Profit 26th December, 2011

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Shaping of a policymaker

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Very visible ‘arms’ of the govt Page 3 ‘No longer the domino theory’ Page 7 Pages: 7

profit.com.pk

Monday, 26 December, 2011

Revenue mobilisation toughest task for Pakistan:WB ISLAMABAD

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AMER SIAL

akistan’s mediumterm outlook critically hinges on a significant revenue mobilization effort that should produce 2-3 per cent of GDP in the next 4-5 years, notes World Bank’s Country Partnership strategy (CPs) progress report. the report says the toughest question government faces is how to create fiscal space. this occurs in a context of fiscal retrenchment and gets aggravated by its low and declining total and tax revenue ratios that reached single digit by end of last fiscal year. Revenue mobilisation in Pakistan has been historically weak. in the last fiscal year, various tax policy reform measures were approved, but not fully implemented. it says looking at the most recent decade, tax revenues are declining since the global crisis, only partially offset by non-tax revenues; budgeted revenue targets are persistently missed under a widening gap. income and sales taxes represent a rising share of total revenues, while trade and excise taxes are trending down. trade taxes decline stopped with a series of protectionist measures applied in fiscal year 2008-09, but these introduced distortions in the trade regime; low and declining tax collection is also apparent for the provincial governments and privatisation proceeds have been marginal in the last four years. a comprehensive revenue mobilization strategy centered on structural reform of the taxation system is needed to confront these challenges. the overall tax policy strategy points to six major measures including adoption of broad

based Reformed General sales tax (RGst) on goods and services, provincial tax reforms; a two-tier structure for individual income tax and adopting a withholding tax; reform of federal excise tax; adopting a business friendly corporate income tax; and a simplified structure of customs duties. tax administra-

tion strategy should be centered on broadening the tax base; establishing an effective audit and enforcement mechanism; establishing an effective internal and external mechanism; and limiting Federal Board of Revenue’s administrative powers to legislate by administrative orders. it says during last fiscal year, various

tax policy reform measures were approved, but not fully implemented. RGst was not approved by Parliament, but additional tax policy measures were introduced in the current fiscal year budget. in midMarch 2011 government approved a flood surcharge levy, increased special excise duty on imports and imposed a 17

per cent sales tax on sales of tractors. it also increased the ex-factory rate on sugar, removed sales-tax exemptions on fertilisers, pesticides and plant machinery, and eliminated zero-rate sales taxes on garments, carpets, leather, surgical and sports goods.

However, soon afterwards, a few measures were diluted: tax rate on the textile sector and some other items was reduced from 17 to 5 per cent. Combined fiscal impact of these tax measures were aimed at preserving the tax ratio at a similar level as last year, but this target was not met. these measures were extended in the current fiscal year budget, while new measures were also adopted. these included a reduction in the sales tax to 16 per cent, removal of sales tax exemptions on 21 items and army’s stores, removal of 397 statutory customs duties, hike in federal duty tax. Overall, tax collection has increased above 20 per cent on an annual basis, compared to the first quarter of last fiscal year. tax administration reforms have been comprehensive, but their implementation had been slow and had not produced the expected final results. However, some catch up effect is expected during next two years with the rapid increase in the number of new tax filers, creation of a centralised unit for audits, introduction of riskbased auditing on large taxpayers, creation of a centralised unit of tax appeals and a fully modern and computerized tax system supported by massive FBR staff training. Building on lessons and performance of taRP, the bank will continue its support to tax administration reform through a performance-based operation.

APCNGA to start CNG kits, cylinders inspection in 25 cities ISLAMABAD

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AMER SIAL

s the government fails to come up with a proper mechanism to check faulty CnG kits and substandard cylinders in public transport vehicles, all Pakistan CnG association (aPCnGa) has taken the lead by announcing inspection of commercial vehicles in 25 cities from December 28. Chairman aPCnGa Ghiyas abdullah Paracha said on saturday that they would be starting inspection and certification of CnG equipment in public transport vehicles to prevent reoccurring of accidents due to substandard and unlicensed CnG kits and cylinders.

During last few weeks many

accidents occurred due to leakage of CnG kits that lead to fatal blasts and inferno resulting in many deaths. More than three million vehicles are converted on CnG during last few years due to comparative low price of CnG as compared to petrol and diesel. the government estimates 310 mmcfd gas is used by CnG sector.

Denying the impression that they have taken the step upon the instruction of government, he said they have taken the initiative on their own and have not received any directives from the Oil and Gas Regulatory authority (OGRa). He said OGRa had asked them to submit proposals by December 26.

Paracha said CnG stations were not responsible for the

fatal accidents and held government responsible for its failure to check installation of unlicensed kits and substandard cylinders. He said they have asked the government several times to check illegal kit conversions but responsible departments had not taken any action. an OGRa spokesman said Chairman OGRa has taken serious notice of recent fire related accidents in CnG fitted public service vehicles and a meeting was called with aPCnGa to address the issue. aPCnGa was advised that CnG stations should immediately stop filling CnG in all public service vehicles which do not qualify the laid down standard as per CnG Rules, 1992.

Chairman OGRa pointed

out that the main cause in most of the fire related accidents was due to improper CnG fittings, location of cylinders beneath seats or on roof top from un-authorised workshops resulted in gas leakages and explosions. it was confirmed by HDiP and other approved third party inspectors. it was also pointed out that CnG stations are not following the mandatory refueling procedure. aPCnGa was advised all CnG stations should follow CnG refueling procedure in letter and spirit while checking validity of test certificate of CnG cylinder in vehicles prior to filling. it was also directed that aPCnGa should constitute teams to visit CnG stations at random to ensure public safety.

Moreover a team comprising of representatives of OGRa, aPCnGa, HDiP and OMCs was constituted to check safety measures at CnG stations to ensure public safety.

Compressed natural Gas (CnG) is a highly pressurised gas for which specially designed and fabricated seamless cylinders manufactured in accordance with prescribed standard are used in vehicles. Only the valid licensees, CnG stations are authorised to convert vehicles to CnG at their respective facilities and provide CnG cylinder test certificate. Only imported brand new CnG vehicle cylinders within its periodic test life duly approved by OGRa, and approved CnG kits should be installed in vehicles.

Tax Reforms Core Group wants issuance of notices to 300,000 non-tax filers ISLAMABAD

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StAff REpoRt

He seventh meeting of tax Reforms Core Group (tRCG) directed Member (iR) to ensure that notices to the remaining 300,000 non-tax filers be issued on priority. tRCG meeting was held at FBR Headquarters under the chairmanship of federal minister for finance Dr abdul Hafeez sheikh and the progress of broadening of tax base was discussed along with review of progress on the 295,000 notices issued to non-filers. the meeting discussed the progress due to reorganisation of FBR, finalisation of administrative-measures agreed with World Bank in april 2011, centralised audit, revenue collection of FBR as well as expanding the outreach programme. the meeting included an update on redrafting the treatment of five zero-rated export sectors, tax incentivisation scheme as well as proposals of stamps on cigarette packs to help identify smuggled or non-excise paid cigarette packs and enforcement of Capital Gains tax.

Finance minister reviewed the revenue performance of FBR and desired that a follow-up meeting of tRCG be held after two weeks to have a complete analysis of the taxpayers’ data and to discuss strategy to pursue the non-taxpayers.

Member (tRCG), Muhammad ali, would also give a presentation on Capital Gains tax (CGt) in the follow up meeting along with relevant data and strategy for enforcement of CGt based on meetings with Member (iR).

