profitepaper pakistantoday 09th july, 2012

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Monday, 9 July, 2012

Facebook, Yahoo tie up, settle lawsuits Facebook Inc and Yahoo Inc agreed to forge a broad Internet advertising and licensing partnership on Friday, laying to rest their dueling patent lawsuits

FPPCI and the chamber of regrets g

FPCCI condemns formation of Pakistan-Afghanistan Joint CCI

SAN FRANCISCO

KARACHI

AGENCIES

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The pact settles accusations of technology patent infringement that began under the stewardship of ex-Yahoo CEO Scott Thompson, ousted after a scandal erupted over inaccuracies in his resume. Sources tell Reuters interim CEO Ross Levinsohn is now the front runner for the top job. Facebook's and Yahoo's strategic deal -- which expands an existing multi-year tie-up that involved mainly allowing Facebook users to share Yahoo content -- encompasses cross-licensing of patents and collaboration on advertising offerings during major media events such as the Olympics or annual Super Bowl. "I`m pleased that we were able to resolve this in a positive manner and look forward to partnering closely with Ross and the leadership at Yahoo," Sheryl Sandberg, Facebook's Chief Operating Officer and newest board member, said in a statement. Yahoo, the once iconic Internet company, has struggled to find its footing in a digital world dominated by the likes of Apple, Google, Facebook, and Twitter. The company's leadership has been in a state of upheaval since turning down Microsoft's $44 billion takeover offer in 2008, plowing through four chief executives in as many years. The company would not say when a final decision on a permanent CEO will be made. Yahoo's lawsuit had invited some criticism that it was trying to wring cash out of a company about to go public in Silicon Valley's largest coming-out party. It sued Facebook in March, claiming the No. 1 social networking company infringed 10 patents including several that cover online advertising technology. In its lawsuit, the company said Facebook was considered "one of the worst performing sites for advertising" prior to adopting Yahoo's ideas.

AJI Fazal Kadir Khan Sherani, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has strongly condemned the statement by the so-called President of the Pakistan-Afghanistan Joint Chamber of Commerce and Industry (PAJCCI) published in a section of the press recently.

In this regard, FPCCI would like to clarify that the usage of the term “Joint Chamber” by PAJCCI is a misnomer, as the body has been formed not as a result of an agreement between the national chambers of Pakistan and Afghanistan, but rather as an agreement between the national cham-

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ber of Afghanistan, and three districtlevel chambers from Pakistan. It may be pointed out that FPCCI, which encompasses 48 chambers of commerce and industry and 96 trade associations, is the apex body of Pakistan’s private sector.

FPCCI is the national chamber of commerce, and incidentally, the three regional chambers representing Pakistan in PAJCCI are all members of FPCCI. In the presence of a national chamber which has a well-established practice of signing MoUs with counterpart bodies (for example, the India Pakistan Joint Chamber of Commerce and Industry, formed as a result of collaboration between FPCCI and the Federation of Indian Chambers of Commerce and Industry, FICCI); the need for a parallel arrangement with-

out the involvement of FPCCI appears not only unnecessary but also illegal.

Furthermore, it is extremely unfortunate that this body has been formed with the patronage of the British High Commission, and we sincerely believe that any funding by the High Commission or any other agency directed towards this joint chamber would be illegal, and would certainly lead to complications of great magnitude,

thereby not setting a good precedent for the future.

It may be further mentioned that FPCCI has already raised the issue of formation of this joint chamber with both the Ministry of Commerce and the British High Commission very categorically, but we have not received any response from them which means that the FPCCI’s stance has been accepted.

Businessmen appeal for early completion of Islamabad Citizen Club ISLAMABAD: Local businessmen in a meeting of ICCI Sub-Committee on CDA appealed to the Chief Justice of Pakistan to allow the start of pending construction work on Islamabad Citizen Club in F-9 Park as it was a project of public interest.

Presiding over the meeting, Asad Farid, Acting President, Islamabad Chamber of Commerce & Industry said that CDA should explore the option of public-private partnership for early completion of this important project so that citizens of Islamabad could avail a better community facility. He said that many entrepreneurs have shown interest to become joint partner for completion of Islamabad Citizen Club and called upon the CDA to form a Committee comprising representatives of CDA and private sector to make a joint venture arrangement for its construction. He said ICCI could help CDA in finding private partners for the project. The Committee Members said that they had taken up many issues of business community with CDA like allotment of plots for construction of a dispensary for industrial labor & multistorey flats for small traders, bifurcation of single owner adjacent industrial plots to set up separate industrial units and removal of encroachments from markets. However, all these issues were still unresolved, which showed the lackluster approach of CDA to address the issues of business community. They were of the view that traders and industrialists were playing a major role in promoting commercial activities and strengthening the local economy. Therefore, CDA should give priority attention to their issues so that entrepreneurs could expand businesses and create more job opportunities for unemployed youth. Asad Farid also stressed for early shifting of courts from F-8 Markaz to some other place because existence of courts in this important Markaz has diminished the commercial value of the area and was badly hurting the business interests of entrepreneurs. He said that industrialists have to pay 5-6 percent cost on registration of industrial plots while CDA was also charging another 4-5 percent as transfer fee. He urged that instead of getting double charges from industrialists on this account, CDA should provide them relief to help boosting industrial activities in Islamabad. ONLINE

