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Sunday, 29 July, 2012
Saving our fiscal soul Savers add over Rs 242bn to government’s ‘unfunded debt’ during FY12 KARACHI
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ISMAIL DILAWAR
he recently concluded FY12 augured well for the country which saw the countrymen managing to save a huge sum of over Rs 242 billion despite a persistent backbreaking double-digit inflation. This saved amount, however, may not seem to set well, in terms of economic soundness, with the cashstrapped government which would have to see this money as an “unfunded debt” to be repaid to the savers with heavy returns. During July-June FY12, the cash-
strapped government garnered Rs 242.168 billion through selling its risk-free saving certificates under the head of National Savings Schemes (NSS). This amount shows an upsurge of 3 percent or Rs 7.22 billion when compared with Rs 234.943 billion the government had raised in FY11. This means, during the year in review, the savers lent over Rs 242 billion to the funds-starved government which would be paid with a 2043 basis points increase announced by the Central Directorate of National Savings (CDNS) on March 30. The current rate of return on NSS instruments stands at 11.87 percent on Special Saving Certificates (SSC), 12.12 percent on Regular Income Certificates (RIC), 14.28 percent on Behbood Saving Certificates (BSC) and Pensioners Benefit scheme, 12.33 percent on Defense Saving Certificates (DSC) and 8.40 percent on the NSS savings accounts. The analysts believe that these savings could have been a very positive and most useful economic indicator for developing Pakistan, had the gov-
WTO sets date for MC9 meeting in Bali, Indonesia GENEVA AGENCIES
The Indonesian island of Bali is to be the venue of next World Trade Organization inter-ministerial meeting, the international trade arbiter said. The decision to hold the ninth Ministerial Conference (MC9) in the first week in December 2013 was decided by the WTO General Council meeting in Geneva on July 25-26. Making the announcement late Friday, chair of the General Council Ambassador elin Johansen of Norway thanked Indonesia for its “kind offer”, which she said was “a clear sign of its commitment towards this organization”. Members would discuss the precise dates of MC9 after the summer break, Johansen added. Representatives from Indonesia said that in the face of the global economic crisis the inter-ministerial meeting could galvanise and strengthen international trade. It could also help relaunch negotiations on the stalled Doha accords, which focus on dismantling obstacles to trade for poor nations, Indonesia said. “In the situation where crisis is still hampering the global economy, Indonesia continues to believe that the multilateral trading system has a significant role in fostering a fair global trade, sustaining the world economic growth, eradicating poverty and creating job opportunities,” its delegation said. “In this regard, the next MC9 will therefore be very important to re-energize the negotiation process and the progress achieved so far, and to strengthen the multilateral trading system.” It said Indonesia also hoped the exotic ambiance, the warm weather and the hospitality of the people of Bali “will rejuvenate and renew the constructive spirit” of the Doha negotiations. The Doha round of global trade talks began in 2001 but have been dogged by disagreement, including how much the United States and the european Union should reduce farm aid and the extent to which emerging market giants such as India and China should cut tariffs on industrial products. The Ministerial Conference is the highest decision-making body of the WTO and meets approximately every two years. The last one was held in Geneva in December.
