Profit 16th January, 2012 by Profit Epaper

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Corporate social responsibility Page 4-5 Capital controls Page 3 PTCL’s new smart phone, IVIO Icon Pro: A welcome product Page 2

Pages: 7

profit.com.pk

Monday, 16 January, 2012

Petroleum minister to visit India for TAPI transit fee talks

AMER SIAL

CM vows to fight gas curtailment

Pakistan and turkmenistan have agreed on the gas sale price of $360 million cubic meter (mcm) at the turkmenistan afghanistan border after deduction of $29 mcm as transit and transportation cost through afghanistan. the cost will be $10.28 mmbtu. the base price comes to 70 per cent of brent oil parity in the mid country delivery point of Multan. the contract price formula comprising basket fuels of HSFo 380 centistokes (cst), HSFo 180 cst and Gasoil 0.5 sulphur, is based on prices of Singapore quotation of Platts oil gram. to share risk of transportation and transit variability through afghan terri-

tory both the countries also agreed on a risk sharing formula. the agreement also contains clause for gas price review after five years. the source said price of gas has remained the major outstanding issue. Pakistan wanted buyers to negotiate price jointly with the seller but afghanistan and India negotiated price on bilateral basis with turkmenistan. after the signing of GSPa by the four participating countries, the process for hiring transaction advisor is expected to be started. the project will take between four to five years to complete after signing of all the contracts with gas flow target of 2016.

Price of gas has remained the major outstanding issue. Pakistan wants buyers to negotiate price jointly with the seller

onal Chairman Pakistan readymade Garments Manufacturers and exporters association (PrGMea), atiq Kochra has urged the government and trade Development authority of Pakistan (tDaP) to make strenuous efforts to find new markets for textile sector as the country’s traditional markets i.e. uSa and eu are facing recession and the exports to these markets are gradually decreasing. “the global economy is once again going through a crisis and as a result Pakistan’s exports are also taking a hit because uSa and the eu are its largest trading partners”, said atiq adding that it can be expected that these economies will remain in recession in the short to medium term and Pakistan urgently needs to diversify its export destinations in order to minimise the effects of recession in the west. While, demand is expected to go down considerably it is also expected that protectionist policies will be implemented by various countries to protect their local industry. although, Pakistan has an Fta with China but exports of woven and knit garments still have an average import duty rates ranging from 8-14 per cent. PrGMea has already requested the government to bring Pakistan’s garment exports under duty-free regime with China. He suggested that value-added garment products should be given preference when negotiating Fta’s or Pta’s especially with larger economies because, 1) it would bolster our export earnings by a larger multiple due to value addition and, 2) bring more jobs to the people as garment manufacturing is very labour intensive. Similarly, giving other countries access to Pakistan’s garment market would not hurt the local garment industry, simply because import market of garments is very small and majority of Pakistanis do not wear western clothing. He further explained that granting of GSP Plus facility to Pakistan is an ongoing process which would likely be implemented in 2014 and not next month.

Islamic Banking gaining ground in Pakistan

LAHORE

STAFF REPORT

unjab Chief Minister Muhammad Shahbaz Sharif has assured the business community that he himself would team up with business leaders in long march on the issue of gas curtailment in Punjab because federal government is behaving like a stepmother with industries in the province. Punjab chief minister was speaking to media after chairing a meeting of all Punjab chambers of commerce and trade associations at Chief Minister’s Secretariat here on Friday evening. He said if the federal government initiated alternate energy projects, the country could easily produce around 4,000 MW of electricity during the last three and half years. but, unfortunately, to serve its own interests federal government decided to go for rental power projects, which could not produce any results, he maintained. He said that energy crisis had become a major challenge for trade and industry in the province. He pointed out that a large number of industrial workers had been unemployed due to gas curtailment, while export industries were missing their export orders.

aKaFul, the Islamic mode of insurance, for being very transparent, is emerging globally as a very viable model and being used successfully as engine of growth in a number of Muslim countries. this was stated by Chief executive officer Pak-Qatar takaful Pervaiz ahmad while speaking at lahore Chamber of Commerce and Industry on Saturday. lCCI Vice President Saeeda nazar presented the welcome address while former Vice President Shafqat Saeed Piracha also spoke on the occasion. Pervaiz ahmad said Islamic mode of banking and all its tools are fast gaining ground in Pakistan when compared to conventional mode of banking; though it is a highly untapped market as yet. He said Islamic financing products such as Murabaha, Ijara, Musharaka and Islamic export refinance, etc, are catering to a diverse cross-section of the economy, including corporate, SMe

KARACHI STAFF REPORT

ISLAMABAD etroleuM minister Dr asim Hussain will be visiting new Delhi to discuss the issue of transit fee for turkmenistan afghanistan Pakistan and India (taPI) gas pipeline project with his Indian counterpart on january 24. talking to reporters Petroleum Minister confirmed that he would be visiting India to discuss the issue of transit fee. He said India was currently out of the Iran Pakistan pipeline and could join the project in future only if tehran was ready to provide additional supplies to new Delhi. an official source said talks on transit fee will centre around the two international formulas of the transit pipeline length and volume of the transit natural gas. During the talks both countries would be presenting their proposals on the transit fee that would be shared with both governments before final decision. turkmenistan has already finalised the Gas Sale Purchase agreement (GSPa) with all the participating countries for $7.6 billion taPI gas pipeline that will pave the way for the supply of 3.2 billion cubic feet of natural gas per day (bcfd) from South Yolotan /osman and adjacent gas fields to South asian states through a pipeline. the pipeline will cover 1,680 km from turkmenistan through Herat and Kandahar in afghanistan, cross Pakistan border near Chaman to pass near Zhob, DG Khan, Multan, and onwards to Fazilka near PakIndia border. asian Development bank (aDb) is acting as the facilitator and coordinator for the project and had funded a feasibility study of the project.

Recession eating up textile exports to EU and US

and consumer sectors. He informed the participants that Sudan was the first country which introduced takaful in 1979 while in 1987 Malaysian government used takaful as an engine of growth by issuing First takaful act. He said that takaful met such a big success in Malaysia that 60 per cent of the takaful customers in that country are Chinese. Pervaiz ahmad said that takaful is emerging globally as a very viable model as it remains unaffected by the economic meltdown witnessed by the Western world. Speaking on the occasion lCCI Vice President Saeeda nazar said that today more than two hundred and fifty Islamic financial institutions are operating world-wide from China to uSa. Western banks through their Islamic units in uK., Germany, Switzerland, luxembourg, etc also practice Islamic banking. She said the basic principle of Islamic banking is the prohibition of riba or interest, which has seldom been recognised as applicable beyond the Islamic world but many of its guiding principles have consciously or uncon-

sciously been accepted. the majority of these principles are based on simple morality and common sense, which form the bases of many religions including Islam. lCCI Vice President said that Islamic finance was practiced mostly in the Muslim world throughout the Middle ages facilitating trade and business activities. In Spain and baltic States, Islamic merchants became indispensable middlemen for trading activities. It is claimed many concepts, techniques and instruments of Islamic finance were later adopted by european financers and businessmen. She said Islamic financial system employs the concept of participation in the enterprise, utilising the funds at risk on a profit-and-loss-sharing basis. this by no means implies that investments with financial institutions are necessarily speculative. this can be excluded by careful investment policy, diversification of risk and prudent management by Islamic financial institutions. lCCI Vice President suggested that the Islamic countries that had under-

The Islamic countries that have undergone the experience of Islamic banking should be consulted

gone the experience of Islamic banking should be consulted so that the existing level of services could be improved and more diversified products could be introduced. lCCI executive Committee Members Sheikh Mohammad ayub, Ilyas Majid Sheikh and Khawaja Khawar rashid were prominent among participants.

