the Financial Times and The Economist, have recognized the State Bank’s role in promoting innovative solutions, especially in microfinance, to get more people into the banking sector. SBP Governor said the State Bank regulates the economy as a whole by using monetary policy instruments, which are transmitted through the financial sector. ‘The potency of our monetary policy instruments depends on how many people are actively using formal channels of borrowing and lending,’ he added. He said the State Bank’s monetary policy tools have become much more potent since the introduction of secondary markets that trade government securities, and the removal of distortions from within these markets. Explaining as to how monetary policy works in Pakistan, Anwar said monetary policy tools target the interest rate. “It’s important to understand just how they do that. Different central banks use different tactics, but at the State Bank, we intervene primarily in the overnight inter-bank market,” he said. This was the market where interest rates on loans that banks make to each other for a day, he said adding the central bank itself was a player in this market and was meant to step in to either provide funds in times of need or drain money in times of excess. By doing that the central bank man-
Pakistan’s MFN move supported ISLAMABAD ONLINE
The Islamabad Women’s Chamber of Commerce and Industry (IWCCI), Monday, supported the decision of the Federal Cabinet to implement the grant Most Favoured Nation (MFN) status to India. Failure to meet the deadline for MFN status to India by Pakistan indicates extra care being observed by government which is not insensitive to the strengths and weakness of the local business community, said said President IWCCI Farida Rashid. Talking to business community, she said that the move indicates that government has realised the undesirable impact of mixing politics with business on the economy, Many perceive MFN as granting huge concessions to another country which is wrong; actually it means that both countries will not discriminate against each other she said adding that we should be able to buy and sell products from India as we can do with any other country. Farida Rashid said that Indian goods will provide some relief to Pakistanis whose purchasing power has been eroded due to host of reasons. Moreover, our industry would gain access to the large Indian market with a great customer base, she added. MFN will reduce trade cost owing to economical transportation, availability of raw materials and machinery which will cut the cost of doing business in Pakistan resulting in improved competitiveness and productivity of our industry. The President IWCCI said that how come this part of world progress when intra-regional trade stands at five per cent which is pointless.
Pakistan to export wheat to Iran ISLAMABAD
PAKISTANI ENTREPRENEURS INVITED TO EXPLORE SUDAN ISLAMABAD ONLINE
Sudan is endowed with abundant natural resources and offers good investment opportunities, therefore, Pakistani businessmen should explore Sudan for making direct investment and joint ventures to earn attractive returns. This was said by Alshafie Ahmad bin Mohamed, Ambassador of Sudan while exchanging views with business community at Islamabad Chamber of Commerce &Industry (ICCI). He said he has come to ICCI especially to congratulate Mr. ZafarBakhtawari for assuming the Presidency of ICCI. He said Pakistan and Sudan are situ-
ated at strategic locations as Pakistan is a gateway for South & Central Asia and Middle East while Sudan is a gateway for huge market of Africa. Thus both countries could reap beneficial results by strengthening their bilateral trade and economic relations. He said ICCI should arrange a delegation to visit Sudan and meet the Sudanese counterparts for exploring new areas of mutual cooperation. The Ambassador said that Pakistan is a brotherly Islamic country who always supported Sudan on all issues. He said both countries have many similarities which should be exploited to create bilateral business and investment opportunities. He said thatby enhancing direct con-
tacts between private sectors of both countries and facilitating them in their efforts, Pakistan and Sudan have the potential to take bilateral trade upto US$700million withina period of 2-years. He said that ICCI and Embassy of Sudan in Pakistan should act as bridge for connecting the business communities of both countries. He identified infrastructure development, pharmaceuticals, textile, oil & gas and agriculture as potential areas of cooperation between the two countries. He assured that Sudanese Embassy would always extend cooperation to Pakistani businessmen for improving trade and exports between the two countries. In his welcome address, Mr.Zafar
Bakhtawari, President ICCI said that economy is the key for stability of a country and a strong force to keep a country united. Therefore, Pakistan and Sudan must focus on strengthening their economies. He said both countries are facing almost similar problems and they can better face the current challenges by promoting bilateral cooperation in multiple fields. He said that the import and export profiles of the two countries indicate that there is a lot of scope to increase bilateral trade as Pakistan is a major exporter of finest quality of rice, fruits and vegetables, textile manufactures, leather products and sports goods which have good potential in Sudan and other African countries.
ONLINE
Pakistan will export some 100,000 tons of wheat to Iran by early February. Reports said Pakistani grain exporter Seatrade Group would ship the grain by the end of January or early February, but the company noted the amount was only onetenth of what was originally planned. An unnamed director at Seatrade Group said “it seems the [Iranian] government does not have the money” to purchase the 1 million tons the two sides had agreed upon in August. Seatrade Group said that, according to the deal, Iran should have exchanged iron ore and fertilizer for the wheat shipments. The Pakistani grain export company said the remaining 900,000 tons was still under discussion and “might be done on the private market.”
