Profit 30th December, 2011 by Profit Epaper

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Fiscal glooms of Annual Economic Report 2011 Page 2 Zardari, I love you Page 3 Italy seeks bigger euro fund after tough debt sale Page 5 Pages: 7

profit.com.pk

Friday, 30 December, 2011

GaS SuPPLy to CNG SeCtoR aND iNDuStRieS

Lack of investor-friendly derivatives plagued capital market in 2011

Na body stops short of outright ban ISLAMABAD

AMER SIAL

TOPPinG short of recommending an outright ban on the supply of gas to the industrial and CnG sectors for at least two months, the national Assembly Standing Committee on Petroleum on Thursday asked the government to implement in letter and spirit gas supply agreements with different sectors and take measure to reduce massive gas theft. Officials of the Petroleum Ministry and Sui companies wanted the committee to give recommendations for an outright ban on gas supply to industrial and CnG sectors. However, intervention from Jamshed Dasti of PPP and Barjees Tahir of PML-n stopped the move as they demanded that the committee should be briefed on steps taken to implement the legal agreements on gas supply with the industrial sector and measures to control the rampant gas theft. Jamshed Dasti wanted to know the reasons why Sui northern Gas Company Limited (SnGPL) could not stop gas supply to a factory of Foreign Minister Hina Rabbani khar even during the current extreme shortage period. He also wanted the officials to name the person who was pressurising

SnGPL to divert gas supply to the industrial sector from the CnG sector. Questioning the competence of officials, Barjees Tahir said they were all highly educated from internationally renowned universities and were experienced enough to present the required steps to avert the crisis. He said they were not bringing the complete picture before the committee and just wanted a recommendation which they were not bound to follow. He said officials were involved in illegally granting licenses to 500 CnG stations during the last four years even though Prime Minister had imposed a ban on issuing new licenses due to gas shortages. Chairman Talib Hassan nakai also supported their demand and said that more thinking was required on finding the solution. He also stressed that the ministry should take steps to create awareness among the people about the need for gas conservation in the presence of low supply. Rana Afzal Hussain of PML-n and Shahnaz Shaikh of PML-Q demanded a complete ban on the supply of gas to industries and CnG sector and demanded parity in CnG, petrol and diesel prices. They said rampant theft in CnG sector was resulting due to the involvement of the staff of sui companies. They stressed that the political

Jamshed Dasti questions SNGPL over continued provision of gas to factory of Foreign Minister Hina Rabbani Khar PML N and PML Q parliamentarians demand complete ban of supply to both sectors SNGPL MD states gas theft at 4pc, whereas actual unaccounted for gas losses stand at 12 per cent parties should dissuade from making it a political issue. Petroleum Minister Dr Asim Hussain said that time had come to take some tough decisions to end gas demand. He said they have proposed to the Finance Ministry that Rs10 per litre petroleum levy on petrol should be reduced as prices of CnG were set to rise to Rs79 per kg from next month. This, he said will facilitate in reaching an equilibrium in supply and demand, as it will reduce the demand for gas otherwise there would be no option other than curtailing gas supply. He said riots in Faisalabad were uncalled for, as industries have supply agreements for only 9 months. They were accommodated by being provided gas supply during the three month curtailment period for the last three years however it was not their right. Secretary Petroleum ejaz Chaudhary said they faced embarrassment before the committee on the slow pace of oil and gas exploration but there were many hindrances. Giving an example, he said an exploration company wanted to do an aerial survey of kharaan block in Balochistan but it was disallowed by the Ministry of Defence. He asked whether the survey could be done on a donkey in the restive province. He said the fertiliser sector was being provided a

cross subsidy of Rs44 billion per annum. MD SnGPL Arif Hameed said that the gas pressure on the company network reduced to 750 pound square inch (psi) on December 27 and if it had decreased to 730 psi then the gas compressors would have been tripped and the rehabilitation would have taken two weeks to complete. He said orders for physical disconnection of 4200 industrial units in Punjab were given and 2060 were already disconnected, while that of foreign minister would be disconnected by this evening. When nazar Gondal of PPP asked him to control massive theft, he said that SnGPL was faced with a theft of 4 percent after a reduction of one percent that helped save the company a loss of Rs2 billion. in reality however, both the sui companies have unaccounted for gas (UFG) loss of 12 per cent that roughly translates to Rs24 billion per annum. internationally accepted UFG benchmark for gas utility companies is 5 percent. He said the company had sacked a GM, 5 officers and 18 staff members while investigations were underway against 106 more employees. When the members asked for names he said that he did not have the names with him but would be submitting them to the committee secretariat.

KARACHI STAFF REPORT

ike many other markets of the world, it was a bad year for Pakistan’s capital market where trading volumes nose-dived to 10-year low. According to market observers, the outgoing year saw the local market posting a negative return of 5 per cent, 9 per cent in dollar terms, with one more session yet to go. “Buying selling of shares, floating of new companies and fund raising through right shares, all remained depressed in 2011,” said Farhan Mahmood of Topline Securities. Most importantly, he said, the market players remain concerned about reintroduction of Capital Gain Tax (CGT) after a gap of more than three decades, its understanding and last but not the least its cumbersome calculations. “Resultantly, individual investors preferred to remain on the sidelines,” Farhan viewed. The market cap based benchmark kSe 100 index fell five per cent ($9 per cent) in 2011 while free float based kSe 30 index came down by 11 per cent ($15 percent). MSCi Pakistan index was also down 16 per cent in the outgoing year. The value of karachi bourse trimmed down by Rs302 billion or 9 per cent as market capitalisation reached Rs2.97 trillion ($33bn) at the end of 2011. Hence, average daily volume of 81 million shares was down 34 per cent from 2010 and 63 per cent from 10year average. in terms of value daily business of Rs3.6 billion ($40 million) was lower by 19 per cent from 2010 and 77 per cent from last 10-year average. Farhan said another misery in 2011 was the limited number of initial Public Offerings (iPOs). A total of only four iPOs (iSL, PkGP, eFOODS, TDiL) were witnessed with total size of Rs1.8 billion, which is far lower from last 20 year average of 16 iPOs a year. Compared to huge selling in global markets, Pakistan in 2011YTD saw net outflow of US$122 million (including US$60 million selling in Hubco) compared to net buying of US$526 million in 2010. interestingly, Pakistan with negative return of 16 percent (as measured by MSCi Pakistan) stood as the best Asian Frontier markets; outperforming three other Asian frontier markets, Bangladesh, Sri Lanka and Vietnam, by 12-29 percent.

CSa with China: Pakistan looking for alternative international currency? KARACHI

ISMAIL DILAWAR

S the international financial crises, originating from the United States and europe, question the status of the dollar as a reliable currency for international trade and investment, Pakistan like many other risk-averse countries of the world has started looking for alternative options. The signing of Dec 23rd Currency Swap Agreement (CSA) between the central banks of Pakistan and China, an emerging economic giant of our time, was partly aimed at enhancing role of Chinese Yuan in international trade and investment. “The principal objective of these swaps is to promote the use of regional currencies for trade settlement purposes and specifically in the case of China, it is to enhance the role of the Chinese Yuan in international trade and investment,” said Governor State Bank of Pakistan (SBP) Yaseen Anwar

in a statement issued Thursday. explaining the features and modus operandi of CSA, Anwar said the agreement represented a significant achievement for both governments in promoting and enhancing not only bilateral trade, but also the opportunity to significantly increase investment in Pakistan going forward. He said CSA is executed for a tenor of three years in respective local currencies, Rs140 billion and Chinese Yuan 10 billion. This is the second CSA that SBP has signed, the first one being with central bank of Turkey on november 1 this year. “While these are strictly bilateral arrangements, the precise terms and conditions of each of these CSAs are confidential between two central banks,” governor SBP said. China’s concurrent Yuan local currency settlement programme was also consistent with the underlying currency swap objectives. The latest CSA between Pakistan and China also reflected similar objectives of promoting trade and investment in

bilateral currencies, he said. Objectives and structure of CSA: The objective of the swap is to 1) promote bilateral trade, 2) finance direct investment between the two countries in the respective local currencies of the two countries and 3) any other ‘purpose’ as mutually agreed between the two central banks. Since CSA is a bilateral financial transaction, all terms and conditions apply equally to both countries and the pricing is based on standard market benchmarks, which are widely acceptable in the respective domestic markets of the two countries. The following are more details on the structure of the transaction: 1) Both central banks will have the ability to draw on the swap line any time during the tenor of the swap. 2) SBP can purchase CnY from PBC against its local currency (PkR), and repurchase its local currency with the same CnY on a predetermined maturity date and exchange rate. Similarly PBC can also purchase PkR against CnY. Standard market