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Monday, 16 January, 2012

news

PDWCP – Vision for future CAPtAIn AnwAR SHAH

He long awaited deep sea container port project, Pakistan Deep Water Container Port (PDWCP) at Keamari in Karachi is well in progress and is reported as per print media to bearing fruit by the first quarter of 2014. Karachi Port trust (KPt) will have spent close to $1 billion on the project to bring this component of our country’s logistics vision to fruition. KPt has now established the key infrastructure by building the breakwater and dredging a new channel, which will pave the way for modular addition of capacity. according to the feasibility study by uK based consultants, royal Haskoning, PDWCP’s planned six phases shall be capable of handling up to 10 million teus (twenty foot equivalent box units) upon their completion. Phase I of PDWCP was awarded to Hong Kong based Hutchison Port Holdings following competitive bidding. Hutchison is said to be independently investing up to $500 million to build and equip the terminal. this is probably amongst the biggest foreign direct investment coming into the country at a time when other investors have exited Pakistan and adopted a wait and see policy. When Phase I is fully completed, it shall be capable of handling 3.1 million teus. It is planned for the facility to have a draft of 18 metres capable of handling the largest container ships in the world and shall be the biggest source of revenue to KPt. as a Pakistani, I am proud of the fact that our country will have the most advance container handling facilities in the West region of the Indian sub-continent. Years of hard work by KPt and others have finally put our country on the world maritime map with PDWCP being Pakistan’s latest success stories. to me, this is just the beginning of a major vision of our country. Pakistan is blessed with a strategic location as the gateway of goods and

people to afghanistan, Central asia and beyond. these future terminals will also have the capability to handle container traffic for China’s western region. However, such a blessing will be wasted if we do not plan our limited resources to gain maximum benefits. by this, I mean that we have to ensure that expenditures are incurred in the most efficient manner. as I discussed in the foregoing paragraph, once the key infrastructure is built for PDWCP, modular additions can be made using the same breakwater and channel resulting in substantially lesser investment when adding new capacity. the success of this port shall also require adequate road and rail connectivity to upcountry destinations and improvements in logistics management techniques. While we forge ahead with major investment in PDWCP, there are discussions about adding further capacity to enhance existing port capacity at our ports. Furthermore, there are discussions to build a third container terminal at Port Qasim. one has to ask if our nation is spending its limited resources wisely to avoid excess capacity. our GDP growth is not satisfactory and container volumes are registering a downward trend, in particular loosing 2.0 lac teus of nato / ISaF cargo, which is presently congesting port awaiting decision to open transit to afghanistan. there is the real danger of uncontrolled expansion of cargo handling facilities. one has to learn from the mistakes of Vietnam, Korea and rotterdam, where currently, there is a fatal excess of capacity, which is driving down the local port’s revenues due to bad decision making by its management and in the long term, may result in driving away foreign investments. Pakistan’s port authorities would be well advised to avoid a similar mistake. the example of Gwadar should also provide lessons for all. Much has been debated as to the wastage caused by building Gwadar, which has been left non-operational except handling tCP (trading Corporation of Pakistan) government cargo in

bulk where logistic is heavily subsidised at the cost of poor tax payers. the subsidy is said to be around rs2,655 per tonne against rs395 per tonne from Karachi. thus, an excess liability/subsidy of rs2,260 per tonne is being paid on cargo discharged at Gwadar. the searching question is how long we can afford logistic subsidy bearing in mind that Gwadar Port was inaugurated in 2007. this wastage is due to policy making failure by the government to plan properly. the project was doomed from the start, as Gwadar has no industries and the required population base to support the generation of container traffic. the absence to date of road and rail links also raises questions about the project’s feasibility. the provision of these links is expected to cost several times more than the cost of the port itself. It is now evident that the predictions made by several senior port experts about Gwadar port’s failure have proved to be true. even as early as 2001, it was advised to proceed with PDWCP instead of throwing away over a billion dollars on Gwadar port. Pakistan is a gateway for the flow of goods and people from the sea to Central asia and beyond. I was representing the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) as a transport expert at a meeting of economic Cooperation organisation (eCo) held in Karachi on 19 november 2011, an event sponsored by the FPCCI. Iranian and turkish delegations promoted their ports extremely well during that meeting. Iranians were well prepared, promoting very well their Chah-bahar port to eCo participating countries. In particular, they marketed well the use of Shahid beheshti Port for handling of cargo bound for Central asian land locked countries. at the same event, turkey promoted Mersin Port, but Pakistan government lost the opportunity to promote our ports. We need to induce interest by through planned marketing efforts to show maritime facilities in Pakistan to induce eCo countries and to increase our

share in regional trade. We must launch our marketing initiative to cater eCo countries to use our Deep Water Port capacity to boost our volumes by making in-roads in eCo countries. Such marketing efforts are needed to ensure the success of PDWCP and bring benefits to the people of Pakistan where job creation is so desperately needed. Having spent so much energies and a planned injection of $1.6 billion, there are several more matters that we, as a nation, need to do to cement the foundations necessary to build a world class port facility. I have expounded these potential initiatives in my previous writings. Firstly, it is imperative that there be serious efforts to build the connecting roads and other infrastructure to cater for efficient cargo flow enabling the full utilisation of PDWCP. Failing such infrastructure, PDWCP will not realise its full potential. Secondly, we must afford the legal status and recognition a deep sea port deserves by enacting a Deep Sea Port act. It would also confer recognition to the men and women who had toiled and sacrificed to make the deep sea port a success. Such a legal status should form the sound basis for other legislation to attract further investment in other economic sectors and to empower the appropriate authorities to expedite bold initiatives to bring our ports to world class competitiveness. thirdly, there is need to amend the Customs act such as to make Pakistani ports a viable option and place them in a fighting chance to get a piece of the trans-shipment cargo market vis-à-vis other ports the region. The writer is Ex Additional Secretary and Director General, Ministry of Ports and Shipping. He had also been the Chairman of Gwadar Port. Currently, he is a member Board of Governors, World Maritime University Malmao (Sweden), while he is also a member of IMO Secretary General’s Panel of Experts, London

PTCL’s new smart phone, IVIO Icon Pro:

