Profit 16th December, 2011 by Profit Epaper

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Bears grip KSE as Euro crisis hits regional stocks Page 4

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Friday, 16 December, 2011

The T-bill rejection

Islamabad: Prime Minister Syed Yousaf Raza Gilani chairs meeting over utilisation of ADB financing facility. ONlINE

PM questions slow progress on utilisation of $2.9b ADB funds ISLAMABAD

sTaFF REPORT

rime minister Syed Yusuf raza Gilani expressed his annoyance over the slow pace of utilisation of Asian Development Bank’s (ADB) financing facility of $ 2.9 billion for 22 projects mainly in energy and highway sectors. Pm said under-utilisation of foreign funding would be treated as criminal negligence of ministries. He further directed that monitoring of the projects should be the integral part of it in order to determine negligence and also to know the pace of the completion of the projects. Prime minister said this during a briefing by the economic Affairs Division on the pace of progress of ADB fi-

nanced projects in the country. The meeting was attended by Finance minister Abdul Hafiz Sheikh, minister for Communications Dr Arbab Alimgir Khan, Secretary Finance Dr Waqar masood Khan, Secretary eAD Abdul Wajid rana, Secretary Water and Power, imtiaz Kazi, Secretary Communications Amjad Nazir, Chairman NHA muhammad Ali Gerdazi, and senior officials of the relevant ministries. Pm directed economic Affairs Division to hold meeting every month instead of three months to remove snags, if any, in undertaking the development projects financed by ADB. it would be appropriate to address issues pertaining to projects prior to negotiating funding with international agencies instead of other way round, he said. He

said it was inexcusable that projects in energy and infrastructure were delayed for which credit facility was already there. He said energy and good highways are the basic requirements for generating economic activities to put the country on trajectory of progress and prosperity. The projects in these vital sectors should be pursued with requisite dedication and commitment. Finance minister Dr Abdul Hafiz Sheikh said rationalisation and prioritisation of projects should be the fundamental principle in development strategy and taking up of too many projects at the same time must be avoided for the same reason. He said prioritisation is the essence of development strategy and should be followed

as such. Secretary Finance pointed out that commitment charges by government due to delay in utilisation of funds had led to net export of capital from the country causing big losses to national exchequer. Secretary Water and Power informed the meeting that reasons for slow pace of utilisation of funds in energy sector had been addressed and therefore it would pick up substantially in the near future. Secretary Communications and Chairman National Highway Authority said land acquisition was the major hurdle in undertaking projects for building roads and highways. However, the land acquisitions and other related problems would be addressed first as directed by Prime minister before undertaking the same with foreign funding.

Apprehensions persist over fertiliser sector kArAcHI

sTaFF REPORT

iveN recent gas supply situation in the country, the fertiliser sector has proven to be the most volatile sector at KSe. Despite gas curtailment, 2011 has been a fruitful year for the fertiliser sector in terms of profitability, particularly FFC which has outperformed the market by 59 per cent YTD. However, with persistent gas load shedding and the approval of Gas infrastructure Development Cess (GiDC) by the National Assembly indicates tough times ahead for the fertiliser sector. This is also highlighted from the price performances of eNGrO, FFBL and FFC off late down 51 per cent, 25 per cent and 22 per cent from their respective peak levels during 2011. The question that arises is whether the recent price meltdown has fully priced in the negatives or not? We believe the implementation of GiDC and the equalisation tax to pose downside risks for FFC, said Naveed Tehsin at

JS, adding that currently our fair value for FFC is rs208, however, we recommend cautious stance on it due to the uncertainties that may hurt FFC earnings moving forward. GIDC: The InCremenTal CosT pass-ThrouGh: According to some sources, on account of GiDC the government has decided to increase fertiliser feedstock gas prices by 193 per cent to rs299 per mmbtu from rs102 per mmbtu. The incremental cost impact of GiDC and the extent that urea manufacturers are able to pass it through to end consumers has emerged as a key question. GiDC is likely to impact old urea plants only, while eNGrO’s enven and Fatima are expected to get feedstock gas supplies at their previous subsidised rate because of their agreement with the government. Therefore, incremental cost impact on eNGrO due to GiDC will be 50 per cent compared to FFC. FFC so far has been a major gainer of urea price hikes by eNGrO. However, in this situation we believe eNGrO will

only raise urea prices to cover its incremental cost impact, he added. Whereas, FFC can see taking a brunt on its earnings as the company will only be able to pass 50per cent of the incremental cost impact, because it won’t be in a position to justify price raise by itself. ‘Consequently, we foresee FFC’s 2012-14 earnings estimate will be revised downwards by 15-17 per cent and its target price will drop down to rs192,’ he added. proposals To TaCkle urea prICes: The uncertainty pertaining to the fertiliser sector doesn’t end here. Due to uproar by the farmers amid higher urea prices, the government is considering different proposals to tackle with the urea price issue. Amongst them, includes the shifting of engro’s enven plant from SNGP network to SSGC and equalisation tax which plans to tax those fertiliser producers facing lesser gas curtailment. This measure is being undertaken to compensate those manufacturers facing excessive gas shortages. Consequently, it may result in urea prices to get under control.

These issues have caused uneasiness amongst investors and prompt them to rethink their investment case for FFC which managed to report record level of 3Q2011 gross margin of 58 per cent i.e. abnormal compared to its average historical gross margin of 38 per cent from CY05-09. resumption of gas supply to eNGrO either through SSGC or any other mean on stable basis may further hurt FFC’s earnings. Though at this point in time it seems a distant probability keeping in mind gas has again being suspended by SNGP to enven plant despite commitments from the government, however, we can’t rule it out completely, he added. if that happens, eNGrO may have to reduce its urea prices due to regulatory pressures, followed by others. To recall, urea manufacturers have increased urea prices worth rs460/bag (including GST) during CY11. moreover, the equalisation tax if implemented will further dampen FFC’s earnings and won’t impact eNGrO’s earnings and it will be maintained.

SAkInA HuSAIn

T just seems too hard to believe that the government is straightening up! An analysis of bid rejection in the latest auction may be appear redundant to the observer considering the miniscule (rs700 million) additional requirement, it nevertheless sends a strong signal; the government chose to retire its debt rather than rolling it over! moreover, it also represents a one-off for the financial system which during the previous and ongoing financial year has been participating with up to three times the auction target. However, in this particular instance (Dec-15), the amount offered stood at rs42.6 billion whereas the target stood at rs100 billion. Strain in the liquidity available within the financial system is evident through the rising KiBOr, currently at 11.98 per cent up from 11.90 per cent beginning of Nov-11. However, SBP chose to mop up liquidity (rs22.5 billion) in the latest OmO conducted on Dec-14, running counter to the liquidity stress argument as a mop-up makes sense only if there is excess. And most probably there is! The government has been exceeding its borrowing limit, rs1,150 billion from the SBP since Oct-11. As of 2nd Dec, the government borrowing stock stood at rs1,257 billion which implies that rs107 billion have been printed in excess till the said date. Thus, one explanation of the strained liquidity can be that the excess money printed for catering to the government has not found its way back into the financial system. A second and much spicier argument can be collusive behaviour amongst treasuries at banks. The much lower than target offer may have been placed to obtain absolute acceptance at higher rates in comparison to the last auction held a fortnight ago. The cut-off rates in the last auction (30th Nov) stood at 11.78 per cent, 11.81 per cent and 11.88 per cent of 3-month, 6-month and 12-month Bills respectively. However, the latest bid pattern shows that the range of yields for stood between 11.78-11.90 per cent, 11.85-11.92 per cent and 11.95-11.99 per cent for 3m, 6m and 12m T-Bills respectively, with higher denominations offered towards the higher end of these ranges across the board. And thus the wrath of the sovereign was ignited resulting in the rejection of all. This may mark a watershed in the relationship between the government and primary dealers which were previously very happily engaged through the alignment of their interests because there was oh so much risk in the economy. And most likely, the government has acquired a stronger bargaining hand because of the turn of its tax collection fate which has kept the deficit at about 1.1 per cent of the GDP during the previous quarter. Historically, if one were to scrutinise the last three years, the government has only partially rejected bids ie (i) of 3m and 6m Bills in July and August 2009, which occurred on the eve of a discount rate cut, and, (ii) of 12m bills in Sep and Oct10, and in Jan-11 along the same lines. This instance may also be indicative of a similar direction, although hindering factors such as over borrowing from the SBP may play strong. But regardless of whether all goes well or unwell, the government can be sure to have its way by hook or by crook. if there was any trust in the government or its good intentions, then hopeful conjectures could have been made about the government wanting to change its debt profile in favour of permanent debt or long-term bonds/PiBs developing deeper precedents for the corporate bond market considering a PiB auction is expected soon. But only if there was!

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Friday, 16 December, 2011

debate The worst and the best of austerity JeAn PISAnI-Ferry

PhotoGRAPhY BY: NIda EzdI

SHAHID kHurSHeeD

CCOrDiNG to the Human Development report 2011 of the United Nations Development Programme (UNDP), Pakistan ranks at the 145th spot among low human development countries; whereas, Bhutan, Sri Lanka, india and China are among medium developed countries. Norway is at the top along with USA. New Zealand, Canada, ireland, Liechtenstein, Germany and Sweden are among the top 10 countries.

