profit.com.pk Monday, 14 November, 2011

Pakistan and Turkmenistan likelyto sign agreement on TAPIg Serious concerns over the security of pipeline transit from Afghanistan g ADB acting as the facilitator and coordinator for the project

Pages: 8

Harnessing technology for electoral transparency Page 2Oil market tight despite slowdown, says IEA Page 6

ISLAMABADSTAFF REPORT

UnCERtaintY grips thefarmer community, as thegovernment has failed toannounce wheat support

price for the current Rabi crop, eventhough the prices of fertilisers andother inputs have more than doubled.an official source said the agriculturePolicy institute (aPi) had estimated anincrease in the cost of production ofwheat due to rise in input prices and hadrecommended enhancing the supportprice to Rs1200 per 40 kg from the lastyear’s level of Rs950 per maund.However, he said the summary couldnot be moved as after the devolution ofagriculture Ministry, aPi was under thecontrol of Ministry of science and

technology and wheat support pricewas under the mandate of Ministry ofinter Provincial Coordination. PlanningCommission, which is overseeingmajority of agriculture issues after thedevolution, the source said was opposedto the support price mechanism for thecrops as it wanted the market forces todetermine the prices of commodities.the support price benchmarks the priceof wheat and the government regulatesthe market by making directprocurements from the farmers.talking to Profit, former agricultureDevelopment Commissioner, Ministry ofagriculture, Dr Qadir Bakhsh Balochsaid the announcement of wheat supportprice gives a relief to the farmers thattheir good yield would get them goodprofit otherwise they opt for otherprofitable crops. “Pakistan has managed

to achieve food autarky during the lastfew years only by timely announcingsupport prices for importantcrops.” Usually the wheat support priceis announced by september end, as thesowing of the crop starts in October inthe rain-fed (barani) areas and in thedistricts of lower sindh. Pakistanannually harvests wheat crop on average8.8 million hectares that yield more than24 million tonnes of wheat as comparedto the country’s annual requirement of22 million tonnes.President agri Forum Pakistan,ibrahim Mughal said that they havewritten a letter to the Prime Minister aweek back suggesting increase in thewheat support price to Rs1250 per 40kg. He said an official Farooq awan ofPrime Minister secretariat informedhim that the government was likely to

enhance the wheat support pricebetween Rs1100 to Rs1200 per 40 kgwithin next few days. Currently, thewheat flour is sold between Rs32 toRs35 per kg. if the price is increased toRs1200 per 40 kg, there would be anincrease of Rs5 per kg in the price offlour. the government had retained thewheat support price during last year tokeep the food inflation low, but thisyear, prices are set to increase as flourmills are demanding an increase in flourprices due to hike in power tariff.Mughal said the increase in price wasessential for better yield. He said if thesupport price was increased to Rs1150per 40 kg, it would be beneficial inincreasing the country’s wheat yield toover 26 million tonnes as compared tolast year’s yield of 24.2 milliontonnes. Pakistan has already been faced

with a urea shortage of 1.2 milliontonnes as compared to estimated ureademand of 3 million tones during theRabi season, which the governmentplans to meet through imports. thecountry has annual urea demand of 6.5million tonnes of urea which can beeasily fulfilled by the local fertiliserindustry that has the capacity toproduce 6.9 million tonnes per annum,provided they get feedstock gassupplies. the annual production for thecurrent year is estimated to be 5 milliontonnes with an estimated urea shortageof 1.3 million. the government hasalready imported 500,000 tonnesof urea during the current year and willincur a cost of $400 million onimporting 700,000 tonnes of urea. thiswill have to provide subsidy of Rs26billion to the farmers.

Farmers uncertain as govt fails to announce wheat support price

The investment argument Page 3

Telecom, broadbandoperators sustaintight quarter

LAHORESTAFF REPORT

tElECOM and broadbandoperators have sustained afinancially-tight quarter as theirearnings sent to headquarters

were seen dropping by 30 per cent in Jul-sept 2011 as compared to same time lastyear, state Bank of Pakistan datashowed. Profit dividends of the telecomand broadband operators stood at $34.6million in the first quarter of thefinancial year 2011-12, which showednegative growth compared with $49.8million of the earning repatriation postedduring the same period of previousfinancial year. according to data, $30.9million profits were sent by cellular andtelecom operators such as Mobilink,Zong, Warid tel, Qubee, Wi-tribe etc., asoperations and services earnings,whereas $3.7 million earning repatriatedabroad by listed companies in stockexchanges such as Wateen, PtCl andtRG through portfolio profits. analystssaid that services’ sales of telecom andbroadband operators were witnessedquite low in the first quarter of financialyear 2011-12 on decreased consumptionsof the subscribers in the country. Duringthe period, heavy rains across thecountry particularly in sindh affected theservices consumption and infrastructureof telecom sector that impactednegatively on earnings of the telecomoperators. they said seasonal drop ofservices was witnessed in Ramadan ascustomers’ activities, were traditionallylow in the country despite introductionof enhanced services packagesparticularly by cellular and broadbandoperators. in Ramadan, the commercialand domestic consumption of telephonyand broadband services witnessed adecline of 15 to 20 per cent comparedwith other months of the year.subscriptions growth of differentoperators was slowing down because ofshifted priorities of masses in Ramadan.Moreover, the stock exchanges remainedvolatile in the first quarter of 2011-12with a mixed trend of share tradingparticularly in companies oftelecommunication sector. Hence, itaffected earnings of listed companies inthe period under review.

ISLAMABAD AMER SIAL

Pakistan and turk-menistan are likely to signan agreement on turk-menistan, afghanistan Pak-

istan india (taPi) pipeline duringthe two day official visit of the Presi-dent of turkmenistan GurbangulyBerdimuhammadov starting today.an official source said both the coun-tries have already agreed on the gassale price of $360 million cubic meter(mcm) at the turkmenistanafghanistan border after deductionof $29 mcm as transit and trans-portation cost through afghanistan.the cost will be $10 mm BtU. thebase price comes to 70 per cent ofBrent oil parity in the mid countrydelivery point of Multan.

Both the countries, he said will

sign a risk sharing agreement forafghanistan, as there are serious con-cerns over the security of the pipelinetransit from afghanistan. the agree-ment will also have a condition forprice review after 5 years. Pakistaniteam lead by Petroleum Minister, Drasim Hussain had last month fi-nalised the price for gas importsthrough taPi pipeline with theDeputy Minister for Energy turk-menistan Yarmuhammet Orazgulyev.

turkmenistan had proposed tobase the price of imported gas on theother alternate fuel High speed Fur-nace Oil (HsFO) available in the localmarket, as it was also used in powergeneration. Pakistan plans to utilisethe imported gas for power genera-tion, as the country is faced with apower shortfall of 5,000 MW duringsummers. the pipeline is expected tostart gas supply by December 2016,

but that depends upon credible secu-rity cover to be provided byafghanistan, which will also be re-ceiving 500 mmcfd of gas, out of totalenvisaged supplies of 3.2 bcfd.

the Economic CoordinationCommittee of the cabinet had consti-tuted a committee headed by the Pe-troleum Minister to finalise the draftof taPi pipeline project. the commit-tee was asked to submit its reportwithin shortest possible time beforethe upcoming visit of President ofturkmenistan. taPi gas pipelineproject aims to bring natural gas fromYolotan/Osman and adjacent gasfields in turkmenistan to south asiancountries. the pipeline will carry 3.2bcfd natural gas covering 1,680 kmfrom turkmenistan through Heartand kandahar in afghanistan, crossPakistan border near Chaman to passnear Zhob, DG khan, Multan, and on-

wards to Fazilka near Pak-india bor-der. the capital cost of the project isestimated at $7.6 billion and will takebetween 4 to 5 years to complete aftersigning of all the contracts. asian De-velopment Bank (aDB) is acting asthe facilitator and coordinator for theproject and had funded a feasibilitystudy of the project in 2004.