Policy Wing of FBR was asked to give a breakup of revenue based analysis of the amount of revenue generated due to exclusive efforts of FBR, and those due to policy decisions and due to exchange rate difference. expected revenue collection during the period between January and June 2012 was also reviewed. Minister for finance desired that in the next meeting, the preliminary budget proposals and efficiency enhancement measures would also be taken up for discussion. earlier Member iR shahid Hussain asad, Member (Customs) Mumtaz Haider Rizvi, DG (sP&R) Dr amna khalifa gave presentations on performance and revenue targets of FBR while Member (Fate) Riffat shaheen Qazi , gave a presentation on outreach and awareness programmes with the way forward strategy for expanding the outreach programmes. Proposals were also put forward by members of tRCG on various policy issues.

Federal minister for finance, at the close of meeting, appreciated efforts of FBR officers and expressed confidence and hope that the assigned budget targets would be achieved through sustained efforts. the meeting was attended by Chairman FBR salman siddique, Deputy Chairman Planning Commission nadeem ul Haq, Members (tRCG) abdullah Yusuf, Habib Fakhruddin, arshad Zuberi, Bashir ali Mohammad, ali Jameel, Muhammad arshad Chaudhry, ashfaq tola, Chairman seCP Muhammad ali, along with the core team members of FBR, Mumtaz Haider Rizvi, Member (Customs), Hafiz Muhammad anees, Member (taxpayers audit), Riffat shaheen Qazi, Member (Fate), shahid Hussain asad, Member (iR), sardar amimullah khan, Member (enf. & acctt), imtiaz ahmad khan, GM PRaL, Dr amna khalifa DG (sP&R) and Dr khaqan Hassan najeeb DG (eRU), finance division.

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Monday, 26 December, 2011

debate

Shaping of a policymaker Dr Ashfaque Hassan, a central pillar of the Musharraf regime’s high-growth economic team, and Dean NUST Business School, talks about himself and his evolution as an economist during an interview with Profit’s Ali Rizvi

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ALI RIzvI

s promised, Dr ashfaque had informed the security about my prior arrival at the campus and i entered his office, with a notepad and a borrowed professional camera, for the photo session that i was to have with him later. after having been an avid reader of his articles for the last many years, i had this desire to meet him in person, in order to have a more personalised interaction, and discuss the multiple facets of the economy and the success of the institution he now heads, that is presently ranked in the top 500 universities of the World, and amongst the top 100 in asia.

He was sorting some things on his table, and welcomed me pleasantly as we sat down. He rang the bell, ordered tea for me and then we got down for business. nUst and more importantly, nUst Business school has evolved greatly over the years and talking to industry professionals and corporates i got the impression that an nBs graduate is perhaps now more valued in the corporate sector than others from leading institutions from the country. so i asked Dr ashfaque how he managed to bring this turnaround in an institution that has often been blamed for a ‘military’ culture, and slow bureaucratic procedures.

“When i joined nBs, the institution was only 10 years old. instantly, my priority was to bring in the best faculty. there were almost 600 students studying at our business school. i am perhaps one of the few deans who also teach, because i personally believe that it is my duty to pass on whatever i have learnt in life to my students. My aim is to ensure that they are well versed in economics, and their success in the corporate world is a testament to the success of the institution as a whole.”

PRoMoTiNG CoMMoDifiCATioN? Critics have often blamed educational institutes in Pakistan of promoting commodification. While talking to a civil rights activist, Wali shahid, he said, ‘the process of mass producing college graduates with worthless degrees is contributing greatly to undermining the value of education. By limiting the scope of their creativity, you are binding them in the confines of mediocrity.” i raised this point with Dr ashfaque and how in his institution he is ensuring these students are allowed to evolve and develop by engaging in extra and co-curricular activities.

“We are engaging with big names and relevant government departments to provide internships to students of the business school. Our students have now been able to land internships in places like Barclays, standard Chartered, Unilever, Ministry of Finance, amongst others. Value ad-

dition through practical experience is very important. this year thirty students went overseas for internship programmes, which not only gave them the relevant exposure but also made them interact with people from diverse cultures. such opportunities are important to develop an understanding in these students of the outside world and prepare them for practical life,” Dr ashfaque said.

While elaborating upon the difficulties he has had to face as Dean of the nUst Business school, he said, “Faculty makes a lot of difference. Unfortunately, after 9/11 it has become hard for students to go to the Us for further studies. Previously, foreign qualified professionals would come back to impart their knowledge to our indigenous students, which was an asset that we cherished. the Higher education Commission did a commendable job to provide scholarships to our students; however after the exit of Dr ata ur Rehman, HeC has deteriorated greatly. We are fortunate that the devolution of the HeC was stopped by the supreme Court. at present, the funding to HeC has almost stopped and in these constraints it is quite hard to attract good faculty especially when they are offered double the salaries by private institutions compared to what we have to offer them. Due to this, we have lost a lot of good faculty; however despite all our constraints we have worked hard to ensure that the standard of the institution is maintained and it is has now made its mark in the corporate world.”

A CoMPReHeNSive iNSTiTUTioN While speaking about nUst as a whole, he said it is a comprehensive institution. With many varied courses and schools under one roof, there is ample opportunity for cross fertilisation of research and ideas. therefore, it is a prerequisite for us to promote research and entrepreneurship. Recently, he said the business school has successfully conducted the prime minister’s entrepreneurship award, an event where more than 1200 teams participated.

Having discussed one of asia’s leading institutions, i was more interested in discover-

ing the man himself, and his journey in life, the highs and the lows, how fate played its bit, and how he managed to make a mark for himself in the field of economics. Dr ashfaque Hasan khan has worked as the special secretary Finance/Director General, Debt Office of the Ministry of Finance. He is also the Director and Vice Chairman of saudi Pak industrial and agricultural investment Company Ltd and holds a PhD in economics from Johns Hopkins University. He was part of the core economic team, along with Dr ishrat Hussain and others, who were responsible for spearheading economic growth of Pakistan during the Musharaf regime. in a short span of a few years, Pakistan managed to sustain an average GDP growth rate of seven per cent. He was actively involved in preparing the reform programme which was launched almost a decade ago and provided vital policy inputs in framing the country’s macroeconomic policies. not only does he have the distinction of facilitating international organisations like the United nations economic and social Commission for asia and Pacific (UnesCaP), asian Development Bank and the World Bank as a consultant, but also has the distinction of being Pakistan’s most widely published economist.

With over nine published books, and more than 170 articles to his credit, his papers have appeared in the most prestigious journals of economics of Harvard University and University of Chicago. He also has the unique distinction of being supervised during his PhD by nobel Laureate in economics, Professor Lawrence R klein. His achievements are many, and if i delve in them i might run out of space, but to sum it up, in recognition of his services he was awarded the sitar e imtiaz for his contributions in the field of economics and public policy.

ReMeMBeRiNG THoSe yeARS “My father was a police officer, and like all fathers he too wanted to see me follow in his footsteps. if not the police then he wanted me to at least join the civil services. i was pursuing my bachelors degree in physics, chemistry and double math from Dhaka university. at that time, i had never in my wildest dreams imagined that i would pursue economics. Being a strict disciplinarian, my father had inculcated in me, the habit of reading and so, i would actively read national and international news. When i used to read articles on the economy, the world crisis, and other such issues, i was fascinated by economics. i realised that in order to gain a deeper understanding of the world around me, i had to study economics. and so, i decided to enroll for the economics programme at the karachi University,” an animated Dr ashfaque said, as he remembered those years fondly.

Were you always so studious, i asked with a smile on my face, and i was genuinely surprised with what he had in store for me. “i was a very good cricket player and played league cricket in Pakistan. i have even

played cricket with imran khan, and during my years in Canada when i was pursuing my educational degree from McMaster University Canada, i had a batting average of 62 playing for the Canadian cricket league. i represented the Hamilton Fairfield club, and given my good batting record, i was offered to play for the Canadian national team in the second World Cup in 1979. the Canadian government offered me citizenship, which i refused because i told them that i wanted to go back to Pakistan.” He explained that he was pleasantly surprised at how cricket was followed in Canada, a country where he least expected the sport to be played.