Multidimensional Poverty Index The multidimensional Poverty index (mPi) examines factors at the family level such as access to clean water, cooking fuel and health services, as well as basic household goods and home construction standards that together depict a more complete portrait of poverty than income measurement alone does. Some 1.7 billion people in 109 countries lived in multidimensional poverty in the decade ending in 2010, by mPi calculus. 1.3 billion people are estimated to be living on $1.25 a day or less. Niger has the highest share of multi-dimensionally poor, at 92 per cent of the population, followed by ethiopia and mali, with 89 per cent and 87 per cent respectively. in South Asian Countries 27.4 per cent of Pakistan’s population is living in severe poverty when juxtaposed with Bhutan – that has a meager 8.5 per cent.

Comparing different policies if we examine the countries falling in the High Human Development list compare them and we can easily conclude that all countries that evolved economic policies based upon human development, who gave their masses the central place in their planning, with their core philosophy orbiting the uplift of the common man reached the mount of advancement. Such countries fall in the earlier group and none of these 47 countries belong to the black world that is historically claimed to be the birth place of the earliest homo erectus and homo sapiens. many of the countries included in the top end of the HDi index belong to europe and some from Asia and America. Japan, South Korea, israel, UAe, Bahrain, Cyprus,

Singapore, and Hong Kong represent Asia while Argentina and Chile represent South America. On the other hand, in the latter group, from 142 – 187, the sway is with African countries, except Solomon island, Papua New Guinea and Timor from Oceania and Pakistan. Yemen, myanmar, Nepal, Bangladesh and Afghanistan are the rest of the countries from Asia. What stands out is that no county from europe and the Americas is included in these 46 Low Human Development Countries. in Asia Pakistan is ranked with Nepal and myanmar. A nuclear power, so weak in the field of human development cannot survive without changing the fundamentals of its policy making. einstein said, “We cannot solve problems by using the same kind of thinking we used when we created them”.

What the UNDP Report tells us

this was termed. Their own need, and power of others, compelled them to act even against their own wishes. They were not fighters; they were not fawns of the powerful; they were only thinkers who resultantly invented and discovered many things. They introduced such ideas which transformed the style of living for their future generations. in 15000 BC they made the ‘bow and arrow’ for easy hunting and in 11000 BC they made vessels of fired clay; in or around 10,000 BC they started agriculture. it was constant journey of progress, evolving with the needs of the hour. in 8500 BC they learnt to make houses made of mud bricks simply to save themselves against mother nature.

Some 1.7 billion people in 109 countries lived in multidimensional poverty in the decade ending in 2010, by MPI calculus. 1.3 billion people are estimated to be living on $1.25 a Evolution of man: day or less. In South Asian traversing time Countries 27.4 per cent of dilations Pakistan’s population is All this was being done living in severe poverty on a small canvas and

The UNDP report confirms that man has learnt through his experience and not by metaphysical guidance. According to the report the nations at the top are those who paved their way themselves and never played as second fiddles whether rightly or wrongly. They shaped their destiny with their own hands.

Prehistoric problems and how humans responded First problems, in prehistory, that our ancestors had to face, were the fear of the unforeseen, apprehension over survival, hunger, lack of knowledge and lack of communications among themselves. But they never surrendered, and tried their utmost to make their environment comfortable and safer for themselves. Their fears compelled them to create groups and tribes, and before 1,000,000 BC men had started living together. They distributed various assignments among themselves. Division of labour,

in different patches and places of this world. A few people used their neurons; their tendency to observe minutely; their capacity to analyse, the facts and situations – they were called the homo sapiens (wise man). The rest only stifled their brain like animals or used it at the lowest level; they were still homo erectus or ‘Chopayas’ (quadruped) as is ascribed in Surah ‘Al- Furqan’ or homo sapiens in the offing. it means that homo sapiens and homo erectus are similar apparently, but the tendency to use the brain or talent places them in different categories. And if a person still lacks the quality of analysing things and issues and does not have capabilities to arrange facts according to their appropriate position, he is still a homo erectus. if we look back into history or even in prehistory, we reach the conclusion that the rulers and the powerful never used the brain for the welfare of public. There are exceptions but during the last 5000 years we can hardly pick five or six rulers who did something which genuinely benefited the common man, and their period of rule was not more

than a 100 years in total. The situation can only be altered if we adopt the habit of reasoning and no other way out. europe did not reach the stage it is today with a sudden jump. rome was certainly not built in a day. From 753 B.C. to date, this continent traversed many upheavals. From miletus, Socrates, Plato and Aristotle to einstein; this region remained the laboratory of world level experiences. From religious rivalries and crusades to the civilised revolutions, Pyrenees and Alps remained constant. europe was the cradle of industrial revolution, enlightenment, agricultural revolution, glorious revolution and in the end two horrible World Wars. All these ups and downs taught the europeans that they should function along with the proletariat and not by dragging them. They finally learnt that the core purpose of this life is the uplift of human beings and making them ultimate useful citizens for the whole country.

What the UNDP Report divulges The UNDP report confirms some basic facts:1. The western countries are in a dominant position as far as human development is concerned. 2. Scandinavian countries are at the top of the table. An efficient and equitable distribution of resources made all the difference which finally shaped the countries into being prosperous. 3. The presence of USA, Canada and New Zealand, in the top 10 countries means that those nations that managed to evolve economic and political policy making have progressed beyond those that failed to do so. 4. Niger, mali and ethiopia have a subterranean historical background but it couldn’t help them out as they failed to make an effective allocation and utilisation of their resources. 5. Those that collected knowledge, refined it, and made effective use of it for their own prosperity were able to sit at the helm of authority. 6. Progress means an effective use of decision making by employing the faculties of the human mind 7. “Followers” can never rule the world. The writer is a Grade-20 government officer and a freelance writer. He can be reached at shahidkhursheed2009@gmail.com

bRUssEls

N June, it was Greece. in August, it was France, italy, Spain, and Portugal. in September, it was Greece again – and Spain. in November, France took another turn, before italy again in December, this time in a major way. every month, despite an ever-darker outlook for economic growth, countries announce new spending cuts and tax hikes in the hope of restoring confidence in the bond markets. Only Germany stands out, having recently announced a tax cut, albeit a modest one. it looks like a no-brainer: accelerated budget cuts are preferable to a lethal interest-rate surge on public debt, even if the cuts increase the risk of recession. But there are caveats. First, while indiscriminate austerity may be the only option for those eurozone countries that no longer have access to capital markets, others have more choice of policy options. Consolidation is required, but governments are responsible for its speed and its design. Second, a sound fiscal strategy requires establishing, on the basis of prudent economic assumptions, an ambitious budgetary target for the medium term, determining what mix of taxation and expenditure cuts are required in order to achieve it, and then sticking to the plan throughout economic fluctuations. This allows the so-called “automatic stabilizers” – lower receipts in a slowdown, higher in a boom – to come into play, preventing the economy from overheating at the top of the business cycle and providing stimulus at the bottom. Third, headlong consolidation is not always the best way to reassure markets, which may worry more about growth. italy is a case in point. The country’s budget deficit this year, at 4% of GDP, is far below that of Spain or France. indeed, it was not the country’s deficit that finally led investors to shun italian bonds, but rather a forbidding cocktail of high debt, desperately slow growth, and political paralysis. in a situation like this, nibbling at the edges of a deficit is at best a sideshow. The markets are demanding reforms that lift growth rates durably and an approach to fiscal consolidation that is consistent with higher potential growth. Fourth, the cost of rushed austerity is that it generally relies on immediate fixes, such as indiscriminate spending cuts and tax hikes that are expected to yield revenue in the short term, but that have an economically damaging impact. At the end of 2010, most eurozone countries were penciling spending cuts into their consolidation programs while preserving the most productive areas, such as education and infrastructure.But, since this summer, governments have done the opposite. rather than focus on spending, they have zeroed in on tax measures, for the most part increasing existing rates. This is a bad sign for growth. What should they be doing instead? Fiscal consolidation is unavoidable, but that is a medium-term process. instead of undertaking knee-jerk cuts, eurozone governments must first reestablish their credibility through policy rules enshrined in national legislations, as recently decided by the european heads of state and government. Second, they should design and implement smart consolidations, even if they take a little more time to design and a little more time to implement. This entails finding the optimal balance between spending cuts and tax increases, and identifying the least harmful measures over the medium term. Doing so will take time, thought, and an iron will. A version of this article was first published in Project Syndicate

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Friday, 16 December, 2011

EDITORIAL

Unequal development and negative affirmation

Economics of oil

eSPiTe fundamental growth problems in the global economy, geopolitical tensions in the Persian Gulf seem set to trigger yet another round of nervous hikes in international oil prices. So far, oil above 100 is definitely overbid, especially since markets have not yet priced in any unintended, or intended, consequences of war clouds gathering over iran. Yet with Tehran throwing an unexpected ace as its first visible move – blockading the Straits of Hormus for ‘regular military exercises’ – oil is likely to break its uncertain, range-bound trading pattern to the upside. That is bad news for emerging markets, and bad news for Pakistan considering its present low-growth dilemma. in case of further escalation, it is difficult to foresee a not-so-sobering outcome. One, expensive oil seriously threatens to derail fragile recoveries in America and the eurozone, both beset by debilitating hangovers from the ’08 recession. Two, it will make retaining struggling emerging economies’ growth trajectories that much more difficult,

slowing down Asia. Three, it will burn America-friendly oil barons in riyadh, long the stabilising force in international oil. They have always been wary of the consequences of too-expensive-oil, and how demand slowdown in the west can compromise its own vaults. But with a $130 billion social spending package to stall a building spring in the oil-rich eastern provinces, it’s support price has risen to the $90-100 range, forcing it to stand with “intolerable” iran and venezuela at the opec conclave. Four, the worst blow will be dealt to economies mired in stagflation, already suffering low-growth and highinflation, like we are. Granted, no economy is immune to international shocks, especially oil price gyrations. But considering how oil movement causes input price correction across the board, commodity price alone can seriously derail our economy. The prime reason is that our economy is continuously near break-down point, unable to withstand exogenous shocks, which is simply poor planning. These developments should prompt some manner of proactive posturing in islamabad.