During the visit of turkmen Pres-ident, both the countries are expectedto ink agreements for enhancementof economic and trade relations thatwill also provide opportunity to Pak-istani businessmen to explore theCentral asian markets. the totaltrade volume between two countrieswas at $43.5 million during 2010-11.Pakistan’s major exports to turk-menistan include fruit and fruitpreparations, medical and pharma-ceutical products, while its major im-ports include raw cotton.

g Agriculture Policy Institute estimates increase in wheat’s cost of production g Planning commission opposes crop support price mechanism

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Monday, 14 November, 2011

02 debate

TARIq MALIk

in the midst of Pakistan’s never ending dis-asters and serious governance challenges,streamlining the voter’s list is the last thingon the public agenda. it is true that themulti-faced challenges facing Pakistan

today require radical steps. But, sometimes, smalltangible steps can lay the basis for radical change.after all, even the most radical institutional changeis laced with small incremental steps that leave anenduring legacy. Restoring the sanctity of the elec-toral rolls is one such step that can have a far-reaching implication for the way we choose ourgovernment, hold it accountable and force it to de-liver. the last voter’s list was marred with errorsand contradictions. this has been a legacy ofdecades of manipulation, where massaging theelectoral data became an important instrument forelectoral engineering. the decision by current lead-ership of the Election Commission of Pakistan toupdate and streamline all electoral lists using latesttechnological tools is likely to revolutionise the vot-ing process. it is our obligation to explain theprocesses behind this exercise to the citizens atlarge – who are the real stakeholders of this coun-try. this is the main objective of this article.

The ‘SuPermAn’ voTertransparency of voters list is of utmost impor-tance but it remained the most neglected do-main in a country like Pakistan where votecounting has become more important than votecasting. Reconciliation of Final Electoral list2007 (FER 2007) with naDRa followed di-rectly from a strong demand by political partiesto streamline the electoral lists. the only way tocomb old voters list out of ‘unverified identities’was to reconcile it with civil registry known ascitizens national database. already, naDRa hasissued 87.5 million CniC against the projected93.8 million adult population. it thus covers 93per cent of eligible voters. these citizens havecome to naDRa during the last 11 years andrecorded their digital finger prints and photo-graphs. Here, it should also be considered thatthe remaining 7 per cent population is not dis-enfranchised but have the option of inclusionin final electoral rolls subject to obtaining

CniC during door to door verification, display pe-riod through claims or objections and through con-tinuous revision till announcement of electionschedule. Reconciling the electoral and citizensdatabases is a no brainer, since most countrieswhere civil registries have registered more than 80per cent of eligible voters are already using this asa competitive advantage in not only conductingelections but rolling out social security programs.

reconcIlIng voTerS lISTthe strategy was, therefore, simple. it involved rec-onciling voters list used in the last election with thecitizens database in accordance with the businessrules duly approved by the Election Commission ofPakistan (ECP). in this process, CniCs in the vot-ers list were verified. the successfully verified vot-ers were retained, while the unverified names wereremoved and augmented with what naDRa wasleft with. so, here is how it worked: if you were reg-istered with a fake identity card in voters list, youare out, if you were registered multiple times. so,if you are a Mr superman from Gujar-khan who isregistered 26 times in 5 constituencies in a 3 hourdrive radius, one of your records is retained, whilethe remaining 25 are ‘gone with the wind’. What ismore, in case you are absent from the previous vot-ers list but recorded in naDRa’s citizen database,your name is added to the draft electoral list. For along time, our arm chair intelligentsia has escapedthe electoral process, but now the ECP and naDRaare providing a welcome opportunity to participatein the democratic process. so, please make sureyou are at home when ECP folkscome to verify your record. Onecannot emphasize enough the im-portance of registering your vote.it must be made to count. ElectionCommission of Pakistan took aninitiative to start consultativeprocess during this exercise. all po-litical parties were briefed aboutstrategy and were updated withprogress through foursessions. suggestionsand feedback of po-litical parties were in-corporated into thep r o g r a m .

this not only helped build confidence of majorstakeholders in electoral process but also broughtpolitical transparency in this revision process.

The curIouS TImIng oF Pcoso far so good. But, as naDRa and ECPwere trailing smooth on the project high-way, we encountered a major speed-

breaker. the Population CensusOrganisation (PCO) has

c u r i o u s l y

timed the undertaking of the census after 13 years.the PCO have now become a major player in thisproject, since in the aftermath of the housing cen-sus the census organization is likely to increase thetotal number of census blocks (or, electoral areablocks) from 102,000 to 149,000, where each blockconsists of 250 families. such a major reshufflingof demographic definition, due to an increase inpopulation meant that naDRa and ECP had to re-assign each voter in the right census or electoralblock. the quick fix to the problem was that ECPgave a form to the housing census department thatcould be readily used during the census to recordinformation linking CniCs with the voting location.naDRa had to realign voters’ list as per informa-tion provided by the census organisation and printit for ECP’s scrutiny. the Election Commission ofPakistan team comprising of 211,000 members isnow making door to door contact to re-verify thevoter’s information. this would help to map theCniCs of voters with respect to their census blocks.it is the first time in the history of Pakistan that thecensus team is going door to door for such verifica-tion. there is great optimism that this new strategyof form verification would replace the older modesof manually collecting the information that gener-ated significant errors. With such digitisation, themargin of error is likely to reduce considerably.

We Are The ‘KhomeInI’the Final Electoral Rolls (FER) will be printedbefore the next election and, in order to bringmore transparency, it has been decided thatthe FER will contain photographs andthumbprints of the voter. Blank spaces will beleft on the FER for capturing thumbprint usingmagnetic ink before a voter casts his/her vote.Presiding officer will ensure that the left thumbimpression is captured at the time of issuanceof ballot paper which will then be automaticallyscanned and matched with the correspondingCniCs using naDRa’s finger printing software.if pursued with diligence, sincerity and trans-parency, the above-mentioned changes willbring a qualitative change to the electoralprocess, making it more credible in the eyes ofthe public. the future of a democratic Pakistanrests on credible electoral rolls that are freefrom egregious mistakes. the ongoing electoralreforms deserve the support of every Pakistanion a non-partisan basis. Rather than infinitelywaiting for a khomeini, we as citizens need torise up and play our part in putting in placethe nuts and bolts of institutional change.

The writer is deputy chairman NADRA

Harnessing technology forelectoral transparency

longSTAnDIng DemAnDan amendment in the election law promul-gated by Parliament earlier this year has madeComputerised national identity Cards (CniCs)mandatory for registration and casting of vote,when more than 93 per cent of adult popula-tion has registered themselves with naDRa.this is a historic step that promises to bringgreater transparency in the next general elec-tions. this is an area where elected parliamen-tarians deserve much credit. it was a longstanding demand of all political parties, civilsociety and media to conduct free and fair elec-tions. in a country whose birth was itself theoutcome of electoral ballot, it is an open secretthat scientific rigging in elections has remaineda festering issue that has often marred thecredibility of the electoral process. in the back-drop of this important legislation, it was obvi-ous that the institution responsible formaintaining civil registry was to be involved inupdating the electoral rolls. Civil registrationwill be used this time to conduct merito-rious elections, a practice followed in mostcivilised democracies. the Election Com-mission of Pakistan (ECP) has sought theextended involvement of naDRa in theelection process to ensure computerisedcredible, fair and accurate electoral rollswith a vision of ‘one voter, one CniC, onevote’. naDRa has agreed to participate inthis important exercise and a contract witha framework for ‘rules of engagement’ wassigned between the two parties. Use of mod-ern technology would put a tab on interven-tions by “various individuals in someinstitutions” that need not be named. thereis a hope that harnessing technology in theelectoral process would go a long way to-wards bringing greater transparency andcredibility to the electoral process.

DrAFT elecTorAl rollSFor its part, naDRa has successfully completedthe task of printing the draft electoral rolls con-sisting of more than 80 million eligible votersunder the close supervision of ECP. the electoralrolls have been handed over to ECP for furtherscrutiny and door to door verification. the lastelectoral roll that was used in 2008 elections wasreplete with many errors. several entries wereduplicate, misappropriated and based on fakeidentities. naDRa has synthesised the 81 millionentries in last electoral list into 44 million verifiedand 37 million unverified voters. But, the scale oferrors was truly mind boggling. the details of the37 million ‘unverified voters’ is enough to shockus beyond imagination. the ugly flaws in the2008 electoral rolls demonstrate the followinguncomfortable realities: 2.14 million fake com-puterised identity cards that were never issuedby naDRa; 2.49 million duplicate CniC entries;6.49 million duplicate MniC entrees. therewere 15 million voters without any identity and11 million fake manual identity cards which thegovernment had never issued. the new busi-ness rules approved by the ECP have allowednaDRa to exclude the unverified 37 millionvoters from the list and add 36 million new vot-ers, who acquired their iD cards from the incep-

tion of naDRa till the preparation ofthe draft electoral rolls Rs in 2011 intheir place. (the final electoral rollsused in 2008 elections still remain in-tact till the time final electoral roll iscomplete and is published by ElectionCommission of Pakistan in 2012).