Coming back to his career, he talked about ahmed Faruqui, his teacher at karachi University. “ahmed Faruqui was a bright young man, and studying under his tutelage greatly benefited me. i was already strong in math, and the rest i found, was merely english.”

Completing his Ma in economics from karachi University, Dr ashfaque proceeded to McMaster University on a scholarship. after coming back from Canada he joined the Pakistan institute of Development economics. However, he said, that at that time, for any economist it was a dream to become part of the planning commission that was headed by Professor khurshid ahmed. “i met him, and he asked me to visit the Planning Commission as well.” He visited the Planning Commission and they were interested in having his expertise. they offered him the position of assistant Chief, however, since he belonged to sindh, he was told that he could only continue on an adhoc basis and not in a permanent capacity. “i came back very dejected, it was my lifelong desire to be part of the planning commission. However when i look back now, it was for me a blessing in disguise. i am thankful to Meekal aziz ahmed for changing the course of my thinking, i will never forget him since he changed the course of my career,” Dr ashfaque said. i joined PiDe, and looking back i can say without an iota of doubt that PiDe has made me the man i am. From PiDe Dr ashfaque proceeded to UPenn, and then eventually to Johns Hopkins for his PhD. He was under the tutelage of nobel Laureate Professor Lawrence klein. “after completing my PhD, i joined PiDe again and now started publishing several economic papers for the institute every year. By 1997, i was the Joint Director of PiDe.”

Look AT STATiSTiCS Dr ashfaque has been under scrutiny for supporting the Musharaf regime and the economic policy making of that era. His critics argue that the economic development during the Musharaf era was purely a façade, and real GDP growth in crucial sectors did not take place. so i brought this subject up with him and his answer was swift, “Clearly then they haven’t looked at the statistics.” While showing me iMF and World Bank reports that have recently been published, he pointed out that those reports clearly highlight the outstanding economic performance of the same era. intriguingly, he joined the government during the nawaz sharif tenure in March’98, after he was asked by sartaj aziz to join the finance ministry. Following the coup by the Musharaf government, he asked shaukat aziz, to send him back to PiDe. “i was appointed by a previous government. it only made sense that i should go back to PiDe and they appoint their own people. However, shaukat aziz asked me to wait sometime till he made the decision.” He said certain people in the bureaucracy like Moin afzal took a stand in front of the prime minister, and then they formed their economic team which included Dr ishrat Hussain and others. “i used to brief Gen Musharaf six to seven hours regularly. He was briefed so often that Musharaf developed a strong command over economic matters. What appealed to me was the fact that he was accessible, he allowed the economic team to make decisions independently and he would always be ready to hear our problems”.

For comments and queries: ali.rizvi7957@gmail.com

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Monday, 26 December, 2011

EDITORIAL

Spirit of capitalist recklessness

World Bank, donors and PSDP

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He World Bank Group’s decision to support Pakistan’s poverty reduction and development agenda comes at a crucial time for islamabad, where senior government officials have lately taken to talking up the economy even as most important indicators present cause for worry. Firstly, the bank’s decision eases concerns about bottlenecks in donor inflow in the post-iMF environment. traditionally, multi- and bi-lateral donors tend to see the Fund as the classic lending litmus test for engaging with struggling countries in the economic south. Minus the Fund, securing funds becomes that much more difficult. and perhaps more importantly, the funding, if properly channeled, will ease pressure on the PsDP. it is not commonly known that a big chunk of the development budget is financed through foreign assistance. in times like the present cycle of

stagflation, when the government’s fiscal space is reduced, the PsDP comes under intense pressure. not only are indigenous funds diverted to non-development heads, but foreign assistance meant to bankroll the PsDP is used elsewhere. that low growth and high unemployment actually demand a more focused use of the development fund is simply ignored. therefore, the World Bank’s commitment to ‘ensure continued attention to critical social services like education, health and safety nets for vulnerable populations’ is appreciated. these investments are necessary, and it is just because they have been ignored far too often in the past that we are in the present quagmire. at the same time, the government must mobilise the other important factor of the PsDP by initiating targeted fiscal expansion to stimulate the job market. it is when the economy is weak that the development budget is most important.

Javed Gilani

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UMans love adrenalin. We like our cars fast, we like our planes faster, we love the thrill, we love how the heart beats against our chest, as we beat on carelessly against the currents. We are at heart wild animals captivated by the thrill of the hunt. and here’s where capitalism comes into play. Capitalism fuels that spirit of recklessness, the uncertainty of life, as we turn it into a poker game, placing our bets on the odd horse we think might win. While we might think we run the game, there are many variables at play, some of them not in our control. there is the odd probability that while we did bet on the glistening muscular arabian horse in the races, the donkey might take the race for whatever reasons.

We have in front of us the example of big organisations, massive in size and employees, stakeholders never thought the empires would ever collapse. But that’s the thing about adrenalin. One wrong move and ‘Poof’ you’re gone. Caput. the car smashes against the wall, and all you can do in that moment where you see the life slipping out of your hands is to pull up a silly face. it’s funny how we react after the accident though. We get back into the car, it has the same horsepower, the same engine, everything is the same and the probability of you getting in the accident is perhaps similar, but then, we’re too afraid and we take it cautiously. We drive our cars hesitantly in the second gear, breaking a little harder than necessary, and a normal 12 hour destination at 80km an hour, then takes double the amount of time, because your moving in at 40km/hour. now, the thing is, let’s try to understand the analogy i’ve tried to present here. imagine the car is the economy and you are the driver. in the ab-

There is an inherent self-destructive streak in modern financial capitalism Re-structuring of FBS this is with regards to the news reports, ‘Govt forms Pakistan Bureau of statistics’ published on 24th December. the re-structuring of Federal Bureau of statistics (FBs), was a long-awaited issue and has now has been settled by the present government. But it is still to be seen whether establishment of an autonomous body will prove to be a pre-requisite in the availability of reliable official statistics or not? it can also be noted that the officials of FBs, while collecting official statistics through different kinds of surveys, etc, did not have any kind of authority or force, like the one vested in Police, military and judiciary, except that they were employees of the government. to an enumerator, being the focal person who collects data and restructuring of the department is not quite an issue. But for the respondent, being the member of a more or less conservative society, it matters too much that the person who wants to get certain important information, which can lead him to face taxation on his income, belongs to either a government owned body or private.

OMER FAROOQ PAKISTAN BUREAU OF STATISTICS

sence of cops, or in the event that you’ve paid them off, you’d love to hit the paddle, to see how it accelerates. You whiz past the 120km mark and you’re tempted for some more, so you floor the paddle as everything blurs past you and your vehicle gain’s momentum. You feel your heart beating against your chest, you know, you’ll beat the rest, you’ll reach the destination sooner than anticipated and thoughts of a happy future occupy your mind. so, you’re cruising, at 180km/hour, loving the performance of your car, honking as you overtake the rest, and arrogantly wear your Ray Bans and just as you had thought of turning on the stereo a truck moves in your lane, it’s too late to stop the car. and, your car smashes into the rear of the truck as it throws you towards the windscreen, and it’s too late. You’d be lucky if you survive, and if you do, it’ll take some time for you to build your car. now strange enough, this is the thing about capitalism. You need to be careful and rein in your temptations. You need to ride smooth, and you’ll have a safe exit. if you try to outsmart yourself, the likelihood is you’ll crash. the global economic recession is one that can be attributed to the innate pride of human’s that they could test the limits of an engine that could only take you so far. sooner rather than later, this had to happen. Which is why if you’re an investor how about you play it safe in the first place than jumping off a twenty story skyscraper because fate played it tough with you?