Ali Shah

He fact is well-known that capital accumulation gives rise to unequal development. Unequal development is a condition in which certain regions, given specific natural, economic, social, cultural and technological endowments, on one hand, and political utilisation of these endowments on the other, tend to become more developed and powerful than the others. A classic case is the division of the world between more developed parts and less developed ones appearing geo-politically as sovereign nation-states which attempt to maximise their power and influence against each other. But the ambit of this law is not limited to inter-state relations alone. Several layers of this phenomenon can be identified such as: continental unequal development, between continents; regional unequal development, between various regions in a national economy; local unequal development, between neighbourhoods; and household-based unequal development. Since this structural asymmetry functions at so many levels, it comes to be accepted as the natural state of affairs, as how things have always been since time immemorial. This eternalisation of a specific historical outcome, and its factitious maintenance in the form of the contemporary free market-based international order, tends to elude the critical cognitive grasp of most people. Negation by affirmation, defined in my last article for these pages as a pre-emptive strategy to manage dissent, neutralising resistance, and containing social change, plays a special role in promoting the misrepresentation of reality that sustains the law of unequal development. This is how they work together: Objectively, unequal development assumes the form of a peculiar historical Darwinism and is represented as a case of neutral historical evolution favouring those who adapt well to epochal transformations by means of efficient resource allocation. This historical Darwinism has the effect of flattening all historical diversity on the plane of the theory of the survival of the fittest and blocks from vision the historical manufacturing of the fittest. inter-subjectively, the fact of unequal development lurks behind and is reinforced by the formal declaration

I invite the good readers to think quickly about the wonderful city of Lahore Unwise decision of economic managers

Loyal customer

This is with regards to the news report, ‘Cabinet committee shelves privatisation plan for PSe’s’, published yesterday. Another unwise decision by the economic managers of the country for not privatising eight public sector enterprises, which are on the verge of collapse, is just safeguarding their vested interest. releasing more money for the revival of these dying institutions is of no use. Government will never be able to rehabilitate these entities on sound footing due to the fact that firstly it is too late and secondly, it cannot manage the industry and trade. it is the job of private sector enterprises, who know how to run organisations, efficiently and profitably.

This is with regards to the article, ‘Ufone, Teri mehrbani’, published on 10/11/12. i am a Ufone user for the last 10 years and i have been a loyal Ufone customer, ever since then. Ufone has always been making awesome advertisements and to be very honest, these ads are the best ads that the Pakistani market has ever seen. But let’s face it, i don’t think so that the effectiveness of Ufone advertisements is actually driving the customers to buy their SimS, for things don’t work here, the way they work in the West. However, this holds true for all other telecom companies as well. Ufone or any other telecom company, in Pakistan should realise that at the end of the day, it’s about what you give to the user.

M ASLAM cHAuDHry

rAMeez

lahORE

CaRdIFF

of the fundamental equality of human beings and the constitutional enshrinement of universal human rights meant to show that this formal principle also exists substantively. Once this formal principle comes to be seen as the basis of human civilisation, unequal development is redeemed through a disingenuous emphasis on the natural difference of ability and talent amongst human beings. in other words, the idea of equality props up the brute fact of inequality. This means a constant struggle goes on between entities populating the various levels of unequal development. This struggle gives birth to networks of domination and collaboration across and within these levels but not without ideological disguise. Whole cities are planned on the basis of the multiple circuits of capital which, through the division of labour, are inscribed in our bodies and psyches. To bring home this flow of capital through our lives, i invite the good readers to think quickly about the wonderful city of Lahore. A marvel of the beautiful blend of the traditional and the modern, it is also a place criss-crossed with myriad practices of inequality and domination. Urban capital accumulation in the city works by creating differential zones of capital concentration. These zones are articulated through discrete channels of capital circulation. The sites of the creation of capital are spatially distanced from the foci of consumption. These zones of capital concentration are legitimised through urban planning policies and manifested in the practices of urban housing. As one goes from the north to the south of the city, there is a marked spatial shift from the older less privileged spaces like Shahdara, Sant Nagar, Sanda etc., to relatively new affluent neighbourhoods like Gulberg, DHA, Bahria Town etc. middle to lower-middle class colonies like Samanabad, iqbal Town, Gulshan-e-ravi reflect their desperate desire for social climbing in their mock-palatial residential facades. Progressive colonisation of the semi-rural belt surrounding the city continues apace. The stark difference between the triad of consumption like the Liberty market, main market, and mini market-cum- m. m. Alam road, and those like ichhra and scores of makeshift Sunday bazaars scattered across the metropolis, is a direct outcome of a sharp income apartheid enabled by the so-called natural phenomenon of the varying purchasing powers of different urban social groups inhabiting the city. The access to public utilities and civic institutions follows the same social lines of force as do the differential circulation of capital in the city. However, the remarkable fact is that we live with this quotidian creation and consolidation of inequality, exploitation, marginalisation, and exclusion in our midst mollycoddled by a sincere belief that all human beings are fundamentally equal and that there is no difference between the rich and the poor except that ordained by nature or the prudent utilisation of something called the freedom of opportunity. The writer is a professor of economics at LUMS

shaRI’a MaTTERs

Islamic banking windows

Humayon Dar

N islamic window is a separate department within a conventional bank, which operates under strict guidance by an independent Shari’a Advisory Board to develop and offer islamic financial products to the clients that demand such products. An islamic Window may offer its products and services through conventional branches or dedicated islamic branches of the conventional bank. There are three notable examples of countries where banking regulators do not allow setting up is-

lamic Windows. malaysia is perhaps the best example, though the prohibition is limited to the offering of islamic retail banking services through islamic Windows. Conventional investment banks, however, are allowed to offer islamic investment banking services in the country. Consequently, major conventional banks have now set up fully-fledged islamic banks to tap the islamic retail banking market. The likes of CimB, rHB, Hong Leong, maybank have set up separately licensed islamic banks. Similarly, Lebanon does not allow conventional banks to offer islamic financial services. Qatar has also introduced a ban on conventional banks to set up islamic Windows. ethiopia, on the other hand, provides an interesting example of a country that allows islamic banking only in the form of islamic Windows. in other words, the existing legislation in the country does not allow the setting up of dedicated islamic banks. in Pakistan, there are five full-fledged islamic banks, and another 12 conventional banks offering islamic banking services

using an islamic Window model. The total number of islamic branches owned by conventional banks is 268, which is more than half of the number of branches of islamic banks in the country (524). This shows that islamic Windows are significant in terms of their market share of islamic banking in Pakistan. While the role that conventional banks are playing in islamic banking in Pakistan is laudable, it must be emphasised that conventional banks take islamic banking as a purely business proposition. The following are some of the major concerns that people have with islamic Windows: 1. islamic windows are seen to have in general contributed to the development of what is known as Shari’a-light products, 2. Shari’a governance regimes in conventional banks tend to be weak. While the likes of Dubai islamic Bank, Abu Dhabi islamic Bank, Kuwait Finance House and Al rajhi Bank have very strong Shari’a compliance departments, conventional banks with islamic Windows tend to be light in terms of Shari’a governance.

