Profit 24th November, 2011

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Thursday, 24 November, 2011

IMF, Pakistan agree on short, medium-term reforms g

Growth projected at 3.5 per cent, inflation predicted to decline KARACHI

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IMF sees ‘challenging’ outlook for Pakistan

ISMAIL DILAWAR

AKIStANI authorities and International Monetary fund (IMf) have agreed to carry out short-term and medium-term economic reforms in the country. these reforms are being touted as means to address fiscal “vulnerabilities” and lift economic growth. this would in turn reduce poverty and assure continued macroeconomic and financial sector stability during fY12. fY12 has been flaunted as a “challenging” year by IMf.

ConStrUCtIve DISCUSSIonS Agreement was reached by the two sides during November 9-19 meeting of IMf staff mission with Pakistani authorities.

Staff mission was led by Adnan Mazarei, and the meetings were held in Dubai and Islamabad to conduct 2011 Article IV consultation. “the Pakistani authorities and an IMf staff team held constructive discussions on Pakistan’s recent economic performance and the challenges ahead, in light of uncertainties in the global economic environment,” IMf mission stated at the conclusion of meetings. It said Pakistani authorities expressed their resolve to strengthen macroeconomic policies and continue to pursue reforms to enhance the country’s medium-term growth prospects. “the outlook for fY2011-12 is challenging,” mission stated.

DeClInInG InFlAtIon It said real GDP growth was projected at about 3.5 per cent and inflation was being predicted to decline, but

external current account balance was projected to return to a deficit. Also, global risk aversion and security concerns may limit capital inflows the mission added. “With this background, discussions are centered on short-term steps to address vulnerabilities. Specifically, the Pakistani authorities and the mission agreed that containing the budget deficit in fY12 a cautious monetary policy and a responsive exchange rate would reduce vulnerabilities and protect Pakistan’s international reserves,” IMf mission said. Pakistani authorities, it said, also discussed a set of medium-term reforms with IMf mission, that would lift economic growth, reduce poverty and raise living standards and employment. It would assure continued macroeconomic and financial sector stability, mission added.

StrUCtUrAl reForMS Mission said these reforms include structural reforms to remove

constraints to growth, especially in energy sector, and strengthen public finances. these finances include tax reform, improving quality of expenditure by raising share of spending in priority areas such as health, education, and infrastructure it added. It would also manage fiscal decentralisation, and improving debt management, mission believed.

FInAnCIAl SeCtor StAbIlIty Additionally, reforms to improve effectiveness of financial sector intermediation, broaden access to finance, and reinforce financial sector stability should also continue. “the mission benefitted from a seminar ‘revival of economic Growth in Pakistan’ that was organised jointly with the ministry of finance. this seminar provided an opportunity for stakeholders in Pakistan from academia, civil society, private sector, and development partners to discuss components of a pro-growth reform strategy,” it said. reiterating its commitment to continued close

115.5 GWh to be saved under USAID programme ISLAMABAD

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JALALuDDIN RuMI

NIteD States Agency for International Development (USAID) has replaced 1200 inefficient irrigation pumps throughout Pakistan in an effort to reduce energy use and agriculture production costs under tubewell efficiency Improvement Program (tWeIP). $18.5 million worth programme offers a 50 per cent subsidy to farmers to replace their outdated irrigation pumps with more energy efficient irrigation pumps that would reduce demand by 45 MW, and save 115.5 GWh of electricity per year.

While giving briefing to media men upon celebration of replacement of the first 1200 inefficient pumps, USAID representative John Pullinger said USAID tubewell efficiency Improvement Program (tWeIP) was one of six activities under U.S. Signature energy Program that Secretary of State Hillary Clinton announced in October 2009 to help alleviate Pakistan’s severe power supply shortfall. He said USAID has started its

programme in Pakistan last year in December from a pilot project in Multan.

USAID tWeIP programme has planned to replace roughly 7,000 tubewells in coming years. He informed that currently tube wells were running on 36 per cent efficiency which will be increased to 60 per cent. USAID Mission Director Andrew Sisson said US wants to support efforts by government and people of Pakistan to build a stronger, more prosperous future for this country. Much like education fuels the minds of the people and enables them to build a better future, energy is essential to the economic growth of the nation he added.

He said United States energy sector assistance is being delivered by his organisation, US Agency for International Development, or USAID, which is working with various Pakistani organisations on several short and long-term projects. He said recognising urgent need of energy sector solutions US is funding Satpara, Gomal Zam, tarbela, Guddu, Jamshoro and Muzaffargharh thermal and hydropower projects that would restore around 900MW power generation capacity by early 2013.

He went on to say that USAID was also working with ministry of water and power, as well as power distribution companies to reduce energy transmission losses, increase revenue, and improve overall management of the energy system. We believe that these changes will contribute to long-term sustainability of Pakistan’s energy sector. electricity used for agriculture is estimated as 16 per cent of total consumption in the country. It is produced at a rate of rs15.50 per megawatt which has been provided to farmers at rs5 per megawatt. Pakistan has major power crises, with a shortfall of almost 5000 MW (increasing), which has led to blackouts that disrupt commerce, industry, and agriculture. As a result, annual GDP growth has declined from 8 per cent to 2.4 per cent.

20.9 per cent of Pakistan’s GDP relies heavily on agriculture. It is the world’s fourth largest user of ground water for irrigation in terms of area underground water irrigation. Agriculture sector is the third largest consumer of energy in Pakistan and tubewell Pump Sets are a major component of peak demand.

WASHINGTON: the 2011/12 outlook for Pakistan’s economy is “challenging,” with global risk aversion and security concerns likely to limit capital inflows, the International Monetary fund said.

IMf said in a statement after talks with Pakistani officials that authorities were committed to reforms to boost medium-term economic prospects. “Pakistani authorities and the mission agreed that containing the budget deficit in 2011/12, a cautious monetary policy, and a responsive exchange rate would reduce vulnerabilities, contain inflation and protect Pakistan’s international reserves,” IMf said in a statement. REuTERS engagement with Pakistan, IMf team said it would prepare a report for IMf executive board on Article IV consultation that was scheduled for consideration in late January 2012.

Under Article IV of IMf’s Articles of Agreement, IMf holds bilateral discussions with members – usually every year. A staff team visits the country, collects economic and financial information, and discusses the country’s economic developments and policies. Upon its return to headquarters, staff prepares a report, which forms basis for discussion by executive board. At the end of discussion, managing director, as chairman of the board, summarises views of executive directors, and this summary is transmitted to the country’s authorities.

CPPA made functional ISLAMABAD STAFF REPORT

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fter the first meeting of board of directors of Central Power Purchasing Agency (CPPA) government instigated next phase of power sector reforms. these reforms would lead to signing of new agreements with the power generation. Distribution companies would end the administrative hick ups resulting in prolonged power crisis. first meeting of the power clearing company, CPPA, which is to replace defunct administrative body, Pakistan electric Power Company (PePCO), was held under the chairmanship of Secretary, Water and Power Ministry Imtiaz Kazi. the board resolved that all pre-requisites necessary to commence business of the company need to be fulfilled to make it a fully functional organisation. It constituted two sub-committees to address matters concerning technical and human resource of the company.

Guarantee limited company, CPPA is created to deal with core functions of transaction of sale and purchase between power generation and distribution companies in accordance with NePrA rules. An official source said initially the company will be finalising its structure, staff requirements after which it will be signing new sale and purchase agreements with GeNCOs and DISCOs. the previous ones with PePCO have ended with dissolution of PePCO. He said the role of CPPA will be that of a clearing house and will have no administrative and financial powers to interfere in affairs of DISCOs. this will lead to great autonomy to DISCOs and GeNCOs, which will be managed through professional management and board of directors.

Members of CPPA board include Managing Director National transmission and Despatch Company (NtDC) rasul Khan Masud, Director General economic reforms Unit, Ministry of finance Khaqan Hassan Najeeb, CeO GeNCO-I Jamshoro Muhammad Akram Arian, CeO PeSCO Peshawar Muhammad Wali, CeO CPPA, CeO KAPCO Aftab Mahmood Butt, engineering Consultant and Member Board of Privatisation Commission Iftikhar-ul-Haq, Chairman Sitara Group of Industries Haji Bashir Ahmad and former CeO of Siemens Sohail Wajahat Siddiqui.

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Thursday, 24 November, 2011

debate

Agriculture Income Tax, a misnomer 1 W Rs500,000 2 Rs350,000 3 Rs150,000 4 MoHAMMAD TARIq BuCHA AnD MALIK KHuDA BuKHSH BuCHA

HeNeVer, Pakistan’s economy is under pressure, instead of reducing its expenses or deferring non-productive projects, the government always adopts easy and coercive measures such as, levying GSt and raising the issue of agriculture tax imposition on farmers. the question is; are our economists incompetent who want to destroy the agriculture sector of Pakistan or is all this being done intentionally? We have no doubt about their sincerity with Pakistan, but they being bureaucrats, not elected by the people of Pakistan, do not understand the problems of an ordinary Pakistani particularly, farmers living in rural areas under extremely hard conditions with issues of survival and sustainability.