However reckless capitalism may sound there’s a reason it collapsed, and the reason is our inherent urge to fuel our adrenalin. institutions and corporations need to play a greater role for the effective allocation of resources, and to resuscitate the economy all you need are safe drivers. a word of advice for the average joe? a favourite quote from a movie my son made me watch some time back, which goes something like this, ‘We're the middle children of history. no purpose or place. We have no Great War. no Great Depression. Our great war is a spiritual war.

Our great depression is our lives. We've all been raised on television to believe that one day we'd all be millionaires, and movie gods, and rock stars, but we won't. and, we’re very very angry.”

Maybe, if we rein in the unscrupulous desires, we might reach the destination. We won’t end up millionaires, but we won’t end up losing everything we spent ages constructing.

The writer is chief manager SME bank and a seasoned banker with over 30 years of experience

ISLAMAbAd

Very visible ‘arms’ of the govt

I

Sakina Husain

n the recent episode of almighty iMF summoning esteemed members of the government, assurances were exchanged with respect to the restructuring of the trading Corporation of Pakistan(tCP), Utility stores Corporation and PassCO. One proudly proclaims itself to be the trading arm of the government, based on which the remaining two can be extrapolated to be the “selling” and the “storing” arms of the government.

a recent controversy has dragged this troika into the writer’s notice. tCP’ recent cancellation of sugar tenders, based on the latter being quoted at a higher than market price, has come with a cost. if one were to believe the trading arm’s ‘feeling cheated’ sentiments, a fair view should also be taken of the losses sugar millers have had to incur. Given that the quoted price was around Rs66/kg and the prevailing market price was Rs59-62, the tCP has benefited from its own red tape and connivance by canceling the tender when the market price came down to Rs50/kg. the losses or foregone income of the millers on account of the sugar hold up ranges from Rs2.1-2.4 million.

Conversely, this amount has been quoted in the defense of the government’s ‘business arm’ as the loss the national exchequer would have to incur had this transaction passed through. at the outset, it just seems wrong

for a government body to be calling itself a business arm as it completely and utterly trashes the entire concept of the public good. simply put, the government should not be in the maximising profit game at all. and so this ‘public’ private limited company has been making profits close to Rs2 billion and above annually since FY-09.

Given that their primary objective is to provide goods at affordable prices to the common man, regular profits imply that they have been buying at low prices and selling at higher. and that is where the remaining arms come into play. One provides additional storage capacity where as the other serves as a retail outlet when prices are skyrocketing. and guess what, everyone goes home with some portion of the profit in their pocket.

On the funding side, the affiliation with government comes in handy as credit is cheap and easy to obtain, as

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The government should not be in the maximising profit game at all

the former clearly offers a risk free window to invest in.

Over the last 3-4 years, government borrowing under commodity operations has ranged between Rs300-400 billion. although this may seem like a paltry sum given that public and private borrowing run in trillions, one must keep in mind that this sum is reserved for the troika’s use solely. if the government really cared about the availability of commodities in general, the wheat support price would not have been fixed at Rs1050/maund, especially when the cost of wheat production in Punjab and sindh lie above Rs1,020/maund. Moreover, distortions have also been created in the cotton market as the government has recently announced its intention to purchase cotton, in order to ‘stabilise’ prices, ie, save

them from falling any lower. if one is any smarter by now, they would clearly know that lower prices are generally good for the population at large which by the way does need to clothe itself. and that this is another classic attempt at buy low to sell high. this is the lowest the cotton prices have touched in the last year and a half. a possible impact may be further denting of already descending textile exports as competitiveness gets hampered in a low-demand environment abroad. But yes, one must still complement the dear tCP for providing some brain and entrepreneurship to our hyper intelligent government.

The writer is an economic analyst and freelance financial journalist. She can be reached at sakina.husain@gmail.com

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Monday, 26 December, 2011

Agencies can and should partner with HR companies. These companies should have a division that manages the recruitment of new graduates for advertising agencies

news

04 Who knows, who knows not

Pirana Advertising Ceo, imran irshad

Pakistan ranks 165th in the Education index out of 179 countries, while it ranks 160th in the literacy index g

ranking. “Ranking” connotes how civilised a country is in the eyes of international community.

EDUCATION INDEX

ShAhID KhURShEED t was certainly perilous news that Pakistan is at no 145 in Human Development index (HDi). But it is not the only set back we are facing at international level. UnDP has many cryptograms of shocks for us. all these shocks and terrors are framed by us, our ancestors, and our own rulers. in education index we are ranked 165th in the list of 179 countries. in literacy, we are at the 160th spot out of 182 countries.

I

DEFINING EDUCATION education is a set of knowledge and behaviour, but literacy has been commonly defined as the ability to read and write with an adequate level of proficiency that is necessary for communication. More recently however, literacy has taken on several meanings. technological literacy, mathematical literacy, and visual literacy are just a few examples. While it may be difficult to gauge the degree to which literacy has an impact on an individual’s overall happiness, one can easily infer that an increase in literacy will lead to the improvement of an individual’s life

and the physical development of societies. education is a composite term and its material aspect is literacy.

HDI IS A YARDSTICK the Human Development index (HDi) is a yardstick to evaluate the level of uplifting the masses in each country

by UnDP. it is an amalgamated statistic used to rank countries by level of "human development" and distinguish “very high human development", "high human development", "medium human development", and "low human development" countries. the Human Development index (HDi) is a proportional measure of life expectancy, literacy, education and standards of living for countries worldwide. it is a standard means of measuring well-being, especially child welfare. it is used to distinguish whether the country is a developed, developing or an under-developed country, and also to measure the impact of economic policies on quality of life. there are also HDi for states, cities, villages, etc. by local organisations and companies. the assortment of all this infra structure makes the final portrait of a country in the shape of her

With an effusive deliberated understanding, the United nations publishes a Human Development index every year, which consists of the education index, GDP index and Life expectancy index. these three components measure the educational attainment, GDP per capita and life expectancy respectively. the pioneers had thought that uneven environment always polluted the human mind and if we wanted to save the next generation from conflict and wars; they might acquire education. the education index is measured by the adult literacy rate (with two-thirds weighting) and the combined primary, secondary, and tertiary gross enrollment ratio (with one-third weighting). the adult literacy rate gives an indication of the ability to read and write, while the GeR gives an indication of the level of education from kindergarten to postgraduate education. education is a major component of well-being and is used in the measure of economic development and quality of life, which is a key factor in determining whether a country is a developed, developing, or underdeveloped country. evolution of human understanding this thought process took thousands of years to evolve. From Dark ages to enlightenment, from Crucifixion of Jesus Christ to the heart transplant by Christian Bernard, from the discovery of gun powder to the silicon chip, man learned the blessings of learning and knowledge. He also learned that minds could be changed and channelised with effective education. Conflicts, encounters, battles and wars can be avoided by virtue of wise and prudent thinking.

the atlantic Charter which paved the way to Un. On 25th of april 1945 a Un Conference on international organisation began in san Francisco attended by fifty governments and more than three hundred nGO members who helped in drafting the Un Charter and finally United nations came into being on 24th of October 1945 with an aim to prevent a third world war. the horrible experience of nagasaki and Hiroshima was there. in January 1946, 1st meeting of the Un was held in West - minister – Central - Hall, in London. among 51 signatories, five were permanent security Council members and 46 other countries. But soon it was realised that better human development is the only way to think peacefully. since man did not succeed in the past to contain himself according to his limitations therefore a battle or a war always remained crucial for him to know his actual worth. United nations Development Programme (UnDP), founded on 22nd november 1965, is the United nations global development network. it advocates for change and connects countries to knowledge, experience and resources to help people build a better life.

UnDP operates in 177 out of 193 Un member countries, working with nations on their own solutions to global and national development challenges.