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

For Pakistan, it is recommended that no new conventional banks be allowed to start their Islamic operations through an Islamic Window model

3. As mentioned above, conventional banks lack real commitment to the development of islamic banking. The managers of islamic Windows always face a daunting challenge, as the main management tends to fear cannibalisation of their conventional business. 4. many conservative muslims believe that segregation of islamic funds within conventional business is merely an accounting trick. A simple requirement for segregation of islamic funds within conventional banks is that at any point the value of islamic liabilities of the bank should be equal to its islamic assets. Given this, it is important for banking and financial regulators in the OiC countries to discourage islamic windows. For Pakistan, it is recommended that no new conventional banks be allowed to start their islamic oper-

ations through an islamic Window model. This kind of protectionist approach to islamic banking will allow the existing islamic banks to expand their businesses. On the back of their growth, the incumbent islamic banks must be asked to increase their capital base, which in many cases will be possible only through attracting more capital from the Gulf countries. in this way, islamic banking can be used to attract more investment into the banking sector in Pakistan, which is indeed a very lucrative business. The writer is a Shari’a advisor to a number of banks and financial institutions and can be contacted at humayon@humayondar.com

For comments, queries and contributions, write to: MUNEEB EJaZ Layout Designer

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

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Friday, 16 December, 2011

news

The governments of developing countries cannot be expected to take care of all development aspects of its citizens; the private sector has to lend a hand

CEO Mehran sugar Mills ltd, Ebrahim hasham

PIA, Pilots’ Association sign working agreement LAHOre

sTaFF REPORT

AKiSTAN international Airlines (PiA) and Pakistan Airline Pilots’ Association (PALPA) have mutually agreed to finalise the working agreement for the year 2011-2013 without any revision in pay and allowances. A spokesman for PALPA said in a statement that considering the financial condition of the national flag carrier the pilots association has already voluntarily dropped chapter two from the working agreement after completing negotiations on procedural issues. The spokesman mentioned that the working agreement was needed to address safety and operational issues. The financial aspect is also a part of the same negotiation, hence after every two years it is renegotiated; but this time round it was dropped from final implementation. He further said that the since the

Working Agreement was of procedural nature it cannot be called an extraordinary favour, thus projecting it as if the association has taken financial benefits is not only wrong but misleading as well. Not only that the association has dropped the pay and allowances from this Working Agreement but has further offered to reduce guaranteed flying hours from 70 to 50, flying allowance on Long range flights from $350 to $275 and all additional flying allowances given to management pilots over and above normal allowances paid to all regular non-management pilots have also been withdrawn forthwith. He said PALPA has contributed significantly to improve airline’s financial conditions by suggesting cost cutting measures in cabin and cockpit crew flight and stay patterns abroad besides many in-flight and on-ground measures through which the airline is saving huge amounts specially in foreign exchange. President PALPA, Captain Suhail Baluch, stated in a press release that PALPA

members have agreed unanimously not to ask for financial benefits from the PiA management in protest over its wrong decisions which have brought the national air carrier on the verge of collapse. He said that the credibility of PiA has been shaken badly in the eyes of its customers and international aviation industry too all due to a series of decisions, marred with corruption and nepotism, which left the airline in a quagmire. He referred to the consistent delays in PiA flights, especially in Pre and Post Hajj operations, as well as recurring technical faults in PiA aircraft one after another posing serious threats to the safety of passengers and aircraft, and the dubious leasing of more aircrafts resulting in the loss of billions of dollars of airline’s finance. Suhail Baluch said PiA management has completely failed to handle the affairs of the airline and is not carrying out due and proper care of the PiA fleet so as to create artificial justification to lease more aircraft to

Australia to provide Rs1.2 billion for agricultural research in Pakistan ISLAMABAD sTaFF REPORT

USTrALiA will provide rs1.2 billion to enhance agriculture research, development and extension system to deliver practical research outputs to agribusiness and farmers. This information was provided by Australian High Commission at a reception on the launch of next phase of the Agriculture Sector Linkages Program (ASLP) in Pakistan. Chief executive Officer of the Australian Centre for international Agriculture research (ACiAr) Dr Nick Austin was also present on the occasion. Addressing the reception, Australian High Commissioner, Tim George said, “ACiAr’s work, including

ASLP, is a key component of Australia’s growing engagement with Pakistan. As a leading agriculture exporter, with world-class expertise in agricultural research, we see great scope to cooperate to build Pakistan’s agricultural capacity.” The partnership in the agriculture sector between both the countries has grown during the last few years. ASLP Phase i, operated from 2005-10, and was successful in increasing the transfer of technical knowledge between Australian and Pakistani scientists to underpin the ongoing transformation of Pakistan’s mango, citrus and dairy industries. ACiAr CeO, Dr Nick Austin, said it was his first visit to the country and was impressed by the huge potential in agriculture. “Pakistan’s farmers face many

challenges and it is critical that we continue our collaboration. ASLP Phase ii has the potential to change the lives of farmers across Pakistan, and i look forward to working with government, academic institutions, and farmers, to make a real difference to Pakistan’s agriculture sector”, he added. ASLP Phase ii will build linkages between agricultural sectors of Australia and Pakistan in order to improve the livelihood of rural poor in Pakistan. The programme will contribute a total $AU 12.95 million or rs1.2 billion, over four years to agricultural research in Pakistan. its goal is to enhance ability of Pakistan’s research, development and extension system to deliver targeted and practical research outputs to agribusiness and farmers.

serve vested interests. He said PiA management should overhaul its grounded aircraft first instead of taking leased planes and should do away with the spare-parts supply contract to inefficient companies like Transworld Aviation, FZe, which have no proven experience of working with commercial airlines. He said PALPA is aware of the financial constraints of the national air carrier and admits that PiA is facing acute shortage of funds. Nevertheless, he added, PALPA members and other employees of the airline can never be blamed for the dire financial crisis as the management is solely responsible for PiA funds and decisions in this regard. He thanked mD PiAC for signing the negotiated and agreed PALPA-PiAC Working Agreement 2011-2013 minus Article ii, as per international aviation rules and regulations it is mandatory to have an agreement between pilots and airline management to ensure smooth functioning and adherence to all international safety rules.

India to hold ‘Made in India’ exhibition in Pakistan in february kArAcHI GhUlam abbas

Or the fist time indian businessmen are going to hold ‘made in india’ exhibition in Pakistan in February next year. The event is scheduled to be held from February 11 to 13, 2012 in Lahore and will also be followed by a CeO conference on the last day of the trade event, sources told Profit. According to the sources, indian Commerce minister Anand Sharma would also attend the business event and would meet Pakistani officials and authorities both in Lahore and Karachi.

Bears grip KSE as Euro crisis hits regional stocks sTaFF REPORT

intraday high and low was, respectively, recorded at 11,301.80 and 11,058.07 points. “The index managed to close above session lows on state-run institutional support in oversold blue chip stocks,” said the analysts. Trading volumes closed higher at 52.0038 million shares compared to Wednesday’s 34.960 million shares. Trading value also set in the green zone and increased

to rs2.01 billion against the previous day’s rs1.96 billion. Of the total 316 traded scrips, 39 advanced, 188 declined and 89 remained unchanged. market capitalisation closed as low as rs2.88 trillion against rs2.930 trillion of a day earlier. KSe-30 index also lost 217.25 points or 2.08 per cent to close at 10, 251.92 points compared to 10,469.17 points of the previous

karaChI: Pakistan National Shipping Corporation (PNSC) has sold its bulk carrier namely m.v multan, and the vessel has anchored at the Gidani Shipbreaking yard. Profit has learnt that in line with its earlier decision of scrapping two bulk carriers of its fleet, the management of PNSC sold m.v multan to Compass Shipping and Trading, Sharjah, United Arab emirates for $25,3271. The sale agreement was made on the 18th of last month, and it has been sold in $466 per LDP, sources added. The said carrier has anchored at the Gaddani Shipbreaking yard, and the fleet of the corporation is now left with 8 vessels. But interestingly the buyers of this vessel were in reality locals, the sources disclosed. The sale agreement was signed by imran Aziz mideast Shipping and Trading. Sources informed that this was solely the decision of the management of the corporation, and the board of directors insisted to maintain the transparency. WaqaR hamza

Centre, provinces to sort out diﬀerences on GsT today IslamaBaD: Federal and provincial governments will again attempt to resolve the issue of agriculture income tax and settlement of dispute on GST on services, at the meeting of National Finance Commission (NFC) today. An official source said the meeting of NFC will be held after one and a half year delay and the centre and provinces will attempt to sort out their differences on the uniform implementation of the GST on services. Three provinces have already granted powers to Federal Board of revenue to collect GST on services on their behalf while Sindh province is still adamant to take a solo flight. Federal government is expected to force Sindh to hand over collection to FBr. However, the source said provincial government was likely to offer resistance on the move. Centre and Sindh are at odds over collection of revenue from port related services on which other provinces have expressed concerns. Other than services in the formal sector, governments have no plan of action on other services like land developers and catering businesses, which still remain outside the tax net. sTaFF REPORT

Broadening industrial base vital for country: seminar IslamaBaD: ministry of industries and its WTO Cell is committed to broaden industrial base of Pakistan, upgrade production methods and create awareness among existing industry about rapidly changing international trading and business rules. WTO Cell of the ministry of industries in collaboration with rawalpindi Chamber of Commerce and industry (rCCi) held a seminar titled on “General awareness about WTO and major issues confronting Pakistan’s industry today and footwear industry of Pakistan with respect to Non-Agriculture market Access (NAmA)”. WTO Cell team was led by Chief WTO Officer ms Seema raza Bokhari. mr Javed Akhter Bhatti, President (rCCi), mr irfan manan Khan, Secretary General, other members of management, industrial representatives and stakeholders from the footwear industry were also present on the occasion. sTaFF REPORT

