Pages: 7 profit.com.pk

ISLAMABADAMER SIAL

as the government failsto come up with aproper mechanism tocheck faulty CnG kits

and substandard cylinders inpublic transport vehicles, allPakistan CnG association(aPCnGa) has taken the lead byannouncing inspection of com-mercial vehicles in 25 cities fromDecember 28. Chairman aPC-nGa Ghiyas abdullah Parachasaid on saturday that theywould be starting inspection andcertification of CnG equipmentin public transport vehicles toprevent reoccurring of accidentsdue to substandard and unli-censed CnG kits and cylinders.

During last few weeks many

accidents occurred due to leak-age of CnG kits that lead tofatal blasts and inferno result-ing in many deaths. More thanthree million vehicles are con-verted on CnG during last fewyears due to comparative lowprice of CnG as compared topetrol and diesel. the govern-ment estimates 310 mmcfd gasis used by CnG sector.

Denying the impressionthat they have taken the stepupon the instruction of govern-ment, he said they have takenthe initiative on their own andhave not received any directivesfrom the Oil and Gas Regula-tory authority (OGRa). He saidOGRa had asked them to sub-mit proposals by December 26.

Paracha said CnG stationswere not responsible for the

fatal accidents and held govern-ment responsible for its failureto check installation of unli-censed kits and substandardcylinders. He said they haveasked the government severaltimes to check illegal kit con-versions but responsible de-partments had not taken anyaction. an OGRa spokesmansaid Chairman OGRa has takenserious notice of recent fire re-lated accidents in CnG fittedpublic service vehicles and ameeting was called with aPC-nGa to address the issue. aPC-nGa was advised that CnGstations should immediatelystop filling CnG in all publicservice vehicles which do notqualify the laid down standardas per CnG Rules, 1992.

Chairman OGRa pointed

out that the main cause in mostof the fire related accidents wasdue to improper CnG fittings,location of cylinders beneathseats or on roof top from un-au-thorised workshops resulted ingas leakages and explosions. itwas confirmed by HDiP andother approved third party in-spectors. it was also pointedout that CnG stations are notfollowing the mandatory refuel-ing procedure.

aPCnGa was advised allCnG stations should followCnG refueling procedure in let-ter and spirit while checking va-lidity of test certificate of CnGcylinder in vehicles prior to fill-ing. it was also directed thataPCnGa should constituteteams to visit CnG stations atrandom to ensure public safety.

Moreover a team comprising ofrepresentatives of OGRa, aPC-nGa, HDiP and OMCs wasconstituted to check safetymeasures at CnG stations toensure public safety.

Compressed natural Gas(CnG) is a highly pressurisedgas for which specially designedand fabricated seamless cylin-ders manufactured in accor-dance with prescribed standardare used in vehicles. Only thevalid licensees, CnG stationsare authorised to convert vehi-cles to CnG at their respectivefacilities and provide CnGcylinder test certificate. Onlyimported brand new CnG vehi-cle cylinders within its periodictest life duly approved byOGRa, and approved CnG kitsshould be installed in vehicles.

APCNGA to start CNG kits, cylinders inspection in 25 cities

Tax Reforms CoreGroup wants issuanceof notices to 300,000non-tax filers

ISLAMABADStAff REpoRt

tHe seventh meeting of taxReforms Core Group (tRCG)directed Member (iR) to ensurethat notices to the remaining

300,000 non-tax filers be issued onpriority. tRCG meeting was held at FBRHeadquarters under the chairmanship offederal minister for finance Dr abdulHafeez sheikh and the progress ofbroadening of tax base was discussedalong with review of progress on the295,000 notices issued to non-filers.the meeting discussed the progress due toreorganisation of FBR, finalisation ofadministrative-measures agreed withWorld Bank in april 2011, centralisedaudit, revenue collection of FBR as well asexpanding the outreach programme. themeeting included an update on redraftingthe treatment of five zero-rated exportsectors, tax incentivisation scheme as wellas proposals of stamps on cigarette packsto help identify smuggled or non-excisepaid cigarette packs and enforcement ofCapital Gains tax.Finance minister reviewed the revenueperformance of FBR and desired that afollow-up meeting of tRCG be held aftertwo weeks to have a complete analysis ofthe taxpayers’ data and to discussstrategy to pursue the non-taxpayers.Member (tRCG), Muhammad ali, wouldalso give a presentation on Capital Gainstax (CGt) in the follow up meeting alongwith relevant data and strategy forenforcement of CGt based on meetingswith Member (iR).Policy Wing of FBR was asked to give abreakup of revenue based analysis of theamount of revenue generated due toexclusive efforts of FBR, and those due topolicy decisions and due to exchange ratedifference. expected revenue collectionduring the period between January andJune 2012 was also reviewed. Minister forfinance desired that in the next meeting,the preliminary budget proposals andefficiency enhancement measures wouldalso be taken up for discussion.earlier Member iR shahid Hussain asad,Member (Customs) Mumtaz HaiderRizvi, DG (sP&R) Dr amna khalifa gavepresentations on performance andrevenue targets of FBR while Member(Fate) Riffat shaheen Qazi , gave apresentation on outreach and awarenessprogrammes with the way forwardstrategy for expanding the outreachprogrammes. Proposals were also putforward by members of tRCG on variouspolicy issues.Federal minister for finance, at the close ofmeeting, appreciated efforts of FBRofficers and expressed confidence andhope that the assigned budget targetswould be achieved through sustainedefforts. the meeting was attended byChairman FBR salman siddique, DeputyChairman Planning Commission nadeemul Haq, Members (tRCG) abdullah Yusuf,Habib Fakhruddin, arshad Zuberi, Bashirali Mohammad, ali Jameel, Muhammadarshad Chaudhry, ashfaq tola, ChairmanseCP Muhammad ali, along with the coreteam members of FBR, Mumtaz HaiderRizvi, Member (Customs), HafizMuhammad anees, Member (taxpayersaudit), Riffat shaheen Qazi, Member(Fate), shahid Hussain asad, Member(iR), sardar amimullah khan, Member(enf. & acctt), imtiaz ahmad khan, GMPRaL, Dr amna khalifa DG (sP&R) andDr khaqan Hassan najeeb DG (eRU),finance division.