Credit to SMEs dips by 43.2% in last 4yrs as banks stay risk-averse KARACHI STAFF REPORT
The central bank Monday reiterated its concern over a more risk-averse posture of the banks towards extending loans to the private sector particularly the Small and Medium Enterprises (SMEs). This, the regulator said, over the last four years had shrunk the banks’ credit by Rs 189 billion or 43.2 percent to the SMEs from Rs 437 billion in 2007 to Rs 248 billion in June 2012. “Lending figures of SMEs are not encouraging in recent years,” said Deputy Governor State Bank of Pakistan (SBP) Kazi Abdul Muktadir while opening a three-day training program on “Scaling Up SME Banking Business” held here at a local hotel by the central bank in collaboration with International Finance Corporation (IFC). With this decline, the SMEs’ loan proportion to the total advances of banks has also decreased from 16 percent in 2007 to less than 8 percent in
Tuesday, 8 January, 2013
2012, the deputy governor said. He said this decline could partly be attributed to adverse economic conditions during the period and growing non-performing loans (NPLs). However, he observed that a more risk-averse posture of banks remained a major factor responsible for their low exposure to SMEs. “Banks in recent years have increasingly invested in safer havens - opting for government paper and increased financing for commodity operations, rather than supporting the private sector which is the main driver of economic activity,” said Kazi. Urging the financial industry to take steps for promoting SMEs through prudent and more innovative banking solutions, Kazi said the banks should formulate strategies to overcome the challenges faced by the SME sector. He said the banks needed to shift from traditional banking approach towards SMEs to the provision of more customized and differentiated financial
products and services to suit different SME segments. The banks also needed to develop and implement appropriate credit evaluation techniques used globally such as credit scoring, cash flow-based lending and program-based lending, said Kazi. He pointed out that the SME sector contributes 30 percent towards GDP, employs more than 70 percent of the non-agricultural workforce and generates 25 percent in the export earnings of the country. “However, despite its significance, the growth of SME sector in Pakistan remains constrained by a number of factors on both the demand and supply side,” he added. Recounting the various important measures taken by the SBP for improving the business environment for SME sector, he said these include provision of Prudential Regulations (PRs) for SMEs, Refinance Schemes for SMEs, Credit Guarantee Scheme for Small and Rural Enterprises and cluster development surveys.
He said SBP, in collaboration with IFC, had been assisting banks in their capacity building efforts with focus on the areas of Strategy Formulation, Product Development, Risk Management and HR Development.
“These efforts will revitalize the SME lending in participating institutions and will be a prototype for other institutions which could see SME financing as profitable business venture,” said Kazi.
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More Sugar in 2013
Business 02
Surplus sugar production of 4.5 million tonnes expected this year ISLAMABAD
S
Major Gainers COMPANY
OPEN
HIGH
LOW
CLOSE
CHANGE
TURNOVER
Pak.Int.Cont. SD
210.30
220.81
210.50
220.81
10.51
25,200
AL-Ghazi Tractors 230.13
234.99
225.00
234.99
4.86
8,300
Linde Pakistan
150.20
154.00
151.02
152.65
2.45
6,200
Noon Pak
40.23
42.24
41.90
42.24
2.01
12,500
Bata (Pak)
1297.00
1299.98 1250.00
1298.99
1.99
300
10000.00 910.00 370.00 285.00 632.00
9900.00 910.00 361.00 280.00 608.00
9974.99 910.00 365.00 280.00 622.10
-225.01 -45.00 -8.92 -8.10 -5.82
220 50 700 800 500
15.45 13.79 14.89 6.35 7.50
14.57 13.01 13.77 6.11 7.00
14.88 13.47 14.67 6.26 7.34
-0.46 -0.32 0.19 -0.09 -0.12
11,927,500 8,650,500 7,707,500 3,956,500 2,918,000
APP
URPLUS sugar production is expected this year too as over 4.5 million tons of sugar production is estimated against the domestic requirements of 4.2 million. Sugarcane crushing continues in full swing across the country as all existing sugarcane crushing units are operating at their optimal capacity to produce the commodity for fulfilling the local consumption as well as to export, said National Sugarcane Coordinator, Sohail Muhammad Khan. Talking to APP here on Monday he said that sugarcane harvesting was completed in the Sindh province and crushing was also nearing completion as all 30 sugar mills were running at their maximum capacity to produce the commodity. Meanwhile, in Punajb crop harvesting over 95 percent area has been completed and all 46 sugar mills were busy in crushing the sugarcane to produce sugar, he added. Sohail Khan said that sugarcane crushing also witnessed full swing in Khyber Pakhtunkhwa where all 6 mills were running at their installed limit adding that the crushing season for the year 2012-13 is likely to continue till first week of next month. He further informed that sugarcane crop production was expected to remain about 55 million tons as against the 63.5 million tons of last year; however, he said that final figures of crop output are yet to come. The indicative sugarcane price was fixed at Rs. 172 per 40 kg in the Sindh Province where
