PRO 21-09-2013_Layout 1 9/20/2013 11:41 PM Page 1
01
B
BUSINESS Saturday, 21 September, 2013
former trade authority chief rounded up
KARACHI: The Federal Investigation Agency arrested former Trade Development Authority of Pakistan (TDAP) chairman Tariq Puri over alleged involvement in a multi-billion rupee trade subsidy scam on Thursday. According to official sources, Puri was arrested from his residence in Karachi’s Defence locality by officials of FIA’s crime circle cell. The former TDAP chairman was accused of granting trade subsidies to several fake companies, they said. An official privy to developments said the FIA had, so far, determined that Puri approved Rs 1 billion in fraudulent subsidies. “We believe, however, that this scam is worth well over Rs 6 billion,” he added. A total of 18 cases had been registered against Puri following investigations, said sources. According to the official, Puri initially maintained his innocence and said he was not involved in the scam. “So far, we have arrested five persons accused of involvement in the scam, including Puri,” the official said. “There are around 100 more suspects we will have to arrest in connection with this scam,” he added. According to sources, the FIA has set up special teams to arrest those wanted in connection with the scam. Those nominated for arrest include Mian Tariq, Haroon Raisani, former minister for trade and industry Farhan Junejo, Faisal Siddique Khan and other senior TDAP officials, they said. Farhan and Faisal allegedly played the role of front men on behalf of an important government official involved in the scam, said another official. Tariq and Raisani too played the role of middlemen in securing trade subsidies for fake companies, he said, adding their arrest could lead to the disclosure of the names of other former government officials involved in the scam. AGenCieS
Disneyland is a work of love. We didn't go into Disneyland just with the idea of making money. — Walt Disney
Govt to strip off non-viable components of pia KArAchI
t
StAff RePORt
HE Pakistan International Airlines (PIA) has rallied 89 percent in last 10 days due to unfolding details on PIA privatisation process narrated in the IMF document released on September 04. Moreover, Prime Minister Nawaz Sharif, on September 13, directed Ministry of Privatisation and Civil Aviation Division to begin the privatisation process of the PIA with immediate effect. "We think it is still too early to be optimistic on the stock like the PIA because of uncertainties regarding the transaction," said Muhammad Tahir Saeed of Topline Research. Therefore, the analyst said, he was cautious on the stock due to many questions that may be clarified in future. Major questions that, he said, needed to be addressed to determine whether investors will benefit or not are: What will be the share split between PIA-1 and PIA2? Will there be any serious buyers for 26 percent stake of PIA-1? As per the IMF document, the government has shown its intention to restructure the PIA by stripping off its non-viable components (including ageing equipment, non flight operations etc) under another Public Sector Enterprise (i.e. PIA-2) by
December 2013. The government will service the guaranteed past loans of PIA2, grant a voluntary ‘handshake’ plan for the excess workforce and then liquidate it by June 2014. The PIA-1 will retain its airline business while in the meantime it will continue contracting leases on more efficient airplanes and rationalise its routes in order to attain efficiencies. The PIA-1 will also keep some liabilities that it can service, streamline its workforce and may receive capital injection from the govt. The government plans to privatise 26 percent stake of the PIA-1 to strategic investors by June 2014. "Ageing fleet, outstanding loans, incomplete cost pass through, lack of quality manpower and overstaffing would make the PIA privatization difficult, we believe," said the analyst. Coupled with these factors, there is lot of pressure against this privatization from labour unions and political parties too. Marred by management-related issues over the years, the PIA's balance sheet looks quite depressed
We think it is still too early to be optimistic on the stock like the PIA because of uncertainties regarding the transaction MUHAMMAD TAHIR SAEED TOPLINE RESEARCH which is evident from Rs 172 billion debt and negative equity of Rs 118 billion as on March 31, 2013. Equity includes Rs156 billion accumulated losses of past years de-
BUSINESSMEN WORRIED SICK ABOUT GAS CLOSURE IN WINTER ISLAMABAD Online
The business community has asked the government to refrain CNG stations, captive power plants and industrial sector from suspension of gas supply as it will badly cripple the industrial activities in the country. In a meeting, the local businessmen have shown great concerns over the reported decision of the ministry of petroleum and natural resources to close down the supply of gas CNG stations, captive power plants, industrial and fertilizer sectors in the coming season and called upon the government to avoid such decisions. Chairing the meeting, Islamabad Chamber of Commerce and Industry President Zafar Bakhtawari said the government should ensure uninterrupted supply of gas to industry by
rationalising the allocation of gas to different sectors as the closure of gas to industry would further weaken the already struggling economy. He said due to energy crisis, the industry was running on far less than its actual capacity and shutting down gas to this critical sector of the economy would cause multiple negative implications including closure of industrial units, bank
defaults, loss of jobs to millions of workers and reduction in tax revenue leading to further slump in economic activities. The businessmen said the new government had created lot of hopes in traders and industrialists as they were looking forward to formulation of business friendly policies for reviving the economy but such harmful decisions go against its promises to facilitate the growth of business and industry. They said the country needed new investment to improve infrastructure and economic revival and warned that stopping gas to industry would discourage prospective investors from considering Pakistan for investment. The industry needed continuous power supply to meet exports orders and any suspension of gas would hurt the exports of the country as well, they further commented.