Punjab govt attentive towards livestock needs

kArAcHI eArS prevailed on Karachi stock market Thursday, after market observers said after regional stock markets and commodities plunged on rising concerns over european debt crisis. “Pakistan stocks closed sharply lower after Asian stocks and commodities plunged on rising concerns for europe debt crisis,” said Ahsan mehanti, director at Arif Habib investments. The analyst said United States’ clarification on a $700 million conditional aid to islamabad also affected the sentiments at the bourse. The day witnessed the benchmark 100-sahre index nose-diving by 161.47 points or 1.43 per cent to close at 11, 139.52 points as against 11,300.99 points of Wednesday. The

Mv Multan sold by shipping Corporation

session. “Foreign outflow from local bourse, uncertain Pak-US relations and prevailing government judiciary conflicts played a catalyst role in negative sentiment at KSe,” analyst Ahsan mehanti observed. Fatima Fertiliser Company was the volume leader of the day by counting its traded shares at 5.9 million with its per share price closing lower at rs21.50 after opening at rs22.10.

lahore: Provincial minister for Agriculture and Livestock malik Ahmed Ali Aulakh has said Punjab government, in spite of financial constraints, is paying special attention to livestock development. He was addressing University of veterinary and Animal Sciences Lahore in a cheque distribution ceremony arranged by Livestock and Dairy Development Department and Punjab Agriculture and meat Company. malik Ahmad Ali Aulakh said cheques worth rs7 crore 25 lakh were distributed among 117 beneficiaries of ‘Save the Calf’ project belonging to Lahore, Sheikhupura and Kasur districts. The minister said Livestock is the asset of Pakistan and we have world renowned Neeli ravi Buffalo and Sahiwal Cattle with equal potential for milk and meat. Pakistan being an islamic state has great potential to access three trillion dollars halal meat market in the world but for that we have to upgrade our products and animals upto the international standard by value addition so that we may be able to export surplus meat to the muslim and adjoining countries. minister said Livestock and Dairy Development Department is working on the right track as during the previous flood, the livestock department team worked very hard in vaccination and treated affected animals owing to which there have not been any disease outbreaks in the province. sTaFF REPORT

PRO 16-12-2011_Layout 1 12/16/2011 12:33 AM Page 5

Friday, 16 December, 2011

Business schools should stop handing out MBA degrees to anyone who comes to them. Work experience of a few years should be mandatory to get into an MBA programme

news

GM hR shell Pakistan, leon Menezes

Spain looks safer than Italy as borrowing costs fall MADrID

REUTERs

PAiN saw solid demand for its bonds on Thursday, paying more than 2 percentage points less to borrow over 5years than italy a day earlier as budget cuts helped ease concerns it could be among the next to fall in the euro zone's debt crisis. But while the Treasury also paid much less to sell two 10-year bonds than a similar issue just a month ago, yields were still near euro-era highs amid doubts over leaders' ability to find a lasting solution to the bloc's debt crisis. "A good auction ... they managed to sell quite a chunk. it won't help to calm these fears everyone in the market is having about funding in 2012, but Spain is considered a far more attractive credit than italy," strategist at West LB, michael Leister said. Spain has been in the line of fire in the euro crisis since Greece was bailed out more than a year ago. But measures which have almost halved the budget deficit along with a massive banking restructuring program have taken some of the heat off. Attention has turned instead to the euro zone's third largest economy, italy, which has seen refinancing costs soar to unsustainable levels and its Prime minister Silvio Berlusconi replaced by technocrat caretaker mario monti.

"The contrast with italy is striking. Spain, despite its severe economic problems, is judged to be a safer credit," said Nicholas Spiro, economist at Spiro Sovereign Strategy. "italy is walking on very thin ice at the moment given the scale of its funding needs next year. Spain is better placed on this front and has more policy-making credibility in the eyes of investors." The premium investors demand to hold italian over Spanish debt rose to a new record of around 162 basis points on Thursday while Spain's spreads against German debt dropped more than 24 basis points following the auction.

SOCIALISTS TROUNCED The centre-right People's Party (PP) trounced the Socialists in November 20 election as voters punished Prime minister Jose Luis rodriguez Zapatero for his handling of the economic crisis though his measures have kept Spain needing a Greek-style bailout. incoming Prime minister mariano rajoy has said he will continue with the previous government's austerity measures and cut the budget shortfall from an expected 6.5 percent of GDP this year to 4.4 percent of GDP next year. Pollsters say Spaniards are largely resigned to the idea of more cuts, but that sentiment could fade within a year if the economy does not bounce back from a prolonged

slump. Spain's economy stagnated in the third quarter and is widely expected to sink into its second recession in three years at the start of 2012 as domestic demand shows no sign of returning and exports are hit by the global slowdown. meanwhile, the burst property bubble has left the country's banks sitting on 176 billion euros ($227.94 billion) of potentially troubled real estate assets at endJune and struggling to raise capital to shore up balance sheets in a paralyzed market. rajoy has said his priorities when he takes office next week are to balance the public accounts, reform the labor market -- Spanish unemployment is more than double the european Union average -- and intensify bank restructuring efforts.

RISING COSTS As market nerves rise over the future of the euro zone, Spain's government has found it increasingly expensive to issue bonds but with a debt-to-GDP ratio of around 68 percent, around 20 percentage points below the euro zone average, it has some margin. Spain also faces a less pressing redemption calendar than italy, with medium and long-term debt redemptions of nearly 50 billion euros in 2012 with none due until April. rome meanwhile faces redemption and coupon payments of around 100 bil-

lion euros between January and April, reuters data shows. The Spanish Treasury raised 6 billion euros from the auction on Thursday of three bonds in the primary market, far surpassing a target of 3.5 billion euros and meaning the Treasury has completed its end-of-year bond issuance goal. The auction came as markets braced for a possible ratings downgrade after a disappointing summit of european Union leaders on Friday. Spain sold 2.5 billion euros of a bond maturing January 31, 2016 at a yield of 4.023 percent, compared to 5.276 percent when it was last auctioned December 1. The bond was 2 times subscribed after 2.8 two weeks ago.

The bond maturing April 30, 2020, sold 2.2 billion euros at an average yield of 5.201 percent while a bond maturing April 30, 2021 sold 1.4 billion euros for 5.545 percent. The last time Spain ran a primary auction a 10-year bill November 17, it paid an average yield of 6.975 percent, considered by most economists as unsustainable over the long term. However, while the benchmark 10year yield was down from recent highs during volatile trade, it was still far above prices paid from the average yields seen before June. "These are still high levels of rates but they are a lot better than italy's ones," strategist at monument Securities marc Ostwald said.

CORPORATE CORNER BoK Raast Islamic Banking branch starts operations in DIK

building a connection with Wateen customers, while encouraging them to recharge their accounts before the recharge date for each month. Shaukat Ali from Sahiwal won a Hewlett Packard laptop, Faisal Altaf from Lahore was the winner of a Dell Streak tablet and Amber Nasir from Karachi won an Apple iPad2 tablet. PREss RElEasE

Cathay Pacific releases combined traﬃc figures

Dera IsmaIl khan: The formal inauguration of Bank of Khyber (BoK) raast islamic Banking branch was held at Tank Adda area of DiK in a graceful ceremony. The inaugural ceremony was attended by managing Director BoK mr Bilal mustafa, executive Director mir Javed Hashmat, islamic Banking Group Head mr Kamran masud Khan, Head islamic Business Development mr Sohail Khan, Head Banking Operations mr Khurshid Alam, and Head marketing Syed Ali Nawaz Gilani, along with business community and the notables of the area. PREss RElEasE

lahore: Cathay Pacific Airways has released combined Cathay Pacific and Dragonair traffic figures for November 2011. The figures showed the growth in passenger numbers again failing to match capacity growth, while cargo and mail tonnage showed another significant year-on-year decline. Capacity for the month, measured in available seat kilometres (ASKs), was up by 8.6 per cent. For the year to date, the number of passengers carried has increased by 2.5 per cent compared to a capacity increase of 9.2 per cent. Cathay Pacific General manager revenue management James Tong said, “Once again the growth in passenger traffic could not keep pace with the increase in capacity, which accounts for the dip in load factor.” PREss RElEasE

Wateen rewards on-time bill payment

Jaﬀer Brothers wins OPN specialised asia Pacific award

lahore: Wateen Telecom has announced the winners of its ‘recharge and reconnect’ campaign through which it is incentivising subscribers to recharge their accounts within time. The ‘recharge and reconnect’ lucky draw campaign was aimed at

karaChI: Jaffer Brothers (JBL) was awarded the Oracle Partner Network (OPN) Specialised Asia Pacific Award for Oracle Accelerate. The awards were given to partners at the Oracle Asia Pacific Applications Partner Summit in Phuket, Thailand in August, 2011. The award reflects Jaffer Brother’s success leveraging its Oracle Accelerate offering to bring industry-specific capabilities to midsize companies in Pakistan. The partners nominated for this award were the top performing Oracle Accelerate Asia Pacific partners in 2011. The OPN Specialised Asia Pacific Awards were presented to partners who demonstrated outstanding use of Oracle products to create value and innovative solutions for customers. PREss RElEasE