Oil mixed in Asia as US fiscal fears offset jobs data SINGAPORE: oil prices were mixed in Asian trade Monday as weak energy demand and concerns over more fiscal battles in Washington tempered news of a modest growth in the US jobs market. New York’s main contract, light sweet crude for delivery in February shed two cents to $93.07 a barrel while Brent North Sea crude for February delivery gained 14 cents to $111.45. Data on Friday showed that the US economy generated 155,000 jobs in December, and the unemployment rate held at 7.8 percent. However, a US government report last week showing softer fuel demand outweighed that news, Phillip Futures said in a market commentary. Weaker US energy demand “added to bearish concerns about oil markets, which have been closely monitoring economic data for signals about consumption, which is under pressure because of the struggling economy”, Phillip Futures added. AGENCIES
Major Losers UniLever Pak Wyeth Pak Limited Mithchells Fruit National Foods Siemens Pakistan XD
10200.00 955.00 373.92 288.10 627.92
Volume Leaders Jah.Sidd. Co. Byco Petroleum Maple Leaf Cement Fauji Cement Azgard Nine
15.34 13.79 14.48 6.35 7.46
Interbank Rates US Dollar UK Pound Japanese Yen Euro
97.4235 156.3452 1.1097 127.0110
Dollar East as it was fixed at 170 per 40 kg in Punjab for the crop year 2012-13, he added. He said that carry forward stocks from 2011-12 crop of about 1.3 million tons were also laying with the local mills and sugar was available at Rs. 52-54 per kg in the open market across the country where as it was also acces-
sible at Rs. 48 per kg in all Utility Stores outlets. National Sugarcane Coordinator informed that new consumption year 2012-13 will start from February and decision to export the surplus commodity would be taken after reviewing the stock position.
FPCCI urges FBR to stop manual selection of returns for audit KARACHI NNI
Haji Fazal Kadir Khan Sherani, President of Federation of Pakistan Chamber of Commerce & Industry (FPCCI) and Mr. Zakaria Usman, Chairman of the FPCCI Standing Committee on Coordination with the FBR, have urged Ali Arshad Hakeem, Chairman of Federal Board of Revenue (FBR) to immediately issue instructions to the RTo –II Karachi to do away with the audit of returns, selected either manually by the audit officers or through computer balloting based on joint parametric selection criteria under the Income Tax, Sales Tax and Federal Excise laws, as it is clearly against the audit policy of the Board. They elaborated that FBR as per the law, is authorized to select cases for audit only through parametric computer random balloting based on either Income Tax, Sales Tax or Federal Excise laws as such the cases selected through computer balloting based on joint parameters under the Income Tax, Sales Tax and Federal Excise Laws have been declared illegal by the Lahore High Court. Moreover, they disclosed
that the FBR in its earlier letter communicated to all tax officials had given them clear instructions that only the tax payers selected through parametric computer random balloting would be audited. The FPCCI President and Chairman referring to the reports that the tax officials had been assigned new tax target for recovery through audit lamented, “Assigning such targets specifically to Karachi-Based tax officials is discriminatory in nature and ultra-vires of the constitutions.” “Rather than simply targeting Karachi and other parts of Sindh, all Pakistan should be brought within the scope of such exercise”, they urged. Mr. Sherani also showed concern on the statement given by the Finance Minister in Senate that the number of Income Tax filers had been drastically reduced to 1.6 million in 2009 and only 810,000 tax payers have filed their returns in 2011-2012. He said that the FPCCI realized the importance of broadening of tax base and as such instead of squeezing existing tax payers the new potential tax payer should be brought in to tax net by suitable reduction in the tax rates, which are exorbitant in Pakistan as compared to other countries in the region.