pricing will apply on the date of utilisation. Like any swap, the pricing is linked to interest rates differentials between the two currencies. 3) However, drawing under the swap line by either central bank will be contingent on 1) bilateral trade being denominated in local currencies, or 2) financing of direct investment between the two countries. SwAp utiliSAtiOn: The announcement of the currency swap agreement between the two central banks will give a positive signal to the market on the availability of liquidity of the other country’s currency in the onshore market. This means that for example, SBP will have the ability to draw on the swap line and provide Chinese Yuan to banks in Pakistan. Banks will on-lend this liquidity to importers/exporters involved in trade denominated in Yuan. At maturity, the importer/exporter will repay the foreign currency to the lending bank; and the bank will repay to the respective central bank. About the process Governor SBP

said utilisation of CnY in Pakistan on account of CnY/PkR swap: SBP will lend CnY to banks which will on-lend to: On the maturity date of the letter of credit (LC), importer will pay off the overseas supplier by borrowing in CnY. Assuming borrowing is for six months, the importer will save on the rupee cost and after six months the importer will buy CnY against PkR and pay off CnY loan. Availability of onshore CnY financing will encourage importers to open CnY denominated LCs. Once the contract is established, the exporter will borrow in CnY, sell CnY against PkR and utilise PkR for its local operations. utiliSAtiOn Of pKR in ChinA: Same concept will apply to PBC drawing PkR against the swap line and lending the same to banks in China. China has significant investments in various projects in Pakistan and Rupee proceeds of the swap can be channelised to such long-term projects in Pakistan via Chinese banks.

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Friday, 30 December, 2011

debate

Fiscal glooms Year after year, the economic outlook, published by the SBP, remained sordid in its attempt to explain the reasons as to why Pakistan has become an economic dwarf. In its recent disclosures, the central bank, has blamed fiscal problems, domestic debt and crowding out, power outages and governance for the 2.4 per cent GDP that Pakistan bagged in year 2011, against the forecasted 4 per cent DURDANA NAJAM

AkiSTAn was celebrating the 135th birth anniversary of its founding father, Quaid-e-Azam Mohammad Ali Jinnah; right after the clock struck 12 am, all the lights went out in many areas of Pakistan, including ours. Darkness on the eve of 25th December, however, evoked feeling of despondency, leaving one questioning oneself, as to how did Pakistan become a state of unmanaged people, institutions and culture? To my query, that i recently posed to one of my scholar friends, about Pakistan’s survival when practically the entire state machinery has broken down; a brief, but short response to my inquiry was, “foreign aid”. My friend readily drew my attention to the newly awarded 5.5 billion rupees aid to Pakistan by the World Bank. Aghast, my mind raced forward to the future that looked almost bleak. Almost simultaneously, i began pondering over the report that was published a few days back by the State Bank of Pakistan (SBP), on the economic performance of the government in the last one year. My heart skipped a few beats, as i recalled trade deficits, declining Foreign Direct investment (FDi), and the macabre of institutional failures, occupying the better part of the report.

tHe FauLt LiNeS Year after year, the economic outlook, published by the SBP, remained sordid in its attempt to explain the reasons as to why Pakistan has become an economic dwarf. in its recent disclosures, the central bank, has blamed fiscal problems, domestic debt and crowding out, power outages and governance for the 2.4 per cent GDP that Pakistan bagged in year 2011, against the forecasted 4 per cent. As one goes back to review the previous reports to find what ailed the economy earlier, surprisingly, the aforementioned fault lines appear out to be a lingering concern; something that has always been there. Still, the report eulogises government’s effort in gaining 2.4 per cent GDP on the face of two consecutive floods that inundated most of Pakistan’s agricultural land. The catastrophe that affected major capital inducing and employment generating sectors such as industry and agriculture raised inflation and unemployment; bringing future more trouble to the people already sinking under the deep waters of poverty.

tHe eCoNoMiC outLooK Unfortunately, the issue in hand is more about economic mismanagement than available opportunities and resources. Digging on the causes of fiscal failures, the report exposes the government for its inability to restructure the Public Sector enterprises, reform General Sales Tax, and broaden tax base, by netting the agriculture sector and services, and curtailing billions of rupees of untargeted subsidies. On the domestic debt, the frontier government is living on borrowing.

of Annual Economic Report 2011

With 60.9 per cent of GDP to debt ratio, and 32.8 per cent of government’s revenue going into interest financing, the ability of the government to bring economic growth through fiscal policy is further stymied. Money is going into the likes of railways, PiA, and Pakistan Steel Mills, as well as on subsidies to energy department. The government’s reserves have always been empty for other expenditures. Debt financing has been largely taken care of through domestic as well as foreign funding. During FY11, the government borrowed Rs1.1 trillion from domestic resources, which accounted for 91.0 per cent of the fiscal deficit. Disciplining its borrowing habits, government instead of knocking the doors of the central bank, had opted to raise money from commercial banks through t-bills thus, crowding out the private sector. Why would commercial bank, finance private sector when it can secure its surplus liquidity by placing it under the wings of government; while also getting away with the trouble of stashing capital for credit risk? As a result, private sector credit only grew by 4 per cent in FY11 and on the flip side, government’s borrowing from commercial banks increased to 74.5 per cent.

iNStitutioNaL FaiLuReS - tHe MotHeR oF aLL eviLS if the business scenario of Pakistan has gone worse, owing to fiscal mismanagement, it has wretched up due to energy failure, causing many industries to slow down or shift their operations to foreign countries, applying further revenue supply shocks to the economy. Textile industry, supposedly the backbone of Pakistan’s economy, is closed for days in a given week for lack of gas. Small businesses, which largely depend on electricity to operate, remain dormant for hours, due to long power outages. As the report points out, government has so far taken three steps to reform the energy sector: installation of Rental Power Plants (RPPs), paying off 120 billion rupees in circular debt, and rising power tariff to secure funds to make up for the bad debts. RPPs have failed, circular debt has come back and consumers have filed suits against the government on charges of fleecing them in the name of fuel adjustment. According to the political pundits, institutional failures in Pakistan, have allowed this magnanimous mismanagement in the economic affairs. Going by definition of the World Bank, an economy’s governance or the ability of an economy’s institution to exercise authority depends on six indicators; voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law and control of corruption; if these six indicators are in place, then there is nothing to fear. All these parameters are dismally weak in Pakistan, leaving our institutions and policies, ineffective and fruitless.

tHe exteRNaL SeCtoR is there any margin for us to look forward to, especially when the world on the Western hemisphere is drowning in debt crisis? The economy of europe and America has slowed down; they are into a battle that hardly allows trade relation on equal terms. The external sector has many questions posted on it; what would be the state of Pakistan’s export, especially when it has to pass through dual shocks and instable domestic as well as foreign market? The direct effect of this would result on low FDi that has already registered a relentless dip in FY11 to the tune of 27.7 per cent. The way forward lies in political will to alter the economic crises.

touGH DeCiSioNS to tuRN tHiNGS aRouND The initial steps required, begin by making the SBP independent in its working. The lender of the last resort should be free to make monetary policies on its own assessment. it is high time that the State Bank disciplines commercial banks to promote small businesses, by lending credit on reasonable terms and conditions. Any development on this front could only be possible if the government reforms its fiscal obligations and brings in more tax payers to the fold and increases the ratio of direct taxation. Presently, the entire developmental budget is diverted toward the rehabilitation of flood affected areas; it would have been wise if Benazir income Support Program has been tied to flood rehabilitation activities, so that sustainability could have been achieved across the board. it is completely imperative for the government to generate excess revenue receipts and for that, the State Owned enterprises should start generating funds; the bailout period should be called out. Some strict decision in the line of hiring competent staff, retiring unnecessary employees, lending a few operations on contract to private entities and getting rid of loss making operations, are urgently required. As Javed Hashmi and all the other political leaders joining PTi bandwagon to bring cleaner and fairer Pakistan said while standing at the mausoleum of Quaid-e-Azam, on his 135 birth anniversary that, “Unless, we take bold steps now and salvage this country out of the darkness that it has slipped into, because of bad politics, we will not be forgiven by the Quaid and by all those stalwarts for their efforts.” The writer is a freelance journalist and can be reached at durdananajam456@hotmail.com