Door To Door verIFIcATIonas citizens demanding rights, it is our obligationto cooperate with the verifying staff knockingour doors. if change in electoral area is required,Verification Officer will fill form – alif for singlevoter and Form – 2 for family or group of voters;if the voter is dead or shifted to another location,the family needs to report this to Verifiying Of-ficer who will fill Form-B; and voter’s particularson draft electoral rolls requires correction, staffneeds to be assisted in correcting the record inRegister J in accordance to particulars availableon CniC. Once these changes are submittedback to naDRa, we will digitise them and sub-sequently print the ‘Preliminary Electoral Rolls(PER)”, which will be displayed according to lawfor a predetermined duration for the filing of ob-jections and claims. again, naDRa intends tosupport the ECP using modern technology byproviding an outreach to eligible voters usingsMs technology. this would help check whereone is registered as a voter and, if so, in which

electoral area. During current door-to-doorverification exercise the naDRa teams arefacilitating the registration of eligible votersthat have not been registered so far and inrectifying errors in the list. naDRa’s 800data acquisition units, including 220 mobileregistration vans and offices countrywide hadbeen directed to work with the district elec-tion staff. Citizens without CniCs would alsoreceive support during the ongoing verifica-tion exercise. Potential voters have the lever-age to opt for their permanent or temporaryaddress for exercising their right to vote.

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As debate about the looseningmonetary environment’s impacton private sector investment con-tinues, it is important to notethat the interest rate regime en-

sures provision of necessary working capital, butmeaningful investment will be stimulated onceaggregate demand rises and capacity is fullyutilised. Presently, excess capacity is observedacross sectors. in the cement industry, for exam-

ple, present capacity isapproximately 40 mil-lion tonnes, yet produc-tion languishes aroundthe 32-33 million tonnemark. similarly, in carmanufacturing indus-try, production at100,870 units falls wellshort of total capacityof 275,000.

so, till the excesscapacity gap is bridged,fixed investment will

not materialise, with monetary easing, or other-wise, and private sector demand for credit willremain elusive . and with GDP growth stuck inthe low 2-3 per cent range, the market is simplynot generating enough aggregate demand to in-duce substantive investment. also, the govern-ment’s continued borrowing in the money marketmakes for the ideal marriage of convenience be-tween the centre and the banking sector. Bankseye this as a risk-free asset, requiring no capitalto back up advances. sovereign debt is, of course,also more reliable considering rising incidencesof non-performing loans. the exercise also cutsdown on marketing expenses in an otherwisestagnant environment.

Before embarking on an investment-inducedgrowth trajectory, relevant authorities must firststreamline the fiscal environment. issues of com-modity pricing, subsidies, public sector enterprises

and circular debt need to be addressed to attract se-rious investors. For now, monetary incentives willnot have the desired impact on employment,poverty, investment and infrastructure. also, thepresent market environment is too uncertain to at-tract serious investors. Parties willing to commitfunds eye medium to long-term predictability andreturns which, unfortunately, cannot be guaranteedfor now. therefore, with banks reluctant to reachout and the government’s borrowing binge contin-uing, interest rate reduction is just likely to feed intospeculative activities stimulating cost-push inflationrather than proactive generation of investment, em-ployment and consumerism.

again, fiscal policy must take centre stage, notjust the government’s budgetary expenses, but pub-lic spending in totality. With Rs400 billion oddhemorrhaging annually from public sector enter-prises, and Rs351 of circular debt impeding on ab-sorption capacity of financial institutions, the fiscaloutlook is unattractive. in the stock market too,while a few blue-chips dictate market direction,there is no meaningful capital formation, no iPOsand no new debt issues. it is little surprise then thateven local investors are fleeing to the relative safetyof regional economies. to bank on inducing freshinvestment in such circumstances would amount tomisreading present market conditions.

immediate fillip in revenue generation shouldcome from fine-tuning the tax administration ma-chinery, which requires greater capacity within FBRalong with full political support to take punitive ac-tions against evaders, concealments or understate-ment of incomes or sales, broadening tax net at boththe Federal and the provincial levels. there has notbeen an encouraging response from provincial au-thorities since the 18th amendment devolved taxcollection to their domain. By simply streamliningcollection of property tax in lahore and karachi, taxauthorities in Punjab and sindh can help contribute1-2 per cent to overall GDP growth. But with localgovernment completely paralysed, and provincesunable to move forward on the tax issue, presentcollection is just a fraction of what it should be. thesooner those in charge reconfigure their priority list,the sooner local and central governments will havenecessary fiscal space to initiate targeted expansion-ary fiscal policies that will unlock immediategrowth, prop up employment, and engineer the sec-ond round multiplier.

The writer is former Governor,State Bank of Pakistan

and Dean and Director, IBA

WHilE it is not clear whatwill become of PakistanRailway’s idea of leasingits land to ease fiscalconstraints, the idea is

sound, and should be taken further. seniorexecutives in the planning commission havelong advocated turning inefficient governmentlandholdings into profitable enterprises.Railways presents the most fitting example. itowns large areas of land, almost allinjudiciously utilised. Pretty much the same istrue for other government organisations. andconsidering prevailing circumstances, suchland is best sold to private sector and corporateuse, especially if it is close to commercialcentres. not only does such an arrangementstand to increase fiscal elbow room, but willalso cut down on needless fixed cost, freeing theland for more profitable enterprise.

such measures are essential to addmarketable density to city centres. Presently,our main urban centres, while flush withindividuals driven from the periphery, are short

of adequate commercial activity, which can beachieved by targeted reforms. Following thesepatterns played an effective role in establishingregional commercial hubs like singapore,Dubai and Hong kong. in Pakistan’s big cities,we have ample space that can be turned intoviable commercial centres. Yet the officialposition continues to patronise the wastefulsystem that hinders meaningful progress.

in principle, all available avenues ofenhancing revenue should be exhaustedbefore reaching out for aid to financeeconomic activity. in the Pakistani context,far too many potential avenues for raisingserious revenue remain locked in passivegovernment control. this position is not onlycontrary to the economic model we follow,but also counter productive considering ourimmediate needs. sick enterprises likeRailways should no longer be bailed out bythe government. they should first cut largeholdings so their dependence on bailoutslessens, then the lands should be used formeaningful commercial activity.

Value for land

Till the excesscapacity gap isbridged, fixedinvestment will notmaterialise

The investment argument

Ishrat Husain

Indian dichotomy and MFN

MFn status was given to india as a ges-ture which was indeed in response toindia's waiver of objections to the prefer-ential trade agreement. the ntBs thatexist on india's part which also hopefullycome down as trade between the twocountries flourishes. this has to be donein small incremental steps so that it givesthe market a chance to adjust. i say welet bygones be bygones and improve therelationship between the two countries,and there has to be an understanding be-tween our two peoples that we have tolive peacefully next to each other. theanimosity must end now!

SAAD ALIKARAchI

The MFN debate

Every government strives to pursuethe policies best suited to their owninterests; is a phenomenon true re-gardless of time and space. Grantingof MFn status to india is beneficialfor both the countries. the article un-folded a very balanced view in a mostunbiased manner. Every sensible Pak-istani is well in favour of free tradebetween india and Pakistan, believingenough is enough as we are sick andtired of animosity and useless acrimo-nious wrangling between the twoneighbours. But at least the fieldshould be leveled for the both playersto void future complications.

AHMED SHAkILLAhORE

E D I T O R I A L

Pak-Iran trade in perspective

THE time-honoured andwindow-seeking allegationsof the west towards resourcebearing economies, espe-cially in the Middle East,

have been the subject of several empa-thetic discussions. Wars were initiatedthrough use of armed forces on the soils ofafghanistan and iraq at the behest ofcovert whims when the west believed thatit was sitting on mountains of money; in-cidentally the amount that will be spentduring war on ‘terror’ in afghanistan up till

FY12 (approximately $500b) matchesquite brilliantly with the euro debt figuresrevealed (more than $450b).