WALL STREET WEEK AHEAD

Stimulus moves, profits to be focus Wall Street has been running in circles for the past two months, and the pattern may continue despite the upcoming start of the earnings season NEW YORK AGENCIES

Quarterly report cards from blue-chips Alcoa and JPMorgan next week could fade into the background as traders jockey for position before key data from China and more central bank headlines next week.

After three major central banks eased monetary policy this week, investors will comb through the minutes of the latest Federal Reserve policy meeting, which will be released on Wednesday, to see what officials said about a further round of asset purchases.

U.S. stocks face headwinds from a slowing global economy. Europe's debt crisis has drawn much of the attention, but little clarity has emerged about how the euro zone's debt and banking problems will be fixed despite numerous meetings.

The uncertainty has left the market in the hands of traders, who look for opportunities for quick returns, while investors, who are in the market for the long haul, watch from the sidelines.

The S&P 500 flirted with going negative for the year shortly before posting its best week since December. The benchmark index is less than 0.1 per-

cent above where it was two months ago. "Traders are happy going in and out of the market within a range, but for the average investor it's a market in which the path is still unclear," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. On Friday, the S&P 500 closed down 0.55 percent for the week. The index has posted four weeks of gains and four of losses in the last eight.

CENTRAL BANKS TO THE RESCUE?: Weak U.S. labor market data on Friday raised the chances in favor of the Fed launching a new round of monetary stimulus to boost growth, according to a Reuters poll. <ID:N9E8GO01T> The Fed's minutes midweek will be followed Thursday by the Japanese central bank's views on the health of its economy after a two-day meeting.

"If we do see additional asset purchases from the Bank of Japan that would depreciate the yen and would be a short-term positive for global equities," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

The recent central bank actions are seen as precautionary moves as the global economy stalls. Next week's gross domestic product data out of China will help give the market important clues

about the world's second-biggest economy. "Some of the negative news is built in, and I'm anticipating a positive surprise coming out of China," Jacobsen said.

Economists expect China to report year-on-year GDP growth of 7.6 percent, compared to an 8.1 percent yearly gain in the first quarter.

Other Chinese data next week include inflation, loan growth, trade balance and retail sales.

Europe remains on traders' minds despite an agreement last week that opens the door for troubled banks to receive rescue funds. However, Italian and Spanish borrowing costs have resumed their rise in a bearish sign for markets.

Testimony by ECB President Mario Draghi to Europe's parliament on Monday will be followed by a meeting of euro zone finance ministers.

EARNINGS, OUTLOOKS ... AND A BIG TRADING LOSS: Aluminum company Alcoa (AA.N) reports secondquarter results on Monday. Alcoa surprised Wall Street last quarter with a positive outlook, but the global slowdown could make it harder for the aluminum maker to keep its bullish stance.

JPMorgan Chase & Co (JPM.N) will also report earnings next week, with investors eager to know how big the

bank's losses will be following a botched trade. The initial estimated loss at the bank was $2 billion but later reports indicated it could balloon to more than four times that.

"The idea is that analysts have been marking down not only earnings estimates but revenue estimates, and the reason is because of weakness in Europe, which is spilling over to weakness

in global operations for many companies," said Brian Gendreau, market strategist with Cetera Financial Group in Gainesville, Florida.

The U.S. economic calendar for next week includes import prices and trade, plus producer prices and the preliminary reading on July consumer sentiment from the Thomson Reuters/University of Michigan surveys.

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Monday, 9 July, 2012

The in-house Italian job Italy raises 9.5b euros with housing tax g

ROME AGENCIES

Italy has raised more than 9.5 billion euros ($11.7 billion) so far in 2012 from a housing tax introduced as part of emergency budget measures, and is on track to meet its target for the full year, the Economy Ministry said on Saturday.

Prime Minister Mario Monti announced the new real estate tax (IMU) in December, along with a series of tax hikes, spending cuts and pension reforms in a tough austerity package aimed at boosting Italy's strained public finances.