A weLCOme PrOduCT PALwASHA QAzI n the past, business people were easily identifiable—they carried large briefcases, binder planners and perhaps a brick cell phone. the scene has changed and so has the way we conduct life and business. Smart phones stores important data and documents, offers a calendar planner, provides instant access to the internet and email and keep you in touch with clients, coworkers, friends and family – anytime and anywhere. as a busy person, you know the importance of staying a step ahead of your clients and your family. You probably know the feeling of being tied to your desk or home so as not to miss that important email or phone call and to maintain convenient access to essential data— proposals, schedules, contact information, business news or the stock market. Millions across the globe have new-found freedom using smart phones designed for business (and fun). However, choosing the right smart phone is a daunting task. Potential buyers need to think through several factors including cost, features, performance and more. the good news is that Pakistan telecommunication Company limited (PtCl) has launched a 3G eVo enabled android smart phone, IVIo Icon Pro, which offers dual support for both eVDo and GSM/CDMa network. Packed with features of Capacitive

touch Screen Multi Gestures, 262K, 5 mega pixels auto focus camera, and a 0.3 mega pixel secondary camera, the smart phone IVIo Icon Pro supports voice and SMS, Hybrid eVDo/uMtS, 256Mb raM, 512Mb Flash roM, and Micro SD support up to 32Gb, with 4Gb of micro SD card included. Providing up to four hours of talk time, the Smart phone IVIo Icon Pro accepts GSM SIMs and with handset configured for eVo, Wi-Fi bluetooth eDr 2.1 aGPS G-sensor, thus giving PtCl customers the freedom to surf, talk, tweet and do a lot more simultaneously on the go in more than 150 cities nationwide. this device allows the user to sync with desktop computer. this means one can store, view, and work on documents directly on your handheld. one can also receive and respond to emails as they arrive in the inbox on the home computer with real-time push email. this revolutionary PtCl product can also serve as multimedia devices, so entertainment goes hand in hand. It can store and display pictures and videos of friends and family and even entire feature-length movies. Most can take pictures and capture video, but the most common multimedia function is the ability to play MP3s—sit back, relax, and enjoy your favorite tunes while traveling or during breaks. another perk of using IVIo Icon Pro is the fairly recent development of third-party applications (or apps).

these apps range from those geared toward hardworking business tasks to entertaining games and everything in between. With thousands of apps available to download in a range of prices, there’s sure to be something that will appeal. What is so exciting and enthralling about Pakistan’s first 3G enabled android Smart phone is its blazing fast 3G speeds of eVo wireless broadband. exhibiting dual support for Wi-Fi and 3G, IVIo Icon pro for browsing 24/7 without any limitations. android 2.2 Froyo oS is packed with a full web browser & an entire suite of Google apps & access to over 250 thousand applications from the android market. It extends the gift of preserving every precious moment with Icon’s dual cameras. Capture excellent quality photos with the 5Mega Pixels auto Focus Camera along with a front digital camera for video conferencing. the personal Mobile Hotspot lets the populace share 3G Internet connections with friends wirelessly & with an edge of Icon pro’s in-built eVo 3G with smooth sharing of connection with friends. It yields on-the-go Social networking, offering dual support for Wi-Fi & 3G, keeping connected with the world24/7, whether its for work or fun. Whether it’s on-the-go video conferencing with a client or accessing the internet for staying in touch with loved ones, one touch gives real

time access to all be it social networks through the pre-installed Face book & twitter apps; or a voice call through Skype or Viber. It gives uninterrupted connectivity to the customers without being worried about finding a Wi-Fi signal or being stuck with a slow data connection on their mobile every time they need connectivity on the go. Generally, smart phones, are very expensive. However, PtCl’s smart phone, IVIo Icon Pro offers is quite competitively priced. the pre-launch offers seem quite exciting with eVo WInD package, which is offering the smart phone along with 15 Gb data for a period of 6 months only for rs17, 999. eVo WInGS, offering the smart phone with 5 Gb data for a period of 3 months for rs19,999 only. the accounts can be recharged at a cost of rs999 for Smart 5Gb and rs1, 999 for Smart 15Gb. the 3G eVo enabled android Smart phone IVIo Icon Pro is the first in the evolution of the smart phone in Pakistan. as the vast selection of smart phone apps continues to grow rapidly, it would assuredly expand the phone's capabilities almost daily. So if you are seeking a smart phone for all the good reasons, IVIo Icon Pro is one of the best options to consider!! The writer is a freelance journalist, a graduate of Quaid-e-Azam University and a researcher based in Islamabad

CORPORATE CORNER UK ministers promote Pakistan as a good place for British investment

KARACHI: lord Green, uK Minister of State for trade and Investment and uK Cabinet Minister baroness Warsi promoted Pakistan as a good place for british businesses to invest while visiting a new shopping centre in Karachi where british retail company Debenhams will shortly open its first shop in the country. british Deputy High Commissioner Francis Campbell and Yasin Paracha from team a Ventures Pakistan, the franchisee of Debenhams in Pakistan, also attended the launch event. the 27,000 sq foot store, set to open in april this year, will be Pakistan’s first international department store. Debenhams will be joining other british brands in Pakistan like next, Mothercare, early learning Centre, accessorize and Monsoon to bring popular goods to a growing market. PRESS RELEASE

Initiation of pension drawing facility for EOBI pensioners through Easy Paisa KARACHI: throughout Pakistan, eobI has organised a new system that provides pensions to the private sector employees and labourers associated with eobI. this has lessened the transaction phase through easy Paisa for their oldage handicapped and widowed pension earners. In this regard, in Islamabad, eobI respected pensioner, Mr Mohammad rauf Kaleem, number Kb-07257 was given his pension through telenor easy Paisa store near his residence. PRESS RELEASE

Nokia Care Centre continues to provide quality services LAHORE: nokia Care Centres were established with the sole purpose of delivering personalised customer support services to enhance the nokia experience for their consumers. nokia Care Centre is continuously striving to provide better services to nokia customers all over Pakistan with a welltrained and courteous staff. once refurbished, the mobile phones are returned to customers by the same courier company. nokia has now introduced its nokia Care Protect extended warranty service in Pakistan. PRESS RELEASE

NHA award contract of construction of M-9 to Malaysian Company

ISLAMABAD: Chairman national Highway authority (nHa), Syed Muhammad ali Gardezi presided over meeting of nHa executive board which accorded approval to award contract of construction of Karachi-Hyderabad Motorway (M-9) to a Malaysian Construction Company M/s bInaPurI Holding, on bot basis with concessionaire period of 28 years. existing 4-lane Karachi-Hyderabad Super Highway will be upgraded into 6-lane Motorway. PRESS RELEASE

Second Global CEO Excellence Awards ceremony KARACHI: leadership of over 40 public and private sector companies awarded Global Ceo excellence awards at a ceremony held at a local hotel. Global Media links (GMl) and business Milestones jointly organised the award ceremony to admire excellence in leadership in various aspects and spheres of corporate, private, public, and industrial administration. the awards were also officially endorsed by two renowned international strategic partners of GMl. the partners were G2 trainings europe and Middle east and G2 Management consultants. PRESS RELEASE

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monday, 16 Januar y, 2012

edITOrIAL

Capital controls

Borrowing binge

He borrowing binge of the government of Pakistan seems to be never ending. the authorities have relied greatly on the SbP to fulfill its burgeoning appetite for budgetary lending one that has had devastating repercussions for the economy. and thus, with the borrowing binge, the private sector crowding out has stifled investment in the economy that has dropped to all time lows in over a decade. In only the first half of 2012, the government borrowed in excess of rs818.91 billion from the banks, against rs285.951 billion in the corresponding period last year. the increase in government borrowings from banks has also been accompanied by a decline in net Foreign assets that is having a debilitating effect on the local currency. While the current regime has focused on expanding trade horizons, a welcome ini-

tiative one must realise that increased trade cannot be sustainable when the local industry is being choked with the export competitiveness of products being compromised. the weakening rupee certainly will render the exports cheaper however it will also increase the import bill. With the vast bulk of necessities being imported, and imports inelastic Pakistan will have to rely on increasing exports. Given the worsening power shortfall where industrialists are now exploring opportunities in neighbouring countries and setting up their plants there due to a conducive business environment, increasing the exports does seem a hurculean task at present. the government must focus on broadening the tax base to satisfy its thirst for budgetary spending, while at the same time take steps to encourage the industries, not through subsidies but through an appropriate incentive mechanism.