Conversely, in the line of bloody wars,iran has had to suffer a rather subtle treat-ment for daring to flirt with a nuclear jour-ney, whereby sanctions imposed prohibitdevelopment of trade relations, financialmarket expansion and progress on the pe-troleum resource aspect. notwithstandingthat the Us, EU and Un are aligned in theirunderstanding of these sanctions, iran con-tinues to export petroleum products, com-prising about 90 per cent of the 25 billioneuros worth of trade that takes place be-tween iran and the EU.

against this backdrop when Pakistan ismade an offer of gas, it faces a conundrumin terms of which way to go and whose sideto take. During Fy11, Pak-iran tradeamounted to approximately $454 million[EX: $154m; iM: $302m] where as Pak-Ustrade arrived at about $5.2b [EX: 4.1b; iM:$1.1b]. thus, the ostensible stakes seem

high and the opportunity costs are obvious.On the other hand, research from the

invincible multilaterals indicates thatpower shortages have caused the economyto lose about two per cent of the GDP(value of domestic output) during the pre-ceding fiscal year, which in dollar termsimplies that Pakistani entrepreneurs couldmake $4.2 billion worth of more outputhad they received uninterrupted powersupply. Currently, about 34 per cent ofelectricity is produced through gas, so theimmediate benefit of the pipeline wouldamount to about $1.4 billion. Further, thecomplaints from the textile industry, (com-prising about eight per cent of the GDP)link gas shortages with a 45 per cent de-cline in productivity. By extremely conser-vative estimates this could amount to about$5-6b during FY11. additionally, one mustnot forget that about $2 billion worth of in-vestment has been made by the CnG sectorin infrastructure and equipment. this willhave to be classified as sunk costs if correc-

tive measures are notundertaken.

additionally, in autopian situation wherethere were no sanctions,Pakistan could, for thefirst time in history,make in roads into fi-nancial sector develop-ment of its neighbour, which couldguarantee structured and predictable re-turns over the next century much needed bythe choking economy. such is the power ofwishful thinking!

and thus my friend, the time tobreak free could not be more opportune.While the euro zone stands waist deep inbubble splinters, and the Us is ready toswim across seven seas to save its dearfriend, Pakistan could very well carve ex-peditiously a maneuverable space toenter into an energy sharing agreementwith its neighbour. the grounds for ex-planation can not be simpler; the Us

needs to be convincedthat if anybody’s nu-clear assets and poten-tial to fuel strategicwars (read: terrorism)needs to be feared,they should be its own.if the entire developedworld, india and Pak-

istan possess nuclear arms, why can’tiran? and considering the fact that Pak-istan is always worrying about safe-guarding its nuclear assets, physicallyand politically, from the Us, the samecan hold true for its neighbour.

and if it’s not nuclear assets, but letssay human rights abuses, the index isnow extremely tired of being endlesslyused as a pointer!

The writer is an economicresearcher and freelance financialjournalist. She can be contacted at

sakina.husain@gmail.com

Sakina Husain

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F r i d a y, 1 1 N o v e m b e r, 2 0 1 1

The gas project withTehran puts Pakistanin a dilemma; whichway to go, whoseside to take?

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Monday,14 November,2011

If we would have strongtrade relations, the politicalrelations would get betterautomatically

04news

kARACHIGhULAM ABBAS

THOUGH many industries andsectors in Pakistan have ex-pressed fear of losing theirlocal markets through opentrade with india, the marble ex-

porters here are ready to face the stiffcompetition with indian exporters as itwill pave the way for exchange of variousqualities of marble.

those types of marble which are notproduced here or are produced in lessquantity are already coming from indiathrough smuggling, and via Dubai or athird country. Regularised trade with the

neighbouring country will earn addi-tional revenue to the national exchequer.

talking to Profit, sanaullah khanformer Chairman all Pakistan MarbleMining Processing industry and Ex-porters association (aPMMPiEa) saidthere was plenty of marble being im-ported from india, many of which aremainly coming through Dubai. Even themarble displayed for visitors at local ho-tels here was mainly indian.

as marble products are already com-ing from the neighbouring country therewas no harm to local industry with re-gards to open trade with india.

there would also be exchange of var-ious kinds of marble between the coun-

tries as many valuable products availablehere have huge demands in india. islam-abad has some of the most valuable stonecolours which could be exported to india.

When compared with Pakistan, indiais far ahead in the marble sector. How-ever both countries could benefit fromthe natural resources available in the re-gion if efforts of both sides collaborated.the marble products have huge demandsin Europe and Middle East. Best qualitymarble of Pakistan technical, coupledwith expertise of india could develop thebase for marble industry. Proximity be-tween karachi and Mumbai also offershuge potential for trade and investment.

talking about impacts of liberalisedtrade with india over the local marble in-dustry, he said that more indian prod-ucts would come to Pakistani market. Onthe other hand the exports of raw marbleand some valued stones would also in-

crease, he added. “lahore will be thecenter of indian marble,” he said addingthat open trade would also affect theprice of the products.

according to sources, the country’sraw material is already being exported toChina in large quantity which is re-ex-ported after value addition. China takesthe raw material in the mainland, cutstiles, finishes it and exports it worldwide.Pakistan can export the same marble toindia with less transportation costs.

Despite huge imports of raw marblefrom Pakistan, there was no investment onthe part of China in Pakistani marble in-dustry. the government may also thinkabout transfer of technology and expertisein field to strengthen local industry. it is afact that an honest cross-border free tradewas always going to be a win-win situation.

it is worth mentioning here that Pak-istan has one of the world's best marble

reserves, but has not been able to utilisethe natural resource and has a share ofonly 0.09 per cent in the world market.However, india is among world's topseven natural stone exporters with whichPakistan has no collaboration despite ahuge potential.

Despite various problems like powershortages and the deteriorating law andorder situation in the country, Pakistanhas achieved a record high export ofmarble with an increase of 72.34 per centduring June to July 2010-2011. thecountry has achieved a record export of$60.620 million as compared to $35.178million during the corresponding periodof fiscal year 2010 with an increase of$25.442 million. Besides the huge exportto China the country’s marble and gran-ite is exported to almost 52 countries ofworld, which include UaE, Uk, india,China, italy, Usa and Malaysia.

Marble industry ready for Indian competition

Indian commercial attaché assuresof businessmen-specific visa regime

LAHOREStaff Report

WHilE agreeing with the lCCiproposal to ease visa proce-dures, indian commercial at-

taché arvind saxena has assured that abusinessmen-specific liberal and flexiblevisa regime would be in place veryshortly. He was talking to lCCi Presidentirfan Qaiser sheikh, Vice Presidentsaeeda nazar here at the lahore Cham-ber of Commerce and industry on satur-day. Vice President saaRC Chamber ofCommerce iftikhar ali Malik and formerlCCi President sheikh Mohammad asifand former Vice President shafqat saeedPiracha also spoke on the occasion.

arvind saxena said that Pakistanibusinessmen are always facilitatedwhenever they intend to visit their coun-terparts in india. On the issue on non-tariff Barriers (ntBs), the indiandiplomat made it clear that Pakistanibusinessmen should not be afraid of in-dian non-tariff Barriers (ntBs) whichare not at all Pakistan specific and aredebatable. speaking on the occasion,lCCi President irfan Qaiser sheikh said

the business community was happy withfederal cabinet’s decision to grant MFnstatus to india but it definitely wantsthat all genuine reservations of varioussectors must be removed through dis-cussions. He said frequent exchange ofbusiness delegations of the two coun-tries, a flexible visa regime and one yearmultiple visas to businessmen woulddefinitely bring prosperity to the region.

lCCi President also stressed theneed for early establishment of infra-structure at Wagah border so that thebusinessmen of both sides could dobusiness with ease. He informed the vis-iting diplomat that lahore Chamber ofCommerce and industry is taking a bigdelegation to india in December.

lCCi President also appreciated in-clusion of 12 more items in the positivelist. irfan Qaiser sheikh said both gov-ernment of Pakistan and the indian hi-erarchy should liaise closely with theprivate sector to stimulate economicgrowth in the region.

