Layout Profit 7 pages_Layout 1 11/20/2011 10:05 PM Page 1
That is how it works in India Page 2 Leveraging indigenous economic potential Page 3 Ambiguity on the political front keeps investors at bay Page 6 Pages: 8
profit.com.pk
Monday, 21 November, 2011
chamber urges Lengthy pen work Islamabad govt to tackle declining FDI keeps investors away from stock markets n ISLAMABAD
StAff RepoRt
eGAtive growth in Foreign Direct investment would adversely affect the country’s economic growth as FDi plays vital role in development of the country. islamabad Chamber of Commerce and industry (iCCi), President Yassar sakhi Butt, in a statement urged government to take remedial measures on urgent basis to reverse this trend to attract more foreign investment. He said the grim condition of Foreign Direct investment in the country fell to $239.4 million during July-October period of 2011-12 against $610 million inflows noted during the same period last year; a decline of 61 per cent which would carry negative impact on Pakistan’s economy. iCCi President said foreign investment
KSE, SECP dispute over additional details in account opening form g 20-page form requires investors to subscribe on 20 places g
KARACHI
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ISMAIL DILAWAR
itH controversial Capital Gains tax (CGt) and politico-security uncertainties being oft-referred persistent reasons for fast depleting trading volumes at Karachi stock exchange (Kse), unnecessarily long and complicated account opening procedures also appear to be a factor that keeps the investors away from the equity market. Kse management is currently at loggerhead with regulators from securities and exchange Commission of Pakistan (seCP) over what an elected director on former board termed it “additional details” sought by commission from investors in its Account Opening Form (AOF). “seCP’s form requires investors to provide so much additional details that their interest to invest on the already volatile stock market fades away. it is discouraging,” said Abid Ali Habib, chairman Abid Ali Habib securities and one of 10-member Kse Board of Directors. Habib stated this while talking to a group of journalists who were invited at Kse Friday afternoon to interact with a visiting indian delegation of journalists, who had “stuck up” at their prior meeting place, MQM’s headquarters, nine Zero. referring to the latest Kse board’s meeting with seCP officials, led by Musarrat Jabeen, director said seCP had come up with a new and lengthy AOF in which extensive details had been sought from the investors. “it’s a 20page form requiring the applicant to read its thorough terms and agreements in at least two days,” director said. Habib went on to say the new form needed investors to subscribe on at least 20 places. Kse director said in addition to their Computerised national identity Cards, applicants were also required by AOF to give additional detail like their
Conference to strengthen regional economic connectivity ISLAMABAD
M driving license (if any), details of their house whether rented or personal possession and salaries or income of applicant’s spouses and so on. “Why an investor, wanting to invest, starting from a meager amount of rs10,000, would bother to provide all these details,” director wondered. Habib said a friction of 180 million Pakistanis, numbering 2 to 2.5 lac, was currently maintaining accounts with Central Depositary Company (CDC) that also include those who had only filled form and never traded then. Practically, Kse director said, 50,000 account holders were trading once a year, while only 10,000 account holders were actively participating in the share trading. “if we ask for such long details the existing traders would too
flee the market,” he warned. According to Habib, Kse side argued that risk-averse investors, who usually turn to stock market in search of higher margins under philosophy of “greed and fear”, should be provided with documentation work that is not that lengthy and complicated. When asked for rationale, seCP officials were citing for new inclusions in AOF, Kse director said they were just following orders. “What can we do, we have orders from above,” Habib quoted seCP official Musarrat Jabeen as saying. He, however, said regulators had assured his side of more deliberations on the issue. “seCP has noted our reservations and assured that they would deliberate on the matter,” director said.
JALALUDDIN RUMI
inisters from 10 countries spanning the Caucuses, and Central, east and south Asia will gather to mark a decade of achievement, including $17 billion of investments in energy, trade and transportation under Central Asia regional economic Cooperation (CAreC) Programme. Finance minister Dr Abdul Hafeez shaikh is likely to lead Pakistan in CAreC 10th Ministerial Conference at Baku, Azerbaijan, starting from 22nd november till 24th november. it’s the first time that Pakistan is attending CAreC ministerial conference as a full member country. established in 2001, CAreC brings together Afghanistan, Azerbaijan, People’s republic of China (PrC), Kazakhstan, Kyrgyz republic, Mongolia, Pakistan, tajikistan, turkmenistan, and Uzbekistan. it promotes implementation of regional projects in energy, transport, and trade facilitation from northern PrC to Caucasus and europe, and from Kazakhstan to warm water ports of Karachi, Gwadar and beyond. CAreC partnership accounts for more than 120 projects to date, including six extensive transport corridors and energy networks that are beginning to improve lives
MFN not to harm local industry g
Pakistan has safeguarding measures to protect its industry KARACHI
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is considered an important source of development for a country; therefore, government should accord high importance to encourage foreign investors by creating investment friendly environment to accelerate the pace of country’s economic progress. He said key issues including power shortage, poor infrastructure, law and order situation and other vital factors, should be addressed on priority basis to improve the bleak foreign investment condition to put the country on track of economic growth and development. He said Pakistan is an attractive market for producers and many sectors of the economy including, oil and gas, power generation, agriculture, pharmaceutical, infrastructure development and many other sectors offer lucrative investment opportunities to foreign investors. Pakistan should not further waste time to loose the opportunities to attract foreign investment.