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Friday, 30 December, 2011

SHaRi’a MatteRS EDITORIAL

Islamic banking and social reforms

The gas bomb

iTH the new year, just days away the prediction of the soothsayers seems to be materialising now faster than ever. ‘2012, will mark the end of the world’. While the general perception regarding the coming of the apocalypse might border on skepticism, the prediction might hold true for Pakistan, where policy makers are bent upon piling misery on the already strained backs of the proletariat. The latest new Year gift has been in the form of a decision to raise gas tariffs to sustain profitability of the two state owned gas utility companies. The government has decided to utilise revenue generated from Cess to fund infrastructure projects like the TAPi pipeline and the iran Pakistan gas project. One cannot help but praise the government’s concern for developmental projects, but our collective wisdom fails to comprehend why the same has to be done by breaking the back bone of the little middle class there is left. The im-

pact of raising gas prices will have disastrous consequences for the economy, as it will adversely impact businesses directly associated with the consumption of gas. The government has on the one hand failed to establish a viable public transport network and on the other failed to take stock of the fact that a hike in fares of such vehicles plying the roads will have a crippling affect on consumer spending power. While the MBBS doctor Mr Asim Hussain, who happens to be our petroleum minister disagrees that such a step will have repercussions for the common man, his views seem detached from reality. The hike in gas tariff of CnG, industrial, power and fertiliser sector will affect people from all segments of the economy and fuel cost push inflation, a connection that a novice in economics can easily make. Seems like Dr Asim Hussain’s prescription is going to kick start an allergic reaction, one that could take a heavy toll on PPP’s bid for the next elections.

Humayon Dar

SLAMiC banking is not just about conducting financial transactions in compliance with shari'a. Rather, it is fast becoming part of a new islamic financial lifestyle, which in turn is giving rise to a modern islamic lifestyle. While most observers of islamic banking refer to islamic banking in the context of an islamic economic system, it is equally important to look into social implications of islamic banking. What are these social implications? Firstly, islamic banking is popular amongst modern and moderate Muslims. Mostly, conservative Muslims shy away from islamic banking because they are not sufficiently convinced of the shari'a authenticity of islamic banking. The profile of a user of islamic banking services includes those who are relatively young (up to the age of 30), educated (mostly to a degree level)- many of them having been educated overseas and hence exposed to living in a multicultural and plural society - and professionals or those with business backgrounds. Trading communities, who happen to be observant Muslims, are perhaps one exception amongst conservative Muslims who prefer to patronise islamic banking. Secondly, islamic banking provides one of the very few credible examples of an application of islamic principles to the modern phenomenon of business activity. Another notable example of the successful application of islamic principles to contemporary society is in education (there are several international islamic Universities in Muslim countries, and a large and increasing number of modern islamic schools). But islamic banking and finance remains by far the only modern application of shari'a, which has spread all over the world. Thirdly, islamic banking and finance is serving as a catalyst for rapid developments in islamic juristic thinking. Continuous search for new tools and innovative use of nominate islamic contracts for product development has initiated a lively debate on "dos and don'ts" in contemporary islamic jurisprudence. While the principles of

It is high time for PTI to embrace Islamic banking as part of its election manifesto The fallacy of Imran Khan’s economic agenda This is with regards to the article, ‘iknomics – walking the PTi talk’, published yesterday. i found imran khan's views on economy and politics in general, childish and uninformed, to say the least. in one interview, he said that Pakistan should end its alliance with USA and meet its subsequent balance of payments crisis by developing a copper mine somewhere in Pakistan. Well, balance of payments refers to current account and developing mines is in itself a capital expenditure, which will take years to materialise when Pakistan may default on its current liabilities. Moreover, if America imposes sanctions on Pakistan, after its withdrawal or Pakistan defaults, no financial institution will finance these fancy copper and coal projects. imran khan’s views on Taliban and peace talks with them are even more childish and reflect the Pakistan Army's view that all is lost in tribal areas and it is best to hand over parts of tribal areas to Taliban, which will make them more ambitious. All in all, it is a sheer hopeless situation for Pakistan and Pakistanis’ inability to accept that their state and its idea has failed which is what makes them desperately cling to a mirage called, imran khan. in my opinion, nawaz Sharif would be a much better bet for Pakistan.

FINANCIAL ANALYST KARACHI

islamic jurisprudence (called usul al-fiqh) remain intact and undisputed, applied islamic jurisprudence is evolving accounting for the developments in the financial markets and islamic banking and finance. A number of madrasas (notably Darul Uloom karachi) have started producing graduates who are experts in fiqh and finance. Many of these graduates now serve as shari'a advisors with islamic banks and financial institutions - a clear divergence from the traditional careers such graduates used to go for in the past. Consequently, we find graduates of madrasas and islamic universities in the fields of economics, banking and investment management. This is bringing about new social trends that are in favour of engaging the religious intelligentsia in the mainstream of business and finance. in a country like Pakistan where the ethical fabric of society is almost ruptured, there is a need to make islam relevant to the socio-economic needs of ordinary people. islamic banking can potentially play an important role in this respect. it can serve as a training academy for ethical behaviour and islamic principles of trade and finance. For example, there are three fundamental prohibitions in islamic banking and finance: riba (interest), gharar (deception and concealment of information), and gambling. These three prohibitions are based on the principle of justice and fairness. interest is prohibited because it allows one party (eg., lender) to "eat another person's belongings unjustly." Deception and hiding information is not allowed for obvious reasons. Gambling has its own socioeconomic implications. if these three prohibitions are inculcated in the behaviour of users of islamic financial services, this will lead to the development of a new ethical code in the society. "Devouring others' property unduly," deception and fraud, and gambling and taking excessive risks are the types of hazards that can not only destroy individual lives but also ruin societies. The movement against interest, a "casino model" of banking, and reckless investing by banks and financial institutions is gaining momentum in the West. This is perhaps time for Muslim countries to devise a new model of financial intermediation, which is based on social justice. Apparently, there is an added emphasis in Pakistan on justice in the wake of the increasing popularity of Pakistan Tehrik-e-insaf (PTi). islamic banking can certainly play an important role in bringing up socio-economic justice to the country. While other parties have by and large failed to capture the opportunity of using islamic banking as a tool for socio-economic reforms, it is high time for PTi to embrace islamic banking as part of its election manifesto, and appeal even more to the younger generation in the country. Let us see if imran khan pays attention to this important phenomenon, in addition to welcoming defecting members of other parties into the PTi. The writer is a Shari’a advisor to a number of banks and financial institutions and can be contacted at humayon@humayondar.com

Zardari, I love you

Ali Rizvi

einG a third world country has its own disadvantages for the politicians that inhabit these lands. Unfortunately, as fate would have it they were born in Pakistan, and not in the family of Queen elizabeth i, royalty they truly deserved. Amongst other things, the cost of living has increased tremendously for these parliamentarians, the ‘elected’ representatives of the people of the country. George Orwell summed up equality in perhaps the most Pakistani context. ‘All men are equal, yet some are more

equal than others.’ Clearly, the parliamentarians, the ‘chosen ones’ are more equal than the rest of the nation and while inflation might have taken its toll on the ordinary man, it has hit the parliamentarians harder than anybody else. it is therefore unfair to blame the present regime for doubling the national debt in four years – it took us 60 years to borrow 4.8 trillion and it now stands at 10.5 trillion – which increased by a mere 5.7 trillion. A man i hold in high regard, Farrukh Saleem, in his recent article mentioned some staggering statistics that i will mention in the course of this article. i feel extremely sorry at the plight of the parliamentarians. The depreciating rupee, the widening trade deficit, the fiscal deficit, the circular debt, the loss making PSe’s, the cost of financing their humble abodes are truly taking a toll on our chosen, elected representatives. ‘Democracy is the best revenge,’ i heard this somewhere, but i would rather push my own self in harms way and allow democracy to take its vengeance on me, than allow it to perturb our honorable parlia-

mentarians. Unfortunately, democracy is taking its revenge from a democratically elected government by subjecting it to problems that are greater than the peaks of nanga Parbat. My love for our ‘chosen representatives’ cannot be summed up in mere words, nay, i’ll have to dip my pen in blood and even then it won’t do justice to the greatness of our democratically elected government. So, i would rather see my child starving than watch the children of our representatives being denied of their gaming consoles and luxury vehicles. i would rather sleep in freezing temperatures than allow gas to be interrupted to the highest echelons of power in islamabad. i would rather walk to earn a source of livelihood, than watch our masters fret over the protests that bring a sweat on their brows, and i’m glad they still sleep like a baby at night. i would rather give up what is rightfully mine, for someone incompetent because he is more equal than me. My request to you all, love thy masters. After all, the political costs of running the