He said the promotion of trade is theonly way to minimise political tension inthe region. the neighboring countriesshould not mix trade with politics and

business communities should be allowedto carry on trade without hurdles. He es-pecially addressed the indian envoy re-garding ntBs (non-tariff barriers) beingimposed by the indian government toblock smooth flow of Pakistani exportsinto india. He asked the indian govern-ment to lift all ntBs. “if we would havestrong trade relations the political rela-tions would get better automatically”, hesaid. He stressed the need for promotingborder trade particularly through landroutes which is in favour of both thecountries. He said the potential gainsfrom increased economic integration be-tween india and Pakistan are largewhereas mutual trade between the twocountries is unnaturally small. Further ef-forts to facilitate and increase trade canbecome an effective tool en route toprogress and prosperity. Pakistan’s majorexports to india include vegetables, fruitsand nuts, sugar confectionery, mineralfuels, salt etc. But these exports form avery insignificant proportion of india’simports of these commodities. a bigchunk of these commodities is importedby india from countries other than Pak-istan. if trade between Pakistan and india

is liberalised, exports of these commodi-ties to india can take a quantum jump.similarly, there is a great potential for ex-port of fish, resins, animal and vegetablefats, beverages, spirits, vinegar, leatherand its goods, carpets, pharmaceuticalproducts, chemicals and tobacco. simi-larly, Pakistan can import cotton seed,meat, dairy products, vegetables, fruits,tea, cereals, organic chemicals, pharma-ceutical products, tanning, dyeing ex-tracts, chemical products, plastics, rubberand its products, iron and steel, machin-ery, vehicles, raw materials and semi fin-ished products etc.

lCCi President said india should allowrepresentatives of private sector of Pak-istan to establish trade offices for variousproducts in india. We believe that easingrestrictions on visas, specifically allowingmultiple entry visas for businessmen, elim-inating requirements to report arrival tothe police at each place of stay, abolishingcity-specific visas, and speeding up ap-proval processes can ensure facilitation toexplore new avenues of trade promotion.lCCi president said, “We, the business com-munity, are committed to have a serious,sustainable and constructive engagementwith india and early and full normalisationof relations on the basis of mutual non-inter-ference, peaceful co-existence and respectfor each other.”

g marble sector favours open Pak-India tradeg Pakistan has one of the world's best marble reserves

g President lccI appreciates inclusion of 12 more items in positive listg Business community supports federal cabinet’s decision to grant mFn status to India

APTmA chairmandemands gas loadshedding exemption

LAHORESTAFF REPORT

all Pakistan textile Millsassociation (aPtMa) chairmanMohsin aziz said textile industry

should be exempted from gas loadshedding in the larger interest of nationaleconomy. Reacting to the EconomicCoordination Committee’s (ECC)decision of continuing with three days aweek gas curtailment for textile industry,Chairman aPtMa said gas curtailment oftextile industry is already inhibiting itsexport target and growth potential.according to him, textile industry hasemployed 15 million workforce and it hadachieved $14 billion exports during 2010-11 and intending to take it to $20 billionduring current fiscal year. He said 80 percent of textile industry is dependent ongas-based captive power plants. Mohsinsaid the country needs an immediatepush to exports in a situation when tradedeficit has crossed over 30 per cent. thistrade deficit could only be overcome

through increase in textile exports.aPtMa chairman said the textileindustry is already facing financialcrunch, leading to bankruptcies in theindustry. a gas load shedding for threedays for textile industry is fatal to thegrowth of industry as well as exports ofthe country, he added. Mohsin said thetextile industry has already beendeprived of gas for 120 days during theongoing calendar year. He said the ECCshould review its decision and announceexemption from gas load shedding fortextile industry without delay. if it isnot possible immediately, he added,the government should reduce gasload shedding for textile industryfrom three days to two days a week.this would strengthen its potential ofachieving $20 billion exports andkeep the jobs of 15 million employeesintact in the country.

LAHORESTAFF REPORT

Rak airways – the official carrier ofUaE state Ras al khaima – hasstarted its operation from

Pakistan. in the first phase, the budgetairline intends to operate two weeklyflights from lahore and Peshawar each.the first flight of Rak airways landed atallama iqbal international airport,lahore, on 10th november whereas, it hadplanned to start its operations fromPeshawar on 16th november. speaking atthe launch ceremony, Rak airways countrymanager syed Moeen Uddin said ‘smallfare, big deals’ is the slogan of the airlinethat intends to provide full services withcompatible fares. He said his company sawa vast potential in Pakistan as a largenumber of Pakistani expatriates wereworking in UaE.

new budget airline startsoperations from Pakistan

lccI President Irfan Qaiser Sheikh

The country needsan immediate pushto exports in asituation when tradedeficit has crossedover 30 per cent

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Monday,14 November,2011

news

CORPORATE CORNERBurj Bank limited appoints AhmedKhizer Khan as their new President and ceo

KARCHI: Mr ahmed khizer khan has joined Burj Bankas the new President and CEO. His last assignment was asChief Operating Officer of iCD (islamic Corporation forDevelopment of the Private sector), Jeddah. Mr khizerwho held a regional and international role at the iCD willnow be focusing his efforts on Burj Bank limited. Whileaddressing the senior management team, Mr khizer stated“Burj Bank has been established as a very strong consumerbrand over the past few months.” PRESS RELEASE

mahvash and Jahangir Siddiqui foundation andJS bank’s 3rd phase of flood relief operation

KARACHI: Mahvash and Jahangir siddiqui Foundationand Js Bank have reached their third phase of floodrelief operations, in order to respond to the severefloods. they are providing immediate assistance tothousands of people whose livelihoods, homes, andbelongings have been destroyed or severely beendamaged by the flood. the focus of the foundation wasagain to provide medical services to all those sufferingfrom infectious diseases. PRESS RELEASE

FAo to organise elISAtraining workshop in IslamabadISLAMABAD: Food and agricultureOrganization(FaO) of United nations (Un) under itsproject, ”Progressive control of Foot and Mouth Disease(FMD) in Pakistan” is organising Elisa trainingworkshop on 14-26 november, 2011 at nVl, naRCislamabad.” the project is aimed at strengtheningdiagnostic capability, efficient surveillance and rapidresponse to FMD outbreaks and demonstrating benefitsof early and consistent immunisation for effectivecontrol of FMD. PRESS RELEASE

etihad airways celebrates 8thanniversary of Abu Dhabi to Al Ain flightlaHORE: Etihad airways, the national airline of the Unitedarab Emirates, marked its eighth anniversary of theinaugural Etihad airways flight from abu Dhabi to al ain in2003 on 5th november 2011.Etihad airways has become asuccessful, multicultural, global business and one of thefastest growing brands in the world. Mr James Hogan, CEOEtihad airways, remarked, “We have grown to become afamily of more than 8,300 people, drawn from more than120 nationalities across the world. We have proudly builtour airline on a foundation of safety and quality, which willalways be our priority, and backed that up with the higheststandards of customer care and service.” PRESS RELEASE

nADrA launches freeSmS service for verification ISLAMABAD: naDRa has launched a mobile sMsservice in collaboration with Pakistantelecommunication authority (Pta) and all operatingtelecom companies to determine a person’s existence inthe beneficiary list for Pakistan Card project to facilitatethe rain affected people in checking the status of theirrequests. naDRa, in addition to setting up centres, hasalso mobilised its mobile resources MRVs (MobileRegistration Vans) to process CniC free of cost in allaffected areas. PRESS RELEASE

Obama's going to need every votehe can get from his base, and thisKeystone decision will help -- butit's not the 'be all and end all

ed chen

How higher taxes fora few lightens load for all

On Jan. 1, 2012, al-most every workingamerican will be hitwith the biggest taxincrease of his or

her lifetime. that’s when the socialsecurity payroll tax will revert to itspre-2009 rate of 6.2 percent, from4.2 percent now.

this post-Christmas lump oftax coal -- under a provision of the1935 Federal insurance Contribu-tion act, known as FiCa -- will takeeffect as the country struggles with9 percent unemployment, recordhome foreclosures, and an econ-omy teetering on the edge of a dou-ble-dip recession.

a full-time worker, makingthe federal minimum wage of$7.25 an hour, will pay $290 morea year. For a teacher, constructionworker or nurse making $50,000annually, the increase will be$1,000. a two-income family, inwhich each spouse makes$106,500 or more, will bewhacked for about $4,240.

although it targets just 2 per-cent of payroll, this 30 percent in-crease in tax rates packs a $120billion annual wallop. Unlike thefederal income tax, with its myriaddeductions and exemptions, FiCafully taxes the very first dollar ofeach worker’s pay, including theself-employed. Only Congress canact to prevent this huge tax in-crease. Fortunately, there is areadily available solution that Con-gress -- or better yet, its bipartisansupercommittee -- can and shouldmake law within the next 75 days.

ANOTHER OPTION

to finance even a one-year ex-tension simply by adding to thedeficit would be both fiscally irre-sponsible and illegal. Under lastsummer’s debt-ceiling deal, Con-gress would need to enact $120 bil-lion in additional spending cuts thisfiscal year to offset extending the tax.slash defense spending? Medicareinsurance subsidies? Veterans’ ben-efits? Even for the most ardent fol-lowers of the tea Party movement,that would be political suicide.