spite the fact that company's operating revenues increased at CAGR of 10 percent in last five years (2008-12) to Rs 112 billion from Rs70 billion. In 2007, accumulated losses stood at Rs 28 billion. Significant increase in accumulated loss is due to the management inefficiencies including inability of the airline to pass on cost of services, huge administrative costs and rising debt servicing requirements. In 2012, the PIA incurred losses of Rs 33 billion vs Rs 27 billion last year while the company has incurred losses of Rs 8.6 billion in 1Q2013. Huge administrative costs are primarily due to the fact that the company has 17,439 employees (as on Dec 31, 2012) while company has a fleet size of 34 aircrafts out of which only 24 are operational. The PIA's employee-to-aircraft ratio is 513 compared to global average of 120. The PIA is unable to pass-through rising cost due to uneconomic routes and subsidised air fare for govt officials.
psm undergoing loss of rs 60 to 70m per day: minister ISLAMABAD APP
Minister for Industries and Production Ghulam Murtaza Khan Jatoi informed the National Assembly on Friday that the Steel Mill of Pakistan was undergoing a loss of Rs 60 to 70 million per day. Responding a question, the minister said four bail out packages of around Rs 40 billion had been given to the steel mill during the period from year 2008 to 2012, while it had borne a loss of Rs 86 billion during the period. He said the government had nothing to do with the enlisting of the steel mill of Pakistan in privatisation list as it was already there. He said through the approval of the Economic Coordination Committee (ECC) three billion rupees were issued for the steel mill. Pending salaries were given to the employees while the remaining amount was enough to cater the needs of the institution till November this year, Jatoi added.
DAR AMBITIOUS FOR GROWTH TARGETS, PRIVATISATION WAShINGTON inP
The Pakistan's finance minister, who has already moved to pull the economy from the brink and garnered vital support from the International Monetary Fund, said in an interview that the country would launch a wide-scale privatisation program as it seeks to meet ambitious growth targets. Finance Minister Ishaq Dar aims to double the economy's growth rate. Under the previous administration of the Pakistan People’s Party, investment had collapsed, the budget deficit had jumped to well over 8 percent, public debt had ballooned, and depleted foreign-exchange reserves meant Pakistan was in danger of defaulting on $3 billion of international loan repayments due this financial year. "We inherited an economy that was in a serious state of imbalance," said Ishaq Dar, a confidant of Prime Minister Nawaz Sharif, who trounced PPP in May's elections and took office the following month. "Pakistan was at a critical stage." Since then, the government managed surprisingly quickly to remove the $5 billion chain of "circular" debt that was choking the crucial electricity sector by paying off and
Ishrat Hussain, a former governor of restructuring the liabilities. A roughly 60 percent increase in electricity tariffs to con- Pakistan's central bank, cautioned that the sumers - an unpopular step - will be imple- IMF conditionalities, based on stabilisation mented fully by October in an attempt to and fiscal discipline, would make meeting stop the debt from accumulating again, the such high growth targets a challenge. "The government is moving in the right direcWall Street Journal reported on Thursday. To protect its foreign reserves, the gov- tion," said Hussain. "After five years of ernment also secured this month a $6.6 bil- stagnation, people are expecting a revival lion loan from the IMF, winning guarded of growth, but the IMF program takes away praise from the fund for its agenda. For the some freedoms. This will be a major balpast three years, multilateral lenders had ancing act for them." shunned Pakistan. The loan, which is designed only to allow the country to make the repayments on the previous, lapsed IMF program, should instill more confidence We have in the country, anathree E's as our lysts said. Dar said that, priority: economy, as a result of the energy and extremism. planned overhauls, he sought The leadership is fully to double the committed to deal economy's growth rate, curwith all three E's. rently barely keepThey are ing up with the population increase, interrelated to 6 percent in three years.
Analysts warn that the new economic strategy can't be realised unless Islamabad also tackles the country's other major crisis: security. A raging Islamist insurgency in the northwest that also menaces the rest of the country, coupled with endemic organisedcrime violence in Pakistan's commercial heart, Karachi, has spooked investors. Dar says he is aware of the challenge. "We have three E's as our priority: economy, energy and extremism. The leadership
is fully committed to deal with all three E's. They are interrelated," he said. Publicly owned enterprises have become a major burden on the economy, losing between $4 billion and $5 billion a year, said Dar, adding: "Surely we can't keeping bleeding like that." The government's plan is to privatise around 35 public corporations in the next three years, he said. This month, the government announced the first on offer: a minority stake in Pakistan International Airways, the troubled national carrier. Increasing tax revenue is another priority. Only about one million people pay income tax in Pakistan, a country of 180 million. Diplomats say the international community, tired of lavishing aid on a country whose own elite refuse to pay their taxes, is eager to bring more Pakistanis into the tax net. Dar said he aimed to add 500,000 taxpayers over the government's five-year term, raising tax revenue as a proportion of gross domestic product to 15 percent from the current 8.5 percent. Having been elected partly on a promise to end electricity shortages, Sharif's government now says it will take at least five years to achieve it, which could test voters' patience.