Shan Saeed

urrenCY war, capital controls, regional trade and protectionist policies would be the hot topics in the years to come. Countries are worried about their exports, employment, productivity and GDP growth. not a single country is willing to let her currency appreciate that would hurt exports. Countries like brazil, thailand, South Korea, Saudi arabia, Singapore, and Switzerland have recently imposed capital controls in one form or the other. In my humble opinion, capital controls are not effective in curbing currency appreciation. Currency appreciation can be controlled through strategic implementation of monetary and fiscal policies. However, many countries have failed to comprehend the tools of macro-economics that can be very useful in getting down to the crux of the issue. Currency appreciation is normally seen as hurting exports, decreasing productivity, increasing unemployment and creating lower than expected GDP growth rate. thus nations are worried not to let their income levels down i.e. GDP growth. once currency starts to appreciate, it makes exports expensive, imports cheaper and sends policy makers wondering as to how to control rising currency. Singapore government has recently taken measures of capital controls, 10 per cent tax on property papers bought by foreigners. brazil have imposed tax on bond purchased by foreigners, thailand and South Korea have done the same. Saudi arabia imposed capital controls on foreign remittances. Foreigners working in Saudi arabia can only send 10 per cent of the total deposit amount in their bank accounts as remittance back home. Switzerland intervened in the currency market and pegged its rate against uSD. Investors, high net-worth clients, speculators and people who are looking for wealth protection have taken position in various currencies including brazilian real, South Korea Won, Swiss Franc to name a few. So the

Countries are worried about their exports, employment, productivity and GdP growth Information Technology

Economic forecast

this is with regards to the news story, “CM reiterates It importance” published on 14/01/12. the man, and his party, might have their flaws but with the elections coming up, they are making all the right noises. Distributing the laptops is a great gesture on the part of Mr Shahbaz Sharif, and what is even more significant is that he has earmarked Information technology as a significant façade of the developed countries. It knowledge is extremely important for a progressive society and we must ensure that your young prodigies advance in this sector and in turn become the cornerstones of development in our neck of the woods.

this is with regards to the article, “the economic crystal ball” published on 14/01/12. I must congratulate the writer for scribing a thoroughly enjoyable and researched article. During my time at the oxford university, my economics professor was of the opinion that forecasting economic repercussions throughout the course of a year is a massive task, and one that requires a lot of savoir faire. I totally agree with the writer’s prediction regarding the euro. I was talking to a German friend of mine the other day; and he stated categorically in his rather typical German accent - that if anyone can save the euro; it’s Germany. I can’t disagree with that as well.

zAInA OMER

SyED ABDuLLAH JAn

ISLAMAbAd

SARgOdhA

question arises, are capital controls effective in controlling rising currency? according to IMF and World bank research reports, capital controls are short term solutions but not a long term one. Hence, capital controls are not effective in taming rising currency. these two policies are the real key in controlling rising currency or taming strong currency. Having studied with a nobel laureate at university of Chicago, Prof Gary becker and respected Prof john Huizinga at Chicago School, I strongly feel that monetary policy and fiscal policy are the real solution to currency appreciation containment. How does it work in the real world? Monetary Magic - Central bank can start printing money or using quantitative easing method or expand balance sheets in order to bring down the value of the currency. In this way, monetary inflation will rise and the currency appreciation impact will die down soon as more supply of the local currency comes in the financial market. Fiscal Magic - Government can undertake huge projects with strong return-value focus in order to create employment and buttress economic activity. once the government starts these projects like infra-structure development, up-gradation of hospital services, restoration of historical sites, building of new departments at universities, updating military hardware or investment on bureaucratic knowledge base or capacity enhancement activities; it would let the economic ball rolling. these investments would require local currency utilisation and keep the currency from rising fast. these ventures would send a signal to the investors globally who might be interested in taking position in currencies viewed as strong to consider macro-audit of their asset allocation or investment portfolio for the long run before making investment in the strong currency. Governments can adopt any one of the two approaches mentioned in order to meet the challenge of rising currency. Chile is often quoted as the best example to take control of the rising currency in 1998. However, some people mention about Malaysia’s capital controls to be effective as well. again, I would say it depends on the individual country and her regions location. In the coming years, I would say that currency manipulation or undervalued currency or currency dumping might become a bone of contention among many countries as they compete quite fiercely in the global trade market to win market share going forward. are you ready for protectionist policy or capital controls phenomenon? the business magazine/financial newspapers would run many articles on capital controls as we move forward for the next 3-years. The writer is a financial market economist with 12 years of solid global experience based in Asia Pacific. He has graduated from Uni of Chicago, Booth School of Business, USA and IBA Karachi. He can be reached at saeedshan@gmail.com. Blogs at www.economistshan.blogspot.com

Status Quo Ahead

Sakina Husain

He government has made a comeback for all those who were wondering what banks’ next avenue of choice would be. With a complete and partially rejected auction up its sleeve, the financial system’s investment portfolio seemed a little threatened at first sight, if one did not take into account the entirety of about rs690bln that has been borrowed from scheduled banks in the half year ending December. However, it seems like the finance

ministry modus operandi regarding resources that it needed to garner during the last month was a little out of order. or maybe, December has not turned out to be a month of pride in terms of tax collection and the officials to sit back and snore. In any case, the recent t-bill action has brought fresh gossip to be consumed by all. lo and behold after months of struggling participation in 3m-bills, (less that rs20bln on average since august-11), the recent auction has brought out an interest of no less than rs52bln with government accepting around rs21.4bln. What is most interesting is that the government has been able to chastise the financial system by making it offer more and that too at a much lower price; the latest cut-off for 3m-t-bills is 11.78 per cent versus the previous 11.82 per cent at which the government picked up a measly rs200mln in the previous auction. Moreover, the participation is con-

centrated in 6m bills, rs97bln of which rs70bln was accepted. the government and the private sector have given each other tacit assurances through this bill, by pricing it higher at 11.83 per cent versus 11.67 per cent in the previous auction. the story goes that a confused financial system once sought a signal as to whether there could be a discount rate increase ahead. they placed their bets on maintain (participation in 6m) while enquiring about a rate hike possibility by engaging the yearlong ignored 3m t-bill. to which, the government removed the need for anticipation by aligning its acceptance with a maintain vote for the policy announcement in january. the 12m t-bill although sidelined for the moment, holds immense importance as far as the future of bank participation has to be determined. In the first half of the current fiscal year, banks have generously poured in about

SHAHAB JAfRy Business editor

KUNwAR KHUldUNE SHAHId Sub-editor

BABUR SAGHIR Creative Head

AlI RIZvI News editor

MAHEEN SyEd Sub-editor

HAMMAd RAZA Layout designer

with the liquidity short and NPLs standing at 16.7 per cent, very little can be done to persuade banks to lend more to increase investment

rs920bln in the respective bond that is going to mature in the first half of FY13. this can be expected to strain liquidity in the banking system and level of participation in the upcoming months. a possible solution could be oMo- injections by the SbP that may pose problems for the latter in terms of necessitating greater printing of money to finance its deficit. During the previous bout of discount rate reductions, the SbP was often attacked for giving in to the political whims unnecessarily. Many predicted that the discount rate was being aimed to be as low as 9-10 per cent as the government wished to lower its servicing costs. However, in the current scenario, with currency deprecia-

tion, and imminent IMF payment, the SbP will face the challenge of keeping itself and the currency afloat while also steering liquidity in the financial system. thus, the private sector might as well sigh and think of out of the box solutions to rejuvenate its growth. With the liquidity short and nPls standing at 16.7 per cent, highest in the last one year, very little can be done to persuade banks to lend more to increase investment. alas, another Sba or a more intense war on terror can be the economy’s next saviour, if at all. The writer is an economic analyst and freelance financial journalist. She can be contacted at sakina.husain@gmail.com