Fortunately, another option isas obvious as it is politically elegant.Congress should enact a one- ortwo-year temporary increase in in-come taxes on the top 1 percent to 2percent of american households tofinance a similarly temporary exten-sion of this payroll tax cut for 99percent of working americans.

Of course, President BarackObama and the Democrats mightsee more immediate appeal herethan congressional Republicans,who, in any case, have maintainedan eerie silence about the enormous“job killing” potential of this partic-ular tax increase. (a case in point isformer Massachusetts GovernorMitt Romney, for example, who saidin the Bloomberg news-Washing-ton Post debate of Republican pres-idential candidates on Oct. 11 thatObama’s proposal to extend theFiCa employee tax cut was only a“temporary little Band-aid.”)

But this tax swap should havebroad, bipartisan appeal, especially ifwe ask ourselves this: What kind oftax cut would americans prefer tokeep -- even if only temporarily -- asthe economy claws its way back toprosperity? Or, put differently:Which tax increase, this January,

truly poses the “least bad” choice forthe economy? Here’s how it wouldwork: in December 2010, Congressextended the FiCa payroll tax cut,but only through Dec. 31, 2011. sep-arately, the Bush-era tax cuts, includ-ing those for the wealthiesttaxpayers, were extended until Dec.31, 2012. Congress should simply“trade” some expiration dates. Extendthe looming FiCa tax cut until at leastDec. 31, 2012. then temporarily “pullforward” -- to Jan. 1, 2012 -- the rever-sion to pre-Bush era income tax brack-ets for top-end taxpayers, effective forthe same time period.

JUST SEMANTICS

When it comes to social securityand Medicare, politicians of bothparties often resort to politically con-venient semantics, such as assertionsthat FiCa levies are more like “con-tributions” than taxes. nonsense. attheir core, FiCa payroll levies andfederal income taxes are bothmandatory taxes. Working ameri-cans --wage- earners and independ-ent business owners alike -- have topay them, under penalty of law.

likewise, social security andMedicare are both governmentspending programs, just like thou-sands of other, income tax financedprograms (including Medicare,which drew $203 billion last yearfrom this source). indeed, both Re-publican and Democratic deficit-re-duction plans now account for theseFiCa- financed spending programs(and the revenue from the tax) inthe same way as all other federalgovernment spending programs.

Expect some liberals to squawkabout the “temporary” nature of sucha tax increase, while some conserva-tives lob accusations of “class war-

fare.” But consider this: Most of the 4million U.s. households with adjustedgross incomes above $200,000 willstill be net winners from this “taxHike for a tax Cut” deal.

a 2 percent FiCa cut reducesevery worker’s tax on the first$106,500 of wages. Raising anupper-level income tax bracket to36 percent from 33 percent (in ajoint return) only affects taxable in-come above $250,000 adjustedgross income. For a working couple,each paying the maximum FiCa so-cial security tax, the “break even”point is about $390,000 adjustedgross income -- which probablymeans $450,000 (or more) of totalhousehold income.

By syncing these three expira-tion dates -- for this temporary in-come tax increase, the FiCa tax cutand the other Bush-era income taxcuts -- Congress and/or its super-committee can then propose which,if any, of these various changes tokeep, modify or abandon post-2012.

so for the next month or two, let’smute the tiresome partisan shoutingmatch about taxes versus spendingcuts. instead, let’s focus on the definingchoice of what kind of tax cut ameri-cans need and want right now. andwith some luck -- and political compro-mise on both sides -- this debate willset the stage for the kind of truly com-prehensive tax and budget reform thatamericans and our staggering econ-omy need even more. BLOOMBERG

(Phil Keisling, director of PortlandState University’s Center for

Public Service, served as Oregonsecretary of state from 1991 to1999. He is also a contributing

editor of the Washington Monthlymagazine. The opinions expressed

are his own.)

OPINIONPhIL KEISLInG

W Hat we’re seeing in Europe— in rising italian borrowingcosts and the felling of two

prime ministers — is the growing im-patience of the markets for a resolu-tion to the euro zone crisis. to put afiner point on it, the hive mind of themarkets has decided it is not going togive Europe enough time to get its acttogether. the big institutions thatdrive the world’s economies are sittingon huge amounts of cash — enough tosolve many of these problemsovernight. But they have lost confi-dence in the ability of the Europeanpolitical system to deliver solutionsthat will work.

in a G-Zero world, where there isno strong global leader to direct thecourse of events, no one is interested intaking a flier on helping the Europeansget out of their mess. as the abortive G-20 conference showed last week, thereis no backstop for any country or insti-tution that makes an error in today’s

environment, whether it’s tiny MFGlobal or the Chinese sovereign debtfund. in the postwar era, the MarshallPlan was the very definition of globalsecurity — it was a huge commitmentby the U.s. to rebuild Europe into theeconomic force (and not incidentally,trading partner) that the world needed.today, there is no Marshall plan forEurope, from within or without.

that’s the high-level view of theEurope situation. the question every-one wants answered is this: what hap-pens next? start with Greece: the bestpossible outcome for that country hashappened with Papandreou’s resigna-tion and the selection of economistlucas Papademos as Prime Minister ofan emergency government. Pa-pademos is committed to remaining inthe euro and accepting the terms of theGreek bailout package. Despite theroller coaster ride Papandreou took hiscountry and the euro zone on, Greecehas now moved closer to the spanishand Portuguese models for avoidingthe debt crisis drama. in Greece, a res-olution is starting to be reached. it’s notthe beginning of the end, but maybethis is the end of the beginning.

the same can’t be said for italy asthe situation changes by the day. thedecisive senate approval of a packageof austerity measures (by a margin of156 to 12) was one small step for italyin the eyes of the markets— and a bigstep toward silvio Berlusconi resign-ing his mandate. it’s a wonder thatBerlusconi held on to power for solong; he burned up his political capitalyears ago with scandals of all stripes.His stepping down is good news foritaly in the long run, but the handoverof power to likely frontrunner MarioMonti is a delicate process that willhave to be handled with tremendouscare. Unfortunately for italy, politicaldrama has insured it will face a higherand longer level of scrutiny.

Markets will continue to demandextensive and enforceable changes inspending levels throughout the pe-ripheral states. When italy and Greecelook more like spain and Portugal, thebond markets will treat them morelike spain and Portugal. But thatalone won’t solve the problem: in-vestors are going to demand to knowwhat happens next time any euro zoneperiphery country is on the brink of

collapse. Euro zone institutions andpolitics have to be reshaped to preventthis type of crisis from ever happeningagain. Until this risk is mitigated,lending costs will stay high for a longtime to come. Case in point: i talkedwith about 200 international financialexecutives at a conference two weeksago. 92 percent thought a “lehmanevent” could easily happen once againsomewhere in the world. Because weall thought the economy had been get-ting better over the last few years, wetook our eye off the ball when it cameto shoring up the global financial sys-tem and making the necessary struc-tural fixes. in the U.s., PresidentObama took up health care. a weakDodd-Frank bill passed. in the globalfinancial system, Basel iii has gonenowhere. and so every time the mar-kets are rattled, we stare down the fi-nancial abyss, again and again.

i’m an optimist on the euro zone;i still don’t think it will fracture. thepolitical will to stay together is toogreat; the mechanisms for countriesto drop out are too complex and un-developed. the institutions thatcompose it will get stronger — even-tually. But that will be a long timefrom now. Until that day, we’re likelyto see a lot of economist Josephschumpeter’s “creative destruction”— but as applied to financial sys-tems, rather than corporations. Muchof the financial edifice of the 20thcentury is yet to come crumblingdown. to fully rebound from this eraof crisis, more of it must. REUTERS

Europe’s necessarycreative destructionOPINIONIAn BREMMER

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Monday, 14 November,2011

Markets

The Arab winter could wellprove as turbulent as theArab spring. The Iraniannuclear issue is again risingamong market concernsmarket report

weekly review

International developmentspressurise local equities

g KSe remains stable despitewary investor sentiments

g 96 scrips advance, 108 declineand 110 remain unchangedout of total 314 scrips

g Stagnation invites lowvolume price erosion duringthe closing hour.