In developed countries, agriculture tax is not considered a reliable source of revenue generation. there are no confirmed figures about revenue generation from agriculture income, though its advocates claim that contribution of agriculture is almost 22 per cent in the national income, but there is no contribution in revenue generation of the country. Moreover, 53 per cent of current agriculture income from livestock and forestry is totally exempt from tax. On the other hand, the people who oppose the agriculture income tax say that they are already paying agriculture tax by government control on agri prices. Moreover, agriculture is already taxed through Income tax Ordinance 1997 and subsequently, by an amendment through Income tax Ordinance 2001. the difference being that earlier in 1997, the tax on agriculture was based on land holding therefore, it was a land based tax (a capacity tax); while in 2001, the tax was redefined by adding the word agriculture income with a stipulation to pay that amount of tax which was higher. to summarise the issue, let’s first of discuss if agriculture tax can be implemented or not? All policy makers agree that collection of tax on small business, services and agriculture is very difficult, while agriculture tax is most cumbersome and difficult to collect. the experts of agriculture tax in Pakistan cite India as example for agriculture tax. According to an Indian writer/researcher, agriculture tax in under developed countries is very difficult because most of the transactions of income and expenses are without receipts. On the other hand, agriculture tax has a nominal importance in developed countries rather agri tax is almost nil in OeCD countries, but in under developed countries like Pakistan and India, its contribution in GDP of the country is 22 per and 15 per cent respectively.

AGrICUltUre lAnD oWnerShIP In PAkIStAn (As per Agriculture Statistics 2000)

land ownership less than 5 acre (%) Pakistan 61.00 Punjab 61.34 Sindh 42.50 KP 79.00 Balochistan 30.00

5 to 25 acres (%) 33.00 34.00 46.00 18.00 52.00

25 to 50 acres (%) 4.00 3.40 7.70 1.70 10.70

50 acres& plus (%) 2.00 1.40 4.10 1.16 8.00

AGrICUltUre lAnD oWnerShIP In PUnjAb (As per Statistics Punjab 2007)

land less than 5 5 to 12.5 12.5 to 25 25 to 50 ownership acre (%) acres (%) acres (%) acres (%) Punjab 90.73 7.40 1.20 0.28

It is easy to say that like other sectors, agriculture should also be taxed, but its implementation is very difficult and impracticable because it’s not possible to calculate agriculture income and tax. the performance of income tax department is already not satisfactory in other sectors, as it collects 63 per cent tax through advance tax regime, so it would be close to impossible to calculate the agri income under the present system of tax assessment.

AT THe mOmeNT THere Are TWO dIffereNT WAyS Are IN prAcTIce TO cAlculATe AGrIculTure INcOmeS: 1. Payment of tax on the basis of ownership of land.

2. Payment of tax on the basis of income from agriculture.

In the provinces, the agri tax is at present generally recovered/collected on land ownership basis. Due to economic constraints, our economists also prefer to levy agri tax on land ownership basis.

Another objection which is raised on agriculture sector is that for the purpose of agri tax calculation, based on ownership/land holding, this sector pays less tax as compared to salaried persons who pay a major share of their income as tax. Big land lords also pay nominal tax out of the income earned from agriculture. this economic disparity is also highlighted by other sectors that emphasise upon the necessity of collecting tax for agriculture sector.

In Pakistan, tax share in our national revenue is only 9 per cent, which is less than other countries, even compared with neighboring countries like, India and Bangladesh. If Pakistan wants to increase its tax revenue up to 14 per cent, GSt and income tax have to be expanded and made more practical because all of this will never be possible by levying agriculture tax

50 acres (%) 0.05

only. Irrespective of the facts mentioned above, if provinces are serious to implement agriculture tax, they will have to maintain the land record up to date which includes, Malkiyat, Girdawarie, Jama bandi and also keep track of the change in ownership.

However, one important factor should also be kept in mind, that before implementing agriculture income tax, constitutional amendment is also required which will empower the federal government to implement and collect it. But before doing this, the following factors should also be taken into consideration: In the above mentioned chart, you should carefully notice the land ownership ratio. those people, who are still under the illusion that there still are big land lords in Pakistan, must understand that there are only 2 per cent agriculturists who are owners of 50 acres or more. If we see details of the provinces, the owners of 50 acres and above in Punjab were only 1.40 per cent, 8 per cent in Balochistan, 4.10 per cent in Sindh and 1.16 per cent in Khyber Pakhtunkhwa.

If we see the figures of year 2007 in the above chart, because of inheritance division of land, economical needs, conversion of agriculture land into residential colonies and many other reasons, the percentage of ownership has reduced further and the owners of land above 50 acres in Punjab are now only 0.05 per cent.

Now in 2011 as compared with the figures of year 2007, there has been further fragmentation in agri land holdings in the province of Punjab i.e. reduced to only 5660 in number.

AGrIculTure SecTOr AlSO pAyS TAx: No doubt, every sector in Pakistan should pay tax, but one fails to understand why it is being prorogated that agriculture sector is not paying tax.

12.5 ACRES LAND OWNERSHIP

No Tax

12.5 ACRES TO 25 ACRES

RS100 PER acRE

26 ACRES TO 50 ACRES

RS250 PER acRE

50 ACRES OR MORE

RS300 PER acRE

factually speaking, Agriculture tax Act was implemented in 1997 and then amended and implemented in 2001 as highlighted below: 1. Agriculture tax on the basis of land ownership.

2. Agriculture tax on the basis income from agriculture.

Moreover, tax is levied and implemented on the above mentioned basis of tax incidence, whichever is higher, whether on land ownership basis or agriculture income based, for example, according to Agriculture tax Act 1997, farmers used to pay tax. this can be seen in the chart below. through an amendment in 2001, now a farmer who owns 50 acres of irrigated land or 100 acres of barani land would be required to submit a return of agriculture income and has to pay maximum tax, from either land ownership basis or agriculture income basis. No farmer is exempt from it.

Now take the example of seemed scenario i.e. suppose, agriculture income of a farmer on 30th June 2011 is rs500,000 and his all agriculture expenses including, depreciation of agriculture machinery of rs350,000l; his tax return form for the year shall be the following: As mentioned above, fixed land based tax per acre on less than 50 acres has to be paid. Based on revenue department calculations, tax on the income per agriculture is calculated by the farmers as per the return specified.

Our parliamentarians should not misguide people and media for their temporary political gains. It is important to create awareness among the farmers about tax system and ensure a properly documented and transparent collection system so that collected tax should be deposited in the government accounts. farmers should be guided and facilitated in this regard.

South Asia’s whispering enemies

t

SHAHID JAveD BuRKI

He leaders of the member countries of the South Asian Association for regional Cooperation met last week in the Maldives for their 17th annual summit. Previous SAArC summits achieved little in the way of regional cooperation. If they are remembered at all, it is for the progress made in getting India and Pakistan to talk to each another. While this time was no different, there are growing signs of a thaw in relations.

Improvement in the India-Pakistan relationship – the main obstacle to greater economic cooperation in South Asia – has come whenever the two countries’ governments have agreed to work together to achieve a common good. that happened in 2004, when, after agreeing to initiate what they called a “composite dialogue” that would cover eight issues that had kept

them apart for decades, India and Pakistan also agreed to work towards the creation of the South Asia free trade Area (SAftA).

Without such limited agreements, stasis in South Asia is the rule.

SAftA was launched in July 2006, but it did little to increase trade between India and Pakistan, which has barely developed since 1947, when the two countries fought the first of many trade – as well as real – wars against each other. In November 2008, after a group of terrorists attacked Mumbai, India’s financial center, India accused Pakistan of involvement in the attack and suspended all dealings with its neighbor. the composite dialogue was put on hold, with both sides unable to cast off the heavy burden of decades of hostility and intense rivalry.

Nevertheless, bilateral relations have warmed slightly over the past 18 months. the process began at a meeting in Bhutan between Prime Minister Manmohan Singh

of India and Yousaf raza Gilani, his Pakistani counterpart. India agreed to begin talking again with its neighbor, accepting Pakistan’s argument that it, too, was a victim of terrorism. Since that meeting, the two countries’ prime ministers have met four times, always on the sidelines of international gatherings. their foreign ministers have met three times, and their commerce ministers once. the Indians agreed to resume the suspended dialogue with Pakistan, despite the failure fully to resolve the Mumbai attacks legally, as well as Pakistan’s inability or unwillingness to move against the two domestically-based terrorist groups that India had accused of having masterminded those and several other attacks on its territory. the most important outcome of these renewed contacts was the Pakistani cabinet’s decision, on November 2, to grant India most-favored-nation (MfN) status in trade relations.

Under the rules of the World trade Organization, MfN status should have been given after both countries became members. India granted Pakistan MfN status in 1996, but Pakistan held back, hoping to win concessions from India on the unresolved issue of Kashmir. that, of course, did not happen, and Pakistan has at last changed its mind.