DIVISIONS OF UNDP THE PIONEERS DIVIDED THEIR JOB INTO FOLLOWING GROUPS OR FIELDS:n n n n n n n n n n n n n

DEVELOPMENT OF UNDP

n n

During World War – ii, on January 1st 1942, twenty six nations signed

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education index Democracy index Freedom House Gini coefficient Gender Parity index Gender-related Development index Gender empowerment Measure Genuine Progress indicator Global Peace index Legatum Prosperity index Living Planet index Gross national happiness Happy Planet index Physical quality-of-life index Human development (humanity) Child Development index satisfaction with Life index

n n

Genuine progress indicator Multidimensional Poverty index

EDUCATION INDEX RANKING in education index, australia, Cuba, new Zealand, Finland and Denmark are at the first spot with 0.993 marks each then there are Canada, norway, south korea, ireland and netherlands are from no 6 – 10 respectively. From 11 to 60 most of the countries belong to europe minus Barbados at no 16, Us at 20, kazakhstan at 23, Uruguay at 31, Japan at 34, israel at 36, argentina at 37, antigua and Barbuda at 38, Guyana at 39, Venezuela at 46, tonga at 47, Chili at 48, kirghizstan at 49. all of these countries are non Muslim states. around Pakistan, geographically, in the list about education index, China is at no 97, sri Lanka at 107, india at 145, nepal at 151, Bhutan at 162, Bangladesh at 163. Here Bhutan and Bangladesh are our next door neighbours as saaRC countries.

Mongolia; in the Gobi desert , the birth place of Genghis khan and Hulagu is at no 53, Libya the Berber tribes of Carthage at 59, Maldives, at no 80, all are in better position. this would not result in any cause for sanguinity in our neck of the woods.

We are in the proximity of afghanistan and 13 african countries Mozambique, Cote d’lvoire, Benin, Gambia, Central african Republic, senegal, ethiopia, sierra Leon, Guinea, Chad, Mali, Burkina Faso and niger. Our religious philosophy opens with the word of ‘iqra’ and we have been advised to go as far as China in the search of knowledge. all Russian state which left the UssR are ranked at decent positions. it means that those termed ‘kafirs and Mushriks’ were in favour of education more than so called Muslim rulers. all countries around ex-UssR like Finland, Lithuania, estonia, Latvia, Belarus, Ukraine et al. in literacy first 18 positions go to ex Russian bloc except Barbados. no traditional Muslim country is before Brunei Darussalam which is at no 71 except some Russian states, Bosnia Herzegovina and albania. after Pakistan all are african countries except afghanistan and Bangladesh. China is at 68, india at 137, nepal at 150, Bangladesh at 163 and Bhutan at 168. From 138 to 159, four countries nepal, Haiti, Papua new Guinea and Yemen are non african countries. it means that Pakistan is in the cluster of 45 african countries. it is indeed a pity that Pakistan a country which boasts itself to be a nuclear state lags so far behind other nations in terms of literacy and education.

Present at the Asian creation JASwANT SINgh sia’s economic dynamism is beginning to find a parallel in the region’s diplomacy, particularly where security is concerned. indeed, we may now be “present at the creation,” as former Us secretary of state Dean acheson called his memoir, which described the construction of the post-World War ii global security order. this time, what is being created is a security order for asia that reflects its newfound primacy in world affairs, though what that order will ultimately look like remains to be determined. security has moved to the top of the regional agenda not only in response to China’s rise, but also because america and the West will be leaving a gaping hole in asia’s security architecture when they remove their troops from afghanistan, without first having established peace there. Perhaps of greater importance for long-term security, the Us-Pakistan relationship continues to plumb new depths, while iran’s relations with the West go from bad to worse, marred most recently by the mob invasion of the British embassy in tehran in november.

Bit by bit, initiative by initiative, many of the region’s powers are struggling to forge

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a coherent cooperative framework to enhance their security. For example, australia’s Labour government has agreed to sell natural uranium to india, reversing a policy that had been in place ever since india developed its nuclear-weapons capacity. almost simultaneously, Us President Barack Obama announced the stationing of Us Marines in northern australia. no one has explicitly linked the two moves, but they are arguably related strategically, as australia seeks to boost its ties with both the Us and asia’s other giant, india. india and the Us have also been strengthening their strategic relations with Japan, not only bilaterally, but also in a unique trilateral way, which Us Deputy secretary of state William Burns has suggested could “reshape the international system.”

Burns, and much of the rest of america’s foreign-policy establishment, now thinks that india’s regional influence has become comprehensive; its “Look east” strategy, announced earlier this year, is being translated into “act east” policies. so far, india’s security relations with Japan and south korea are somewhat understated. But that is changing. During indian Defense Minister a. k. antony’s recent visit to tokyo, it was agreed that Japan and

india would hold their first-ever joint naval and air force exercise in 2012. this elevates bilateral defense cooperation to the role of primary national-security tool, most importantly for Japan, which has broadened its strategic horizon beyond its immediate surroundings and the country’s longstanding alliance with the Us. indeed, Japan and india have now agreed to cooperate on “maritime security issues, including anti-piracy measures, freedom of navigation” and on “maintaining the security of the sea Lanes of Communication to facilitate unhindered trade, bilaterally as well as multilaterally with regional neighbors” – meaning, of course, China. a “Japan-india Defense Policy Dialogue” will be held in tokyo in early 2012, and staff-level talks are to take place between Japan’s Ground self-Defense Force and the indian army, along with staff exchanges between the Japanese air self-Defense Force and the indian air Force. indeed, Japan and india are beginning to build the type of comprehensive military cooperation that has long characterized Japan’s ties with the Us. this development will, undoubtedly, disturb China, which has been making ever more strident moves toward regional

suzerainty. Chinese assertiveness, most of it currently focused on the country’s claims to the south China sea, has been a wake-up call about the type of regional order that China would establish if it had the power. Fears are running so high that 15 of the 18 countries at the recent east asian Cooperation meeting in Bali singled out China’s behavior concerning the south China sea as a threat. the core issue is maritime security – and not only in the south China sea. “the indian Ocean,” says the Us author Robert kaplan, is “where the rivalry between the United states and China in the Pacific interlocks with the regional rivalry between China and india, and also with america’s fight against islamic terrorism in the Middle east, which includes america’s attempt to contain iran.” india’s and China’s rival aspirations to be acknowledged as regional Great Powers, as well as their quest for energy security, are compelling both countries to seek greater maritime security. india, however, has a clear advantage, as its recent Look east policies show that it can forge enhanced security ties not only with the Us, but also with the region’s other key powers – even indonesia. stephen P. Cohen, a renowned analyst of india, has argued that, since the country gained independence, its

“officials have inculcated the precepts of George Washington’s Farewell address of 1796: that india, like the United states, inhabits its own geographical sphere, in india’s case between the Himalayas and the Wide indian Ocean, and thus [it] is in a position of both dominance and detachment. During the Cold War, this meant non-engagement; now it means that indians see themselves with their own separate status as a rising power.” the problem, of course, is that China views itself the same way. so, how are asia’s two giants to live in neighborly accord without encroaching on the other’s space? so far, the response has been to construct a regional security structure with no Chinese participation. that need not be the case, but the current impulse behind today’s asian security diplomacy will not change unless China rethinks its attitude towards its neighbors. Otherwise, its leaders will find themselves present at the creation of a regional order that holds little appeal for them.