g Bourse closes with 50 point gain, technical error witnessed

g 154 crips advance, 77 declineand 2 remain unchanged outof total 260 scrips

g IT technical error resultsclearing of the day movesto monday

kARACHISTAFF REPORT

On thursday local bourse trailed regionalpeers in the session as trading commencedamidst wary sentiments after the prolongedEid holidays. as italy replaced Greece at the

center of European debt crisis, fear of a split in the euro-zone kept global equities under pressure. investor par-ticipation remained dismal with 49 million sharestraded during the day as the benchmark index could notsustain 12k level amidst profit taking. since local fun-damentals remained mostly impervious to the latest de-velopment in euro-zone, the reaction at the local bourseappeared transitory. Positive news flows especially inenergy sector indicating speedy resolution of circulardebt depicted possible re-rating in the sector thus posi-tively influencing the overall index’s performance in theintermediate term.

the local bourse, on syndicated efforts energised bypositive developments, restructuring of maturing t-billsand meeting of Pak-india leadership, successfully resis-ted otherwise an extensive decline, mainly on the fiercemelt down in international and regional equities andcommodities. the index although failed to sustain theinitial low volume high of 12000, support by OGDC andMCB, the stocks contributed almost 40 points to thebenchmark 100, for it too managed an unchanged statuson closing besides keeping the benchmark in brownzone during the closing hour.

issuance of bonds and t-bills to offset interest re-ceivables of the local banks did inspire the accumula-tors to adopt an aggressive stance, as the step willcreate space for financing to the OMCs and iPPs, al-though the plan to settle circular debt by securingloans from international lenders seemed far fetched.

since lOC from iMF stayed a major pre requisite, thefinancial transaction executed will provide somebreathing space to the mentioned beneficiaries, thuskeeping the interest in banking stocks alive. Cued upsellers on strength following the old saying “act on ru-mors and react on news” however disallowed the sectorstocks as well as various high priced stocks from stag-ing a rally, thus leading to a weaker market, as re-flected by low volumes despite news flash suggestingimproved relations with once annoyed neighbor.

the propagation did inspire snap rallies in frontlinecement and textile stocks, absence of follow-up how-ever disallowed aggressive display despite corporateparticipation, thus forcing the strength to defuse afterchange of hands on strength. therefore, stagnation in-vited low volume price erosion during the closing hour.Fauji group stocks from the fertiliser sector undoubt-edly led the market during early hours seemingly in-vited renewed buying after staying under correctionphase for quite a few sessions, the junior partner lostthe steam quite early while range bound activity andlack of interest disallowed the elder brother FFC to findconsolidation on strength.

On Friday, due to technical error the market gotclosed 15 minutes earlier from its official closing, there-fore, trading has been merged in the coming Monday’ssession. according to the notice issued by the DeputyGeneral Manager Operations karachi stock Exchange itwas informed that due to technical fault the ksE build-ing terminal got disconnected that resulted in the sus-pension of the Friday’s trading session earlier thanclosing time. ‘Consequently, it has been decided thattrading of Friday november 11, 2011 and Monday no-vember 14, 2011 will be merged and settellement forboth days will take place on Wednesday november 16,2011,’ the notice stated.

LONDONREUTERS

WORlD oil demand will bea bit lower than expectedthis year and next aseconomic slowdown and

high prices curb consumption but theoil market is strong and supplyremains tight, the international Energyagency (iEa) said on thursday. theagency, which advises more than twodozen wealthy industrialized countrieson energy policy, said demand for oilfrom the Organization of thePetroleum Exporting Countries(OPEC) was running ahead of output.and while some oil production fromlibya had resumed earlier thanexpected following the overthrow offormer dictator Muammar Gaddafi, theiEa said it would take a long time toreturn to pre-conflict levels of oiloutput in the north african producer.Oil supply and demand fundamentalswere underpinning “stubbornly highprices,” the iEa said in its monthly OilMarket Report, adding politicalturbulence was also a risk for oil.“the arab winter could well prove asturbulent as the arab spring,” it said.“the iranian nuclear issue is againrising among market concerns.” theiEa said high oil prices were helpingrestrain fuel use in the Unitedstates, China and Japan and this trendcould intensify if economic activityslowed. “the demand picture couldsour significantly should economicprospects falter,” the iEa said.“RELATIVELY ROBUSTFORECAST”: the iEa cut its forecastfor world oil demand this year by70,000 barrels per day (bpd) to 89.16million bpd, and reduced its 2012 demand

projection by 20,000 bpd to 90.47 millionbpd. this brought the agency’s forecastfor global oil demand growth in 2011down by 90,000 bpd, but increased itsestimate of expected 2012 oil demandgrowth by 50,000 bpd. Oil prices havebeen historically strongthis year, with north seaBrent averaging morethan $100 per barrel,and this has helped keepa lid on consumption inmany major economies.Brent crude

oil futures were tradingaround $113 per barrelat 1600 GMt on

thursday, up frombelow $90 a year ago.Despite concerns over theoutlook for demand, theiEa suggested the oilmarket could stay strongfor some time. OPEC oiloutput rose 95,000 bpdin October to 30.01million bpd, the iEasaid, with more oil fromsaudi arabia, angolaand libya. But demand

for OPEC oil and stockswas projected at around30.5 million bpd thisyear, slipping onlyslightly to about 30.4million bpd in 2012 asnon-OPEC supplies increased.Harry tchilinguirian, head of commoditymarket strategy at BnP Paribas, said theiEa report suggested the oil market couldstrengthen if the northern hemispherewinter was severe. “it is a relatively robustforecast,” tchilinguirian said.

“the fundamental position at the end ofthe year could be much tighter. From a

fundamental perspective, this suggests possiblesupport for prices this winter.”LIBYA: libyan oil production had so farrecovered much faster than expected and wasnow around 530,000 bpd, the iEa said, addingthat damage to infrastructure had been less

than feared. But it had a muchmore conservative view of thepace of recovery of the rest ofthe country’s productioncapacity. it projected libyanoil output would reach 1.17million bpd by the fourthquarter of 2012 — 90,000 bpdmore than it previouslyforecast, but still well belowgovernment estimates.acting Prime Minister alitarhouni said on thursdaylibyan output wouldcomfortably exceed 700,000bpd by the end of this yearand reach full pre-conflictproduction levels of around of1.6 million bpd by June ofnext year. the agency saidheavy damage to oil exportterminals and other oilfacilities would hold uprecovery and many of thenecessary repairs would haveto be undertaken by foreignspecialists working for theinternational oil companies.“the bulk of the restorationof production has been

carried by local petroleum industry staff,with much of the foreign workforce stilloutside the country,” it said. the iEa saidindustry stocks of oil in the majorindustrialised countries had fallen by 11.8million barrels in september to theequivalent of 57.9 days of future demand, butit noted that these stocks were still around1.5 days above the five-year average.

Oil market tight despite slowdown, says IEA

The IEA said industrystocks of oil in the majorindustrialised countries

had fallen by 11.8 millionbarrels in September tothe equivalent of 57.9

days of future demand,but it noted that thesestocks were still around

1.5 days above the five-year average

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Monday,14 November,2011

mD nestle Pakistan, Ian James Donald

analysis

07

1930’S rePeATIng ITSelFGovernments in advance economies are running outof financial ammunition to fight bankruptcies. thefinancial bazooka continues in the global financialmarkets. all financial transactions carry a risk.While i am convinced that your gold and silver in-vestments will pay off, but they don’t come withoutrisk. What do you suppose is the biggest risk we facetoday? another 2008 style sell off? Gold stocksnever breaking out of their funk? Maybe a Depres-sion that would slams our standard of living verysoon. You bet. is the history repeating of 1930’s? ithink, this time would be different and even worstthan 1930. kenneth Rogoff, from Harvard Univer-sity in his Book, “this time is different: Eight cen-turies of financial folly” has mentioned many thingsthat solidify, the history is repeating itself argument.

PolITIcAl rISK or economIc rISKthough those things are possible, i don’t see that asyour greatest threat: Your biggest risk is not that goldor silver may fall in price. nor is it that gold stockscould take longer to catch fire than i think. not eventhe prospect of the Greater Depression. investor’sbiggest risk is political. as bankrupt governmentsGreece, italy, spain, ireland, Portugal, Usa, and Ukget increasingly desperate for revenue, any finan-cial/real/monetary asset held domestically could bea target. interesting book by Barry Ritholtz “Bailoutnation, with new post-crisis update: How Greed andEasy Money Corrupted Wall street and shook theWorld Economy” shares exciting insight about an en-gaging look at what led to the financial turmoil wenow find ourselves in advance economies. Honestly,the party is over. it is absolutely essential that everyinvestor diversify themselves politically and econom-ically. in fact, at this point, it is one action that shouldbe taken before anything else. Diversification strat-egy is the key across countries, currencies, equities,bonds, real estate and commodities. i know many

reading this are prudent investors. these investorsown gold and silver as solid protection against cur-rency debasement, inflation, fiscal indiscipline andfaltering economies. they set aside cash for emer-gencies. they have strong exposure to gold stocks,both producers and juniors, positioned ahead ofwhat is likely the next-favoured asset class. they feelprotected and poised to profit. investors should re-main ahead of the curve in these volatile markets.Yet, despite all this preparation, investors remain ex-posed to one of the biggest risks i.e. Political Risk.similar to holding a diversified portfolio at a bankwithout checking the institution’s solvency, many in-vestors keep their entire stash of precious metals in-side one political system without considering thepotential trap they’ve set for themselves. While stor-ing some of your gold outside your home country isnot a panacea, it does offer one important thing: an-other layer of protection. Valued investment strategyin the long run can protect wealth.