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Email: profit@pakistantoday.com.pk Ph: 042-36298305-10 fax: 042-36298302 website: www.pakistantoday.com.pk

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Monday, 16 January, 2012

We see growth coming from every tier but we will not leave the top and bottom ends untouched. In each of the categories, we look at the consumer pyramid and then ask whether we are addressing that pyramid adequately

news

Chairman & CEO, Unilever Pakistan, Ehsan A Malik

Corporate Social Resp HIle different organisations have derived different meanings for the term corporate social responsibility, however there continues to be much in common between all the strategies adopted by companies for CSr programmes. While it is commonly argued that Pakistan is a country that is still lacking in CSr practices among companies there have been certain organisations that have taken the lead and must be lauded for their efforts in contributing to the society and people of Pakistan. Corporate Social responsibility can be understood as “the continuing commitment by businesses to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”

3. Improving Health& Hygiene by helping more than 68 million people take action to improve their health and well being through our personal care products. nutrition enhancement to reduce salt and calories in our food brands 4. Promoting Sustainable Workplaces by improving employees’ lifestyles, encouraging diversity and creating an environmentally friendly office. through this programme they have reached 6.2 million people in the year 2010. In their health and hygiene programme, they have managed to reach approximately 5.2 million people, under their nutrition programme 82,608 meals were provided to the world food programme, under their environment initiatives they managed to reduce carbon footprint through unilever Head office Initiatives by 16 per cent. they also took part in flood rehabilitation programmes by contributing rs2.43m towards flood relief and rehabilitation work.

UNIlEvER CSR INItIAtIvES

PSO CSR INItIAtIvES

KunwAR KHuLDunE SHAHID

one company that has been exemplary in its CSr initiatives is unilever and I say this not because of any personal biases against any other companies but because their CSr programme titled the unilever Sustainable living Plan has covered a wide domain of areas that has considerably impacted the society and the underprivileged people. according to the Sustainable living Plan, the company has outlined a number of goals to be achieved by the year 2020. these are:

SMAll ACtIONS. BIG dIffERENCE Halve the environmental footprint of our products n Help more than 1 billion people take action to improve their health and well-being n Source 100% of our agricultural raw materials sustainably n unilever Pakistan’s Sustainable living Plan focuses on the following: 1. reduce the environmental Impact of our products through reduction of greenhouse gases, optimisation of water usage and waste management 2. enhancing livelihoods by rural programmes and creating opportunities through enhanced distribution and empowerment through education n

another company that has taken leaps as far as corporate social responsibility is concerned is PSo. the company engaged in a plethora of initiatives encompassing education, Healthcare, Community building, Women empowerment, Special children welfare, Sports development and relief activities. the company has led from the front in its CSr campaign by financially supporting several national educational institutes in order to enable the outreach of education to the underprivileged across the country. With the help of the heritage foundation, PSo has also helped build two schools in the earthquake affected region of Mansehra, whereas five more such schools are still in the pipeline. With regards to healthcare, PSo has partnered with various institutions in the health sector to facilitate the underprivileged in having access to healthcare facilities. the company has provided financial assistance to institutes such as the cardio Vascular Diseases, Karachi. Further an annual donation is also given to the Marie adelaide leprosy center. PSo has also helped a number of hospitals to acquire ambulances and state of the art medical equipment among other similar CSr initiatives. according to the PSo website under their community building platform they have made efforts in the domain of Women empowerment,

special children welfare, sports development and relief activities.

wOMEN EMPOwERMENt PSo has been supporting behbud association, a national nGo working in the field of reproductive health, community development, education, vocational training, to uplift the underprivileged sections of society. Moreover, PSo also assists rashid Memorial Welfare organization which carries out education, Health, and Vocational training for females and orphans and takes poverty alleviation measures. by providing financial assistance to this organisation, PSo aids the substantive development of a large proportion of rural population.

SPECIAl CHIldREN wElfARE PSo has generously supported Institute for Special Children Quetta, the only institute of its kind in balochistan to upgrade its equipment to facilitate imparting of education to the special children. Moreover, the company financially assists Pakistan national Institute for the deaf children of rural areas, Kamoke, district Gujranwala. the major objectives of this institute were to uplift the living conditions of the neglected special children by imparting education and vocational skills. So far several hundred students have benefited from this institute. PSo extends financial support to this institute to overcome the maintenance, transportation expenses of this institute and to construct Skill Development training Center. on the same lines of helping the special children of the society the company has provided financial assistance to Munir arshad Memorial trust that has

triple digit oil prices to hamper growth FARAKH SHAHzAD

He global economy depends on oil as the human body on blood. It is because oil is the major source of energy to drive the wheels of production across the globe. Interestingly, it is the converging point of economics and politics. that is why it is sold in a world market in which every barrel, regardless of its source, competes with every other barrel. the united States, with about 5 per cent of the world’s population, is responsible for 25% of the world’s oil consumption. every uS President since richard nixon has openly expressed his fears about dwindling oil reserves predicting problems. Saudi arabia, termed the world’s oil superpower, possesses both the world’s largest known oil reserves, which are 25 per cent of the world’s proven reserves, and produces the largest amount of the world’s oil. It ranks as the largest exporter of petroleum, and plays a leading role in oPeC; its decisions to raise or cut production almost immediately impact world oil prices. the country is capable of producing up to 12 million barrels of oil a day.

PRICE Petroleum politics have been an increasingly important aspect of since the rise of the industry in the in the early 20th century. as competition grows for an increasingly scarce but vital resource,

the strategic calculations of major and minor countries alike place more prominent emphasis on pumping, refining, transport and use of petroleum products. the oil price hit $101.08 (brent crude) a barrel in February, 2011 the highest since october 2008 (In june 2008, they were jogging around $147 a barrel). In june, 2011 they fell to $90 a barrel amid fears of supply disruption due to the closure of Suez canal and egypt unrest but it has again crossed 2011 benchmark of $101.08 as the current price is hanging at about $101.93.

OIl-wEAtHER fORECASt Goldman Sachs Group Inc. has, in a recent report, said that oil supplies would become “critically tight” in 2012. analysts of the group predict that could go even higher as spare production capacity and inventories are “effectively exhausted.” Goldman has also shared apprehension on the ability of Saudi arabia to raise oil production in the face of eventual scarcity as it believes that Saudi arabia won’t be able to pump as much extra oil as many people believe. on a scary note, the scarcity could occur as early as later this year. It is evident that under normal circumstances, the oil prices will remain stable at $100 plus level. Diminished global growth and the possibility of a double-dip recession in the euro zone are widely predicted to push the price of oil below $100 a barrel at least in the first half of this year, with prices possibly rebounding later in the year alongside a recovering world economy and

underlying supply risks. a reuters poll of analysts predicted brent crude to average $105 a barrel, not far below the $111 average of last year. last year, the price of brent crude rose to $140 a barrel as europe was deprived of libya’s exports during the civil war that ended Muammar Qaddafi’s rule, and the arab Spring added a hefty risk premium to oil prices.