Jaswant Singh, a former Indian finance minister, foreign minister, and defense minister, is the author of Jinnah: India – Partition – Independence. A version of this article was first published in Project Syndicate

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Internet is the best tool presently available to connect people; there is no better medium at removing geographical constraints

news

wateen Telecom Ceo, Naeem Zamindar

05

World economy to trudge on in 2012 despite Europe: poll LONDON REUtERS

UROPe faces another year of dismal economic performance in 2012 that will weigh on global growth, but emerging markets and the United states should at least keep the world economy moving in the right direction. there are several reasons why next year may be nothing to look forward to, according to Reuters polls from the last few months. Many of the world's biggest developed economies are heading into recession, global stock markets look set to recoup only a fraction of their heavy losses in 2011, oil prices will head lower, and asset managers are unsure where best to invest. and these could be the best-case scenarios. Most economists base their assumptions on the hope that the euro zone's sovereign debt crisis will not boil over into a new global economic crisis, having already dented growth in major exporters to europe. still, most of the major emerging market economies like Brazil and China should pick up speed later next year. all of them have suffered from slowing economies in recent months, caused mainly by tightening monetary policy in the face of high inflation. "it's important to stress the world economy is still growing. But it's a tale of two worlds," said Gerard Lyons, chief economist at standard Chartered Bank. "the storyline for 2012 is that europe drags the world down in the first half of the year, and China drags it up in the second half of the year." enormous political risks cloud the outlook further, with elections and leadership changes in the most powerful countries and the prospect of continuing turmoil in the Middle east. still, there are glimmers of hope. the

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United states' economy has performed better than most had hoped over the last quarter, and Reuters' polls of economists show it growing around 2.2 per cent in 2012, compared with zero growth in the euro zone. "the big unknown in europe and the U.s. is that big companies, with balance sheets in good shape, have the ability to invest at home if they want. it's more likely that will take place in the U.s. rather than europe," said Lyons.

THE EURO ZONE QUESTION european Union leaders took a historic step towards greater fiscal integration earlier in December, but economists have been clear that this would not ease a debt crisis entering its third year and still hogging the headlines in 2012.

Reuters polls show real concern that leaders are doing far too little to stimulate growth, with the likes of spain and italy destined for long and painful recessions. the euro zone as a whole, meanwhile, is probably in a moderate recession right now that will last midway into 2012. "the euro area continues to be a source of economic and financial instability for the rest of the world," said Juan Perez-Campanero, economist at santander, in a research note.

"We could be facing a more permanent and lasting decline in growth capacity in developed economies and, particularly, the euro area."

Whether spain and italy will need to seek funding from the euro zone's bailout facility next year is open to question, with a very slim majority of economists polled this month - 27 out of 56 - saying not. and a november survey of 20 top economists and former policymakers in academia and respected research institutes showed 14 of them do not expect the

euro zone to survive in its current form. even in Japan, where economists have downgraded growth forecasts relentlessly, the economy is expected to pick up in the fiscal year from april and expand 1.8 per cent. Japan should narrowly avoid a recession, but polls show little hope it will emerge from deflation any time soon.

ASSESSING THE ASSETS the severe uncertainty surrounding 2012 is perhaps best reflected by Reuters' asset allocation poll of more than 50 leading investment houses in the United states, europe and Japan. investors raised their cash balance to the highest in a year in December as they prepared for a jittery 2012, although they also moved back into cheap equities, Reuters polls showed on Monday. the euro zone crisis was the key concern of asset managers polled, hence the increased preference for cash as well as moves into British and asian shares rather than european ones. similarly, the last quarterly stock markets poll suggested emerging markets will easily outperform european share indexes in 2012, which will struggle to bounce back to end-2010 levels, never mind end-2011. With europe heading into a recession, oil prices look set to fall from here. Brent crude will average $105 a barrel next year, not far below this year's record high average near $111.

"We expect a mild recession across the OeCD next year to put a damper on demand and consequently prices," David Wech from Vienna-based consultants JBC energy said. "nevertheless, the risk to oil prices is definitely on the upside given a still troubled geopolitical environment." economic growth is likely to slow among the Gulf's wealthy oil exporters

next year, but governments will remain able to spend to counter the impact of any global slump, a Reuters poll showed on Wednesday. Respondents cited the euro zone debt crisis and signs of slowing growth in China as reasons for the darkened economic outlook in the Gulf.

DELAYED CHINESE CHEERS Whatever the euro zone's future, the effects of the debt crisis have already been felt across the world. the european Union is China's biggest export market, and manufacturing data there show dwindling levels of foreign new orders. indeed, the Chinese economy is now growing at its weakest pace since 2009. in an effort to support it the central bank cut reserve requirements at the end of last month for the first time in three years. economists polled by Reuters after this move, however, said the People's Bank of China will refrain from more aggressive stimulative policies unless growth falls sharply to below 8 per cent. similarly, india has been suffering from a pronounced slowdown in growth

and Reuters polls suggest its central bank will also slacken monetary policy by mid2012 to counter this, despite stubbornly high inflation. it could be in for a difficult year. "Looking ahead, the economy faces the lagged effects of monetary tightening," said Leif eskesen, economist HsBC in singapore. "Moreover, administrative hurdles and domestic policy paralysis are holding back investments and hurting sentiment." Brazil's central bank on thursday cut its 2011 growth estimate to 3.0 per cent, versus its previous estimate of 3.5 per cent, and said 2012 would see growth of 3.5 per cent.

Compared with previous years where growth averaged near double-digit rates, that would be a disappointment, although still a fair improvement on the anaemic rates of most developed peers.

Overall, even the slightly depressed growth rates from these developing economic powers will power world growth next year. "it is positive growth, but the picture does vary considerably - not just in terms of the first and second half of the year, but also depending on which part of the world you look at," concluded Lyons from standard Chartered.

CORPORATE CORNER Secretary Commerce visits indus Motor Company

KARACHI: Federal secretary Commerce, Mr Zafar Mahmood, paid a visit to indus Motor Company (iMC). He discussed about possible changes in the coming trade policy in the background of MFn status being granted to india and its impact on Pakistan’s auto industry. He complimented indus Motors on its vital role in supporting the auto industry and parts suppliers in this challenging environment. Mr Zafar acknowledged the challenges faced by the local auto manufacturing industry and assured the company of his ministry’s full support. He stated that the government would work closely with the auto industry and private sector and try to solve the issues faced by it. pRESS RELEASE

(Pre-steP) held a scholarship award ceremony at the karakorum international University in Gilgit. During the ceremony, 64 students currently enrolled at the karakuram international University and Government Colleges of education received scholarships.

Dr Marilyn Wyatt, the Us ambassador’s wife, joined government of Gilgit-Baltistan officials and faculty of teacher education institutions to award scholarships to talented students enrolled in recently approved associate Degree in education (aDe) and Bachelor of education (Bed) (Hons) programmes in Gilgit-Baltistan. “Our shared efforts to improve education in Gilgit-Baltistan are a symbol of the long and productive partnership between the government of Pakistan and the government of the United states.” said Dr Marilyn Wyatt. pRESS RELEASE

kolson distributes biscuits among flood victims

the critical time of need. pRESS RELEASE

PiP hosts strategic workshop to address energy challenges KARACHI: the Petroleum institute of Pakistan (PiP) organised a strategic workshop at the Defence authority Country and Golf Club karachi, presided over by Chairman PiP and MD and CeO, Pakistan Petroleum Limited asim Murtaza khan, to address the growing energy crisis in the country on the basis of recommendations in PiP’s 15-year Pakistan energy Outlook (PeO) document published earlier this year. CeO, PiP saleem Piracha and representatives of leading up- and downstream oil and gas companies also participated in the workshop. pRESS RELEASE

8th convocation ceremony of Bahria University

Dr Marilyn wyatt awards scholarships to Gilgit-Baltistan students GILGIT: as part of the Us government’s long-term efforts to improve the quality of basic education in Pakistan, UsaiD through its Pre-service teacher education Programme

asif sandila, Chief of naval staff, presided as the Chief Guest, who conferred the degrees to 793 graduating students in various disciplines including BBa, Bse, BCe, Bs, Ms, MsC and Ba. seventeen gold medals and fifteen silver medals were also awarded to the outstanding students as recognition of their remarkable achievement in their respective academic programs. Felicitating the graduating students, admiral asif sandila, expressed his deep admiration for the strenuous hard work put in by them. pRESS RELEASE