What that implies is that trade with India will be conducted according to the same set of regulations and tariffs that govern other countries’ trade with Pakistan.

India responded to Pakistan’s gesture by supporting its bid for membership of the United Nation’s Security Council, and by withdrawing its objections to the european Union’s grant of special privileges to Pakistani textile exporters. So the Maldives SAArC meeting offered an opportunity for further easing of tensions.

Given that Pakistan’s relations with the United States are arguably at an all-time

Total Agriculture Income of the year

Cultivation Expenses

Balance Income

Basic Exemption from Tax

Rs80,000 Taxable Income of the Year

Rs70,000 Payable Tax (Rs.70,000 X Rs.100 * 5)

Rs3,500 Other provinces should also make concrete and effective efforts to collect agriculture tax so that people can know about the procedure of payment of tax by the agriculture sector. Since in current system, a ‘patwari’ collects tax and does not issue a proper receipt to the farmers, which is why the tax does not properly gets recorded and neither is the amount credited from the farmers’ accounts.

If government is serious about collecting tax from the agriculture sector, it will have to be more proactive. It is pertinent to launch a media campaign to create awareness among the farmers. the farmers’ organisations can also be approached to assist them in this regard, with positive contribution to the national exchequer.

Mohammad Tariq Bucha and Malik Khuda Bukhsh Bucha are currently working as President Farmers Associates Pakistan (FAP) and President Agriculture Foundation, respectively. low, Pakistani leaders seem determined to lower the temperature on its disputes with other global powers, particularly India. Gilani extended another invitation to Singh to visit Pakistan. Singh, in keeping with past practice (he has received at least six invitations from various Pakistani leaders, starting with then-President Pervez Musharraf), remained non-committal, but showed warmth towards his Pakistani counterpart.

“I always regard Gilani as a man of peace, and every time I meet him my belief is further strengthened,” he told the press. enduring hostility between India and Pakistan, the region’s largest economies, remains the key barrier to such a breakthrough. Neither Gilani nor Singh was certain of domestic public support for further warming of relations, so they played it safe, rather than displaying the bold leadership that the occasion demanded.

Shahid Javed Burki, former Finance Minister of Pakistan and Vice President of the World Bank, is currently Chairman of the Institute of Public Policy, Lahore. A version of this article was first published in project syndicate.

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Thursday, 24 November, 2011

EDITORIAL

Drafting our own misfortune

The CNG ban

T

He proposed ban on CNG kits is yet another example of unplanned, ad hoc policy making, reflecting a disturbing gap between on ground reality and the government’s understanding of some of the people’s most basic concerns. Simply banning CNG kits, in the absence of a viable alternate public transport system, will immediately distort market prices, encourage corruption and smuggling, and bite into people’s budgets in times of already high inflation, rigid wages and depressed employment.

According to our news report, consumers have invested a combined rs70 billion just on CNG conversion since the process gathered steam in the mid ‘90s. And with this particular head only accounting for 10 per cent of available gas supply, which is further diminished because of controlled availability, the difference on the overall supply equation stands to be negligible once the ban is enforced. In real terms, such steps will only compound

problems for the middle and lower income groups, whose earning power has progressively diminished in the three-anda-half years of the present government. the decision is all the more surprising since it comes without any alternative means of addressing people’s problems. Simply enforcing such bans will only add to overall problems, while adding to the government’s unpopularity. Granted, industry is severely compromised due to energy shortage. But measures that add to people’s misery while doing little beneficial for industry or the economy are self-defeating. It behooves the government to ensure energy shortage is dealt with in a proactive manner, rather than squeezing the productive segment of society.

With elections not very far, Islamabad seems scrambling to posture towards an energy efficient outlook. Not addressing power problems at the right time was bad enough.

But groping in the dark and presenting halfcut solutions will just not wash with the people anymore. Concerned quarters are advised to reconsider such steps.

Syed Asad Hussain

P

OSt 2007 period for Pakistan’s economy has been quite tough. Until 2011, the cost of the War on terror on our indigenous economy has been a whopping $67 billion. As a consequence, Pakistan’s investment to GDP ratio has declined from 22.5 per cent in 2006/07 to 13.4 per cent in 2010/11. Hence the pool of unemployed workforce has grown exponentially and poverty levels have deteriorated. the middle class has shrunk phenomenally and has been struggling to make ends meet. Socioeconomic disparities are on the rise and this is further amplifying the growing divide between the rich and the poor.

Increasing incidents of suicide bombings, worsening of power crisis, poor economic governance, continuing unrest in Karachi and other parts of the country, flight of capital and increasing inflation have caught the economy in a severe low-growth rut. However, all these problems have taken root due to our own follies, and cannot be attributed to anyone else. We are indeed the authors of our misfortunes.

What should be fixed first then? Well among other indicators, economic governance perhaps is one of the most significant indicators that we should scrutinise first. It reflects how economic decisions are made. Good and timely decisions can turn the economy around. On the other hand, bad decisions with narrow political considerations and short term political gains can push the economy off the cliff and produce deep cracks which

Pakistan’s investment to GDP ratio has declined from 22.5 per cent in 2006/07 to 13.4 per cent in 2010/11

Europe and the bitter Beijing pill

Devil wears Prada

It can be safely said that europe has no other option but to look towards China to dig their economy out of the mess that it finds itself in. China might have its own interests in bailing out europe, but the fact of the matters is that as things stand – with U.S having many problems of its own and Germany also backing out – China and China alone can help europe. Yes, China would want political favours in return but everything comes at a price. And I don’t believe that europe has another choice. Beggars can never be choosers, this is just the way the word works.

One can safely generalise that there is an upsurge in the 'average spend' when it comes to fashion. Among other reasons, deep down it is perhaps the self adopted need to be seen, recognised (envied?) or appreciated, that drives the fashion hungry. this pretty much covers the motivations of the rising "faisalabadi/Sialkot New Money" class to the creme de la crème; not to forget the squeezed middle class and the teeny boppers. Yes, social acceptance has skipped a few rungs to climb up the ladder of priorities for us.

Does that mean we are complexed? At least a certain chunk of the population is (although we will never like to admit).

SAnIyA WASIM

nAMRAH SyeD

later become hard to repair.

Given the government performance in the last many years, the economy has plunged into the depths of oblivion. However, it can recover as long as the government has a will to make tough decisions.

Ironically, many incompetent people are peddling the wheels of the economy that too in the wrong direction. the heads of key public institutions, I guess, are topping the list of our misfortunes.

It is hard to disagree with the claim that many such public institutions are facing the rot, due to mismanagement, corruption, incompetence and nepotism.

Pakistan Steel Mills, PSO, SNGC, SSGC, PASSCO, tCP, PIA, WAPDA, railways, PePCO, Port Qasim, USC, etc., are no doubt rotten-eggs riddled with corruption and victims of blatant neglect on the part of policy makers. Politically backed strong union-mafia seems to be in total control of PSes and have proven over time to be the major hurdle in the performance of such State owned entities. Overstaffing and political appointees in the PSes are causing serious damages to the productivity of these organisations and are the main source of increasing losses. the railways, PIA and Pakistan Steel Mills are classic case studies in this regard where incompetent captains have sunk the ship. Unfortunately no one seems to accept the blame. Instead of improving the performance of these PSes and cutting losses, more money is being demanded to pay for the losses.

Sadly speaking, over rs300 billion of tax-payers money is being spent every year to keep them afloat.

Unfortunately, the nation is caught in an unending cycle of deprivation, negativity, and frustration. Ideally speaking the country’s economy should be run by professionals who have a deeper understanding about the complex economic issues and are capable of not only suggesting but implementing the solutions to improve the economy. this is only possible if the economy is set free from political influence. time has come to take tough economic decisions if economic recovery is desired. However, unfortunately, under the current democratic setup, politics not economics wins most of the time.

The writer is Director Szabist Institute Islamabad. He can be reached at syed311@hotmail.com

LAhORE

LAhORE

Dissecting economic paradigms

Basit Rizvi

W

ItH the global economic recession taking a toll on developed countries there is a growing sense of uncertainty that is gripping the majority in the west. Just like the calm before the storm, the uncertainty has lent itself a sound that is almost palpable and rightly so. People are worried not only about their future, but are also considerably perturbed over the future of their children, that they fear might end up

worse off than them. Unfortunately, like mentioned earlier, this is merely the calm before the storm. the US is having a tough time, trying to pave way for its economy to return to the path of high growth coupled with vigorous job creation. As a result of this meltdown, thousands of people have taken to the streets of the US, with the clamour for a just economic order growing with every passing day. As things stand, the winds of change have already begun with protests against the financial imbroglio, claiming two governments and simultaneously replacing elected representatives with technocrats who are expected to get things in order. As fears rise, so does the concern of the institutional integrity of the euro zone.

What is now being witnessed is that this uncertainty is not regional, but extends well beyond the realms of countries and states.