Ufone restores BlackBerry Internet services IslamaBaD: Ufone has managed to delight its valued customers by restoring the much desired BlackBerry internet Services (BiS). BiS is a service that provides BlackBerry smartphone users with access to internet browsing, allows email messaging, instant messaging using the BlackBerry messenger service, and more. The service also allows users to access POP3, imAP, and Outlook Web Access email accounts without connecting through a BlackBerry enterprise Server (BeS). PREss RElEasE

lahORE: On the occasion of an international conference, Chaudhry abdul Rehman is presenting shield to Prof stephen. PRESS RELEASE

Dubai Islamic Bank launches Islamic priority banking solution karaChI: Dubai islamic Bank Pakistan Ltd (DiBPL) has launched Pakistan's first islamic priority banking solution to offer its exclusive customers with a gateway to an exquisite banking experience. Dubai Lounge Priority Banking caters to the affluent segment by offering an unmatched luxurious banking experience. moreover, the exclusive customers can enjoy a host of privileges including fee based waivers, viSA Gold Card, access to viP airport lounges in Pakistan and a higher cash withdrawal limit. PREss RElEasE

Islamabad: Group photo of young elected representatives of primary class after oath taking ceremony at beaconhouse primary branch, Peshawar road, Rawalpindi. PRESS RELEASE

TRG holds TRG learnfest IslamaBaD: TrG LearnFest, Pakistan's pioneer learning festival of training providers and seekers; was held for the second time this year in islamabad with around 30 diverse training sessions. Organised by Trainer’s resource Group, with the core objective of strengthening the training and development industry in Pakistan, the event attracted more than 300 people. Official partners included, TCS, CityFm89, Orient Advertising, wCube Dimensions, express Tribune and Torque. PREss RElEasE

lahORE: Yaseen anwar, Governor state bank of Pakistan, along with Rajiv Vastupal President all India management association (aIma); d shivakumar senior Vice President aIma and Nokia India, middle East and africa; Kamal Chinoy President management association of Pakistan (maP), saadia Naveed VP maP and others at 12th Convention of maP. PRESS RELEASE

PRO 16-12-2011_Layout 1 12/16/2011 12:34 AM Page 6

Friday, 16 December, 2011

06 Markets top 10 sectors

24% 09% 35% 10% 08%

Chemicals

01% 07% 02% 03% 01%

General Industrials

Construction & Materials Electricity Banks

Fixed Line Telecommunication

Oil & Gas

Financial Services

Personal Goods

Equity Investment Instruments

STOCK MARKET HIGHLIGHTS Index 11139.52 2749.64 2553.44

KSE-100 LSE-25 ISE-10

Change -161.47 -61.74 -18.87

Volume 43,855,890 1,719,144 13,082

Market Value 1,969,263,156 37,917,007 496,805

top 5 perForMers sector wise

Major Gainers Company Colgate Palmolive Dadex EternitXD Leiner Pak Gelatine Shakarganj Food Singer Pakistan

Open 634.87 35.49 16.40 4.50 13.07

High 649.00 37.26 17.40 5.50 14.07

Low 621.00 37.26 16.40 5.39 13.07

Close 639.11 37.26 17.40 5.50 14.06

Change 4.24 1.77 1.00 1.00 0.99

Turnover 66 1 500 16,000 502

5406.67 2314.00 240.99 239.61 361.88

5443.99 2350.00 240.00 239.00 360.49

5200.00 2228.00 230.00 229.00 353.25

5329.80 2290.60 230.88 230.39 354.89

-76.87 -23.40 -10.11 -9.22 -6.99

208 54 172,374 360,383 458,899

Volume Leaders Fatima Fert.Co. Hub Power Co. Fauji Fert BinXD Lotte PakPTA Engro Corp

22.10 36.04 48.31 9.03 104.03

22.00 36.03 47.94 9.00 103.50

21.00 34.95 45.91 8.69 98.83

21.50 35.15 46.18 8.77 99.08

-0.60 -0.89 -2.13 -0.26 -4.95

5,991,996 4,136,319 3,423,950 3,283,821 2,570,956

Bullion Market Gold 24K Gold 22K Silver (Tezabi) Silver (Thobi)

Per Tola (PKR) 53,227.00 51,608.00 967.00 1025.00

Per 10 Gm (PKR) 45,682.00 44,245.00 830.00 880.00

Per Ounce US$ 1,585.00 – 35.05 –

hIGh

lOW CURRENT

419.00 116.90 21.51 6.95 91.25

410.55 112.50 20.01 6.85 88.25

ChaNGE

vOlUME

Oil and Gas Attock Petroleum Attock Refinery Burshane LPG Byco Petroleum Mari Gas Co.

411.29 115.05 20.96 6.90 90.37

Agritech Limited Arif Habib Co SD Bawany Air Products Clariant Pakistan Dawood Hercules

16.99 28.54 5.81 155.00 34.19

0.71 -1.95 0.04 -0.03 -0.35

36,564 463,796 41 113,350 16,930

19.31 1.20 8.40 29.07 10.01

17.50 28.85 5.00 158.35 34.70

17.50 28.25 5.00 153.00 33.90

17.50 28.40 5.00 157.80 33.90

0.51 -0.14 -0.81 2.80 -0.29

500 386,065 3,000 4,858 37,823

2.11 51.93 14.30 7.52 20.22

20.00 1.33 8.50 29.53 10.49

19.00 1.15 8.35 29.00 9.80

19.79 1.25 8.35 29.25 9.80

0.48 0.05 -0.05 0.18 -0.21

615 7,365 2,122 6,422 2

28.56 3.42 40.17 7.70 85.83

Ados Pakistan AL-Ghazi Tractors AL-Khair Gadoon Bolan Casting Dewan Auto Engg

89.6165 138.6009 1.1491 116.2416

5.25 174.55 4.51 28.50 0.75

2.30 52.79 14.00 7.68 20.53

2.00 50.06 14.00 7.35 20.11

2.30 51.65 14.00 7.64 20.30

0.19 -0.28 -0.30 0.12 0.08

370,668 3,527 95 1,173 1,564,009

US Dollar Euro Great Britain Pound Japanese Yen Canadian Dollar Hong Kong Dollar UAE Dirham Saudi Riyal Australian Dollar

International Oil Price WTI Crude Oil

Sell 90.20 116.98 139.49 1.1489 87.68 11.58 24.47 23.95 90.31

Brent Crude Oil

Atlas Battery Ltd. Atlas Honda Ltd. Dewan Motors General Tyre Ghandhara Nissan

167.13 117.00 2.13 17.00 2.33

29.00 3.50 40.75 7.70 89.51

28.60 3.35 40.00 7.60 86.10

28.85 3.35 40.75 7.70 86.10

0.29 -0.07 0.58 0.00 0.27

6,065 8,506 1,095 890 2,553

5.99 183.27 5.51 28.01 0.78

5.30 177.99 5.50 28.00 0.78

169.00 122.00 2.20 18.00 2.97

166.60 121.90 2.10 17.00 2.60

110.49 111.43 150.02 150.00

5.30 183.06 5.51 28.01 0.78

$105.02

167.00 122.00 2.20 17.25 2.60

109.00 111.18 145.05 145.58

Adam Sugar AL-Noor Suger Mills Chashma Sugar Mills Colony Sugar Mills Dewan Sugar

17.00 52.34 7.99 1.76 2.11

16.02 54.95 8.30 1.80 2.15

Diamond Ind. Hala Enterprise Pak Elektron Ltd. Singer Pakistan Tariq Glass Ind.

8.20 6.01 4.06 14.07 8.30

9.18 6.90 4.38 15.06 8.50

(Colony) Thal Ali Asghar Textile Amtex Limited Artistic Denim Mills Ashfaq Textile

1.40 0.55 1.30 21.00 8.96

1.40 0.46 1.33 21.00 9.00

AHCL-DEC ANL-DEC ATRL-DEC BAFL-DEC BAHL-DEC

28.55 3.34 115.75 11.85 29.02

28.95 3.60 117.30 11.90 29.00

Abbott Laboratories Ferozsons (Lab) Ltd. GlaxoSmithKline Pak. Highnoon (Lab) IBL HealthCare