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A pen dipped in my own blood, will still not do justice to the sacrifices of the current regime

government has now exceeded Rs1 trillion. The cost of the PM secretariat has increased owing to ‘inflation’ by a massive 137 per cent, to Rs15 lakh a day, 365 days of the year. With teary eyes, i look wistfully at the humble abodes of our masters. How they must struggle in these difficult times. The cost of the cabinet division has swelled to Rs80 lakh a day, 365 days of the year. The cost of running the President house is now Rs13 lakh a day. And yet, despite all their troubles, they do not spare a thought and smile cheerfully back at us. Oh how they care for us, if only you could see. The power sector consumes Rs100 crores a day, that’s Rs360 billion a year, or 2.5 per cent of Pakistan’s GDP. in addition to the power sector 42 other public sector entities are losing Rs100 crore a day. As for the national flag carrier, in the third quarter ending September 30th, PiA reported a loss of

Rs8.3b or Rs100 million a day, every day of that particular quarter. ‘At emirates, an airline that PiA helped build, profits this year stand at $1.5b or Rs350 million a day, up 51.9 per cent’ Dr Farrukh writes. Well, thankyou for these wonderful statistics Dr Sahab. i now understand the hardships being faced by the democratically elected government. They truly deserve a round of applause. nobel prize for bravery perhaps. i mean, you tell me? How many people do you know who can grin cheerfully, just when they’ve thrown Rs1,000,000,000,000 in the gutters. not many. i thought so. And this is why, i love Asif Ali Zardari and the democratically elected government. Writer is News Editor Profit. Comments and queries: ali.rizvi7957@gmail.com

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Friday, 30 December, 2011

International aﬃliations have played a pivotal role in restructuring the local advertising industry

news

oMD Pakistan Ceo, Rizwan Merchant

Cotton prices, gas woes dominate 2011 KARACHI

STAFF REPORT

AkiSTAn’S textile industry has endured a mixed year, ranging from a sharp fall in cotton prices from its all time peak levels to the escalating energy crisis. Cotton prices peaked in March 2011 resulting in windfall gains for the textile chain during 1H2011. However, since then prices have tumbled to Rs5,400 per maund (down 58 per cent from its peak) due to growth in cotton output. in addition, gas shortage in the country especially during the ongoing winter season has put more burdens on the sector.

Hence, the textile sector has so far underperformed the local bourse by a massive 19 per cent. The 1H2011 witnessed cotton prices rallying to all time peaks internationally and domestically on the back of limited supply and escalating demand. As a result, the textile chain made windfall gains during that period with exorbitant margins. However, prices have since then taken a breather and come down significantly to $0.93 per lbs. Domestically as well, the prices have contracted by 58 per cent to Rs5,400 per maund from its peak level of Rs13,000 per maund in March 2011. As evident from 1QFY12 results, we do not see the windfall gains made by the industry to continue in the future on account of improved global cotton production which is expected to keep

prices at current levels, said Bilal Qamar at JS. Also, Pakistan’s cotton production is expected to reach 12.6 million bales, up eight per cent from last year. nevertheless, lower cotton prices will somewhat reduce textile manufacturers’ reliance on short term borrowings which can lead to reduced financial charges. Since the start of the year, the country has faced acute gas shortages resulting in massive production losses or reliance on expensive alternate fuel such as diesel. For our sample companies, fuel and power costs contribute 10 per cent towards the total cost of goods sold, and a five per cent increase could result in a decline in gross margins by 30-50 bps for nML and nCL. With the decline in cotton prices

Textile stakeholders agree on no TCP intervention LAHORE STAFF REPORT

meeting of textile ministry was held on December 28 with stakeholders of cotton trade including industry, karachi Cotton Association (kCA) and cotton exporters to agree on no TCP intervention in free market mechanism. Trading Corporation of Pakistan (TCP), therefore, is not likely to intervene, as the ministry was convinced by participants. it may be noted that the proposal of PCGA for lifting their remaining cotton stocks through TCP amidst falling prices was pending with textile ministry. Participants of the meeting argued that as of 15th December 2011, as many as 11 million bales of cotton had arrived, which would further increase by 31st December 2011 to around 12.2 million bales. They pointed out that crop lifting data suggests that 95 per cent of the cotton crop, estimated to be 12.58 million bales, would be out of the hands of cotton farmers. Therefore, intervention would not

Regional trade to be enhanced in 2012: Govt

and global cotton production expected to surge by 11 per cent to 26.8 million tonnes in FY12, the profitability of the stand alone spinning units will be affected the most. Spinners will not be able to make windfall gains which they had made last year on account of continuously rising prices and supply concerns. However, the standalone weaving units and other value added units will benefit due to lower yarn prices. Furthermore, composite units like nML and nCL could somewhat manage the current situation as they are elastic in switching focus in-between their segments. Also, we expect additional working capital lines (taken last year due to expensive cotton) to decrease resulting in lower finance costs in FY12, he added.

PM directs Moit to resolve diﬃculties in Zong project ISLAMABAD STAFF REPORT

Cotton prices surged abnormally to $2.2 per Kg last year but aPtMa did not ask for government intervention for a single day and instead fought for continuity of free market mechanism yield any benefit and if so, it would benefit only cotton hoarders, APTMA Chairman Mohsin Aziz said. Cotton prices surged abnormally to $2.2 per kg last year but APTMA did not ask for government intervention for a single day and instead fought for continuity of free market mechanism, he added. Right now, he further added, fall in cotton prices is a global phenomenon and APTMA has nothing to do with tumbling cotton prices; therefore PCGA's propaganda of manipulation the

market by APTMA was baseless. it is not manipulation but speculation of a few ginners that has created fuss recently, he said. He said TCP's intervention, if inevitable in any case, should be broad-based and APTMA should also be allowed to bid for TCP's tender against 4.5 million stocks with industry at present. There should be an equal opportunity for every stakeholder to avail the opportunity at the cost of exchequer and no discrimination should be made by government, he added.

RiMe Minister Syed Yusuf Raza Gilani on Thursday directed Ministry of information Technology to take urgent steps to resolve difficulties being faced by the mobile company Zong in implementation of their extension projects. Chief executive Officer of Zong Fan Yunjun called on Prime Minister. He said Zong, subsidiary of the world’s largest telecom operator, China Mobile, wants to extend its operations in the country that would provide job opportunities to youth in various fields benefiting from its future projects. He said Zong has made a cumulative investment of $1.5 billion during the last four years and has contributed Rs26 billion in revenue during the same period. He said Zong was keen to invest in upcoming 3G licenses auction. He also presented a cheque of Rs1 million to the PM for Flood Relief Fund.

iSlAMABAD: Promotion of regional trade is the priority of government and for this purpose government has declared the year 2012 as the “Year of regional trade and economic connectivity.” Zafar Mehmood, Federal Secretary for trade and commerce said while addressing a seminar on Thursday on “Regional trade and economic connectivity” at the ministry. Secretary commerce, while highlighting the strategic importance of Pakistan and the role the country can play as an economic hub for landlocked Central Asian Republics (CARS), touched upon the trade normalisation process with india, economic Cooperation Organisation (eCO) and Central Asia Regional economic Cooperation (CAReC). He said this seminar is the first in a series of seminars which will be organised over the next year including one in February 2012 to develop further coordination among stakeholders. Director General of Pakistan institute of Trade and Development gave a presentation on trade performance of Pakistan and regional trade initiatives i.e. SAFTA, eCOTA, ASeAn and GCC. STAFF REPORT

BiSP acting as a bridge for Sino-Pak social cooperation: Farzana Raja iSlAMABAD: Federal Minister and Chairperson Benazir income Support Programme (BiSP), Madam Farzana Raja said Pakistan and China are all weather friends and the government and people of Pakistan fully acknowledge and appreciate support of China, especially in the social sector of Pakistan. She said this while talking to His excellency Mr Liu Jian, Chinese Ambassador to Pakistan here at BiSP Secretariat Thursday who visited to deliver relief goods from All China Women Federation (ACnF) to the flood affected beneficiaries of BiSP in Sindh. Madam Farzana Raja, while appreciating support of ACnF to recent flood affectees of Sindh said China is always the first to stand by Pakistan in the hour of need. it should be remembered that ACnF had also sent relief goods for flood affectees in 2010. Chairperson BiSP said BiSP has emerged as an organisation which is proving to be a bridge for enhanced Pak-China cooperation in the social sector. She added further that BiSP is willing to explore new facets of mutual cooperation with China in the year 2012 as a part of its resolve to benefit the under privileged segments of society. Chairperson BiSP appraised visiting Chinese ambassador about the ongoing initiative to promote vocational and technical skills in Pakistan with the collaboration of China Federation for Peace and Development. GNI