All the changes taking place today, point out blatantly towards paradigm changes that are shaping the global economy and more im-

portantly towards the anxiety that is resulting from the loss of faith in what were once thought to be dependable economic, financial, social or political anchors.

It will take time, to restore faith in these anchors and there seems to be no clear roadmap on what needs to be done, and certainly history at this crucial juncture in time, provides little inspiration.

But what mostly stands out is the fact, that different countries have realised that their destinies can never be in harmony with the rest and hence seek different outcomes out of necessity, while the challenge the global system as a whole faces is how best to reconcile the challenges.

In predicting the future of these states, one that precariously hangs in balance, we can employ a simple analytical framework to comprehend what can be expected and how these countries can best adapt to the troubling times that are headed their way. Using this simple analytical framework it may be prudent to ob-

ShAhAb jAFry Business Editor

kUnWAr khUlDUne ShAhID Sub-Editor

bAbUr SAGhIr Creative Head

AlI rIZvI News Editor

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hAMMAD rAZA Layout Designer

Winds of change have already begun with protests against the financial imbroglio, claiming two governments

serve that the future of the global economy will be shaped by the ability of different countries to manage financial, social and political dynamics. the first ability relates to balance sheets.

What many western economies are now struggling with, is a severe debt crisis that has been fueled over the years by excessive borrowings, especially when the governments could not sustain them with economic growth. faced with this reality, countries will now be faced with a multitude of de-leveraging options. On this account, differentiation is in fact more than evident.

De leveraging is then closely linked to economic growth. those countries that have a stronger ability to generate additional national income have a greater ability to meet debt obligations while at the

same time maintaining a certain standard of living for its citizens. the final variable is the role of politicians and policy makers. the longer the policy makers fail to adjust, the greater the risks they will be exposed to.

As far as those on the receiving end of the spectrum are concerned, ordinary people, the proletariat, they need not be paralysed with anxiety. Instead they should use the simple framework to monitor developments, imbibe from them and most importantly learn to adapt. Most significantly a global paradigm shift, one that is being drafted at present does not merely present risks but implies a change in opportunities as well.

The writer is a professional banker and financial commentator

For comments, queries and contributions, write to: MUneeb ejAZ Layout Designer

email: profit@pakistantoday.com.pk Ph: 042-36298305-10 Fax: 042-36298302 Website: www.pakistantoday.com.pk

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Thursday, 24 November, 2011

We should focus on the well-being of the people of the South asian region and that is only possible through strengthening SaaRc

news

04

Foreign Minister, hina rabbani khar

FBR notifies zero pc tax rate on imports tors as mentioned in SrO 283 dated 1st April 2011 through SrO 1012, dated 4th November, the above scheme was revamped and items were reduced from 184 to 126.

And sales tax charging made zero rated on import of items by export oriented sectors and single reduced rate of five per cent was made applicable on local supplies among these sectors.

Now, this zero rating scheme further revamped through SrO dated 23rd November 2011. Sales tax with zero per cent charge on import of 128 items by export oriented sectors and reduced rate of four per cent and six per cent would be applicable on local supplies among these sectors. facility of zero-rating shall be available to every such person engaged in manufacturing

ISLAMABAD

f

STAFF REPORT

eDerAL Board of revenue (fBr) and government announced through notification that goods on which sales tax shall — subject to conditions stated in this notification – be charged at the rate of zero per cent on the supply and import. Depending on the case a reduced rate of six per cent or four per cent - as specified in the said conditions of 128 imported material items - would be applied.

Previously, sales tax for export oriented sectors on around 184 items was being charged zero per cent at import stage and at four per cent and six per cent on local stage supplies for export oriented sec-

SeCP seeks feedback on voluntary Pension System ISLAMABAD STAFF REPORT

A

S Securities and exchange Commission of Pakistan (SeCP) is amending Voluntary Pension System (VPS) rules, SeCP seeks feedback on amendments to facilitate growth of pension industry and to protect participants’ interests. VPS rules were notified in 2005 to provide a framework for building pensions by salaried as well as self-employed people.

Private pension funds were launched in June 2007, which have now grown to nine funds with more than rs1.5 billion worth of assets. through amendments, participants are being given a choice to shift their accumulated balance from one pension fund to another once in a year instead of waiting for the anniversary date. Notice period for change of fund or fund manager is being reduced from 30 days to 21 days.

or trading in textile sector (including carpets and jute) who is registered for the purpose of sales tax other than retailer. No tax shall be payable at any stage of the supply chain if goods are sold by a registered person to a registered person till the stage of processing where sales tax shall be charged as specified hereunder. the benefit of this notification shall be available to registered importers, traders, manufactures and exporters. In case where a commercial importer sells any imported goods to unregistered person, he shall charge and pay sale tax at six per cent of value of supply, if goods are usable in textile sector up to the stage of spinning including the product of spinning such as yarn and its byproducts, where after such

importer shall charge and pay sales tax at four per cent of value of supply.

No sales tax shall be payable at ginning or manmade and synthetic fiber manufacturing stage. In case of registered manufacturers importing their inputs or acquiring their inputs from commercial importers or registered manufacturers such manufacturers shall charge and pay sales tax at six per cent of value of supply only at the spinning stage, i.e. yarn and its by-products if these goods are supplied to any unregistered person provided that if such goods relate to stages after spinning, sales tax shall be charged and paid at four per cent of the value of supply.

In case of yarn purchases on payment of sales tax at six

per cent of value of supply from spinning mills by unregistered persons i.e. traders or persons engaged in activities like sizing, warping, weaving, intermediary and other ancillary processes. Before processing of finished fabric, no further amount of sales tax shall be charged or demanded.

In case of registered persons engaged in providing processing services of any kind in respect of textile goods, such person shall charge from the person, who owns the goods but is not a registered person, sales tax at four per cent of service charges.

In case of stages after weaving, if the fabric is sold by a registered manufacturer to an unregistered person, sales tax shall be charged at four per cent of value of supply, if such

Pak businesses represent 7 per cent of rAk FtZ’s registered companies

Ceo and President PtCl becomes vice Chairman SAMenA duBAI: SAMeNA telecommunications Council has elected CeO and President Pakistan telecommunication Company Ltd (PtCL), Mr Walid Irshaid, as the new vice chairman of its board of directors. Mr Irshaid succeeds Mr riad Bahsoun of telecommunications Information technology (tIt). SAMeNA board of directors now comprises of 11 major regional operators, including, Batelco Group, Omantel Group, Saudi telecom Group, etisalat Group, Orange-Jordan telecom Group, Qtel Group, turk telekom Group, PtCL, Viva Kuwait, and Bravo. “Mr Walid Irshaid’s election to the board adds to the leadership support that Sheikh Mohamed bin Isa Al Khalifa, Group CeO of Batelco Group, is now extending to SAMeNA as its chairman,” said Chief executive and executive Managing Director SAMeNA, tom Wilson. “SAMeNA is making strides on multiple fronts, of interest to our operator membership, and Mr Irshaid’s leadership and experience in the regional ICt are precisely what SAMeNA’s membership will gain from.” “It is a great honour for me to have been entrusted with this esteemed position,” said CeO and President PtCL, Mr Irshaid. “this new honour for PtCL actually reflects SAMeNA’s recognition of our company’s frontline role in fostering and leading the telecommunications revolution in Asia.” In his capacity as vice chairman of SAMeNA, Mr Irshaid will aid SAMeNA’s relationship-building efforts with policy circles in the SAMeNA region. “As SAMeNA Vice Chairman, I envision this as a great opportunity for PtCL to expand its outreach with both regional and global players thus, putting Pakistan firmly on the international map as a global telecom market leader,” said Mr Irshaid. An international information and communications technology (ICt) expert, Mr Irshaid has more than 30 years of professional experience in the Middle east, North Africa and South Asia regions. throughout his career, he has led a multitude of high-value telecom projects in several markets. His previous international stints include emirates telecom (etisalat), Datanet (Lebanon), Paltel (Palestine), and fLAG (Middle east and North Africa). STAFF REPORT

Bears prevail at KSE as index further dips by 133 points KARACHI STAFF REPORT

B

eArS continued to prevail on the Karachi stocks market where the benchmark KSe 100-share index further plunged by 133.03 points or 1.13 per cent on account of international and domestic negatives. the market analysts believe that decline in global stocks and commodities on concerns for US economic growth and european debt crises coupled with the investors’ cautiousness towards the State Bank’s discount rate announcement due at the month end kept shattering the investors’ confidence. the day saw the benchmark, KSe 100-share index, dipping to 11,633.97 points as against 11,767.00 points of the previous day. the intraday high and low were recorded, respec-

tively, at 11,836.21 and 11,622.40 points.