Shaping of a policymaker Page 2

Very visible ‘arms’ ofthe govt Page 3‘No longer the domino theory’ Page 7

Monday, 26 December, 2011

ISLAMABADAMER SIAL

Pakistan’s medium-term outlook criti-cally hinges on asignificant revenue

mobilization effort that shouldproduce 2-3 per cent of GDP inthe next 4-5 years, notesWorld Bank’s Country Part-nership strategy (CPs)progress report. the reportsays the toughest questiongovernment faces is how tocreate fiscal space. this occursin a context of fiscal retrench-ment and gets aggravated byits low and declining total andtax revenue ratios that reachedsingle digit by end of last fiscalyear. Revenue mobilisation inPakistan has been historicallyweak. in the last fiscal year,various tax policy reformmeasures were approved, butnot fully implemented.

it says looking at the mostrecent decade, tax revenuesare declining since the globalcrisis, only partially offset bynon-tax revenues; budgetedrevenue targets are persist-ently missed under a wideninggap. income and sales taxesrepresent a rising share oftotal revenues, while trade andexcise taxes are trendingdown. trade taxes declinestopped with a series of pro-tectionist measures applied infiscal year 2008-09, but theseintroduced distortions in thetrade regime; low and declin-ing tax collection is also appar-ent for the provincialgovernments and privatisationproceeds have been marginalin the last four years.

a comprehensive revenuemobilization strategy centeredon structural reform of thetaxation system is needed toconfront these challenges. theoverall tax policy strategypoints to six major measuresincluding adoption of broad

based Reformed General salestax (RGst) on goods andservices, provincial tax re-forms; a two-tier structure forindividual income tax andadopting a withholding tax; re-form of federal excise tax;adopting a business friendlycorporate income tax; and asimplified structure of cus-toms duties. tax administra-

tion strategy should be cen-tered on broadening the taxbase; establishing an effectiveaudit and enforcement mecha-nism; establishing an effectiveinternal and external mecha-nism; and limiting FederalBoard of Revenue’s adminis-trative powers to legislate byadministrative orders. it saysduring last fiscal year, various

tax policy reform measureswere approved, but not fullyimplemented. RGst was notapproved by Parliament, butadditional tax policy measureswere introduced in the currentfiscal year budget. in mid-March 2011 government ap-proved a flood surcharge levy,increased special excise dutyon imports and imposed a 17

per cent sales tax on sales oftractors. it also increased theex-factory rate on sugar, re-moved sales-tax exemptionson fertilisers, pesticides andplant machinery, and elimi-nated zero-rate sales taxes ongarments, carpets, leather,surgical and sports goods.However, soon afterwards, afew measures were diluted: taxrate on the textile sector andsome other items was reducedfrom 17 to 5 per cent. Com-bined fiscal impact of these taxmeasures were aimed at pre-serving the tax ratio at a simi-lar level as last year, but thistarget was not met.

these measures were ex-tended in the current fiscalyear budget, while new meas-ures were also adopted. theseincluded a reduction in thesales tax to 16 per cent, re-moval of sales tax exemptionson 21 items and army’s stores,removal of 397 statutory cus-toms duties, hike in federalduty tax. Overall, tax collec-tion has increased above 20per cent on an annual basis,compared to the first quarterof last fiscal year. tax admin-istration reforms have beencomprehensive, but their im-plementation had been slowand had not produced the ex-pected final results. However,some catch up effect is ex-pected during next two yearswith the rapid increase in thenumber of new tax filers, cre-ation of a centralised unit foraudits, introduction of risk-based auditing on large tax-payers, creation of acentralised unit of tax appealsand a fully modern and com-puterized tax system sup-ported by massive FBR stafftraining. Building on lessonsand performance of taRP,the bank will continue itssupport to tax administrationreform through a perform-ance-based operation.