101.11 74.10 66.12 29.60 12.60

102.00 76.80 66.25 29.75 12.99

0.05 8.51 1.00 -0.49 0.03

105 5,018 4,492 639 173

-0.13 5.00 0.07 0.25 0.27

923 100 602 6,734 3,003

0.69 -4.44

1,170 203

P.T.C.L.A Pak Datacom Ltd Telecard Limited Wateen Telecom Ltd WorldCall Telecom

10.24 36.49 0.81 1.80 1.00

16.00 52.80 8.30 1.80 2.10

-1.00 0.46 0.31 0.04 -0.01

7,138 1,902 49,195 1 296

9.18 6.90 3.94 13.07 8.31

9.18 6.90 3.94 15.06 8.39

0.98 0.89 -0.12 0.99 0.09

1 50 389,302 501 11,224

1.11 0.41 1.20 21.00 8.11

1.40 0.41 1.23 21.00 9.00

0.00 -0.14 -0.07 0.00 0.04

8,000 2,000 30,238 400 550

28.40 3.35 113.00 11.75 29.00

28.76 3.35 113.50 11.75 29.00

0.21 0.01 -2.25 -0.10 -0.02

53,500 82,500 240,000 26,500 500

101.00 75.50 65.12 29.30 12.99

-0.11 1.40 -1.00 -0.30 0.39

227 21 1,593 1,151 1,014

101.00 75.50 65.11 29.30 12.60

10.48 36.25 0.88 1.99 1.04

10.08 35.95 0.78 1.77 0.91

10.15 36.25 0.82 1.80 0.93

-0.09 -0.24 0.01 0.00 -0.07

1,783,870 2,075 13,572 156,283 1,076,370

6.25 0.37 36.45 0.60 1.56

6.00 0.42 36.70 0.70 1.68

6.00 0.31 36.45 0.57 1.50

6.00 0.31 36.50 0.60 1.57

-0.25 -0.06 0.05 0.00 0.01

1,186 16,006 901,477 36,483 488,458

58.53 10.01 5.33 11.75 28.75

59.49 10.39 5.47 11.99 29.40

58.50 10.15 5.25 11.56 28.95

59.00 10.27 5.31 11.80 29.00

0.47 0.26 -0.02 0.05 0.25

16,287 122,208 281,491 1,265,356 157,733

Banks Allied Bank Ltd Askari Bank B.O.Punjab Bank Al-Falah Bank AL-Habib

OPEN

hIGh

lOW CURRENT

ChaNGE

vOlUME

Non Life Insurance 16.00 52.80 7.97 1.80 2.10

Electricity Altern Energy Genertech Hub Power Co. Japan Power K.E.S.C.

syMBOl

Adamjee Ins Ask.Gen.Insurance Atlas Insurance Century Insurance Cres.Star Insurance

42.99 8.50 36.00 6.94 2.97

43.45 8.79 36.40 6.94 2.97

42.25 7.87 35.40 6.50 2.00

42.64 7.87 36.40 6.94 2.97

-0.35 -0.63 0.40 0.00 0.00

8,309 2,990 215 400 501

13.50 1.40 65.53

14.50 1.40 65.53

0.00 0.00 0.00

2 1 157

0.30 16.43 15.00 0.80 2.70

-0.03 0.12 0.29 -0.02 0.16

35,272 402 4,491 5,998 31,436

Life Insurance American Life East West Life Assur EFU Life Assur

14.50 1.40 65.53

14.50 2.34 68.80

Financial Services AMZ Ventures A Arif Habib Investmen Arif Habib Ltd. Dawood Equities F. Nat.Equities

0.33 16.31 14.71 0.82 2.54

0.36 16.43 15.10 1.00 2.87

0.27 15.50 14.70 0.80 2.35

Equity Investment Instruments 1st.Fid.Leasing Mod AL-Noor Modar Elite Cap.Mod Equity Modaraba F. Dawood Mut.Fund

1.56 3.99 2.20 0.85 1.85

1.60 4.10 2.20 1.33 1.85

1.54 4.10 2.20 0.87 1.85

1.60 4.10 2.20 1.25 1.85

0.04 0.11 0.00 0.40 0.00

1,041 5,000 22,335 25,109 35,000

12.70 35.00 31.76 12.98 65.00 1.16 64.00 5.39 109.25 7.20 3.20 13.07 8.35 23.60 57.92 28.99 15.75 6.96 1.76 9.82 0.71 1.75 0.83 16.00

13.17 35.00 33.30 13.43 65.47 1.23 65.49 5.50 110.07 8.20 3.42 14.06 8.35 23.75 57.92 30.24 16.00 7.99 1.81 9.99 0.75 1.75 0.86 16.25

-0.33 -0.05 0.00 0.68 0.00 0.00 -0.88 1.00 -4.93 0.00 -0.46 0.99 0.01 0.00 0.00 0.76 0.00 0.03 -0.04 -0.17 -0.06 -0.05 -0.03 -0.57

13,107 29,833 34 5,716 1,277 506,131 1,921 16,000 1,751 150 363,050 502 1,500 10 1 600 502 3,236 24,136 2,331,360 43,023 191,954 445,463 381

Miscellaneous Century Paper Security Paper Pakistan Cables P.N.S.C. Pak.Int.Con. SD TRG Pakistan Ltd. Murree Brewery Shakarganj Food Shezan Inter. Diamond Ind. Pak Elektron Ltd. Singer Pakistan Tariq Glass Ind. Grays of Cambridge Pak Tobacco Co. Shifa Int.Hospitals Hum Network Ltd. Media Times Ltd P.I.A.C.(A) P.T.C.L.A Telecard Limited Wateen Telecom Ltd WorldCall Telecom Sui North Gas

13.50 35.05 33.30 12.75 65.47 1.23 66.37 4.50 115.00 8.20 3.88 13.07 8.34 23.75 57.92 29.48 16.00 7.96 1.85 10.16 0.81 1.80 0.89 16.82

13.40 35.75 33.30 13.48 68.00 1.39 66.00 5.50 111.00 8.20 3.90 14.07 8.35 23.75 59.00 30.49 16.00 8.00 1.99 10.20 0.80 1.94 0.94 16.96

Mutual Funds fund

$95.52

vOlUME

Fixed Line Telecommunication

Beverages Murree Brewery Co. Shezan Int’l

ChaNGE

Pharma and Bio Tech

Automobile and Parts Buy 89.40 115.54 137.89 1.1385 85.35 11.34 24.26 23.77 87.69

lOW CURRENT

Future Contracts

General Industrials Cherat Packaging ECOPACK Ltd Ghani Glass Ltd MACPAC Films Packages Limited

hIGh

Personal Goods

Construction and Materials Al-Abbas Cement Attock Cement Berger Paints Cherat Cement D.G.K.Cement

OPEN

Household Goods

Industrial metals and Mining Crescent Steel Dost Steels Ltd. Huﬀaz Seamless Pipe Int. Ind.Ltd. Inter.Steel Ltd.

syMBOl

Food Producers 412.00 113.10 21.00 6.87 90.02

Industrial Engineering

Interbank Rates US Dollar UK Pound Japanese Yen Euro

OPEN

Chemicals

Major Losers UniLever Pak Ltd. Nestle PakistanXD National Refinery P.S.O. Pak Oilfields Ltd.

syMBOl

Alfalah GHP Cash Fund Askari Islamic Asset Allocation Fund Askari Islamic Income Fund Askari Sovereign Cash Fund Atlas Income Fund Atlas Islamic Income Fund Atlas Money Market Fund Atlas Stock Market Fund Crosby Dragon Fund

Oﬀer 501.2900 114.7196 103.6501 100.6900 519.3500 519.0900 516.9700 453.1500 82.9800

Repurchase 501.2900 111.8516 102.6136 100.6900 514.2100 513.9500 516.9700 444.2600 81.3500

Nav 501.2900 111.8516 102.6136 100.6900 514.2100 513.9500 516.9700 444.2600 81.3500

fund

Oﬀer

Repurchase

HBL Money Market Fund HBL Multi Asset Fund HBL Stock Fund IGI Income Fund IGI Stock Fund JS Principal Secure Fund I JS Principal Secure Fund II KASB Cash Fund

100.2768 87.0103 97.6745 101.8987 112.3545 121.5000 104.1200 0.0000

100.2768 85.3042 95.2922 100.8898 109.6141 111.5200 96.5000 0.0000

Nav 100.2768 85.3042 95.2922 100.8898 109.6141 117.3900 101.5800 100.1087

PRO 16-12-2011_Layout 1 12/16/2011 12:35 AM Page 7

Friday, 16 December, 2011

Engro foods is already doing great; my focus will be to take it a step further

news

Newly appointed CEO Engro foods, afnan ahsan

Cement sector underperforms KsE by 27pc, analysts

ECC orders re-tendering for

kArAcHI sTaFF REPORT

200,000t g

PsMa Chairman Javed Kiyani demands purchase of sugar from local industry Export of petroleum products to afghanistan disallowed Energy Eﬃciency audit of fertiliser plants ordered ISLAMABAD

amER sIal

CONOmiC Coordination Committee of the cabinet (eCC) on Thursday ordered retendering for purchase of 200,000 tonnes of sugar, banned import of CNG cylinders and conversion kits and their installation in new vehicles, and also banned export of POL products to Afghanistan and Central Asian republics. The meeting of eCC was held under chairmanship of minister for finance Dr Abdul Hafeez Shaikh. An official source said to the surprise of committee members. Chairman Pakistan Sugar mills Association (PSmA) Javed Kayani was again present in the meeting to lobby for the association for the purchase of sugar from local sugar mills. ministers were concerned over Kayani’s presence again as under the rules no outsider could participate in eCC meeting. Kayani stressed upon the committee to approve the already negotiated price with

of sugar

PSmA so that the process could be started to make payment to farmers. However, the committee rejected his intervention and directed re-tendering for the procurement. it was decided that the bench mark price on the opening day of the tender would be the wholesale price of sugar in commodity market. it was decided that all sugar mills will be invited for the tenders instead of PSmA and up to 10,000 tonnes will be procured from each mill at the finalised rate. it was also decided that the mills failing to supply sugar will be imposed with a hundred per cent penalty. The sub committee formed after last eCC meeting submitted its recommendations which lowered sugar purchase price from rs63 to rs53.73 per kg. it proposed elimination of 3.5 per cent withholding tax on sugar to be procured from local sugar mills. Both recommendations were accepted by the committee, the source said. According to the official statement, eCC decided that purchase of sugar will be retendered with certain modifications in tender terms and conditions. The committee directed TCP to issue a gall-up tender and finalise the process within next two weeks. eCC was of the opinion that the blacklisted sugar mills will be also allowed to bid in the tender provided they deposited the penalty to TCP. This decision was made in good spirit so that a level playing field was provided to all mills. eCC also approved