“Bearish activity prevailed at KSe amid thin trade,” said Ahsan Mehanti, a director at Arif Habib Investments. the trading volumes could make a slight recovery to 33.565 million shares after falling to a record low of 28.368 million on tuesday. the trading value also lost its face and contracted to rs1.2 billion compared to tuesday’s rs1.3 billion. the market capitalisation amounted to rs3.02 trillion against rs3.061 trillion of a day earlier. In total 310 scrips were traded, of which 69 gained, 159 declined and 82 remained unchanged. Mehanti said the bearish trend continued to negatively affect sentiments of the riskaverse investors in view of the falling global stocks and commodities on the United States and european debt fears.

“Stocks closed lower broadly as global stocks and commodities

fell on concerns for US economic growth and europe debt crises,” the analyst said. Mehanti said the rumours dominated the market sentiment that ended on cautious note ahead of SBP policy announcement later next week. Bank Al-falah was the volume leader of the day counting its traded shares at 3.307 million at the highest per share rate of rs12.14. the bank’s share price opened at rs11.90 and closed at rs11.95.

Other scrips found place

among the top 10 best traded included Azgard Nine, Lotte PakPtA, trG Pakistan, fauji fertilizer Bin Qasim, fauji fertilizer XD, fatima fertilizer Company, National Bank of Pakistan, Nishat Mills XD and P.t.C.L.A. these scrips recorded their traded shares, respectively, at 2.2 million, 2.0 million, 1.9 million, 1.8 million, 1.6 million, 1.3 million, 1.2 million, 1.1 million and 1.0 million. the turnover at future market, however, remained positive

manufacturer has availed zerorate facility at previous stages of the production chain.

At the stage of processing or finishing of any kind of fabric or stitching of such fabric, if any registered person supplies the goods including finished products like finished, dyed/processed/printed fabric, textile apparel, home textile and clothing including garments and all non-woven products etc to an unregistered buyer, he shall charge and pay sales tax at four per cent of the value of supply. registered persons who have acquired goods at zerorate under this notification shall pay sales tax at four per cent of value of supply on their supplies of all kinds of finished products to retailers, regardless of registration of such retailers.

and totaled at 6.429 million shares against the previous 6.1153 million shares. the futures scrips that were rated plus, numbered 15, whereas 123 were minus and 2 remained unchanged. ANL-DeC appeared as a volume leader on the future market having 0.848 million of its shares traded during the day.

“Limited foreign interest and institutional consolidation in blue chip stocks played a catalyst role in bearish close at KSe,” Mehanti concluded.

KARACHI STAFF REPORT

P

AKIStANI businesses represent 7 per cent of ras Al Khaimah free trade Zone (rAK ftZ) registered companies. Out of more than 5,000 companies from 138 countries registered at rAK free trade zone, Pakistan is third in the top 10 countries in our portfolio. this was stated by Mr Azfar Saeed, Marketing and Business Investment Manager, rAK ftZ while addressing Pakistani businessmen, entrepreneurs and investors regarding business opportunities available at rAK ftZ during a two-day road Show at a local hotel.

He informed that currently 469 investors have registered with free zone from Pakistan and number of investors is still increasing around the globe. In third quarter of year 2011, rAK ftZ registered 413 new companies which represent a significant increase of 38.6 per cent over the same period last year, when 298 new companies registered. He informed that vast majority of new companies originate from UAe and India, with other new partners hailing from Pakistan, Afghanistan, france and Netherlands. At rAK ftZ Pakistani businesses are enjoying special advantages such as 100 per cent foreign ownership, 100 per cent income and corporate tax exemption, 100 per cent and profit repatriation, and no import and export duties. With cost effective set-up packages regulations and procedures have been kept simple to facilitate investors. rAK ftZ provides Pakistani businesses, especially those from SMe sector, to set up their business quickly, easily and smoothly in UAe. State of the art infrastructure and facilities rAK ftZ provided for startups are incomparable especially with our value-added support to help you reach your target markets and open up opportunities for your businesses to connect to emerging markets, said Azfar Saeed. He informed that rAK ftZ is a purpose-built area where certain normal trade barriers such as tariffs and quotas have been eliminated and bureaucratic requirements are lowered to attract new business and foreign investment. rAK ftZ could be a good hub for trading and marketing of products in Gulf States with facilities of warehousing as well. Investors can set up their facilities in rAK ftZ in six sectors - logistics, industrial, academic, commercial, consultancy and general trading. With full ownership and a tax free jurisdiction, business environment within the free zone is specifically designed to facilitate successful entry into emerging markets, particularly for small and medium enterprises.

Layout Profit 7 pages_Layout 1 11/24/2011 12:16 AM Page 5

Thursday, 24 November, 2011

central bank will be comfortable with proposed capital distributions

news

Governor US Federal reserve board, Daniel tarullo

Fed to test six big banks for Euro stress

t

He federal reserve plans to stress test six large U.S. banks against a hypothetical market shock, including a deterioration of the european debt crisis, as part of an annual review of bank health. the fed said it will publish next year the results of the tests for six banks that have large trading operations: Bank of America (BAC.N), Citigroup (C.N), Goldman Sachs (GS.N), JPMorgan Chase (JPM.N), Morgan Stanley (MS.N) and Wells fargo (WfC.N). "they are clearly worried about the issue of europe," said Nancy Bush, a longtime bank analyst and contributing editor at SNL financial. "In a time of risk aversion and concern, you need transparency." the fed said its global market shock test for those banks will be generally based on price and rate movements that occurred in the second half of 2008, and also on "potential sharp market price movements in european sovereign and financial sectors."

In the fed's hypothetical stress scenario, unemployment would spike as high as 13 per cent while U.S. gross domestic product would fall by as much as 8 per cent. the heightened stress tests are part of a larger supervisory test the fed will conduct on the capital plans of 31 firms with at least $50 billion in assets. the tests will apply to 19 banks who have previously been through the process and 12 more financial firms considered less complex. the test each bank faces will be based on its size and complexity. the banks must submit their capital plans to the fed by January 9, 2012. the fed said that it plans to respond to banks by March 15. It was not clear when

the results would be published. the fed will use the stress tests to determine whether banks are robust enough to raise dividends or repurchase stock, or whether they need to obtain additional capital. the fed plans to release more information than it did last year about the tests' results. the regulator said it is doing so to "foster market discipline." the fed will disclose the estimate of revenues, losses and capital ratios of the 19 biggest banks if they were to suffer a market shock. this type of disclosure could give investors and markets more certainty about the strength of U.S. banks at a time when there are deep concerns about their european counterparts. "eventually, this will be viewed as a positive, and a lot of people will focus on this as a way to verify the viability of these companies," said Matt McCormick, portfolio manager at Bahl & Gaynor investment counsel in Cincinnati.

CONTAGION FEARS fitch ratings earlier this month expressed concern that U.S. banks could take a hit from the debt crisis in europe.

Analysts at the credit rater

said their concerns are based, in part, on U.S. banks having increased trading operations in europe in the past several years.

"Our concern is with counterparty risk, the impact of europe on global economic growth and how that weighs on the economic recovery in the U.S.," said analyst Joseph Scott in the November 16 note. fears over U.S. firms' european exposure grew after brokerage Mf Global filed for bankruptcy on October 31. Mf Global collapsed after disclosures about its massive bets on european debt spooked investors and counterparties. U.S. bank stocks in general have taken a beating over the last year with investors concerned about the sluggish economy, european debt, and the impact of more intense regulation. the KBW Bank Index .BKX of stocks has fallen more than 30 per cent this year.

DIVIDENDS Banks have been eager to boost dividends and buy back stock, but the fed has indicated it will take a tough stance, particularly if a bank is not far along in meeting new international Basel capital standards.

In a November 9 speech, fed

Governor Daniel tarullo said the central bank would be "comfortable with proposed capital distributions" only when it is "convinced" a bank is on a path to easily meet the new standards.

"I don't think anyone could say that this is anything but an extremely stringent stress test," said Karen Petrou, managing partner of federal financial Analytics. "It will really put the burden on the affected bank holding companies to prove they can make a capital distribution, not on the fed to block it." the fed is putting in place a broad stress testing regime in the wake of the 2007-2009 financial crisis when taxpayers were forced to extend a $700 billion bailout to the financial system. this will be the second round of fed tests of banks' capital plans. earlier this year, the fed rejected Bank of America's plan to boost its dividend in the second half of 2011, while allowing other big banks to move ahead with dividend hikes.

Under the 2010 Dodd-frank financial oversight law, the fed is required to conduct stress tests on banks with more than $50 billion in assets. the latest capital tests are separate from this requirement but the fed said on tuesday it would try to harmonize the different testing regimes facing banks. the expansion of the capital tests beyond the 19 who have been scrutinized in the past will likely not be welcomed by those being added to the list.

"It's another layer of fed oversight on their capital, and they've fought tooth and nail not to be included in this," said Paul Miller, analyst at fBr Capital Markets. "So I don't think any of those banks are particularly happy right now." REuTERS

05

jobless claims rise, spending barely up WASHInGTon REuTERS

t

He number of Americans filing new unemployment claims rose last week and consumer spending barely increased in October, according to data on Wednesday which could prompt economists to tamp down on expectations for solid growth in the current quarter. Other reports showed new orders for a range of long-lasting manufactured goods rose, but details of the report were generally weak, with spending plans by businesses the weakest since January. "We are getting a disappointing start to the fourth quarter. It doesn't have the strong upward thrust we normally see in a regular recovery," said Pierre ellis, senior global economist at Decision economics in New York.

Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 393,000 last week, the Labor Department said. economists had forecast claims rising to 390,000.

Separately, the Commerce Department said consumer spending edged up 0.1 per cent, slowing sharply from a revised 0.7 per cent increase in September as households took advantage of the largest increase in income in seven months to rebuild their savings. economists had expected spending, which accounts for about 70 per cent of U.S. economic activity, to rise 0.4 per cent.

When adjusted for inflation, spending nudged up 0.1 per cent last month, pointing to a loss of momentum after a relatively strong third quarter, when it grew at an annual rate of 2.3 per cent. Income rose 0.4 per cent last month, the largest gain since March. that was a touch above economists' expectations for a 0.3 per cent increase and followed a 0.1 per cent gain in September. taking inflation into account, disposable income rose 0.3 per cent, the largest increase since October 2010. It had declined 0.1 per cent in September.

MORE SAVING With incomes failing to keep up with inflation amid a 9 per cent unemployment rate, households had been saving less in recent months to fund spending. the saving rate increased to 3.5 per cent last month from 3.3 per cent in September. Savings rose to annual rate of $400.2 billion from $376.9 billion in September. economists had forecast this category unchanged from the previously reported 1.8 per cent rise.

But weak demand for transportation equipment saw overall orders falling 0.7 per cent after declining 1.5 per cent in September. economists had forecast overall orders dropping 1.0 per cent last month. Overall orders were dragged down by a 4.8 per cent drop in bookings for transportation equipment as orders for civilian aircraft dropped 16.4 per cent last month.

Boeing received only 7 orders for aircraft, according to the plane maker's website, down from 59 in September. that overshadowed a 6.2 per cent increase in orders for motor vehicles.

Despite the rise in orders excluding transportation, the tenor of the report was weakened by a drop in non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending. the category fell 1.8 per cent last month after a downwardly revised 0.9 per cent rise in September.

CORPORATE CORNER eCo trade and Development bank signs loan pact with DG khan Cement

TurKey: economic Cooperation Organisation (eCO) trade and Development Bank signed a loan agreement with DG Khan Cement Limited (DGKCC) to finance 3 projects. the loan will last for 5 years with one year grace period. DGKCC is part of Nishat Group and one of the largest as well as oldest cement manufacturing companie of Pakistan. One of the projects that eCO trade and Development Bank (etDB) is involved in is the grant of loan to DGKCC for the establishment of a Waste Heat recovery plant (WHr) for power generation with a capacity of 8.6 MW at the Khairpur Cement Plant. PRESS RELEASE

Ufone offers new value added service, ‘Utrack business’ ISLAMABAD: Ufone has offered ‘Utrack Business’ which is specifically designed to cater

to the needs of the corporate sector. Utrack Business provides a complete employee tracking and management solution, allowing businesses to track their work force, ensuring effectiveness and safety, all via a self-care web portal. Basic features of Utrack Business are; location of employees is displayed on a map within the main web interface, businesses can track their workforce every 30 minutes and 1 hour. Most importantly multiple hierarchies/accounts can be created under one main account e.g. head quarter and regional accounts or manager/team based accounts. PRESS RELEASE

obtain views of different segments of the society and make broad based recommendations to PtA, a committee has been constituted. PRESS RELEASE

nokia launches an extended warranty programme for its customers KARAChI: A group photo on the occasion of first International Conference on Logistics and Supply Chain, chief guest Iftikhar Malik with Moin Malik, Nadeem Khan, Asim Saeed, Naeem Qureshi, Mehmood Tareen, Tauqeer Lodhi and others are present. PRESS RELEASE

PtA filters undesired words through SMS lAHOre: In order to resolve complaints received from customers regarding obnoxious calls and undesired SMSs, PtA has formulated “Promulgation of Protection from Spam, Unsolicited, Obnoxious and fraudulent Communication regulations 2009” and “telecom Consumer Protection regulations”. Based on these regulations PtA has established Consumer Complaint Management Cell and initiated dialogue and consultation with mobile operators to curb the transmission of undesired words through SMS. PtA has also received input from customers, government and other quarters on this issue. therefore, implementation of previous PtA instructions has been withheld. In order to

KArAcHI: Nokia has launched Nokie Care Protect with extended warranty offer for the convenience of its customers. Nokia Care Protect is an extended warranty that can be purchased for nominal charges and offers mobile phone warranty service for additional 12-months after the original Nokia warranty expires. this is an add-on service from Nokia and there is no hidden or additional fee involved. PRESS RELEASE

ISLAMABAD: Mr Cameron Munter, Ambassador of the united States of America (left) being received by Mr Sheharyar Mirza, General Manager (right) along with Mr Abdul hayee, Executive Assistant Manager (center), Pearl Continental hotel Rawalpindi upon his arrival at the hotel. PRESS RELEASE

Layout Profit 7 pages_Layout 1 11/24/2011 12:16 AM Page 6

Thursday, 24 November, 2011

06 Markets

top 10 sectors

24% 09% 35% 10% 08%

Chemicals

01% 07% 02% 03% 01%

General Industrials

Construction & Materials Electricity Banks

Fixed Line Telecommunication

Oil & Gas

Financial Services

Personal Goods

Equity Investment Instruments

STocK MaRKET HIGHLIGHTS Index 11633.97 3028.8 2608.66

KSE-100 LSE-25 ISE-10

Change -133.03 -37.77 -30.64

Volume 25,660,762 969,943 18,800

Market Value 1,217,154,077 26,705,734 1,133,450

top 5 perForMers sector wise

Major Gainers Company UniLever Pak Ltd. Bata (Pak) Ltd. Colgate Palmolive Linde Pakistan Ltd. Exide (PAK)

Open 5399.70 710.34 561.00 103.07 173.25

High 5600.00 745.85 585.00 105.00 175.99

Low 5361.00 745.00 582.00 102.00 173.60

Close 5440.00 745.07 585.00 104.64 174.79

Change 40.30 34.73 24.00 1.57 1.54

Turnover 879 109 250 45,581 4,203

2955.74 875.00 169.86 406.18 90.98

2996.00 860.11 169.00 409.00 86.44

2807.96 854.90 163.00 399.00 86.44

2810.98 860.11 163.17 400.43 86.44

-144.76 -14.89 -6.69 -5.75 -4.54

357 11 4,328 35,328 535

Volume Leaders Bank Al-Falah Azgard Nine Lotte PakPTA TRG Pakistan.

Fauji Fert

11.90 3.55 10.32 1.48 1.53 58.04

12.14 3.60 10.45 1.38 58.65

11.86 3.30 10.06 1.40 56.86

11.95 3.34 10.10 -0.08 57.15

0.05 -0.21 -0.22 1,997, -0.89

3,307,950 2,270,985 2,063,578 436 1,809,034

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

Per Tola (PKR) 55,464.00 51,608.00 1,036.00 1025.00

Per 10 Gm (PKR) 47,602.00 44,245.00 889.00 880.00

Per Ounce US$ 1,691.00 – 35.05 –

hIGh

loW CUrrent

412.75 127.68 23.89 7.38 97.00

406.10 125.01 23.22 7.19 93.15

ChAnGe

volUMe

oil and Gas Attock Petroleum Attock Refinery Burshane LPG XD Byco Petroleum Mari Gas Co.XB

411.14 126.72 23.22 7.20 96.00

Agritech Ltd. Arif Habib CoXDXB SD Bawany Air Products Clariant Pakistan Dawood Hercules

15.00 29.85 5.00 156.34 39.08

-4.15 -1.35 0.00 0.05 -2.26

18,325 226,908 1 1,147,404 47,325

1.51 9.20 33.86 10.80 6.97

15.48 29.90 5.25 156.74 39.35

15.00 29.45 5.00 155.00 38.50

15.00 29.51 5.25 155.18 38.62

0.00 -0.34 0.25 -1.16 -0.46

1,002 252,944 1,000 2,897 15,788

1.91 52.50 1.95 14.18 6.00

1.59 9.48 33.00 11.00 7.25

1.46 9.06 32.18 10.77 6.97

1.48 9.06 32.53 11.00 6.97

-0.03 -0.14 -1.33 0.20 0.00

71,503 2,002 16,754 5,352 205

28.15 3.10 39.88 9.00 89.50

AL-Ghazi Tractors Bolan CastingXD Ghandhara Ind. Hinopak Motor K.S.B.Pumps

87.5245 136.3720 1.1356 117.7818

169.86 28.00 6.94 96.11 26.95

2.19 52.52 1.98 13.70 6.50

1.90 52.40 1.95 13.70 6.00

1.90 52.49 1.95 13.70 6.00

-0.01 -0.01 0.00 -0.48 0.00

3,005 1,288 100 500 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 87.90 117.66 136.88 1.1326 85.24 11.32 23.92 23.41 86.64