Following the June deadline for the first IMU installment, the ministry said the tax had raised a total of 9.55 billion euros. About 23.8 million contributors paid an average of about 400 euros, it said.

The results of the first six months of the year suggest the government will meet a target of 20.1 billion euros by the end of 2012, the ministry said. The IMU applies to first homes in addition to other property, reintroducing a similar tax which was scrapped under former Prime Minister Silvio Berlusconi, who quit in November amid soaring Italian bond yields and a looming debt crisis. It has been among the more unpopular measures adopted by Monti's government, adding to pressure on Italian families already struggling with recession, rising unemployment and stagnant wage growth.

The Economy Ministry said in a separate statement on Saturday that the total raised from value added tax (VAT) in Jan-May 2012 had fallen 1.1 percent compared with the same period of the previous year.

Italy hiked the main VAT rate to 21 percent from 20 percent in September 2011, but the ministry said stagnating domestic demand had led to the decline in the amount raised.

Italian consumer morale hit its lowest in at least 16 years in June and real disposable income of Italian families is lower now than it was 20 years ago, according to national statistics office ISTAT. Total tax revenue between January and May 2012 was up 2.5 percent compared with the first five months of 2011, despite difficult economic conditions, the ministry said.

Business 02

Man United filing shows Glazers’ borrowing, buying debt

Manchester United's filing for an initial public offering of shares in the United States is shedding fresh light on the way its owners, the Glazer family, both borrowed from and bought debt in the English football club in recent years

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NEWS DESK

MERICAN entrepreneur Malcolm Glazer and his six children, who took control of the English soccer club in 2005 after a bitter takeover battle, have in the past been criticized by fans for saddling the club with too much debt, amid fears that it didn't have as much money as some rivals to compete to buy and retain top players. Now the filing shows that the Glazer family was not only borrowing from the club - which describes itself as one of the most popular and successful sports teams in the world but that at least one son also bought the club's debt, earning a higher rate of return on that money than the family was paying on its borrowings.

"The historical dealings between family members of the company are something for investors to be aware of before they decide to invest in the IPO," said Thomas Conaghan, an attorney at McDermott Will & Emery, who represents companies in IPOs. He said that such sweetheart related-person transactions -while legally permissible - may not be in the best interests of the club. It was not clear why the Glazers borrowed from the club rather than from other family companies or banks in 2008 or what they used the funds for. The family has a diverse portfolio of interests, including U.S. shopping mall owner First Allied Corp and the Tampa Bay Buccaneers, an American football team in the NFL. Other experts emphasized that the Glazers were well within their rights since they own the company and it was not publicly traded at the time of the transactions. "It is important to realize that it is not uncommon for private companies to make loans to owners," said Campbell Harvey, a professor of international business at Duke University.

However, Manchester United is no ordinary private company. The club, founded in 1878, boasts a global fan base of 659 million, many of them following the sport with almost religious fervor. The disclosure may help reignite the debate that became extremely heated at the time when the Glazers first took control of the storied soccer club after a passionate drawn-out battle, which saw the family's patriarch Malcolm Glazer facing protests from Manchester United fans. Manchester United spokesman Philip Townsend declined to comment on the IPO or the Glazer

family's private affairs. The timing of the IPO is unclear.

Buccaneers' director of communications Jonathan Grella, who has spoken on the Glazer family's behalf in the past, could not be reached for comment. The public relations firm that the club has hired for the IPO in the United States, Sard Verbinnen & Co, and the lead underwriter for the IPO, investment bank Jefferies Group, both declined to comment.

DEALINGS WITH THE GLAZERS: At the height of the global financial crisis in December 2008, the six Glazer siblings - Avram, Joel, Bryan, Edward, Darcie and Kevin - got 10 million pounds ($15.5 million) in loans for at least five years from the club "for general personal purposes" - or about 1.67 million pounds each - and paid an interest rate of 5.5 per-

cent, according to Manchester United's filing with the U.S. Securities and Exchange Commission this week. In November 2008, commercial banks on average charged an interest rate of 11.44 percent for a two-year personal loan, according to the U.S. Federal Reserve. Manchester United said in its filing that it believed "the terms of the loans were at least as favorable to us as compared to terms that we would have received in connection with a loan to an independent third party."

Then between October 2010 and January 2011, one of the sons, Kevin Glazer, members of his immediate family, and a Glazer family company bought $10.6 million of Manchester United senior secured notes in the open market that paid an interest rate of 8.375 percent. The notes "were acquired for general investment purposes," according to the SEC filing. It was unclear precisely which other members of the family, apart from Kevin Glazer, were involved in that transaction, or what funds they used to make that investment. In April 2012, Manchester United paid the Glazers a dividend of 10 million pounds, which was used to repay the loan it had made to the family.