GHULAM ABBAS
lMOst 80 per cent of the country’s trade bodies and business associations have shown fear of losing their domestic market after granting Most Favored nation (MFn) status to india. However, there are still safeguarding measures to protect local industry. Granting equal status to india, as Pakistan has already granted the same to other countries under the rules of World trade Organisation (WtO), was a mandatory subject for Pakistan. However, if islamabad is apprehensive of possible infiltration of exports from india, it can take measures, under WtO’s own provisions against such imports to protect local industry. According to a fresh report prepared by tDAP, article XiX of General Agreement on tariffs and trade (GAtt), provides that if a country finds a
product being imported “in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers” it can impose safeguard measures to restrict such imports for temporary periods. there was already an example of Us imposing safeguard measures against foreign imports in order to protect its domestic steel industry. report says idea of protecting domestic economy from ‘infiltration’ of indian products appears to be based on an assumption that all indian goods are more competitive than domestically produced goods. Opening borders for trade does not suggest an unrestricted flow of indian products. All indian imports into Pakistan will remain subject to tariffs already in place. it can also be argued that if indian goods remain cheaper than their domestic counterparts even after paying import duties, then why not allow them? Does it not auger well for ‘Consumer Protection’ out-
look for people of Pakistan? nevertheless, if it is felt that indian imports into Pakistan are increasing due to unfair practices like price undercutting etc, then Pakistan is free to restrict imports of specific products by increasing tariffs under various provisions of the WtO for example anti-dumping duties, countervailing and anti-subsidies etc. Furthermore, substitution of Pakistan’s imports with cheaper indian products should be more than welcome since this could benefit us in two ways: Firstly, low cost of imports and secondly, lesser time involved. Findings of trade diversion theory on indo-Pakistan trade relations suggest that Pakistan can save valuable foreign exchange of $1.5 billion to $2.0 billion in case Pakistan diverts imports of such items (Chemicals, steel, machinery, industrial equipments, plastics etc), which are not locally manufacture and have to be imported from far-flung markets like Brazil, Mexico, Australia, Germany. since these products are available from india at competitive prices and substan-
and livelihoods across the region. Asian Development Bank (ADB) has contributed $5.5 billion to total CAreC investment since 2001. ring road, rail and electricity projects in Afghanistan, and eastWest Corridor in Azerbaijan are flagship programmes that embody CAreC. About 4,000 km of road and 2,250 km of railway lines have been built or upgraded, opening up corridors of trade and opportunity. streamlined customs procedures are moving people and their businesses across borders faster and at less cost. electricity transmission lines and upgraded power plants are beginning to boost vital energy trade in the region that will bring prosperity and security. Ministerial conference will also launch CAreC 2020 as the new roadmap for the next 10 years. this will provide a blueprint to help countries expand trade, spur competitiveness in broader global economy, and reposition Central Asia as pivot of regional trade. six multilateral institutions support work of CAreC that includes ADB, european Bank for reconstruction and Development, international Monetary Fund (iMF), islamic Development Bank (iDB), United nations Development Programme (UnDP), and World Bank. ADB has served as CAreC secretariat since 2001.
tially cut-down transaction time and cost. Also, “strategic considerations” have been used to advocate denial of MFn to india. And, certain Pakistani manufacturers and businesses have also been preoccupied with ‘dooms day’ scenario that granting of MFn status to india will ‘flood’ Pakistan’s markets with indian goods and that it would mean a complete obliteration of Pakistani industry. Question of granting MFn status to india is perceived to be a long standing demand from india, whereas in reality it is an integral part of commitments undertaken by both countries under WtO agreements. Fact of the matter is that under articlei of GAtt 1994, all members of WtO are bound to grant MFn treatment to all other members, with respect to trade in goods. this makes it mandatory upon Pakistan to grant MFn status to india, as non-compliance constitutes a violation of WtO Agreement. india has not taken matter to WtO Dispute settlement Body. if Pakistan is waiting to respond when india does take MFn matter to Geneva, then it seems that Pakistan is illadvised, as in all likelihood the decision would be against it. Additionally, by not taking MFn matter to Geneva, india has already scored a ‘Moral victory’ which is already tilting global opinion in favour of india’s trade policies.