SeCP relaxes cash margins to facilitate MtS market KARAChi: SeCP, the apex regulator has amended the Securities (Leveraged Markets and Pledging) Rules, 2011, to facilitate liquidity in the market. The amended rules now give power to the regulator to set down lenient cash margin requirements and allow individual investors to participate as financiers in the Margin Trading System (MTS). These rules provide a big regulatory framework for Margin Financing, Margin Trading, and Securities Lending and Borrowing. Purpose Trading activity at the bourse was at peril due to stringent regulations whereby a lot of cash was required to use MTS but as per broker community’s request the rules have been bended. STAFF REPORT

Lahore gas supplies closed

Margin Trading System spurs bulls at Karachi Stock Exchange KARACHI STAFF REPORT

Se-100 index closed up 83 points at 11,456 level with 45m shares traded today, down 3 per cent from yesterday. SeCP announced participation of individual Financiers in the Margin Trading System (MTS) a move that provided some much needed impetus for locals to join buying spree led by institutional investors. niB bank stood as volume leader today after rumors of Tamasek Holding intending to sell their majority stake in the bank to industrial Commercial Bank of China (iCBC). Fii’s activity was

lAhORE: SnGPL has suspended gas supplies to Lahore industries for an indefinite time, sources told Profit on Thursday. The decision was made to facilitate domestic users. Sui northern Gas Pipelines (SnGPL) is facing 900 million cubic feet (MCF) shortfall, as its demand is 2,700 mmcf while its supply is only 1,800 mmcf. To overcome shortfall and facilitate domestic consumers, the company has decided to close gas supplies to all industries in Lahore. SnGPL higher-ups has warned industries to follow the closure and if any industry violated the ban then its connections would be disconnected. STAFF REPORT

LPG prices to increase

unheard today due to Christmas Holiday season while locals were rumoured buyers in fertiliser stocks. The kSe 100 index closed at 11435.67 levels with the gain of 83.08 points, while kSe 30 index

bagged 29.96 points to close at 10318.16 levels. All Share index closed at 7912.96 levels after gaining 56.93 points. Total 133 scrips advanced 87 declined and 98 remain unchanged out of total 318

scrips traded. The companies that reflected significant turnover included niB Bank, Worldcall, FFBL, Dawood Hercules, BoP, HUBCo, SSGC, FATiMA, nBL, and Bank Al-Falah.

lAhORE: LPG Association of Pakistan (LPGAP) spokesman Bele Jabbar said LPG prices are expected to increase in the country due to increase in international prices. He said PARCO has reduced supplies in domestic market, which resulted in increase in LPG prices in Pakistan. The price range of LPG in the country is between Rs120 and Rs160 per kg. He said current price of LPG in international market is $805 per metric tonne and it is expected the price would increase to $845 per metric tonne and it would increase LPG price in Pakistan. STAFF REPORT

PRO 30-12-2011_Layout 1 12/30/2011 12:55 AM Page 5

Friday, 30 December, 2011

East Asia is facing new situation after the demise of top leader of Korea, Kim Jong Il, and it is timely for Japan to exchange views with China, which is the chair of the stalled Six-Party Talks

news

Chinese Prime Minister, wen Jiabao

Italy seeks euro fund after tough debt sale TALiAn Prime Minister Mario Monti sought reinforcement for the euro zone's bailout fund and pledged new efforts to boost the economy after a disappointing bond auction on Thursday underlined the threat to the country's shaky public finances. investors demanded a yield of nearly 7 per cent on 10-year paper at the auction of medium- and long-term bonds, down from the record highs seen last month but still unsustainable given the 450 billion euros ($580 billion) that italy needs to raise through debt issuance in 2012. An unprecedented european Central Bank injection last week of nearly half a trillion euros of cheap funding for banks eased pressure at a short-term italian debt auction on Wednesday, but longer-dated bonds still pose a challenge. Monti put a brave face on the auction result, which analysts described as "slightly positive" or "average" at best. "Auctions held yesterday and today went rather well, this is encouraging but the financial turbulence absolutely isn't over," Monti said during a traditional end-year press conference. italy, the euro zone's third

largest economy, remains at the centre of the debt crisis that began in Greece two years ago and its borrowing needs could overwhelm the bloc's financial defenses if it were forced to seek an international bailout. "A lot of work remains to be done but from this point on, this work has to be done in europe above all," Monti said. He said the european Financial Stability Facility, the bailout fund set up byeuro zone governments, needs "significantly greater" resources but refused to quantify how much more was required. Monti promised to outline a first package of growth measures to european partners next month and said the emphasis would be on liberalizing the economy, boosting competition and overhauling the jobs market, though he did not give details. The measures will follow a 33 billion euro package of cuts and tax hikes aimed at balancing the budget by 2013 which was passed by parliament last week but which has been criticized for weighing too heavily on italy's already sickly growth prospects. Monti said he was aware that the austerity package had "many disadvantages" but said budget

discipline was needed to restore confidence in italy's public finances. However he added that european policy had to focus increasingly on growth. "All mechanisms for making the application of this discipline more secure is welcome, provided it is integrated into a comprehensive european economic policy which has more resources to get the euro zone out of its current difficulties and above all promotes growth more," he said.

RECESSION italy's chronically weak economy over the past two decades has been one of the main factors in creating a debt burden that now amounts to around 120 per cent of gross domestic product, second only to Greece in the euro zone. Rigid labor rules - which give some workers iron-clad guarantees while forcing increasing numbers of young people to accept short term jobs with few prospects - an inefficient public sector, low productivity and choking red tape have long weighed on the economy. italy is widely considered to be heading for a severe recession next

year and data on Thursday showed business confidence at its lowest for two years, with orders falling and the production outlook worsening. Although he offered no firm timetable, Monti said the government would move quickly under pressure both from international partners and the bond markets. "The timetable will be rapid. We aren't being permitted to work calmly," he said. Underlining the pressure he faces, yields on 10-year bonds remained locked above 7 per cent

on the secondary market on Thursday, near the levels which forced Greece, ireland and Portugal to seek an international bailout. italy sold 7 billion euros ($9 billion) of bonds at auction in thin holiday markets, just above the mid-point of its target range, but the yield on benchmark 10 year BTPs was 6.98 per cent, not far from a euro lifetime record of 7.56 per cent a month ago. "Buying 10-year italian bonds is a leap of faith which in-

vestors are prepared to take only at very high interest rates," said nicholas Spiro of Spiro Sovereign Strategy. "There are simply too many risks and uncertainties surrounding italy." its 3-year bonds sold more easily and their yield fell more than two per centage points at auction to 5.62 per cent -- far below the euro era record of 7.89 per cent that italy paid to sell the same bond at the end of november. ($1 = 0.7724 euros). REUTERS

CORPORATE CORNER Petroleum minister distributes Benazir employees’ Scheme certificates

gathering representing civil society organisations, local and international nGOs, Un, district government officials and media. PRESS RELEASE

intel begins shipping of new intelR atomtM processors

ADhi: Federal Minister for Petroleum and natural Resources (MPnR) Dr Asim Hussain distributed Benazir employees Stock Option Scheme (BeSOS) certificates among employees at Pakistan Petroleum Limited’s (PPL) Adhi Field (AF). Besides Dr Hussain, the event was attended by Member national Assembly Raja Parvez Ashraf, Speaker, khyber Pakhtunkhwa Assembly karamatullah khan Chagermatti, as well as local representatives and media. Dr Hussain highlighted the technical problems in reaching optimum production targets in Plant ii. “Given the current energy crisis, i immediately advised PPL’s management that all technical bottlenecks should be removed as soon as possible. i am happy to note that the plant is now functioning at full production capacity.” PRESS RELEASE

KARAChi: intel Corporation announced the availability of the latest mobile intelR AtomTM processor-based platform, formerly codenamed "Cedar Trail". Designed to provide small, compact, on-the-go computing with great battery life at an affordable price, the latest platform adds several new features to netbook computers. These devices will be available in early 2012. Systems based on the new intelR AtomTM processors may have up to 10 hours of battery life and weeks of standby, allowing for all-day use between charges. Additionally, intel increased processor and overall system performance while reducing power consumption up to 20 percent compared to the previous platform. PRESS RELEASE