IRAN ESCAlAtIONS this year, Iran’s sabre-rattling signals some potential to create a situation similar to libyan embargo. In the unlikely event that it carried out its threat to block the Strait of Hormuz, choking off 40 per cent of the world’s maritime crude flow, prices would probably spiral out of control. Iranian authorities have already warned that in case of Iran uS conflict, the oil prices may sky rocket to $200 or above. the subsequent lack of export options would deprive Gulf producers of the means to exploit any gains and would be likely to send the world economy into recession, undermining the long-term oil price outlook. analysts think that Iran will be the big loser among the major oil producers in 2012, as its intransigence over its nuclear programme led to a fourth round of sanctions by the uS and europe. as it becomes increasingly hard for international oil companies to operate in the country, and Iran finds it more difficult to get access to modern technology to rejuvenate its ailing production infrastructure, output is forecast to drop. the

International energy agency says Iran’s oil production could be cut by as much as 890,000 bpd to just under 3 million bpd by 2016. In the near term, the eu may impose an embargo on nearly 600,000 barrels per day of Iranian crude imports

OIl-BASEd MIddlE EASt ECONOMIES economies in the Gulf should continue to benefit from healthy income from their crude trade. the Institute of International Finance predicts revenue from hydrocarbon export will hit uS$725 billion (Dh2.66 trillion), down only slightly from last year. a large proportion of this income would feed into the domestic economies, as regional governments have initiated huge infrastructure programmes and public-sector pay increases in response to the arab Spring. nevertheless, many analysts believe an average GDP growth of 7 percent in the GCC will not be repeated this year. “While sustained fiscal stimulus will continue to bolster non-oil sectors, a weaker global environment and reduced contribution from oil sectors will see growth dip to 3.7 percent in 2012,” says a report by the Saudi american bank. Saudi arabia doubly profited from the shock to the oil markets caused by the arab Spring and the outage of libyan crude. It increased production to make up the libyan deficit, and has profited from prices kept well above the uS$100 a barrel mark for most of the year due to geopolitical uncertainty and continued

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news

ponsibility in Pakistan I n fo grap hics a by B bur S agh ir

been working for the poor children of rural areas on modern lines. It aims to develop personality and character qualities inner discipline and control. PSo is also associated with Family education Services Foundation, a non-profit, educational, volunteer organization working in Karachi. they have established Deaf reach, a school for the Deaf in Karachi as well as two vocational training centers for Deaf students; one in Karachi which has been running for the past ten years, and another in lahore which was opened six years ago. PSo appreciated the commendable community services of Family education Services Foundation by adopting some students and providing their monthly expenditure and also by facilitating them in providing free pick and drop service to needy students by providing free diesel.

SPORtS dEvElOPMENt PSo has always been at the forefront of promoting various sports at all levels. In such an endeavor, we sponsored the PSo-CnS International Squash Championship 2007, which is a world-class squash event. It was held at the roshan Khan / jehangir Khan Squash Complex. International and national players of world ranking participated in this event. Further more, we were the tournament sponsors of asian Football Confederation (aFC) held in September 2007 that was arranged by Pakistan Football Federation (PFF). league champions from aFC’s eight emerging countries participated in this tournament. recently we sponsored the nademand from the asian growth markets. the kingdom’s production peaked at a 30-year record in november, and is set to remain high this year after opec amended its production ceiling. the government has launched a uS$385 billion (Dh1.41 trillion) infrastructure programme, in part to address the root causes of regional social unrest. abu Dhabi, the uae’s hydrocarbon powerhouse, should continue to earn handsomely from its exports in 2012. efforts to increase production capacity to 3.5 million barrels per day by 2018 are likely to start bearing fruit and could help offset a decline in oil prices if the global economy contracts. no other country will see economic growth driven up by oil more than Iraq this year. the country’s GDP will grow by 8.4 percent this year, the biggest growth in the region, according to estimates by the Institute for International Finance. Devoid of significant hydrocarbon revenues and stripped of its business-friendly tag by unrest last year, bahrain’s outlook for 2012 is the least optimistic of the Gulf countries. the Institute of International Finance nevertheless estimates growth will stand at 3.3 percent this year. bahrain will benefit from a uS$10 billion (Dh36.72bn) injection coming from a fund established by the GCC in the

tional Skiing tournament.

Corporate social responsibility is one of the most significant gauges one can use to measure the worth of any company, and its contribution towards the nation. Siemens Pakistan, has been one of the leading companies in Pakistan with regards to just about any economic façade and certainly if one pulls out the corporate social responsibility yardstick. Siemens is a firm believer is sustainability and for the company sustainability implies that they should act responsibly on the behalf of future generations for the fulfillment of eco-

nomic, environmental and social progress. Siemens takes this responsibility as an employer, a contractor, an investor and provider of innovative technology solutions. and of course as an integrated technology company, the company wants to promote as many opportunities of sustainable development as possible. Compliance is another facet that can be peddled as the cornerstone of responsibility conduct. Corporate responsibility can fully realise all of its prospects if everyone complies with external and internal company rules and regulations. Decision making and actions should always be in synchrony with moral principles and values. and Siemens has rightfully claimed that it measures itself by this abovementioned standard. Siemens’ compliance programme is what towers above and showcases the depth and fortitude of a truly formidable company. and then there is the factor of diversity – another feather in the cap of Siemens. the company’s success is a corollary of a multitude of ideas – ones that ensure that the product is a diverse ensemble of competence and compliance. and Siemens oozes with such dependability and integration of diversity. the company realises its social responsibility and ensures that no discrimination prevails – be it owing to race, religion, colour or any sort of backgrounds whatsoever. Siemens provides that quintessential environment that enhances productivity with responsibility. the company considers responsibility as a strategic, management-driven assignment and binds the business, environment and citizenship activities and this in turn creates sustained tangible and intangible value for the company and also for the myriad of stakeholders. and also this is done within the realms of ethics and morality. even though there has been an indubitable economic and financial turmoil in Pakistan, Siemens has ensured that it maintains a top-drawer standard and cements their high level of commitment for projects that run the entire gamut from health, education, culture and sports. Siemens values the corporate social responsibility, and makes sure that it is a well thought out process that encompasses sustainable projects with long term benefits. the agha Khan Hospital’s new emergency center and the workshop for the disabled are noteworthy examples. as Siemens touts so brilliantly; that they are vying to make Pakistan a wise, healthy and enjoyable place – and fair play to the company.

two or three years, but what still is driving this globalization is the idea that is you cannot possibly get rich, stay rich and get richer if you don’t release more greenhouse gases into the atmosphere. that was true in the industrial era; it is simply factually not true. What is true is that the old energy economy is well organized, financed and connected politically.” However, the extracts of 1999 speech of , the uS Vice President and former Ceo of (one of the world’s largest energy services corporations), carries much political motivation than Clinton. He said, “by some estimates

there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves. that means by 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from?....While many regions of the world offer great oil opportunities, the Middle east with two thirds of the world’s oil and the lowest cost, is still where the prize ultimately lies, even though companies are anxious for greater access there, progress continues to be slow.”