ernment not been using the saved money under the non-development heads, such as running of the government. The economic observers, though positive towards the current upward trend in national savings, are critical of piling up of the heavily indebted government’s liabilities for the retirement of which the latter was doing no provisioning. A recent history of the government borrowings through NSS instruments shows that the risk-free and heavily-weighted saving certificates had fetched the government over Rs 224.767 billion in FY10, Rs 267.223 billion in FY09, Rs 86.639 billion in FY08, Rs 67.651 billion in FY07 and Rs 6 billion in FY06. The investments in NSSs, which amounted to a meager Rs 6 billion in FY06, ballooned by over 1000 percent in FY07, over 28 percent in FY08 and over 208 percent in the recession-hit FY09 and then dipped by 15.8 percent in FY10. But, finally, in FY12 a recovering global economy seems to have restored the investors’ confidence who bought saving certificates worth Rs 242 billion. “The money that come to the government through saving
schemes is a liability and is called unfunded debts,” views a senior analyst Asfar Bin Shahid,. But, the analyst believes, worrisome was the fact that the government was using these debts without creating a separate fund that could ensure retirement of the borrowed money. “Spending these unfunded debts without doing provisioning is going to be a dangerous thing,” Shahid warned. he says setting a sort of collateral for these unfunded debts by the government would also provide the investors with a confidence against his/her money. “It’s a kind of confidence building measure that we are apportioning a certain amount to retire your debt,” said the analyst. The provisioning against the unfunded loans, he suggested becomes easier when the maturity periods have been set in advance for these credits. About usage of the NSS debts, the analyst said, ideally, every penny of the taxpayers’ money should be spent “optimally” for the development purposes, especially in the socio-physical infrastructure side.
Investors terrorised
ISLAMABAD ONLINE
Pakistan loses $18 billion investments in three years due to terrorism, energy crises
Pakistan has lost around $18 billion foreign and domestic investments in last three years due to terrorism and chronic energy crises, an official of Board of Investment said. The official told “Online” Saturday that the expected investment of about $18 billion of last 3 years did not come in Pakistan after investors cited the problems of terrorism and energy shortages. “Now government is making all-out efforts to build the confidence of foreign investors by removing the barriers that discourage investment in the country,” said the official, adding that terrorism and energy shortages have put long-off term investors. The official told that unstable law and order situation, political instability, corruption and inconsistent policies on part of government were also major impediments in way of promoting investment in the country. The official further told that the Board of Investment will now move ahead more rapidly for motivating local and foreign investors to invest in the country and through recently passed Special economic Zones (SeZ) bill some of the investor countries like Korea, China and Japan were expecting to benefit from the scheme as soon as it became operational. According to the State Bank of Pakistan (SBP) foreign investment into Pakistan fell 65.6 percent to $680.4 million during financial year 2011-12 and foreign direct investment fell 50.3 percent to $812.6 million.
Indebted to lack of payments Pakistan may face ‘unpleasant implications’ for exchange rate due to foreign debt repayments
ISLAMABAD ONLINE
The aid-dependent Pakistan may face unpleasant implications for exchange rate due to foreign debt repayments in current financial year 2012-13 which in return will fuel inflation due to increasing cost of imported goods. The approved current 2012-13 fiscal year financial year’s development budget and annual plan said the country’s gross official reserves may d eplete to $8.24 billion by June 2013 which is 28 per cent or $3.2 billion, lower than what has been projected for last financial year 2011-12. An official working in the Finance ministry told “Online” that in current financial year 2012-13 unavoidable, international and domestic contractual and obligatory payments will be considered on case to case basis and relaxation if required may be allowed by the Finance Secretary The current account deficit – gap between total foreign receipts and payments –is expected to widen to $5.3 billion or 2.1 per cent of total size of economy during on going fiscal year. According to the repayment schedule agreed between Pakistan and IMF, Pakistan will repay its $7.6 billion debt to the IMF till the end of fiscal year 2014-15. The $11.3 billion SBA program had expired on September 30, 2011 and the last two trenches of $3.7 billion could not pay to Pakistan by IMF following Islamabad’s failure to pursue key reforms as well as the emergence of the revenue figures fiasco. Despite depressive economic situation of the country, the government had paid back total amount of $1.2 billion to International Monetary Fund during fiscal year 2011-12 from foreign currency reserves held by the State Bank of Pakistan (SBP). Pakistan had entered into $11.3 billion programme in 2008 with IMF and got disbursements of about $7.6 billion, but failed to get the remaining $3.7 billion due to slippages in performance criteria, leading to suspension of the programme in May 2010 and was ended unsuccessfully on September 30,2011.