Quran Khawani for Benazir at BiSP Secretariat

Sawab to Shaheed Benazir Bhutto. PRESS RELEASE

ufone introduces BlackBerry torch 9810, 9860 iSLAMABAD: Ufone expands its BlackBerry profile with the launch of two extremely stylish smartphones- BlackBerry Torch 9810 Smartphone and All-Touch BlackBerry Torch 9860. The new BlackBerry Torch 9810 is faster and fluid with enhanced hardware features. With a faster processor, Liquid Graphics, HD video recording, and 8GB of built in storage, the result is an enhanced multimedia experience in an all-in one BlackBerry design. Similarly, BlackBerry Torch 9860 smartphone also offers BlackBerry 7 experience in a stylish new all-touch design and powerful gaming experiences without compromising the real-time collaboration and communication loved by BlackBerry users. Blackberry torch 9810 is priced at Rs49,999 and Blackberry Torch 9860 is priced at Rs45,000. PRESS RELEASE

ISLAMABAD: Deputy Chairman NADRA Tariq Malik, Mr Ishatiaq Ahamad Khan Secretary ECP, Naveed Khalid Butt Ufone, Malik Faisal Qayyum Telenor, signing the MoU at NADRA HQs for introducing SMS service to facilitate citizens to verify their vote registration and particulars in the list. PRESS RELEASE

Sanofi South asian head visits Pakistan KARACHI: Management of Atrium cinemas and Atrium mall, along with guests during the cake cutting ceremony to celebrate their 1st anniversary. PRESS RELEASE

Plan Pakistan to rehabilitate 391 primary schools MultAn: Plan Pakistan will soon rehabilitate 391 government primary schools in the three flood affected districts of Muzafargarh, Layyah and Ranjan Pur. Rashid Javed, the Country Director of Plan Pakistan, shared this at the end Project Convention of the project, “Getting Children Back to School in three districts of Southern Punjab”. The project aims to assists more than 54000 primary grade children with a variety of child friendly interventions and installation of solar panels for electricity in 250 vulnerable schools with no electricity. The event was attended by a large

iSlAMABAD: Quran khawani and prayer ceremony in accordance with the 4th Youm-eShahadat of Shaheed Mohtarma Benazir Bhutto was held at Benazir income Support Programme (BiSP) Secretariat. The ceremony was chaired by Federal Minister and Chairperson BiSP Madam Farzana Raja and large number of PPP leaders and workers participated in the ceremony. On the occasion, special prayer was offered for Aisal-e-

KARAChi: Dr Shailesh Ayyangar, VP Sanofi South Asia zone and Managing Director of Sanofi india came on a two-day visit to Pakistan. Arriving in Lahore through the Wagah border, Dr Ayyangar met with the Chairman of Sanofi (Pakistan) board, Syed Babar Ali, and discussed expansion of Sanofi’s presence in Pakistan, including the possibility of enhancing production capacity and increasing access to medicines for the local population. “Pakistan is an emerging market with rich potential in the pharmaceutical sector”, said Dr Ayyangar. PRESS RELEASE

LAHORE: Mr Fan Yunju, CEO Zong, presenting a cheque of Rs1 million to the Prime Minister Syed Yusuf Raza Gilani, for flood affectees at PM house, Islamabad. PRESS RELEASE

PRO 30-12-2011_Layout 1 12/30/2011 12:56 AM Page 6

Friday, 30 December, 2011

06 Markets top 10 sectors

49% 09% 10% 04% 04%

Chemicals

01% 03% 01% 02% 17%

Real Estate Investment

Construction & Materials Electricity Banks

Fixed Line Telecommunication

Oil & Gas

Financial Services

Personal Goods

Equity Investment Instruments

STOCK MARKET HIGHLIGHTS Index 11435.67 2837.92 2553.72

KSE-100 LSE-25 ISE-10

Change + 83.08 +36.08 +8.83

Volume 33,842,079 1,047,570 4,910

Market Value 1,135,284,803 17,471,144 173,985

top 5 perForMers sector wise

Major Gainers Company Mian Textile Chenab Ltd.(Pref) NAMCO Bal Fund Gharibwal Cement Dawood Equities

Open 0.15 0.36 4.13 4.39 0.67

High 0.45 0.99 5.13 5.38 0.79

Low 0.40 0.99 5.11 4.20 0.71

Close 0.44 0.99 5.12 5.24 0.79

Change 185.53 175.00 23.97 19.36 17.91

Turnover 1,000 500 871 29,333 7,498

90.87 77.00 45.58 45.66 28.39

92.50 77.50 45.58 46.00 28.39

86.35 73.15 43.31 43.82 27.00

87.51 74.46 43.34 44.19 27.04

-3.36 -2.54 -2.24 -1.47 -1.35

551 2,150 611 3,320,379 8,812

Volume Leaders NIB Bank Limited WorldCall Telecom Fauji Fert Bin Qasim Dawood Hercules B.O.Punjab

1.49 0.86 45.66 41.55 5.20

1.83 1.00 46.00 43.62 5.68

1.50 0.86 43.82 39.96 5.23

1.72 0.97 44.19 42.30 5.56

0.23 0.11 -1.47 0.75 0.36

8,704,802 4,470,859 3,320,379 2,994,681 2,759,426

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

Per Tola (PKR) 51,189.00 51,608.00 884.00 1025.00

Per 10 Gm (PKR) 43,933.00 44,245.00 758.00 880.00

Per Ounce US$ 1,524.00 – 35.05 –

HiGH

Low CuRReNt

420.50 109.55 22.80 6.78 84.74

416.00 108.00 22.52 6.65 82.62

CHaNGe

voLuMe

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

420.02 109.17 22.52 6.72 83.42

Agritech Limited Agritech(PREF)(R) Arif Habib Co SD Clariant Pakistan Dawood Hercules

15.55 1.01 26.97 151.00 37.70

-0.27 -0.61 0.00 0.03 -0.68

16,299 152,085 101 60,252 4,422

18.50 1.13 8.24 32.91 10.49

16.50 0.85 27.00 151.50 39.58

16.40 0.40 25.95 149.00 38.00

16.44 0.64 26.70 149.30 39.58

0.89 -0.37 -0.27 -1.70 1.88

1,800 16,880 1,559,547 1,265 411,564

2.54 50.99 6.75 18.82 1.41

18.75 1.12 8.43 34.55 10.50

18.15 1.10 8.00 31.70 10.03

18.74 1.10 8.09 34.46 10.47

0.24 -0.03 -0.15 1.55 -0.02

10,566 8,000 4,334 173,937 5,502

27.23 3.75 42.06 6.99 79.81

Ados Pakistan AL-Ghazi TractorsXD Bolan Casting K.S.B.Pumps Millat Tractors Ltd.

89.9951 138.8174 1.1565 116.2646

5.28 176.55 28.50 24.51 365.22

2.60 51.00 6.80 18.95 1.59

2.12 50.99 6.45 18.70 1.41

2.32 50.99 6.75 18.83 1.41

-0.22 0.00 0.00 0.01 0.00

820,325 26 1,502 419,090 1

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 90.30 116.50 139.19 1.1566 89.34 11.65 24.62 24.09 92.10

Brent Crude Oil

Atlas Battery Ltd. Atlas Honda Ltd. Bal.Wheels Dewan Motors Exide (PAK)

162.00 125.98 23.70 1.69 159.60

27.85 3.70 43.00 6.99 81.00

27.10 3.60 41.30 6.90 80.00

27.23 3.70 42.85 6.99 80.74

0.00 -0.05 0.79 0.00 0.93

326 7,012 5,515 47 2,100

5.80 184.75 29.92 25.73 369.00

4.70 176.00 28.50 24.51 364.00

165.00 125.98 24.88 1.68 161.30

163.45 125.00 23.70 1.62 159.60

110.49 111.43 150.02 150.00

5.31 180.75 28.50 24.51 366.04

$107.56

164.45 125.98 23.70 1.62 159.60

109.00 111.18 145.05 145.58

Adam Sugar AL-Abbas Sugur AL-Noor Suger Mills Baba Farid Bawany Sugar

17.90 92.48 55.99 39.83 11.00

18.90 92.49 55.99 39.00 11.80

AL-Abid Silk Mills Hala Enterprise Hussain Industries Pak Elektron Ltd. Tariq Glass Ind.