ban on import of CNG cylinder and conversion kits in the wake of current gas shortage in the country. installation of new CNG kits in vehicles will also be banned. manufacturers were allowed to use their existing stock of kits and cylinders. However, CNG fitted public transport vehicles buses and vans are exempted from this moratorium. An official source explained that ministry of petroleum was attempting to convert CNG users to LPG; as CNG kits and cylinders were not manufactured locally, their ban will shift people to LPG. eCC reviewed its previous proposal of monthly natural gas load management programme on SNGPL system, and decided to withdraw the previous approval of supply of 76 mmcfd gas to iPPs because of severe shortage of gas in coming months and to enhance gas supply to fertiliser plants. it also approved energy efficiency audit of fertiliser plants and ban of POL product export to Afghanistan and Central Asian republic, proposed by ministry of petroleum. The committee was informed that the actual conditions were quite different as the export was only on papers and all POL products were being sold in the country. The committee discussed proposal of ministry of industries for import of urea for rabi Season 2011-12. it was informed that import requirements of urea were 700,000 tonnes against demand of 3.4 million tonnes dur-

ing rabi season, out of which 200,000 tonnes have already been imported. minister for petroleum said import requirements would further increase due to short supply of gas in coming two months. eCC discussed the proposal at length and decided to meet the remaining shortage of urea for rabi 2011-12. Finance minister inquired about formula on the basis of which gas was provided to fertiliser plants and took exception that certain plants did not lower prices of their products. He expressed concern over pricing regime and subsidy provision and directed that a proper distribution mechanism be identified. A committee was formed headed by minister for petroleum including Secretaries of Water of Power, Production, Finance, Food Secretary, industries and Deputy Chairman Planning Commission, to deal with fertiliser companies for fixation of urea price. The committee will report to eCC in three to four days. Committee also deliberated upon distribution of available and imported urea, and directed concerned ministry to ensure the pricing regime for the urea. And in this regard the line ministry was asked to have a meeting with dealers of urea in the provinces to have a unified price in the market so that the farmers should get the subsidised price. it was decided that hoarding of fertiliser be curtailed by the dealer to avoid fluctuation in urea price.

iTH no uptick in cement dispatches and slowdown in infrastructure spending, investors remained distant from Pakistan cement sector which posted negative return of 33 per cent in 2011 YTD, said analysts. moreover, they said global debt crisis also kept local investors at bay due to uncertainty in commodity markets. Out of 19 listed cement companies, only two companies, Kohat Cement (KOHC) and Lucky posted positive returns of 22 per cent and nine per cent respectively. “For a better comparison we have excluded Javedan Corporation (JvDC) as it has relinquished its cement operations,” said Furqan Punjani of Topline Securities. The analyst said the worst performing stocks in the sector were AlAbbas Cement (AACiL) followed by Bestway (BWCL). Turnaround in profitability amid higher sales in local arena, Kohat Cement stood as the best performer in the cement sector universe. Scrip posted a double digit positive return of 22 per cent in 2011 YTD outperforming the benchmark KSe 100 by 28 per cent. Similarly, Lucky, with 9 per cent return stood as the sec-

ond best performing stock in cement, thus outperforming KSe-100 index by 15 per cent. The cost efficient plant not only benefited from rising local cement prices (highest share in local market) but also remained stable in export markets despite weak global demand. Javedan Corporation also posted a positive return of eight per cent during the said period but since the company has abandoned its cement operations we have not included it in our sector return calculation. Apart from heavy weight Lucky cement and turnaround story in Kohat cement, entire cement sector posted negative returns. Al-Abbas Cement with negative 73 per cent return stood as the worst performer. Besides technical difficulties in plant, non materialisation of acquisition deal by Attock Cement remained the other major reason behind its huge underperformance. Bestway cement posted negative return of 68 per cent over its persistent under utilisation while FCCL posted negative return of 63 per cent amid delay in commercial production of its new 2mn ton plant. “moreover, with depressed market sentiments, DG Khan with huge investment portfolio posted negative return of 38 per cent,” said the analyst.

India,Pakistan to evaluate listing of sensex, KsE indices LAHOre sTaFF REPORT

AKiSTANi securities market regulator has shown keen interest to promote and allow listing of products based on india’s Sensex index at domestic stock exchanges of the country. This development took place during Pakistani capital market focus group’s visit to Bombay Stock exchange, where the leader of the Pakistani delegation mr imtiaz Haider, Commissioner of Securities market Division of SeCP informed BSe officials that Pakistan may allow listing of such products to sensitise Pakistani investors about indian market and economy on the whole. He said on reciprocal basis, indian markets should also consider listing products based on Karachi stock exchange’s premier index – KSe 100. Pakistani delegation comprising

of securities market regulators, stock and commodity exchanges leaders, heads of the depository and clearing institutions, brokerage houses CeOs and institutional investors is currently visiting india under Aman Ki Asha (Hope for Peace) initiative promoted jointly by Times of india and Jang/Geo group of Pakistan. The delegation used the opportunity to get detailed briefing about new ventures of BSe-the United Stock exchange of india and indian Clearing Corporation Limited, where they were briefed by mr Ashishkumar Chauhan, the deputy CeO of BSe and mr. Balasubramaniam, the Chief Business Officer of the Asia’s oldest exchange. The delegation also discussed various areas of potential cooperation such as cooperation in the field of capacity building, Sme listing procedures and market management.

Implications of financial crisis need to be understood: Dr Nadeem ul haque ISLAMABAD

sTaFF REPORT

ePUTY Chairman, Planning Commission, Dr Nadeem ul Haque emphasised the importance of understanding implications of global financial crisis for sustained economic growth. Chairing the lecture on the third day of the annual conference of the Pakistan Society of Development economists he said in Pakistan’s context the underdeveloped financial system has made it immune to the international financial crises but at the same time it is not conducive for its long term economic growth. The conference also honoured eminent economist Dr Parvez Hasan. He said Pakistan could not grow until saving culture was introduced instead of foreign aid and loans. He said development of infrastructure was necessary for rapid economic growth along with increasing the

local investment in the export oriented sectors. However, he stressed that improvement in governance was required to achieve these aims, as without good governance economic progress was not possible. He said the world is passing through turmoil due to financial crisis but international trade will not collapse, it will grow. The government should focus on enhancing export oriented sectors as the share of other major developing countries in international trade have grown four times during the last few decades. He said upto 80 per cent of new labour force will come from South Asian and Sub-Sahara African countries. Factors of productivity have remained low and new areas of trade should be focused to provide employment to the entry of new labour force. He said Pakistan was witnessing fifth year of double digit inflation and it was due to the high borrowing of government. He warned that if faith in currency vanishes then it was difficult to

revive. He said there was no need to be emotional about exchange rate and let the market make correction. earlier, delivering the distinguished lecture, Professor Atif mian of University of California said great recession in US, has to offer important lessons. This recession was triggered by massive accumulation of debt on US household balance sheet. US households borrowed more and more for every dollar of income, which increased dramatically from 2000-2001. He pointed out that this was not accompanied with high growth. Professor mian argued that when credit comes into an economy it results in two different affects. On the one hand, when it comes into geographical regions where more houses are built housing prices do not increase a lot while on the other hand, in areas where more houses cannot be built, it shows up in increasing housing prices. When housing prices increase, the households borrow more against value of their houses,

which creates bubble. And one important consequence of which is that the first people to default are the ones who were last to borrow because they had little income. Consequently, the net worth of US households started to decline. macro impact of this situation is that aggregate demand decreases and employment to population ratio declines, which has social and political consequences. Professor mian, chalking out lessons that can be learnt from the financial crisis, said the first lesson that we can learn from this is that debt matters should be given priority in theory formulation. When you have debt it translates into huge distributional shock as well, but nothing happens to that lending class. The way around this problem is to reverse the distributional shock, which is difficult due to political reasons. Therefore, financial contracts should be reformed ex ante, he concluded. A panel discussion on a very important theme of entrepreneurship was also held on the

third day of the conference. The discussion was chaired by Dr rashid Amjad, vice Chancellor, PiDe. The panelists included Azam Chaudhary, Dean, Lahore School of economics, Lahore; Zafar mueen Nasir, Dean, Business Studies and Chief of research, PiDe, islamabad; Thomas morris, Chief economist, USAiD, islamabad; Shoaib Z. malik, Director, Kausar Group of Companies, and Omer Saeed, Chief executive, Service industries Limited, Lahore. The panelists tipped entrepreneurship as key to private sector development and economic growth in Pakistan. They addressed issues such as factors hindering entrepreneurship in Pakistan and how it can be promoted. They said entrepreneurial skills do not fully transfer to the next generations. Further, they said entrepreneurship curriculum taught at educational institutions in Pakistan is not up to par and it should be revised according to the needs of the domestic economy.