Brent crude oil

Agriautos Industries Atlas Battery Ltd. Atlas Honda Ltd. Bal.Wheels XD Dewan Motors

60.27 172.01 125.27 26.00 2.15

28.60 3.15 40.50 9.38 92.00

27.80 2.85 39.00 8.53 85.03

27.86 3.11 39.34 9.38 88.55

-0.29 0.01 -0.54 0.38 -0.95

14,445 110,806 1,261 502 17,243

172.00 28.55 7.40 95.76 27.13

168.00 28.00 7.34 91.31 25.61

60.99 172.01 126.00 25.99 2.60

60.27 172.00 125.00 24.70 2.11

110.49 111.43 150.02 150.00

169.86 28.00 7.38 95.76 26.95

$109.03

60.27 172.01 125.00 24.84 2.13

109.00 111.18 145.05 145.58

AL-Noor Suger Mills Bawany Sugar Clover Pakistan Colony Sugar Mills Crescent Sugar

55.09 11.10 51.41 1.90 12.00

55.09 12.00 53.00 1.90 13.00

AL-Abid Silk Mills Diamond Ind. Hussain Industries Pak Elektron Ltd. Tariq GlassXD

23.34 8.20 3.90 4.20 8.65

23.60 9.03 3.90 4.40 8.89

Amtex Limited Artistic Denim XD Ashfaq Textile Azam Textile Azgard Nine

1.31 19.50 7.10 1.35 3.71

1.44 19.45 8.10 1.40 3.85

AHCL-DEC AHCL-NOV ANL-DEC ANL-NOV ATRL-DEC

29.94 29.94 3.74 3.74 127.13

29.94 29.76 3.80 3.80 127.50

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

102.51 76.66 69.25 29.29 12.78

103.20 78.00 69.90 29.50 13.29

0.00 0.00 0.44 -0.35 0.00

68 4,001 500 11 418

0.00 0.00 -0.27 -1.16 -0.02

50 100 500 537 79,586

0.69 -4.44

1,170 203

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

10.80 34.50 0.96 1.85 1.11

55.09 11.10 51.41 1.63 12.99

0.00 0.00 0.00 -0.27 0.99

35 1 100 14,431 771

23.34 8.20 3.80 4.20 8.65

23.34 8.20 3.90 4.25 8.65

0.00 0.00 0.00 0.05 0.00

2 2 6 8,650 10

1.30 19.00 8.10 1.34 3.62

1.38 19.01 8.10 1.35 3.66

0.07 -0.49 1.00 0.00 -0.05

26,864 74,958 5,000 5,200 672,596

29.80 29.55 3.71 3.65 127.00

29.89 29.61 3.75 3.65 127.23

-0.05 -0.33 0.01 -0.09 0.10

9,000 34,500 1,286,500 1,354,000 12,000

102.74 76.66 69.00 29.38 13.18

0.23 0.00 -0.25 0.09 0.40

6,920 100 3,312 3,502 9,773

102.50 76.66 69.00 28.70 12.80

10.95 34.50 1.00 2.00 1.17

10.70 34.00 0.89 1.82 1.05

10.74 34.50 0.90 1.88 1.06

-0.06 0.00 -0.06 0.03 -0.05

873,286 50 179,056 2,098,153 74,429

0.36 37.11 0.68 1.63 17.01

0.42 37.15 0.68 1.71 17.00

0.32 37.00 0.64 1.63 16.61

0.32 37.01 0.65 1.70 17.00

-0.04 -0.10 -0.03 0.07 -0.01

3,307 416,249 164,679 232,001 300,022

62.23 10.95 5.69 12.07 29.87

62.80 11.00 5.80 12.31 30.00

62.10 10.80 5.62 12.00 29.75

62.23 10.86 5.65 12.04 30.00

0.00 -0.09 -0.04 -0.03 0.13

216 77,973 350,983 5,499,424 71,128

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

oPen

hIGh

loW CUrrent

ChAnGe

volUMe

Non Life Insurance 52.35 11.10 51.41 1.63 12.99

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

SyMbol

Adamjee Ins Atlas Insurance Century Insurance Cres.Star Insurance EFU General Ins

47.94 36.49 7.23 2.40 36.61

47.59 36.49 6.80 2.99 36.51

46.80 35.27 6.36 2.00 36.50

47.07 36.49 6.51 2.01 36.51

-0.87 0.00 -0.72 -0.39 -0.10

15,293 2 10,100 1,123 1,713

13.50 1.40 65.53

14.50 1.40 65.53

0.00 0.00 0.00

2 1 157

0.25 16.40 15.97 1.25 0.86

-0.10 0.00 -0.06 0.00 -0.23

36,032 101 2,207 4 631

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 Cap.Man XB Dawood Equities

0.35 16.40 16.03 1.25 1.09

0.33 16.40 16.29 1.29 1.07

0.25 15.56 15.96 0.75 0.83

Equity Investment Instruments 1st.Fid.Leasing Mod 1.52 Allied RentalModXDXB 21.64 Atlas Fund of Fund 5.86 B.R.R.GuardianXD 2.00 Cres. Stand.ModXD 0.49

1.53 22.45 5.85 2.00 0.44

1.53 21.64 5.85 1.72 0.34

1.53 21.64 5.85 2.00 0.42

0.01 0.00 -0.01 0.00 -0.07

2,500 1 29,600 493 69,931

13.05 31.00 35.51 14.35 69.00 1.38 69.10 115.50 3.92 8.25 25.37 59.00 29.98 15.25 7.00 2.00 10.49 0.75 1.85 1.02 17.02 19.26 68.54 26.15 1.55

13.14 31.00 36.17 14.72 69.00 1.40 69.73 115.96 3.95 8.40 25.37 59.69 30.33 15.46 7.96 2.02 10.69 0.80 1.88 1.05 17.20 19.61 68.54 26.44 1.60

-0.36 0.40 -0.23 -0.35 -1.00 -0.08 -0.26 0.00 -0.25 -0.25 -1.33 -1.96 0.19 0.42 0.00 -0.02 0.09 -0.08 -0.02 -0.03 0.03 -0.27 0.00 -0.66 -0.04

6,352 6,005 5,155 1,431 1,101 1,997,436 1,859 2 35,516 563 606 2,079 1,201 598 1 22,121 1,081,050 858,332 120,692 254,656 13,977 20,505 40 1,183 430,303

Miscellaneous Century Paper Pak Paper Prod.

Security Paper P.N.S.C.XD Pak.Int.Con. SD TRG Pakistan Ltd. Murree BreweryXDXB Shezan Inter.XD Pak Elektron Ltd. Tariq GlassXD Khyber Tobacco Pak Tobacco Co. Shifa Int.Hospitals Hum Network XD Media Times Ltd P.I.A.C.(A) P.T.C.L.A Telecard Limited Wateen Telecom Ltd WorldCall Telecom Sui North GasXDXB Sui South GasXDXB EFU Life Assur AKD Capital Ltd.XD Pace (Pak) Ltd.

13.50 30.60 36.40 15.07 70.00 1.48 69.99 115.96 4.20 8.65 26.70 61.65 30.14 15.04 7.96 2.04 10.60 0.88 1.90 1.08 17.17 19.88 68.54 27.10 1.64

13.50 31.80 37.15 15.80 70.10 1.53 73.39 115.96 4.25 8.99 25.37 61.50 30.40 15.50 7.96 2.08 10.78 0.88 1.99 1.17 17.32 20.72 70.00 27.00 1.70

Mutual Funds Fund

$96.39

volUMe

Fixed Line Telecommunication

Beverages Murree Brewery Co. Shezan Int’l

ChAnGe

Pharma and Bio Tech

automobile and Parts Buy 87.20 115.99 135.10 1.1210 82.81 11.04 23.68 23.20 83.90

loW CUrrent

Future contracts

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

hIGh

Personal Goods

construction and Materials Al-Abbas Cement Attock Cement Bal.Glass Berger Paints Buxly Paints

oPen

Household Goods

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

SyMbol

Food Producers 406.99 125.37 23.22 7.25 93.74

Industrial Engineering

Interbank Rates US Dollar UK Pound Japanese Yen Euro

oPen

chemicals

Major Losers Nestle PakistanXD Siemens Pak AL-Ghazi Tractors Attock Petroleum Hinopak Motor

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

Layout Profit 7 pages_Layout 1 11/24/2011 12:17 AM Page 7

Thursday, 24 November, 2011

Pakistan values its cordial and friendly ties with Uzbekistan and desires to further enhance bilateral cooperation in all fields especially in economy, trade and investment

news

07

President, Asif Ali Zardari

MonetAry PolICy AnnoUnCeMent

SBP to follow regional pro-growth trend KARACHI

t

ISMAIL DILAWAR

He central bank is expected to further cut the discount rate at least by 50 basis points (bps) in line with, what the analysts believe, pro-growth regional trend, based on prioritising the “feeble” economic growth to avoid economic slowdown. A foreseeable widening deficit in the country’s current and fiscal accounts, however, the economic observers say, might make the State Bank go for monetary tightening.