To be sure, the Glazers injected 249.1 million pounds into the company in November 2010, which the company used to repay another expensive loan. Lower debt would tend to make the company more palatable for investors in an IPO. The filing doesn't reveal how the Glazers funded that capital injection, whether from their own resources or through more borrowing.

Moreover, that was after the family had levered up Manchester United in the first place, loading a soccer club that was once debt-free with huge amounts of borrowings to fund their 790-million-pound takeover in 2005. Manchester United still has a debt pile of 423 million pounds, which it plans to reduce through proceeds of the proposed IPO. However, the cash and cash equivalents on its balance sheet dropped to 25.6 million pounds at March 31 this year from 150.6 million pounds on June 30, 2011. Soon after taking over the club in 2005, another son, Joel Glazer, told the club's television channel MUTV that his family wanted to develop Manchester United as "a great club." "Judge us over the long haul. Don't judge us on a day or the last several months," Glazer said at the time.

Afghan economy: a hard landing ahead SANJEEV MIGLANI If you go to the run-down Desh bazaar in central Kabul – which sells everything from widescreen Samsung televisions to used shoes - it doesn’t matter what currency you use to pay for your shopping.

They will accept the afghani, the US dollar or the Pakistani rupee.

But if you were to go further east to Jalalabad near the border with Pakistan, you will probably end up paying for everything in the Pakistani currency, or kaldhar, as it is known in Afghanistan from the Taliban period. In fact, the shopkeeper – who buys all his goods from Pakistan – might even insist you pay in rupees rather than afghanis. An Afghan colleague who was coming through Jalalabad on his way back from Pakistan said the restaurant where his family stopped for lunch refused the afghani. And just as a large swathe of Afghanistan near the border with Pakistan uses the rupee, in the west the Iranian rial competes with the afghani.

Ten years after Afghan authorities relaunched the afghani, its use remains limited. It is not uncommon for small landlocked nations to use a bigger neighbour’s currency. But the everyday usage

of foreign currency in large parts of Afghanistan, despite the threat of fines by the central bank, reflects a lack of confidence in the currency and the economy as the country enters its most uncertain period yet.

The afghani has been more stable than its peers in the west and the east, with the Pakistani rupee having lost near half its value to the dollar reflecting the country’s

own precarious economic health. But the afghani has been artificially pegged and reflects the funds that poured into what is called the donor-drunk economy. As the West begins to wind down its military engagement and inflows dry up, the currency is expected to come under real pressure.

Affluent Afghans are already cashing out, with about $4.6 billion having left Kabul airport alone in suitcases and hand-

bags, according to central bank governor Noorullah Delawari. Those who can’t stash funds abroad keep dollar accounts at banks in Kabul – including a central bank employee who said it was a confidence thing.

“We have gone from a time when say, you had 1,000 afghanis in your account and then there is a decree to remove three zeroes, your account is down to 1 afghani. Its psychological, it erodes confidence.”

Confidence is in short supply in Afghanistan as 2014 nears when most of the foreign combat troops in the country will leave. And it’s hard to see how Afghanistan – which relies on foreign aid for 90 percent of its budget – can escape a hard landing when its Western backers are embroiled in financial crises at home.

The war economy is unravelling, Leif Rosenberger from the U.S. Army War College Strategic Studies Institute, wrote in an October 2011 article. Between now and 2014 more than 150,000 foreign troops and some 30,000 foreign contractors will leave.

USAID has cut its budget for Afghanistan by half which means the bubble economy created by the huge inflow of aid over the past 10 years or so is going to dry up.

Rosenberger, citing U.S. Treasury assessments, says Afghan GDP could fall by

13 percent, about the same as happened to the United States during the Great Depression. The worst case scenario could be a fall of 41 percent which means mass unemployment and perhaps more fodder for the Taliban as they seek to wrest control of more parts of the country.

This month, donor nations are meeting in Tokyo to consider ways to stabilise Afghanistan during a 10-year period following the Western withdrawal in 2014.

Some amount of confidence is returning, officials say, following a NATO summit in Chicago last month when allied nations committed themselves to sustaining Afghan national security forces. Central bank governor Delawari said real estate prices in Kabul that had fallen all through to the NATO summit and even during the meeting itself, have since come back up.

But these deals are still done in dollars and it would need a lot more to convince Afghans of a stable future.

And when Afghans can barely be convinced to use the afghani even to buy tomatoes, we have a measure of how little has been achieved in Afghanistan and its vulnerability to a very hard economic landing ahead.

Courtesy: Reuters Blog