ISLAMABAD: 8th convocation ceremony of Bahria University islamabad was held on at Jinnah Convention Centre. admiral Mohammad

UMERKOT: kolson (Lotte Confectionery Co Ltd) distributed biscuits among the flood victims of Chhor Cantonment, District Umerkot. this distribution of biscuits was performed by kolson’s representatives who stretched out their humanitarian efforts to over 25 locations, including remote villages like new islamabad, Maulvi sanaullah Goth, sabir Goth and Haveli arisar, in collaboration with sina-a nongovernmental organisation. Lotte Group always values its Corporate social Responsibilities and has always been at the forefront for the nation at

KARAchI: picture shows Mr Rizwan Marchant of Qatar Airways along with the consul General of the State of Qatar Mr Rashid bin Shafeea Al Marri, and other diplomats at a reception on the occasion of the anniversary of the National day for the accession of Sheikh Jassim bin Mohammed bin thani, the founder of Satate of Qatar at a local hotel. PRESS RELEASE

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UBL is committed to the objectives of financial inclusion in Pakistan

Markets

United Bank Limited President and Ceo, Atif Bokhari

weekly review

kSe gains 2.5pc wow outperforming regional markets by 1pc g

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Rumour mills fan bullish surge in kSe 150 scrips advance, 79 decline, 83 remain unchanged of total 312 scrips traded kSe-30 index closes at 10409.25

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g

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Pressure on rupee, foreign outflows knock 69 pts o kSe 92 advance, 113 decline, 101 remain unchanged of total 306 scrips traded kSe-30 index loses 101.16 points

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Pressure of rupee limits market gains 119 advance, 72 decline, 98 remain unchanged of total 289 scrips traded kSe-30 index closes at 10360.69

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Jittery kSe posts minor loss 140 advance, 143 decline, 15 remain unchanged of total 298 scrips traded overall market sentiments remain gloomy

Jittery kSe gains 54.89 pts on Zardari’s return 116 advance, 95 decline, 90 remain unchanged of total 301 scrips traded LoPTA, JSCL, eNGRo, DGkC, ffBL the volume leaders

KARAChI

t

StAff REpoRt

He week began on a positive note as speculation in domestic politics eased somewhat after the return of President Zardari.

Concurrently, further impetus came on the back of rumours related to proposal of kse to collect capital gain tax under the presumptive tax regime for individual

investors. nonetheless, contrasting views of government and army on the memogate controversy and a current account deficit (CaD) of $2.1 billion reported in 5M kept the market sentiment fairly cautious.

Overall, kse 100 index gained 273 points, up 2.5 per cent WoW. Volumes also improved marginally by 1.4 per cent WoW to 45 million shares.

Moreover, local bourse outperformed

the regional markets by one per cent. though, despite the recovery foreigners remained net sellers, offloading shares worth $8.9 million.

SBP annual report: Key projections for FY12: state Bank of Pakistan (sBP) expects the economy to grow in the range of 3-4 per cent in FY12. the reason highlighted by sBP for the expected underperformance is its bleak outlook on agriculture sector.

sBP also believes that the fiscal deficit target of four per cent will not be met as flood in sindh, dengue fever in Punjab, upcoming elections and absence of iMF programme are likely to take their toll on expenditures. additionally, inflows from coalition support fund are uncertain on the back of strained UsPak relationship.

Consequently sBP has projected fiscal deficit of 5.5-6.5 per cent of GDP for

NEw YORK

O

Oil rises on supply worries, supportive data

REUtERS

iL prices rose for a fifth straight day on Friday, on concerns about potential supply disruptions in iran and iraq and recent signs of a strengthening Us economy. trading volumes were thinned in a shortened session ahead of the Christmas holiday. Oil also found support from stronger equities on Wall street, with the s&P 500 index turning positive for the year in a four-day rally to end up for the week, on the recent better-than-expected economic data. "it's very thin trading, but stronger equities are helping oil stay up today," said Chris Dillman, analyst at tradition energy in stamford, Connecticut. the government on Friday said new Us single-family home sales rose to a seven-month high in november, with the supply on the market at the lowest in 5-1/2 years. the home-sales report and thursday's data showing a fall in initial jobless claims last week helped offset a separate report on Friday showing consumer spending fell for a second straight month.

FY12. On the external front, sBP projects current account deficit (CaD) of 1.5-2.5 per cent of GDP in FY12 against the initial target of 0.6 per cent of GDP. InDIvIDUAL STOCKS: Mixed reaction in fertiliser stocks was witnessed amid the uncertainty on gas related issues. Fatima and FFBL outperformed the market by six per cent and two per cent, respectively, while both FFC and engro unperformed by one per cent.

Geopolitical uncertainty, especially in iraq and iran, also kept investors focused on potential threats to supply.

Brent February crude rose 7 cents to settle at $107.96 a barrel. For the week, Brent rose 4.46 percent, breaking a string of two weekly losses and posting its biggest weekly percentage gain since the week to October 14, according to Reuters data. Us February crude rose 15 cents to settle at $99.68 a barrel, reaching $100.23 intraday. Frontmonth Us crude rose 6.57 percent for the week, the biggest weekly gain since the week to October 28. Crude trading volumes were very thin ahead of the Christmas holiday and the approaching new year. Us dealings were 76 percent below the 30-day average and Brent 69 percent under its 30-day average. speculators cut their net long positions in Us crude oil futures and options in the week to December 20, data from the Us Commodity Futures trading Commission showed on Friday. the spread between Brent and Us crude narrowed to $8.28 a barrel based on settlements, and fell as low as $7.60 intraday. the Us Congress passed legislation containing a provision aimed at forcing a quicker decision by President

Obama on the keystone XL pipeline. analysts say the pipeline, from Canada to refinery and port facilities in texas, would ease a supply glut at the Cushing, Oklahoma, delivery point for the Us crude contract that has hemmed in prices for the Us benchmark crude. the euro was little changed against the Us dollar, but the dollar was on track to end the week lower against a currency basket .DXY. the recent encouraging data from the United states helped key industrial metal copper rise on Friday, but the ongoing worries about europe's economy and the region's debt crisis limited gains.

THREATS TO OIL SUPPLY: iran's navy will launch a 10-day war game in the strait of Hormuz on saturday, state tV said, raising concern about a possible closure of the key oil shipping route. in iraq, a wave of bombings that killed in Baghdad on thursday pointed to a deteriorating security situation just days after the last Us troops left the country. "there are lots of reasons not to carry a short position into the holidays," said Bill O'Grady, chief market strategist at Confluence investment Management in st. Louis.

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Rozee.pk, Pakistan’s largest jobs website, attracts nearly 500,000 unique visitors a month

analysis

Ceo Naseeb Networks, Monis Rehman

Pakistan to benefit by granting MFN status to India: Dr Manzoor Ahmad Pakistan to benefit by granting MfN status to india

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n an interview with our correspondent amer sial, Pakistan’s former ambassador to World trade Organisation Dr Manzoor ahmad, is of the opinion that the granting of MFn status to india is in Pakistan’s interests as it will allow diversification and increase in exports.

PROFIT: IS IT In PAKISTAn’S ECOnOMIC InTEREST TO GIvE MFn STATUS TO InDIA? MA: Without a doubt it is in Pakistan’s interest to do so. there are several reasons why this decision should have been taken much earlier. Firstly, Pakistan needs to diversify its export destinations, as currently 50 per cent of its exports go to either United states or european Union. secondly, our imports from india come mostly through third countries adding to costs. thirdly, all successful trading nations build on their regional base. in contrast, our regional trade is less than five per cent.