AmerIcAn PerSPecTIve AnD ITS gloBAl ImPAcTConsider the exposure of the typical Us investor: 1) systemic risk, because both the bank and bro-

ker are Us domiciled; 2) Currency risk, as virtually every transaction

is made in Us dollars; 3) Political risk, because they are left totally exposed

to the whims of a single government; and, 4) Economic risk, by being vulnerable to the

breakdown of a single economy. Viewed in thiscontext, the average Us investor has minimaldiversification. the remedy is to internation-alise the storage of some of the precious metals.

ThIS AcT reDuceS 4 PrImAry rISKSA) Confiscation: i don’t know the likelihood of an-

other gold confiscation. it did happen on 5thapril 1933, when Usa government confiscated

Gold to give boost to its balance sheet. all per-sons were required to deliver on or before May1, 1933 all gold coins, gold bullion, and gold cer-tificates owned by them to a Federal ReserveBank, branch, or agency, or to any member bankof the Federal Reserve system. i do know thatthings are working against many Us investorsat the moment. With $14.9 trillion of debt and$117 trillion of unfunded liabilities, the Us gov-ernment will likely pursue heavy-handed solu-tions. Under the 1933 FDR “gold confiscation”in the Us (the executive order was actually aforced delivery of citizens’ gold in exchange forcash), foreign-held gold was exempted. Valueloss to the holders of gold to Us residents in1933 was 43 per cent at that time. Gold holdingwas criminalised in Usa in the 1930’s.

B) Capital Controls: Many think some form of cap-ital controls lie ahead, limiting or eliminating acitizen’s ability to carry or send money abroad.if enacted, all americans capital would betrapped inside the Us and at the mercy of what-ever taxing and regulating schemes the govern-ment might concoct. although they might beable to leave the country, however, their assetscould not travel with them.

C) administrative action: there are plenty of hor-ror stories of asset seizure by a governmentagency without any notice or due process, pos-sibly leaving the victim without the means tomount a legal defense. Having some gold or sil-ver stored elsewhere provides what could be theonly available source of funds in such a scenario.

D) lack of Personal Control: Having gold and sil-ver stored elsewhere adds to the best options,people can pursue. americans will have asource of funds available for business, entrepre-neurial pursuits, investment, pleasure or travel.notice above i have said these risks can be re-

duced, not eliminated. after talking to so many amer-ican friends, i have shared this article on theirinsistence. there is no perfect solution; Us personscould, for example, be compelled to pay a “wealth tax”on assets held worldwide, or even repatriate them ina worst-case scenario. absent a crystal ball, the polit-ical diversity of asset location is an essential strategy

against an uncertain future to get economic freedom.

ForeIgn-helD ASSeTS AlSo reQuIregreATer AWAreneSS AnD PlAnnIng1) access to the metal or sale proceeds may

not be quick. therefore, this option is forthose with some gold and silver stored at ornear home. i do not recommend storing all ofyour precious metals overseas; that defeatsone of its purposes, to have it handy for anemergency.

2) While i think the Us poses the greatest challenge, a foreign government could move tocontrol certain assets as well. the risk varies bycountry and is generally greater within the bank-ing system than with private vaulting facilities.

3) Understanding and complying with reportingrequirements is essential. the bottom line,though, is that foreign-held precious metals canmitigate risk and give investors more options.and as the metal holdings grow; diversificationbecomes more crucial and strategic in the longrun. Given the current rapacious climate inUsa, it’s likely that simply buying gold won’t beenough. i strongly suggest every investor diver-sify one’s bullion storage outside his/her cur-rent political regime. the option may not beavailable someday, leaving investors vulnerablewithout a secondary source of bullion. Happyinvesting in gold with effective due diligence.

Shan Saeed is a financial marketeconomist and commodity expert. He has

12 years of solid financial marketexperience. Graduated from University

of Chicago, Booth School of Business,USA & IBA Karachi. He can be reached

at Blogs at

SHAHAB JAfRy

COntRaRY to the impression myconstant long-term euro shortposture might betray, i do not seethe cataclysm in Europe as the end

of the single currency, just the end of itspresent form. as the previous week’s lasttrading day again sparked risk appetite,lifting equities, bidding up euro, yen andpressuring the dollar, deep-rooted marketuncertainty was best expressed in opposingtakes of two leading investment banks –Goldman recommending going long euro-dollar all the way to 1.40, Morgan stanleypredicting the opposite, down to 1.30. these are historic times indeed. Europe isflush with irony when it takes politicalguillotines in athens and Rome for the euroto pare weekly losses, even if new setups willbe just as helpless and the outlook just asgrim as hawks in the forex market milk eventhe briefest news-pushed risk-on windows tothe last drop. Papendreu sealed his fate byinvoking public consent in mattersconcerning severe austerity, inviting scornfrom Berlin and Paris, ultimatelyabandoning the referendum as well as thepremiership. How a couple of millennia havechanged the home of democracy.Berlusconi’s scalp, too, makes way for similarausterity, wage cuts, throw awayprivatisation, etc, signaling another electedleader’s collapse while political appointeesdictate the continent’s future from commandcentres at the ECB, EMU and the like. i don’tunderstand Goldman’s optimism. there isno way Merkel and sarkozy can talk the euroall the way to 1.40. the most they can do isengineer brief windows of false hope toprovide brief, sure long-opportunities fordear friends. and that’s not all the bad news.Mr Market seems on the verge of vindicatinganother of this column’s positions. thisweek, the spread between French andGerman bonds rose to the highest levelssince the euro was floated, according toBloomberg. it didn’t help that s&P followedby erroneously announcing a downgrade inFrance’s ratings. now it can’t be long beforeFrance becomes the next italy as punditsexplore its mounting deficits, its banks’exposure to peripheral debt, its perilous all-or-nothing walk on the tightrope holding thefragile union together. stay committed to theeuro short. sometimes others’ ignorance isour bliss! Resumption in yen-inflows alsosignal increased risk aversion around thecorner as tokyo’s intervention loses steamand the Japanese currency gained 1.4 percent to $77.20, the biggest weekly climbsince aug 12. Commodity currencies will rideoil’s longest streak of weekly advances sinceaug ’09, but it would be foolish to bank onEurope-centric news to continue providingfillip. Better than expected data from the Usadded to the relief, but such numbers havebeen playing hide-and-seek with the marketfor over two years, and cannot be trusted tilla positive pattern emerges. as complex asthe market situation is, trading ought to bejust as simple. strange, but true. Hope on theMerkozy risk bandwagon whenever they actsincere and genuinely attempt to fend off badnews, even if their sympathy is directedtowards giant European financialinstitutions, not its governments or itspeople. and short with abandon wheneverthe market calls their bluff. short termdirection is a sure tell. Enjoy risk with euro,commodity currencies, even oil. Do just theopposite as soon as greed gives way to fear.the only plausible way forward for theeurozone is phased exclusion of debt-defaulters. after trying all medicinespossible, the fatally sick must finally be let goof. Failing that, the financial malaise willturn increasingly political, with the monetaryunion turning fiscal/political, its core centrebeing Germany. isn’t that just the eventualitythe union was initially created to avert?Either way, the first phase of the euro is over.it must mould, or end, but cannot continue.this week delivers the end of the beginning.

currency mArKeT FocuS

end of thebeginning

Gold investor’sbiggest risk is politicalDiversification is the key to strategic wealth protection for economic freedom

Many areas of Punjab and northern Baluchistanare not yet developed for milk collection, andthen the output from existing dairy farms canalso be increased significantly, if the farmersimprove the fodder and water for their cattle

SHAN SAEED

Similar crises, similar headlines; drawing parallels with the Great Depression

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