PAMA, PAAPAM for consultation with stakeholders KARACHI NNI
The auto sector of the country while showing serious concerns has requested to the federal information minister to ensure consultation with the sector about new entrant policy before making any final recommendations for eCC. The Federal Minister for Information is heading a
sub committee constituted by the economic Coordination Committee of the Federal Cabinet to evaluate the proposal by Ministry of Commerce to allow new investment with additional incentives over the existing tariffs and regulations. Pakistan Automotive Manufacturers Association (PAMA) Director General Abdul Waheed Khan and Pakistan Association of Automotive Parts Accessories Manufacturers (PAAPAM) Chairman Syed Nabeel hashmi have made this request in a letter to Ministry of Information & Broadcasting Federal Minister Qamar-uz- Zaman Kaira. They said that unfortunately the voice of auto industry, which is the major stakeholder in this issue, has totally been ignored in government’s policy of extending tariff concessions to new entrants. ‘Both these organizations are the only officially recognized representatives of the OeMs and the vending industry working in the country. On the other hand, the sub-committee formed in this regard by the government has been gracious in allowing the opportunity to a particular foreign investor to make presentations to it and thus influence the decision making process in its favor,’ they stated in the letter. But a decision reached and policy de-
veloped without having an opportunity to listen to both sides of an argument cannot be balanced, they reasoned, adding that the motorcycle sector is the most vibrant sector of the industry. It has registered a growth of 37 percent on year-on-year basis over the last 10 years and no other sector has shown such consistent high growth. They stated that policy interventions are being made in this sector just to appease interest of persons related to a single investor in total disregard of the interests and concerns of an industry which has billion of rupees of investment and is supporting direct employment for around 200,000 skilled and semiskilled jobs. Motorcycle industry has a high multiplier effect due to its forward and backward linkages and is supporting around 1.5 million jobs in different sectors of the economy, so the way the policy is being developed for this sector is most unfortunate indeed, they stated in the letter. They further said that ‘the proposed policy shift will have serious ramifications for the vending industry of 800 odd players, as the technology transfer rolls back, investment decisions are suspended and will have long-term negative impact on investors confidence on governments policies for future investment.
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Business 02 London Olympics open with $42.5m party of music, history
THOMAS PENNY, DANIELLE ROSSINGH AND TARIQ PANJA
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he London Olympics opened with a spectacle celebrating Britain’s engineering, national health care and rock ‘n’ roll. harry Potter and the Beatles joined in. The 27-million-pound ($42.5-million) show culminated with seven young British athletes lighting the flower-petalshaped Olympic cauldron after the flame was brought into the stadium by Steve Redgrave, who won five gold medals for Britain in rowing. Aditya Mittal, chief financial officer of Luxembourg-based Arcelor Mittal(MT), the world’s biggest steelmaker, sat in the second row waving an
Indian flag. “It had a lot of soul, it went through Britain’s glorious history and it was very compelling and very emotional and a lot of fun,” he said in an interview. Medals will be awarded in 12 events today, the first full day of competition. The schedule includes the men’s swimming 400-meter individual medley at the Aquatics Centre that will feature 14-time gold medalist Michael Phelps of the U.S. Watched by more than 130 heads of state and an estimated global television audience of 1 billion, last night’s opening ceremony took a sweep through British history. It was choreographed by film director Danny Boyle who won an Oscar for “Slumdog Millionaire” in 2009. Spectators gathered outside the park more than eight hours before the start of the show. After several days of sunny, warm weather, rain began 30 minutes before the start, causing fans to gather under umbrellas and ponchos. It stopped by show time. NATION’S RECESSION: The Olympic Park, including the stadium, is in one of the poorest areas of the capital city of a nation mired in recession. “Britain needs a bit of a lift at the moment,” said Karen Saleh, from Portsmouth on the south coast of england, who paid 600 pounds for tickets for
a family of four. Starting with the “green and pleasant land” of William Blake’s poem “Jerusalem,” the show passed through the Industrial Revolution and led to popular music of the past half- century. The portion of the show on the National health Service, featuring volunteer performers from hospitals and clinics, was watch by spectators including U.S. Republican presidential candidate Mitt Romney who has pledged to overturn President Barack Obama’s healthcare plan if elected. Former Beatle Paul McCartney actors Rowan Atkinson, Daniel Craig and ,Ken-
neth Branagh and “harry Potter’” author JK Rowling all joined in the ceremony. Queen elizabeth II officially opened the games. FLAG CARRIERS: The British flag was carried into the stadium by Chris hoy, the most successful Olympic male cyclist. Fencer Mariel Zagunis was the flagbearer for the American team, while reigning French Open tennis champion Maria Sharapova held the flag for Russia. The world’s fastest man, Usain Bolt, carried the Jamaican flag. Distance runner haile Gebrselassie and 1960 boxing champion Muhammad Ali were among the flag bearers carrying the Olympic banner.