PROFIT: InDIA’S ECOnOMY IS MUCH LARGER THAn PAKISTAn’S. HOw CAn wE COMPETE AGAInST InDIAn InDUSTRY? MA: the experience of many small economies that developed closer trade relations with larger ones shows that it was a “win-win” situation for both sides. For the smaller economy there was the gain of access to a bigger market. For instance, when turkey signed an agreement with eU in 1996 for free movement of industrial goods, its exports totaled a mere $11.5 billion. Fast forward fifteen years and turkey’s exports to the largest economy in the world have multiplied five times, reaching $61 billion last year. similarly, Mexican exports to United states more than quadrupled after it joined north american Free trade area (naFta) in 1994, climbing from $60 billion to $280 billion per year. as for direct trade between Pakistan and india, at the very least it would help increase our global exports as our input cost would come down.

PROFIT: OUR ExPORTERS FACE MAnY nOn-TARIFF BARRIERS wHEn THEY ExPORT TO InDIA. wHAT CAn BE DOnE TO IMPROvE

OUR ExPORTS TO InDIA? MA: Our exporters would need to specifically identify such barriers and bring them to the notice of Ministry of Commerce. it is a fact that india used to be a closed economy but it has been gradually opening up. its imports are now growing at a fast pace. Pakistan should try to benefit from this opening of indian economy. an example is when Pakistan started exporting cement to india, many exporters complained of difficulties in meeting the indian standards because of bureaucratic hurdles. However, these problems have been resolved to a large extent. now the main problem is non-availability of railway carriages. if india allows import of cement through Wagha border by road, Pakistani exporters may be able to export up to 10 million tonnes as india is facing a shortage and Pakistani cement is more competitive.

PROFIT: IT IS KnOwn THAT InDIA IS THE wORLD’S BIGGEST USER OF AnTI-DUMPInG DUTIES. wILL THIS nOT HInDER OUR ExPORTS? MA: it is a fact that india is the world’s most frequent user of anti-dumping duties but most measures are applied against China. Despite frequent application of anti-dumping against Chinese imports, their mutual trade has been growing rapidly. When india and China agreed to give MFn status to each other in 1984, their mutual trade was very low.

Over the last 20 years, their trade has grown from less than $1 billion to over $60 billion in 2011. this is an increase of over 60-fold. so far there is no known case where india has imposed any antidumping duties on exports from Pakistan.

PROIT: InDIA IS OnE OF THE LARGEST AUTOMOBILES MAnUFACTURERS AnD SOME OF ITS CARS SUCH AS TATA’S nAnO BRAnDS ARE SOLD AT LESS THAn $2000 PER UnIT. OUR CARS COST MAnY TIMES MORE. HOw CAn wE COMPETE AGAInST THEM? MA: it is true that our automobile industry does not have economies of scale and is therefore less competitive than india’s.

MFn status, however, is not likely to have

any impact on our auto-industry for the foreseeable future since MFn status does not mean that tariff rates will be brought down to zero. Currently custom duty and other taxes on imports of vehicles are more than 100 per cent, which is enough of protection. import of second-hand cars

‘No longer the domino theory’

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ShAhAB JAFRY

risk-on window is perhaps the best way to bid farewell to trading year ’11, especially one not triggered by the usual Merkozy market talk-up that proves hollow two days into risk trading. But there is something eerie about upbeat Us data suddenly de-linking the crossatlantic nosedive. should i be concerned that my crystal ball just does not agree with currency strategists on Bloomberg, that the domino theory no longer holds going into the new year? that what happens in europe will no longer immediately impact commodity currencies like the aussie and loonie?

Fine, we will likely see a risk rally in early year trading, but will that owe more to holiday season job trends than idle money rounded off at year end making its way back into the market? i expect europe to stay centre-stage for some time, not least because one, its failing banks can cause a money

hemorrhage in the Us in no time. two, even in the best case scenario, where sovereign debt problems can be wished away, cut-throat austerity across the eurozone is sure to plunge the continent into a steep recession in ’12, depressing export activity in emerging markets, with a pronounced effect on commodity currencies just like the aussie and loonie. three, eCB’s loan window is little more than another form of quantitative easing, condemning the single currency to prolonged depression. and four, there is no guarantee banks will not hold the cash for refinancing needs, especially when less than a month after coordinated central bank initiative to lower dollar borrowing cost, european banks have wiped out most intervention gains. allied irish Bank, Banco santander, Credit agricole and Commerzbank, to name a few, are deeply distressed.

Going into the last week, though, Us numbers are indeed driving the market. eCB’s easy money will stitch europe’s

wounds for now, and minus a game changer, overall sentiment in the threeday trading week is expected to stay positive. still, best see whether euro breaks off from range bound trading upwards to 1.3200/50 level or drops to the 1.2940/50 range. Remember, the failed summit and the desperate funding did not budge rating agencies from the downgrade threat. the pleasant surprise in the Us job market, and subsequent impact on oil is interesting. Black gold advanced the most in three weeks, up 3.2 per cent at the slightest window of opportunity in the world’s largest economy. i still believe oil is over-bid, and has not priced in a potential thunderbolt from the many problems in the Gulf – war clouds darkening over iran, renewed unrest in saudi’s oil-rich eastern provinces, Libya unable to restore Gaddafi-era production level and iraq-kuwaiti tension over the same reason that pushed saddam’s national guard across the border in ’91. Oil will fly at the slightest hint of increased

is only allowed under special conditions and it is not likely that they would be imported from india. also, it is likely that our government may place automobiles on negative list, which is under preparation.

Profit: what about pharmaceutical industry? India is one of the tension. How higher prices will impact signs of recovery in the Us needs little elaboration. the international economy remains too tightly intertwined to give a clean chit on account of improved Us sentiment, that too when american job numbers are known to be dodgy at year-end. in a year when markets remained event driven and technical analysts and chartists suffered the fate of uncertain markets in uncharted territory, best wind up on event trading too. the ’11 endgame is buy risk.

But in the longer term, the euro-short, with all its implications, holds. all said and done, things have not changed enough to warrant the ‘no longer the domino theory’ position.

Comments & queries: jafry.shahab@pakistantoday.com.pk

largest manufacturers and some of the medicines are much cheaper than those produced in Pakistan.

How will our industry compete against Indian imports?

MA: Pakistan has a smaller pharma industry than india but it is making quality products. it is already exporting medicines worth over $150 million to 45 countries and access to the big indian market will be an advantage. Furthermore, import of medicines into Pakistan is controlled through the Drugs (import and export) Rules, 1976. Pakistan is already allowing import of some high quality lifesaving drugs from india. they are much cheaper than importing from europe. even such common medicines as aspirin, amoxillin, ampicillin, Ciprofloxine, Famotidine, Laxotanil, Renitidin, whose import is not allowed are smuggled in, because they are cheaper. allowing imports would only legalise the current situation. it will also bring down prices of essential medicines which would greatly benefit the poorer section of our society.

PROFIT: CAn YOU MEnTIOn THE SECTORS wHERE PAKISTAn wILL GAIn AnD wHERE wOULD InDIA BEnEFIT? MA: in my view Pakistan has comparative advantage in textiles sector in particular bed-linen and towels. Likewise, in several light engineering products such as surgical goods, cutlery and sports goods Pakistan would have an edge and can get a good market share.

On the other hand, for heavy machinery, indian manufacturers would be in an advantageous position. For auto-parts, india may replace traditional suppliers such as thailand and taiwan.

PROFIT: wHAT ABOUT AGRICULTURAL GOODS? MA: in agriculture, it is likely to be a balanced picture. in some cases, such as citrus fruit, mangoes, rice and wheat, Pakistan may have an advantage as it enjoys advantage of better quality. On the other hand, india may have an advantage in several other agricultural products such as garlic, red chilies, capsicum, beans and soybean-meal. For most other products, it will vary from year to year depending upon harvest conditions. this will stabilise prices, bring down inflation and make these products more available.