“During fY12YtD, the private sector credit has contracted by rs48.3 billion as against expansion of rs23.7 billion in the same period last year,” he said. Weakness in Pakistan’s fiscal and current accounts, the analyst said would, however, keep threatening the expected monetary easing cycle in the second half of fY12. Sohail said during the current year the country’s current account was expected to stand to the tune of $2.7 billion, 1.1 per cent of GDP, against a $268 million surplus last year.

Adverse commodity price shocks and slowdown in capital flows were the reasons, the analyst cited, for the widening of current account gap. He said the country’s fiscal deficit was expected to escalate beyond 6.0 per cent of GDP, which includes onetime impact of energy sector debt swap deal, higher power related subsidies and shortfall in overall revenue collection.

Asfar Bin Shahid, a senior economist, however, warned that slashing the interest rate further would adversely affect the returns on savings. “It’s a double edged sword as the savings (of one-year maturity) would be negatively impacted,” he said. the analyst slammed the government for its failure to curb profiteering in the retail and wholesale markets that he termed as major stimulus behind inflationary pressures in the poverty-stricken country.

As the State Bank of Pakistan (SBP) is due to announce its monetary policy statement (MPS) on the 30th of this month, the investors on the country’s volatile capital market are cautiously moving, one of the reasons for sending turnover at the volumes-starved Karachi bourse to record low of 28 million shares and the benchmark 100-index shedding 133 points on Wednesday. “We expect another round of 50bps cut in the upcoming MPS,” said Nauman Khan of topline Securities. the analyst bases his assessment on the ongoing pro-growth trend followed by the regional economies like Indonesia, Australia, taiwan and Singapore who, recently, revised their policy rate downward to sustain economic growth. Khan said a likely fall in average inflation by the initially targeted 12 per cent during fY12, positive real interest rate with November (YoY) CPI inflation to range from 10.7 to 11 per cent and the rupee’s depreciation against US dollar to a controllable level of around 1.5 per cent in fY12YtD would be the apparent attributable factors for monetary easing by the regulators. He said fears of economic slowdown had forced various central banks in the region to focus on growth instead of tackling inflation. “(the) central bank(s) of thailand and Malaysia are (also) expected to follow the same policy measures,” Khan said. Muhammad Sohail, a senior analyst and chief executive officer of topline Securities, backed Khan by saying that the State Bank, in the upcoming MPS, would continue to pursue a loosening monetary policy stance to induce the currently “stifled” private credit off-take.

“You curb profiteering and inflation would come down to single digit of 8 to 9 per cent allowing the central bank to cut interest rate to the same level,” A.B Shahid said adding “this would bring the accumulative discount rate to 12 per cent.” the economist said the present 12 per cent discount rate was still high in a country like Pakistan where the businesses were “over-leveraged”, meaning less liquidity and more borrowings.

About the regional trend, he said India was a country which had constantly been tightening its monetary policy for more than decade. “Let’s see if SBP freezes or reduces the cost of borrowing.”

Pakistan-UAe trade reaches $11 billion KARACHI GhuLAM ABBAS

t

rADe volume between United Arab emirates (UAe) and Pakistan has reached around $11 billion while the bilateral trade will be enhanced further through exploring new opportunities both sides. UAe foresees new investments in Pakistan through joint ventures. Sevenemirate block already has over $20 billion worth investment in the country. this was said by Suhail Bin Matar Al-Ketbi, Consul General of UAe to Pakistan here at his office while talking to journalists. According to Counsel General, since UAe already have investments in various sectors here including transport, energy, agriculture, fruit and vegetable and others, it has also identified lands in Sindh and Punjab for modern farming and corporate farming. Best quality of agricultural products would later be marketed locally and internationally Counsel General added. He said state of ras Al Khaimah, one of seven emirates of UAe, has also got approval from government of Pakistan to start the new airline service, ‘rAK Airline’ from three destinations in Pakistan including Karachi, Lahore and Islamabad. Due to modern refrigeration system in emirates Airline, he said, first consignment of Pakistani mango had reached Japan through the Dubai based air service. talking about forthcoming ‘UAe expo 2011’ scheduled to be held at Karachi expo Center from November 30 to December 2, 2011, he said that the first event would explore further trade opportunities in Pakistan and emirates. In the important event, over 70 companies of UAe would participate while almost 90 businessmen belonging to various sectors would also attend the expo where they would hold meetings with their Pakistani counterparts.

Businessmen, exhibitors, official especially Miss Sheikha Lubna Bint Khalid Al Qasimi, UAe’s minister for foreign trade UAe who will open the event, and emirates based media persons would also attend the firstever UAe’s “Magnificent 7” expo being organised by the Consulate General at Karachi. Activities of the scheduled event were included in the comprehensive exhibition, showcasing highly promising UAe manufactured goods, conference and seminars and gala night. exhibition not only invited eminent industry personalities but also amassed general public. exhibition would also help to improve the image of Pakistan, Consul General stated. He was informing foreign businessmen and tourists that there was a peaceful business friendly environment in Karachi. He informed that friendship with Pakistan was instigated after the first visit of Sheikh ZAyed bin Sultan Al Nahyan toPakistan in 1969.

NA body seeks details of directors of all DISCO boards g

Power sector incurred losses of rs227 billion last fiscal year g net electricity sold during last fiscal year was 82.3 billion units ISLAMABAD

e

AMER SIAL

XPreSSING concerns over government’s plan to grant administrative and financial autonomy to power distribution companies (DISCOs) through board of directors, National Assembly Special Committee on power crisis sought complete details of board members to ascertain whether professionals were appointed or influential persons were obliged. Meeting of committee was held under chairmanship of engineer Usman Khan taraki. Committee was attended by one five MNAs, three from ruling PPP, one independent and one from MMA. No member from PML-N, which has been most critical of the government steps to end power crisis and MQM, attended the meeting. Minister, secretary, chairman WAPDA and other senior officials were present to brief the committee.

rana farooq Saeed Khan of PPPP pointed out that board of directors of faisalabad electricity Supply Company (feSCO) had members who have no professional background to be on the board of a DISCO. He said government was headed towards a grave crisis and board members will be instrumental in appointing their handpicked candidate as Chief executive Officer to influence him later on in grant of tenders. He said if a nexus developed between directors and officials of any DISCO then there will be utter chaos in the power sector.

Secretary Imtiaz Kazi did not agree to his assertion and said professionals having experience to run businesses were appointed in the boards. However, he said Ministry of Water and Power (MOWP) had no role in their appointment as Cabinet Committee on restructuring headed by finance minister made recommendations which were approved by Prime Min-

ister. rana farooq disclosed that feSCO board was headed by a cable operator and includes a petrol pump operator and a school owning lady as members. Local textile sector, which is the real stakeholder, have minimal representation in the board and were opposing intended corrupt practices of fellow members. He asked committee to seek complete biodata of all board members to ascertain their qualifications. He stressed that MOWP should have monitoring role in affairs of DISCOs otherwise government would lose its control over the sector.

Independent MNA Saima Akhtar Bharwana asked why approval for directors was taken from Prime Minister if planned reforms target ensuring transparency and autonomy in the sector. Ayatullah Durrani of PPP said that actually all maneuvering was done at PM level. He said he had many facts to reveal but since they were in government it was not appro-

priate to speak up. However, he said they would be soon going to opposition benches and then would be free to speak.

Saima Akhtar Bharwana asked what would be authenticity of figures if appointment of any chairman of the board was challenged by the committee. She said despite an elaborate briefing on power sector there was no mention of ensuring transparency in the system. She mentioned that government had changed mechanism for installation of tubewells as farmers have to buy transformers on their own and that was not mentioned on the demand note. If it was clearly mentioned it could avoid a delay of months.

Chairman Usman Khan taraki agreed with members concern and noted that role of the board in appointment of CeO could not be ruled out and further they would be exerting influence in award of tenders. He ordered providing of complete details of directors of all DISCOs to

the committee to determine whether they were appointed on merit.

In his presentation to the committee, Joint Secretary Power, MOWP Zargham Ishaq Khan said net electricity sold during last fiscal year was 82.3 billion units, out of 66.2 billion units were sold to DISCOs to consumers. 16.1 billion units lost in transmission resulted in a financial loss of rs24.5 billion during the fiscal year. He said power sector faced a financial loss of rs227 billion during last fiscal year, out of which rs26 billion were incurred due to gap between actual and permitted losses determined by NePrA. Another amount of rs65 billion resulted due to non recovery

by DISCOs while rs10 billion were lost due to payment of GSt on uncollected bills. tariff differential subsidy added another rs110 billion while rs16 billion resulted due to tubewell subsidy in Balochistan and provision of subsidised electricity to Azad Jammu and Kashmir.