PTCL re-launches voluntary welfare severance scheme for employees ISLAMABAD: On popular demand by its employees, Pakistan Telecommunication Company Limited (PTCL) has launched a new Voluntary Separation Scheme (VSS), offering attractive financial benefits and facilitation options for employees. “VSS is a completely voluntary offer especially designed to ensure long-term welfare and well-being of our employees and their families,” said Senior executive Vice President hR, Syed Mazhar hussain while briefing the media here today. “employees have a choice to either opt for a very attractive severance package, or continue working at PTCL which has always considered its employees as a top priority.” Giving details of the new VSS scheme, Mr. hussain told the press that PTCL’s first 2008 VSS scheme had received a very positive response, which far exceeded expectations. he informed that the 2008 VSS was offered to 50,000 employees and 35,000 opted for it. “honoring the hard work and commitment of our employees, PTCL invested huge sums to make their choice beneficial and rewarding,” said Mr. hussain, adding that PTCL relieved 30,000 employees while around 5,000 applicants couldn’t be spared and it has since been a pressing demand from employees to introduce a similar scheme again. explaining the key features of the new VSS scheme announced today, Mr. hussain informed that it was being offered to approximately 16,000 employees. “We are offering yet another golden option to our employees to choose a rewarding future which may be a lifetime opportunity,” he said. “however, if they choose not to avail this opportunity, they will remain respectable employees of the company”. For raising awareness and consultation among employees, PTCL has undertaken an efficient nationwide mechanism comprising information & special counseling sessions, promotional road-shows, and financial advisory consultations & services. Special helpline and help desks have also been set up for the purpose with a toll-free number 0800-13531. “Our employees are PTCL’s most important asset and our aim is to provide them maximum facilitation and guidance in deciding a bright future for themselves,” said Mr. hussain.