23.34 7.00 3.00 3.55 8.30

24.50 7.00 3.00 3.65 8.49

Amtex Limited Azam Textile Azgard Nine Babri Cotton Bannu Woollen

1.20 1.11 3.21 8.41 14.85

1.25 1.60 3.26 8.50 14.37

AHCL-DEC AHCL-JAN ANL-DEC ATRL-DEC ATRL-JAN

27.00 27.47 3.25 109.50 110.62

26.92 27.10 3.20 109.25 110.50

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

99.95 75.44 66.08 30.23 13.76

100.00 78.00 67.00 30.23 14.00

0.03 4.20 0.00 0.00 0.82

3,131 707 8,600 99 4,390

2.45 0.00 0.00 -0.07 0.00

1,460 5 300 27,809 1

0.69 -4.44

1,170 203

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

10.00 34.50 0.80 1.75 0.85

18.90 92.49 55.99 39.00 11.00

1.00 0.01 0.00 -0.83 0.00

10,491 7 26 2,000 10

24.50 6.90 3.00 3.40 8.00

24.50 7.00 3.00 3.59 8.12

1.16 0.00 0.00 0.04 -0.18

500 111 100 38,312 4,396

1.19 1.11 3.08 8.41 14.26

1.24 1.11 3.11 8.41 14.26

0.04 0.00 -0.10 0.00 -0.59

103,150 1 314,901 1 1,510

26.05 26.40 3.11 108.30 109.31

26.73 26.93 3.17 108.91 109.94

-0.27 -0.54 -0.08 -0.59 -0.68

88,500 94,000 1,500 60,000 61,000

100.00 75.44 66.68 30.23 14.00

0.05 0.00 0.60 0.00 0.24

1,361 1 1,508 20 5,275

99.50 75.44 66.00 29.25 13.70

10.10 34.50 0.83 1.85 0.89

9.96 34.00 0.75 1.75 0.83

10.00 34.50 0.80 1.75 0.84

0.00 0.00 0.00 0.00 -0.01

140,195 101 42,806 26,613 214,669

0.31 34.17 0.64 1.59 15.51

0.34 34.33 0.68 1.59 15.51

0.22 34.06 0.61 1.53 14.62

0.27 34.11 0.63 1.59 15.51

-0.04 -0.06 -0.01 0.00 0.00

30,012 417,944 47,381 41,119 100

56.41 10.01 4.86 11.20 28.10

56.50 10.20 4.96 11.34 28.20

54.99 9.85 4.83 11.18 27.80

55.34 9.92 4.93 11.20 27.88

-1.07 -0.09 0.07 0.00 -0.22

16,622 80,549 331,096 102,692 60,345

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

oPeN

HiGH

Low CuRReNt

CHaNGe

voLuMe

Non Life Insurance 18.40 88.00 53.20 39.00 11.00

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

SyMBoL

Adamjee Ins Central Ins Co. EFU General Ins Habib Insurance IGI Insurance Ltd.

44.42 50.02 36.21 9.85 43.38

45.70 52.50 36.05 10.29 43.50

43.30 50.02 36.00 9.85 42.74

45.29 50.02 36.00 9.85 43.46

0.87 0.00 -0.21 0.00 0.08

102,889 50 1,804 100 2,200

13.50 1.40 65.53

14.50 1.40 65.53

0.00 0.00 0.00

2 1 157

0.34 15.17 13.59 0.70 2.54

-0.01 0.27 -0.08 0.05 -0.01

1,523 6,608 12,450 500 4,006

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

0.35 14.90 13.67 0.65 2.55

0.35 15.60 13.60 0.70 2.75

0.30 13.90 13.28 0.70 2.37

Equity Investment Instruments 1st.Fid.Leasing Mod AL-Noor Modar B.F.Modaraba B.R.R.Guardian Cres. Stand.Mod

1.58 4.50 4.25 2.06 0.49

1.60 4.30 4.00 2.15 0.50

1.58 4.10 4.00 2.06 0.42

1.58 4.30 4.00 2.06 0.50

0.00 -0.20 -0.25 0.00 0.01

7,490 10,239 1,398 100 4,815

12.77 35.40 32.00 12.75 65.50 1.12 64.00 4.16 23.00 25.37 55.50 26.01 16.00 10.43 1.94 28.80 9.95 0.75 1.77 0.86 15.65 19.36 71.00 1.22 8.80

12.77 35.40 32.00 12.75 66.90 1.14 64.31 4.44 23.00 25.37 55.50 26.20 16.00 12.41 2.00 28.80 9.98 0.83 1.80 0.97 15.99 19.55 74.28 1.31 8.91

0.00 -0.93 0.00 -0.25 2.63 0.01 0.23 -0.31 -0.75 0.00 0.00 -0.97 0.00 1.00 0.10 0.00 -0.02 0.02 0.05 0.11 0.24 0.09 -0.05 0.01 0.01

1 500 2 8,425 2,270 448,138 471 5,500 1,493 100 50 1,453 500 2,010 93,342 200 901,872 90,834 33,736 4,470,859 37,129 2,088,039 3,703 97,630 40,921

Miscellaneous Century Paper Security Paper Pakistan Cables P.N.S.C. Pak.Int.Con. SD TRG Pakistan Ltd. Murree Brewery Shakarganj Food Grays of Cambridge Khyber Tobacco Pak Tobacco Co. Shifa Int.Hospitals Hum Network Ltd. Media Times Ltd P.I.A.C.(A) Pak Hotels P.T.C.L.A Telecard Limited Wateen Telecom Ltd WorldCall Telecom Sui North Gas Sui South Gas EFU Life Assur Pace (Pak) Ltd. Netsol Technologies

12.77 36.33 32.00 13.00 64.27 1.13 64.08 4.75 23.75 25.37 55.50 27.17 16.00 11.41 1.90 28.80 10.00 0.81 1.75 0.86 15.75 19.46 74.33 1.30 8.90

13.19 35.40 33.50 13.00 67.00 1.17 64.89 4.94 23.00 26.63 56.00 28.20 16.00 12.41 2.19 30.24 10.10 0.85 1.85 1.00 16.00 19.90 74.74 1.39 9.01

Mutual Funds Fund

$99.38

voLuMe

Fixed Line Telecommunication

Beverages Murree Brewery Co. Shezan Int’l

CHaNGe

Pharma and Bio Tech

Automobile and Parts Buy 89.30 114.13 136.70 1.1391 86.52 11.35 24.28 23.79 88.96

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 Cherat Cement D.G.K.Cement Dadabhoy 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 419.75 108.56 22.52 6.75 82.74

Industrial Engineering

Interbank Rates US Dollar UK Pound Japanese Yen Euro

oPeN

Chemicals

Major Losers AL-Abbas Sugur J.D.W.Sugar Salfi Textile Fauji Fert Bin Qasim Ibrahim Fibres

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 30-12-2011_Layout 1 12/30/2011 12:57 AM Page 7

The cellular sector market needs to consolidate through merger and acquisition of operators before launching the 3G technology in Pakistan otherwise; this will be a losing proposition for every operator

Friday, 30 December, 2011

news

PtCL Ceo and President, walid irshaid

New solvency regime for insurance companies g

Board approves Fit and Proper criteria for appointment of Ceos ISLAMABAD

JALALUDDIN RUMI

Y amending the Solvency Regime, Securities and exchange Commission of Pakistan (SeCP) board approved Fit and Proper criteria for the appointment of Chief executive Officer (CeO) and other officials of the insurance companies’ which requires prior permission of the commission to appoint senior management including public and private sector insurance companies. The SeCP Chairman Muhammad Ali while addressing a press briefing on amended Solvency Regime said that Fit and Proper criteria will help in curtailing mismanagement and corruption by only allowing people with relevant experience to hold important positions in insurance sector. AMEnDED SOlvEnCy REgiME: While informing about the amended Solvency Regime for the insurance companies he said that the amendments will strengthen the financial position of insurers over time and reduce the risk of volatility in the prices of certain assets, such as equities and properties, which threaten their solvency. The Policy Board of the SeCP has approved the Solvency requirements for insurance companies, which would improve the liquidity position of the insurance companies and eventually protect the interests of policy holders. Solvency is the ability of a business to have enough assets to over its liabilities, and the amendments call for insurance companies to manage their assets with different priority. The changes in the solvency regime calls for non- life insurance companies to increase the value of their admissible assets from Rs50 million by December 2011 to Rs100 million by December 2012, Rs125 million by December 2013 and by the end of year 2014 the net admissible assets have to be Rs150 million.