RElIEf ACtIvItIES amongst other economic contributions, we also take pride in our immediate response to any situation. While it may be impossible to prevent disaster and misfortune from happening, it is possible to provide relief. Infact, we feel it is our duty to do so. the 2007 Cyclone that lashed Pakistan’s southern coast crippled life in the affected areas specially in bolochistan. about a million were made homeless by the rain-water and floods. Worst affected areas are turbat, Gwadar , Pasni, naseerabad, jafferabad, jhal Magsi, bolan and Sibi. PSo as a good corporate citizen as always was on the forefront. on july 13, 2007 two convoys comprising three truckloads for turbat and two truckloads for Pasni left the company headquarters. they were carrying 3,000 food packets, 500 kitchen utensils, 650 tarpaulin sheets and 30,000 bottles of mineral water. earlier on july 9, 2007 PSo had dispatched a similar batch of food packets and mineral water to Greshia, 35 km from Khuzdar. this was the first relief to reach this devastated village. Similarly in previous natural calamities, PSo staff was involved in the relief operations from day one ensuring uninterrupted and smooth fuel supplies to the defence forces’ aviation fleet operated by navy, air Force and army at Pasni and turbat airports. Company donated rs5 million to the President’s Disaster relief Fund to help the victims.

SIEMENS – flAG-BEARER Of CORPORAtE SOCIAl RESPONSIBIlty

aftermath of the region’s tumultuous spring, and assistance from neighbouring Saudi arabia. Kuwait should experience strong GDP growth on the back of its oil production, which peaked at 3 million barrels a day last year. Despite expectations that crude prices will decline this year on the back of the continued economic woes of the euro zone and the uS, economists predict oil will help Kuwait’s GDP hit a growth rate of 4.4 percent. oman managed to overcome the turbulence of the arab Spring and end the year with a healthy fiscal surplus, which Saudi american bank estimates at about 10 percent of GDP. However, the high level of 10 percent growth is impossible to be continued this year. Qatar enters the new year on the back of a huge growth in gas exports. Its GDP growth is likely to remain at about 8 percent as the government steps up infrastructure spending.

EUROPE the continued struggle by europe and the uS to shrug off the malaise from the financial crisis of 2008 is likely to restrict growth - even in the buoyant asian economies that supported high oil prices last year. “europe has now entered another recession, only a little more than two years after the last recession ended,” says joachim Fels, an analyst at Morgan Stanley, in a research note. “our uS base case remains anaemic growth of just over 2 percent next year. unsurprisingly against this backdrop, growth prospects for emerging-market economies have dimmed further.”

BOttOM-lINE the significance of oil in global economy can be testified from a june 2006 speech of former u.S. president who said, “We may be at a point of peak oil production. You may see $100 a barrel oil in the next

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Everyone wants a more simple tax system. But if this means that certain tax breaks have to be cut, people are no longer so enthusiastic

Markets

German Chancellor Angela Merkel weekly review

Political uncertainty, weakening investor confidence cloud bourse

Activity starved bourse loses 85 points KSE-30 index loses 41.39 points to close at 10124.20 70 scrips advance, 112 decline, 120 remain unchanged of total 302 scrips traded.

g g

KARACHI

STAFF REPORT

He local bourse remained lackluster owing to the political uncertainty prevailing in the country. on the macro front, swelling of trade deficit also dampened the investor sentiment. on a positive note, inauguration of Kunnar-Pasakhi Gas

Political warfare shatters confidence, KSE sheds 107 pts KSE-30 index loses 62.76 points to close at 10061.44 52 scrips advance, 175 decline, 102 remain unchanged of total 329 scrips traded

Pipeline Project by the prime minister created some excitement for investors. overall, the benchmark KSe 100 Index lost 111 points to 11,014 levels, depicting a decline of 1.0 per cent WoW. Dullness in market activity can be vindicated by 33 per cent WoW drop in volumes to 28m shares. this tamed performance led to the market underperforming the regional markets by 3 per cent, however, foreigners

LAHORE

AAhYAN MUMTAZ

He local bourse remains lackluster amidst growing political uncertainty, losing 133 points (-1.2% WoW). activity was volatile during the week and negative sentiments prevailed as investors adopted a cautious stance, with average Daily Volumes coming out at 28.3mln shares (-33% WoW). the local situation kept domestic investors at bay, thereby causing the KSe to underperform regional peers by 3% on average. the political situation of the country continues to dampen activity, in the wake of fears of an impending military coup. the tug-of-war situation between institutions (military, judiciary, and the government) is taking its toll on the functional, in turn, economic standing of the country. a primary impact of this is borne by foreign investment, which has registered a total outflow of uSD 114mln since oct 2011 to date. Furthermore, on the macro front, the widening trade deficit on the back of burgeoning oil import bill has led to substantial devaluation in the currency exchange rate. In 1HFY12 Pakistan’s trade deficit stood at uSD 11.5bn, rising by 38.5%YoY. In Dec-11, exports plummeted because of declining cotton prices to uSD 1.9bn, down 11.5% YoY, whereas imports increased to uSD 4.3bn, up 13.6%YoY. although, remittances during the 1HFY12 have registered a 19.5% YoY increase, the MoM trend seems to indicate deceleration in this regard.

g g

Market stages comeback, index ends flat KSE-30 closes at 10068.49 122 scrips advance, 87 decline, 117 remain unchanged of total 326 scrips traded

were net buyers of uS$0.2m. MACROS: SuRgIng IMpORt BILL wIDEnS tHE tRADE DEfICIt: outlook on the external account got bleaker with the widening of the trade deficit. In 1HFY12 Pakistan’s trade deficit stood at $11.5b, rising by 38.5 per centYoY. During the period under review, exports of the country increased by only 3.9 per centYoY to uS$11.2bn,

Bulls return to KSE as index gains 105.34 KSE-30 index bags 115.59 points to close at 10176.24 147 scrips advance, 47 decline and 131 remain unchanged of total 325 scrips traded.

KSE-100 loses 21 points based on dismal macroeconomic variables

mainly due the decline in cotton prices. on the other hand, country’s import bill rose by 18.9 per cent YoY to $22.7b owing to higher oil prices. In Dec-11, exports plummeted to $1.9b, down 11.5 per cent YoY, whereas imports increased to $4.3b, up 13.6 per cent YoY. encouragingly, remittances sent by overseas Pakistanis have amounted to $6.3b in 1HFY12 against $5.3b in the same

period last year, up 19.5 per cent YoY. fERtILIzERS gAIn On uREA pRICE HIKE: both FFC and FFbl raised urea prices this week, consequently outperforming the market by 5 per cent and 4 per cent, respectively. amongst other blue chip stocks, MCb and luCK outperformed the market by a respective 3 per cent and 2 per cent on the back of attractive valuations.

StOCK SPECIfIC ACtIvIty

fORwARd lOOKING ExPECtAtIONS

Fertilizer stocks were in the limelight again. both FFC and FFbl raised urea prices this week, consequently outperforming the market by 5% and 4%, respectively. this follows the price hike which was initiated by enGro last week, as the two companies had not followed suit before. However, now urea prices have again obtained uniformity across manufacturers. a point to be noted was that urea prices have come close to international parity, thereby leaving little room for additional price increases; a point which was noted by investors. this was the prime concern for underperformance of FatIMa. Furthermore, amongst other blue chip stocks, MCb and luCK outperformed the market by a respective 3% and 2% on the back of dividend expectations and attractive valuations. With an improving off-take situation for manufacturers bouyed by domestic demand and concurrent higher prices, luCK and DGKC remain the top picks in the cement sector.