BUY US Dollar Euro Great Britain Pound Japanese Yen Canadian Dollar Hong Kong Dollar UAE Dirham Saudi Riyal Australian Dollar
SELL
98.10 127.63 156.70 1.1062 98.39 12.40 26.60 26.05 101.71
98.80 129.56 159.02 1.1218 100.49 12.70 26.95 26.39 104.71
SECP, law enforcing, probing bodies to combat business scams ISLAMABAD NNI
In order to chalk out a comprehensive strategy to combat business fraud, a meeting of a special committee comprising of representatives of the Securities and Exchange Commission of Pakistan, Financial Monitoring Unit, State Bank of Pakistan, National Accountability Bureau, Federal Investigation Agency, and the police is being held on Tuesday, January 8,2013, at the SECP head office. The committee will focus on preventing illegal business activities, including Ponzi and pyramid schemes, carried out by companies and unregistered entities. The committee has been formed to achieve synergy to prevent fraudulent business activities that cheat the public. It will share information to identify and prevent business scams. The participants will consider developing a national antifraud strategy and institutionalizing the coordination mechanism by setting up an all-encompassing anti-fraud body in the country. The committee will identify various areas of common interest, including intelligence sharing, and training of investigators. Mr. Tahir Mahmood, the SECP Commissioner, Company Law Division, will make the keynote speech.
CORPORATE CORNER Air Indus caters to increasing air travel demand
PACRA maintains ‘AAA’ entity rating of Pak-Arab Refinery
Indus to sponsor Pakistan Auto Parts Show 2013
KARACHI: To meet the growing demands of domestic air travel in Pakistan, Air Indus is now in business after receiving clearance from Civil Aviation Authority (CAA). Air Indus Boeing 737 will be arriving at the Jinnah International Airport Karachi shortly to launch its inaugural flight with a fresh and unique style. Air Indus management pledges the highest safety standards and an unforgettable experience. For this purpose, an agreement has been signed with Malaysia Airlines (MAS) for training its cabin crew members. Malaysia Airlines is accredited by International Air Transport Association with (IoSA) IATA operational Safety Audit for its operational safety practices. This agreement would facilitate Air Indus crew to receive training at par with the highest international standards. Air Indus not only planned to cover all the major cities of Pakistan i.e. Karachi, Lahore, Islamabad, Peshawar & Quetta but it will also be the first private Airline which will cover socio economic & tertiary routes from the beginning of its operations such as Bahawalpur, Dera Ghazi Khan, Skurdu, and Faisalabad.
KARACHI: The Pakistan Credit Rating Agency (PACRA) has maintained long term and short term entity ratings of Pak-Arab Refinery Limited at “AAA” (Triple A) and “A1+” (A one Plus) respectively for the past 15 years. The ratings denote the lowest expectation of credit risk emanating from an exceptionally strong capacity for timely payment of financial commitments The ratings reflect PARCo’s sovereign ownership structure owned by the Government of Pakistan (GoP) (60%) and the Emirate of Abu Dhabi (EAD) (40%). Additionally, it enjoys strategic importance to the GoP for its socio-economic policies and its quest of reducing the import bill. The Company’s low business risk emanates from its leading market position, strong demand of its products, and diversified revenue stream. The ratings recognize the company’s ability to manage its financial profile. Although this has lately been stretched by higher short-term borrowings, it is supplemented by strong cash flows and GoP’s frequent intervention to mop up circular debt, prevalent in the country’s energy chain.
KARACHI: In continuation of its policy and commitment in the development of engineering base of the country, the Indus Motor Company (IMC) is sponsoring Pakistan Auto Parts Show 2013 as one of the prime sponsors that is to be held at Karachi Expo Center from January 11 to January 13, 2013. ‘PAPS-2013 is an exhibition depicting the achievements of Pakistan’ s auto industry in terms of localization and provides local auto part vendors an opportunity to showcase their localization efforts and seek new markets and buyers. It is also a good platform to educate key stakeholders about the industry in details, ’ said Chief Executive officer of IMC Parvez Ghias. While praising the efforts of local vendors in developing engineering base and enhancing skill sets of local engineers, Ghias said that through the efforts of oEMs local auto manufacturers have achieved over 60% localization. ‘IMC is fully committed to localization process and has already developed 60 vendors and has arranged for 34 technical assistance agreements for transfer of technology. In addition, IMC has invested over Rs
13 billion for progressive localization of its range of products in Pakistan and procured Rs 27 billion worth of local parts and sub assemblies from local sources during year 2011-12, ’ he added. Being the leading oEM and platinum sponsor for PAPS2013, IMC aims to provide a platform to local engineering firms to showcase their efforts and achievements and explore new market opportunities. He further stated that industry contributes more than 5% of total FBR collections annually.
KARACHI: PIA Managing Director, Junaid Yunus photographed with PIA Christian employees at the Christmas Annual Dinner held at Karachi. Also seen in the picture is Anwar Khan Gill, PIA Christian Employees Society President and Hidayatullah Khan, CBA President along with PIA staff and others.
Tuesday, 8 January, 2013