liMitAtiOn Of pRiOR RulES: The solvency regime for the insurance industry was introduced in the year 2002 through SeC (insurance) Rules, 2002. it was felt that the rules then published had certain limitations such as a detailed solvency regime for life insurance companies as envisaged by the insurance Ordinance, 2000 and the admissibility of assets introduced in 2002 had awfully high limits for certain assets in the case of non-life insurers, while other assets commonly invested in, were not covered at all. Under the current rules the Life insurance companies need to have admissible assets of Rs75 million, however after the amendments the companies need to have admissible assets of Rs105 million by the end of 2012, they have to be Rs135 million by December 2013 and Rs165 million by the end of 2014. The SeCP officials said that currently the total insurance base in the country is worth Rs107 billion but the non-life segment was dominating at Rs59 billion. it is expected that the new solvency regime for the insurance companies will further strengthen the financial position of insurers over time and reduce the risk of volatility in the prices of certain assets, such as equities and properties, which threaten their solvency. Considering these issues, in year 2006 a group of experts from relevant stakeholders including insurance Association of Pakistan, Pakistan Society of Actuaries, Pakistan Banks Association and SeCP as the regulator, engaged in an exercise to analyse the provisions relating to solvency requirements for both life and nonlife insurance companies. MAnDAtE Of thE COMMittEE: The mandate of this committee was not only to recommend the rational solvency requirements, but also to examine the existing practices and policies of

insurers with respect to the investment of their funds. The committee presented its recommendation relating to admissibility of assets, valuation of assets and liabilities, solvency requirements of life insurers, solvency requirements of non-life insurers, minimum valuation basis for life insurance, reporting on solvency by insurers and investment guidelines. These recommendations were approved by the commission earlier in 2010 for publishing in the official gazette and eliciting public opinion to be received in subsequent 30 days. The SeCP thoroughly reviewed the comments received on the draft amendments and the suggestions found to be consistent with the regulatory framework and the enabling provisions of the law, without prejudicing the rights and duties of any stakeholder, were suggested to be accommodated. it has been noted with satisfaction that while preparing these new provisions of Solvency, the SeCP complied with the due process i.e. taking into consideration the stakeholders’ comments, engaging industry experts in the deliberations and seeking advice from the Legal experts. Accordingly, the amendments in the SeC (insurance) Rules, 2002 related to Solvency provisions were presented in the SeC Policy Board meeting held today and the same was approved by the Board for final promulgation. The more substantive changes are to be implemented in a phased manner so as to allow the industry to implement these changes at a reasonable pace. The new regime is therefore not anticipated to cause any material difficulties to insurers, although the increases in absolute amounts and the introduction of life insurance solvency regime is likely to result in increasing the capital base by some new companies. There is, however, adequate time allowed for this increment.

KSe eLeCtioN 2012

Low gas pressure cause plant tripping KARACHI

STAFF REPORT

OW gas pressure is causing plant tripping as well as production losses to industries, complained manufacturers from Bin Qasim industrial Zone (BQiZ). “The pressure is getting as low as 3-4psi causing plant tripping,” said Mian Muhammed Ahmed, patron in-chief and founding president of Bin Qasim Association of Trade and industry (BQATi), in a letter sent by him to Sui Southern Gas Company on Thursday. Mian said complaints about persistent low gas pressure were received throughout the week from BQATi’s members located in BQiZ, especially operational zone (Bonded Area) and nWiZ. “Many of our mem-

bers have lodged complaints in this regard, but to no avail,” he lamented. He said natural gas provided by SSGC was the major source of energy for our member industries. Last week on Sunday and this week on Sunday and Monday, the industrialists had done their best to respond positively and responsibly to the SSGC’s request for a two-day shut down. “The situation, unfortunately has now exacerbated, deficient gas pressure is causing further production losses to industries which already observed two days shut down. All this is translating into escalating financial losses and threatening the survival of many industries,” the BQATi chief said. Mian requested the state gas supplier to restore required gas pressure immediately and asked measures to be taken to ensure consistent supply to keep the industries running.

Forex reserves move up to $16.769b KARACHI STAFF REPORT

He country’s liquid foreign exchange reserves remained in the green zone this week inching up to $16.769 billion, the central bank reported Thursday. This shows a slight increase of 0.6 per cent or $111 million over the past week when the country possessed $16.658 billion. This surge is on the back of an across-theboard increase in the dollar reserves of the central and commercial banks. During the cur-

rent week, which ended on December 23, the State Bank counted its foreign exchange reserves higher by 0.3 per cent at $12.806 billion as against $12.757 billion of the preceding week. Similarly, the commercial banks’ holdings of the greenback swelled to $3.962 billion, registering a hike of 1.5 percent compared to last week’s $3.900 billion. The analysts believe that the current seesawing trend in the country’s dollar reserves was mainly based on the volume of import payments plus the retirement of external debts that, according to SBP data, have aggregated to $62 billion.

SuGaR PRiCeS DRoP

Government cut sugar price Members losing interest in volumes-starved KSE election by Rs10 at Utility Stores KARACHI ISMAIL DILAWAR

eMBeRS of karachi Stock exchange (kSe) seem to have lost interest in the affairs of the ill-regulated and therefore volumesstarved bourse as turnover for 2012 board of directors election declined by 19 per cent this year. Last year, some 170 members had casted their votes and had elected Zafar Siddiq Moti, Abdid Ali Habib, Haji Ghani Haji Usman, Abdul Majeed Adam, Mohammad Sohail, Ashraf Bava, Azhar Ahmad Batla, Mohammad Azam khan and Muhammad Qasim Lakhani to the kSe board for 2011. Thursday saw only 138 of the total 200 members taking part in voting held at kSe on Thursday to elect five candidates to directorship of the exchange for calendar year 2012. Out of a total of seven candidates, one withdrew his nomination before the commencement of ballot-

ing, leaving six candidates to contest the election. Of total 138 members who casted their votes, three ballot papers were declared invalid and 135 ballot papers were declared as valid. Based on the results, the five candidates who were declared as successful, in order of the votes secured, are: Abdul Majeed Adam (125), Muhammad Yasin Lakhani (123), Yaqoob Habib (122), Saeed Ahmed Butt (104), and Haji Ghani Haji Usman (102). As per articles of association of the exchange, four non-member directors are required to be nominated by Securities and exchange Commission of Pakistan (SeCP) for the next term from whom the next chairman shall be elected by the board. nadeem naqvi, who is holding the office of managing director, is the tenth director on the kSe board. Management of kSe, in a statement, appreciated contribution made by outgoing directors during the year 2011 and welcomed the incoming directors on the kSe board for next

term. According to market observers, trading volumes at kSe had decreased to a 10-year low during the outgoing 2011 due to controversial levies like Capital Gains Tax (CGT). “Buying selling of shares, floating of new companies and fund raising through right shares, all remained depressed in 2011,” said Farhan Mahmood, an analyst at Topline Securities. He said market players remained concerned about re-introduction of CGT after a gap of more than three decades, its understanding and last but not the least its cumbersome calculations. The market cap based benchmark kSe 100 index fell five per cent in 2011 while free float based kSe 30 index came down by 11 per cent. MSCi Pakistan index was also down 16 per cent in the outgoing year. The value of karachi bourse trimmed down by Rs 302 billion or 9 percent as market capitalisation reached Rs2.97 trillion ($33bn) at the end of 2011.

LAHORE

IMRAN ADNAN

eDeRAL government has reduced white refined sugar price by Rs10 per kilogram at utility stores, which is now available at Rs42 per kilogram. After this announcement, sweetener price in Punjab’s largest wholesale market, Akbari Mandi, has witnessed a downward trend. Speaking to Profit, sugar dealers disclosed that due to reduction in sugar price at utility stores, wholesalers had started to offload their stocks. They revealed that just after the announcement by federal government sugar prices in the Akbari Mandi dropped by Rs1.25 per kilogram. They pointed out that a 50-kilogram sugar sack was being quoted at Rs2,562 ex-mill on Wednesday evening. But after the announcement of price reduction at utility stores, it touched Rs2,500 per bag or Rs50 per kilogram, while the commodity was being sold at Rs51 to Rs52 per kilogram at wholesale level. Speaking to Profit, Pakistan Sugar Mills Association President Javed kayani said that the country was expecting a bumper sugarcane crop

of some 60 million tons, of which some 4.7 million tonnes of white refined sugar production was expected. He said that the country would have over one million tonnes of surplus sugar stocks as the national requirement was 4.2 million tonnes and the country had some 0.6 million tonnes of carryover sweetener stocks. He underscored that though the country had favourable circumstances for sugar exports but government did not allow sweetener exports. “Sugar price is already hovering around bottom and industry has limited outlet due to export ban. The price in domestic markets will remain stable,” he maintained. Responding to a question, he said that in the international markets sugar was being quoted at $619 per tonne, which meant that Pakistan could export the sweetener around Rs60 per kilogram. Federal minister for industries Chaudhry Pervaiz elahi in a press statement said government had decided to reduce sweetener prices to provide maximum relief to the common man. Government had reduced sweetener prices from Rs55 to Rs42 per kilogram during the last two weeks. earlier, it reduced sugar price by Rs three per kilogram and now it dropped Rs10 per kilogram at utility stores, he pointed out.