Politics in the upper echelons of the government seem to be taking their toll on the situation of the country; the coming week is not expected to be any different. activity is expected to remain subdued and cautious. as far as infrastructural issues are concerned, progress on the much needed Iran- Pakistan gas pipeline has come to resounding halt owing to uS sanctions on Iran. the problem of gas load management continues and a short term solution does not seem to be in sight. on the company’s front, results expected to be announced in the coming days could see some stock specific plays.

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I always believe that competition makes the market grow and it leads to improved levels of service

news

07 American Brand — Capitalism is it under fire now? Sohaib Sheikh, Head of Marketing wateen

SHAn SAEED

wrote an article in one of the leading newspapers titled “american brand of capitalism –an icon shattered” on aug 26, 2002, when enron, World com and arthur andersen went bust and people thought capitalism was finished. just think about what has happened in the financial markets during the last 10 years period. We’ve had several huge stock market crashes, several big accounting crises (enron and WorldCom)lots of bankruptcies (GM, Fannie Mae, bear Stearns, lehman brothers) a real estate bubble and collapse, a war in the Middle east, a massive financial credit crisis and most recently a credit downgrade of u.S. government debt. However, fast forward from 2001 to 2012, 11 years have passed, american brand i.e. capitalism is under duress but not finished as yet. I am a strong believer of free markets which have resulted in many opportunities and economic success for many countries. If you read the book “How capitalism can save us” by Steve Forbes and elizabeth amy, mentioned on page 29 in which they stated on one hand for some people capitalism is amoral, its dogeat-dog system of the market. but on the other hand, some people believe that capitalism and free markets have provided job, prosperity, innovative culture and economic growth for various regions in the world. I believe in the latter that capitalism is truly a source of inspiration for many people as they pursuit their entrepreneurial spirit for the social and economic well-being of the people. according to the greatest economist, nobel laureate late Milton Friedman from university of Chicago, booth School of business, uSa said capitalism is all about making free choices. the famous book of adam Smith in 1776 called Wealth of the nations advocates for free markets and Invisible Hands that promote economic well being for the people as they pursue their own self interest. Some people call free markets as gambling. I tend to disagree. there is a difference between gambling and investing. Gambling is about entertainment. and investing is to finance future growth and innovation for economic prosperity. In today’s world Keynesian approach has failed with too much government intervention is precarious for economic growth.

Economic History—the guiding principle uSSr was broken and transformed herself in market based system. China changed from a socialist system to market based economic culture announced by Deng Xiaoping on Dec 22, 1978. India was following socialist nehru system and believed in it for many years. the current prime minister of India and finance minister in 1991 Dr Manmoohan Singh announced a paradigm shift to market based economy to gear up to the structural change in the economic fundamentals for growth and economic progress. Many believed the economic integration to the global world would not be beneficial to In-

dians and they would lose out. the empirical evidence demonstrates a different story. India along with China, brazil and russia termed as brIC economies, an acronym coined by jim o’ neill of Goldman Sachs and author of the book the Growth Map, the future growth engine of the global economy. China, russia and India were not market based economies 20 to 30 years back. looking at their economic growth in the last 10 years and many would believe the benefits of capitalism and entrepreneurial culture that it promotes for economic welfare.

man Sachs, Deutsche bank, jP Morgan these countries are driving the global economy with China being the economic power house to validate the point of capitalism gains they have achieved through free market system. China is the 2nd largest economy in the world just behind uSa who is the master of capitalism. I would not be surprised if China becomes world’s leading economic power by 2015. I am not bold enough in my prediction but this is my rough estimate taking into account the current economic malaise of 2012 which might lead europe in recession and may hit uSa as well according to Professor robert Shiller at Yale university, uSa

Economic growth in the last 10 years [Average] China gDp India gDp Russia gDp

10.2 per cent 7.4 per cent 6.1 per cent

Sources World bank, IMF, economist, Financial times, Wall Street journal, business-week, aDb, Gold-

Champion of Capitalism — USA according to Famous professor of Free market eugene Fama from university of Chicago, booth School of business, uSa that capitalism itself is under fire. but that does not mean that we forget the good things in this world and companies like apple, Google, lG, Dell, baidu, Facebook, Sony, lenova, HtC, acer, Shanghai tang, nike, Coke,

HP, toyota, Samsung, GSK, j&j and many others who have transformed the lives of many individuals in this world, provided jobs and helped uplift the living standards of many people to make them economically powerful and socially empowered. Capitalism and free markets is the real growth engine for any economy without government interference. I am not suggesting that capitalism is the solution to everything. there are short comings in every system and is not a panacea for all diseases. However, in recent times, countries, companies that have thrived exponentially in economic, social and technological area have benefitted a lot from capitalism and its merits for the betterment of people. Happy investing and supporting capitalism for the economic growth, integration and prosperity of the nation! Shan Saeed is a financial market economist with 12 years of solid global market experience based in Asia Pacific. He has graduated from Uni of Chicago, Booth School of Business, USA and IBA Karachi. He can be reached out at saeedshan@gmail.com. Blogs at www.economistshan.blogspot.com

Gold falls 1 percent on euro zone downgrade talk nEw yORK/LOnDOn

REUTERS

olD fell 1 percent on Friday, after the dollar surged against the euro and fears about an imminent credit downgrade of euro zone countries prompted bullion investors to take profits on the recent rally. the metal fell along with u.S. equities and other commodities as ratings agency Standard & Poor’s was poised to lower ratings of several euro zone countries including France and austria. the news rattled markets in the first blow of the new year for the troubled

single currency. the euro sank to a 16-month low at under $1.27, while the price of safe-haven u.S. treasuries climbed. “the dollar seems to be the main goto safe-haven play at the moment. Market talk of downgrade has taken away some of the recent support from gold,” said David Meger, director of metals trading at futures brokerage Vision Financial Markets. “Given the size of its recent rally, it’s certainly not surprising to see profit taking on the back news like this,” Meger said. Gold was still up 1 percent for the week, for a second consecutive weekly gain, despite euro’s woes. the metal’s positive correlation with the

euro had shown signs of strain after the two had traded in lockstep in the previous two months. “Sovereign issues in the euro zone are clearly not over and we may see further bouts of price correction in the gold market over the coming months,” said anne-laure tremblay, analyst at bnP Paribas. Spot gold was down 1 percent at $1,633.90 an ounce by 2:50 p.m. eSt. It was still up about 5 percent so far this year, thanks to buying by investors re-entering the market after a 10 percent drop in December. u.S. gold futures for February delivery settled down $16.90 an ounce at $1,630.80. u.S. financial

markets will be shut on Monday for the Martin luther King day holiday. trading volume was around 40 percent above its 30-day average, set to be one of the heaviest trading days since mid-December . on the options front, CoMeX gold options floor trader jonathan jossen said a number of $1,500 puts were traded, as gold futures investors sought protection against the downside.

lUNAR NEw yEAR lOOMS buying sentiment also worsened after the Shanghai Gold exchange said it will temporarily raise margins and daily trading limits for its gold and

silver forward contracts on january 20 ahead of the lunar new Year holiday. analysts said gold has gotten a boost from physical buying from China, the world’s largest bullion consumer. but buying in China should ease as new Year celebrations get underway. Silver was down 2.5 percent at $29.51 an ounce. Spot platinum was down 0.7 percent at $1,481.24 an ounce. Platinum posted its best weekly performance since october, however, with a 6 percent gain. the metal was boosted by concerns over South african power supply, which state power utility eskom said could be under pressure this year. Spot palladium was down 0.2 percent at $635.22 an ounce.