Flower petals carried by each team were combined into the cauldron, which rose from the floor of the stadium to form one flame. Fireworks lit up the sky as McCartney took the stage. Throughout the almost four-hour extravaganza, loud music ranging from the Beatles and the Rolling Stones to David Bowie and Adele pulsed around the 80,000-seat Olympic Stadium. “I thought it was epic, a little long, but I loved the music closing,” Jim habel, a Los Angeles attorney with the firm of McKool Smith hennigan, said in an interview at the stadium. “I loved the fact that they saluted all the eras of music.” COuRtESy: BLOOMBERG
CORPORATE CORNER LG announces second-quarter 2012 financial results
looks to Fe d, EC to de B liver stimu lus NEW YORK AGENCIES
Investors face US and european central bank meetings next week hoping to see fresh action to spur economies damaged by the eurozone sovereign debt crisis. Over the week, the Dow Jones Industrial Average gained 1.97 percent, finishing above 13,000 points for the first time since early May. The blue-chip index of 30 stocks finished Friday at 13,075.66, the highest close since May 4, and the second day of triple-digit gains. The tech-rich Nasdaq advanced 1.12 percent, to 2,958.09 points. The Standard & Poor’s 500, a broad measure of the markets leaped 1.71 percent to 1,385.97 points. “Stocks rallied throughout the day on speculation that the Federal Reserve and the european Central Bank are close to providing further stimulus,” analysts at Wells Fargo Advisors said. All eyes will be on the Federal Reserve when it wraps up a two-day policy meeting Wednesday. economists are divided over whether the central bank’s Federal Open Market Committee will announce additional stimulus for the slowing economy, or wait for more information. The world’s largest economy slowed in the second quarter as consumers cut back spending on big-ticket items, offi-
cial data showed Friday. The Commerce Department said that gross domestic product growth fell to a 1.5 percent annual rate from 2.0 percent in the first quarter, fueled a big rally on Wall Street, which had expected a worse reading. economists say the economy is set to muddle along in the third quarter amid risks from europe and fears of the government’s year-end tax hikes and spending cuts they could push the country back into recession. “The outlook is worse than the Federal Reserve’s June projections, and as a result we expect to see another round of quantitative easing from the Fed,” said Nigel Gault, chief US economist at IhS Global Insight. “But we expect the Fed to wait until September to act — which would allow it to see two more monthly employment reports —, rather than move at next week’s meeting,” he added. The big week for macroeconomic news culminates Friday with the keenly awaited July US jobs report. expectations are for the unemployment rate to hold unchanged at 8.2 percent, and sluggish jobs growth to continue. With markets on tenterhooks over the eurozone’s fate as debt-laden Greece looks headed for an exit and yields on sovereign debt of Italy and
Spain surge higher, investors will be looking across the pond to the european Central Bank’s meeting Thursday. eCB president Mario Draghi’s comments that the bank was “ready to do whatever it takes” to preserve the euro on Thursday sparked massive equities rallies. Pledges by the leaders of Germany and France on Friday to do “everything” to save the shared currency further eased concerns. In a joint statement, German Chancellor Angela Merkel and French President Francois hollande pledged to do “everything to protect the eurozone.” Wall Street put on an impressive comeback late in the week, after stocks plunged Monday on eurozone crisis fears and the Dow closed Tuesday with tripledigit losses for the third straight day. Better-than-expected earnings reports from Merck, exxonMobil and Boeing, among others, spurred bullish sentiment. Consumers will be in focus on next week’s economic calendar, starting Tuesday with personal income and spending numbers and a July reading on consumer confidence. Auto sales data for July arrive Wednesday. The closely watched Institute for Supply Management’s PMI indices on manufacturing and services are due Wednesday and Friday, respectively.
KARACHI: LG electronics (LG) reported a 46 percent increase in net profits for the second quarter of 2012 versus the same period a year ago. Despite the continuing recessionary conditions, LG’s operating profit in the most recent quarter increased significantly year-over-year. Stronger performance in home entertainment and home appliances compared to the second quarter last year helped offset profit declines in LG’s mobile business. pRESS RELEASE
NHA chairman addresses executive board
ISLAMABAD: NhA Chairman Syed Muhammad Ali Gardezi has said that sufficient funds have been provided to NhA for the financial year 2012-13, which will enable NhA to carry on all its projects. he added that provincewise allocation of funds will help NhA to allocate more funds for near completion projects and complete them in time. Chairman NhA said this while addressing the executive Board meeting at NhA headquarters. pRESS RELEASE
CFO Mideast Forum KARACHI: Fluctuating fortunes in trade and commerce worldwide is resulting into financial turbulence to the extent that even continent like europe has fallen into its grip. This would be the food for thought at the CFO Mideast Forum planned to be held in Dubai in October. It would be a large platform of experts in financial management to formulate way out for the corporate sectors in the Middle eastern region from the devastating effects of world wide recession. pRESS RELEASE
Sunday, 29 July, 2012