Revenue mobilisation toughest task for Pakistan:WB

Layout Profit 7 pages_Layout 1 12/25/2011 11:51 PM Page 1

debate

Monday, 26 December, 2011

02

ALI RIzvI

as promised, Dr ashfaque had informedthe security about my prior arrival atthe campus and i entered his office,with a notepad and a borrowed profes-

sional camera, for the photo session that i was tohave with him later. after having been an avidreader of his articles for the last many years, i hadthis desire to meet him in person, in order to havea more personalised interaction, and discuss themultiple facets of the economy and the success ofthe institution he now heads, that is presentlyranked in the top 500 universities of the World,and amongst the top 100 in asia.

He was sorting some things on his table, andwelcomed me pleasantly as we sat down. He rangthe bell, ordered tea for me and then we got downfor business. nUst and more importantly, nUstBusiness school has evolved greatly over the yearsand talking to industry professionals and corpo-rates i got the impression that an nBs graduate isperhaps now more valued in the corporate sectorthan others from leading institutions from thecountry. so i asked Dr ashfaque how he managedto bring this turnaround in an institution that hasoften been blamed for a ‘military’ culture, and slowbureaucratic procedures.

“When i joined nBs, the institution was only 10years old. instantly, my priority was to bring in thebest faculty. there were almost 600 students study-ing at our business school. i am perhaps one of thefew deans who also teach, because i personally be-lieve that it is my duty to pass on whatever i havelearnt in life to my students. My aim is to ensurethat they are well versed in economics, and theirsuccess in the corporate world is a testament to thesuccess of the institution as a whole.”

PRoMoTiNG CoMMoDifiCATioN?Critics have often blamed educational institutes inPakistan of promoting commodification. Whiletalking to a civil rights activist, Wali shahid, he said,‘the process of mass producing college graduateswith worthless degrees is contributing greatly to un-dermining the value of education. By limiting thescope of their creativity, you are binding them in theconfines of mediocrity.” i raised this point with Drashfaque and how in his institution he is ensuringthese students are allowed to evolve and develop byengaging in extra and co-curricular activities.

“We are engaging with big names and relevantgovernment departments to provide internships tostudents of the business school. Our students havenow been able to land internships in places like Bar-clays, standard Chartered,Unilever, Ministry of Finance,amongst others. Value ad-

dition through practical experience is very impor-tant. this year thirty students went overseas for in-ternship programmes, which not only gave themthe relevant exposure but also made them interactwith people from diverse cultures. such opportuni-ties are important to develop an understanding inthese students of the outside world and preparethem for practical life,” Dr ashfaque said.

While elaborating upon the difficulties he hashad to face as Dean of the nUst Business school,he said, “Faculty makes a lot of difference. Unfor-tunately, after 9/11 it has become hard for studentsto go to the Us for further studies. Previously, for-eign qualified professionals would come back to im-part their knowledge to our indigenous students,which was an asset that we cherished. the Highereducation Commission did a commendable job toprovide scholarships to our students; however afterthe exit of Dr ata ur Rehman, HeC has deterioratedgreatly. We are fortunate that the devolution of theHeC was stopped by the supreme Court. at pres-ent, the funding to HeC has almost stopped and inthese constraints it is quite hard to attract good fac-ulty especially when they are offered double thesalaries by private institutions compared to what wehave to offer them. Due to this, we have lost a lot ofgood faculty; however despite all our constraints wehave worked hard to ensure that the standard of theinstitution is maintained and it is has now made itsmark in the corporate world.”

A CoMPReHeNSive iNSTiTUTioNWhile speaking about nUst as a whole, he said itis a comprehensive institution. With many variedcourses and schools under one roof, there is ampleopportunity for cross fertilisation of research andideas. therefore, it is a prerequisite for us to pro-mote research and entrepreneurship. Recently, hesaid the business school has successfully conductedthe prime minister’s entrepreneurship award, anevent where more than 1200 teams participated.Having discussed one of

asia’s leading in-stitutions, i

was moreinterestedin dis-

cover-

ing the man himself, and his journey in life, thehighs and the lows, how fate played its bit, and howhe managed to make a mark for himself in the fieldof economics. Dr ashfaque Hasan khan has workedas the special secretary Finance/Director General,Debt Office of the Ministry of Finance. He is alsothe Director and Vice Chairman of saudi Pak indus-trial and agricultural investment Company Ltd andholds a PhD in economics from Johns HopkinsUniversity. He was part of the core economic team,along with Dr ishrat Hussain and others, who wereresponsible for spearheading economic growth ofPakistan during the Musharaf regime. in a shortspan of a few years, Pakistan managed to sustain anaverage GDP growth rate of seven per cent. He wasactively involved in preparing the reform pro-gramme which was launched almost a decade agoand provided vital policy inputs in framing thecountry’s macroeconomic policies. not only does hehave the distinction of facilitating international or-ganisations like the United nations economic andsocial Commission for asia and Pacific (Un-esCaP), asian Development Bank and the WorldBank as a consultant, but also has the distinction ofbeing Pakistan’s most widely published economist.With over nine published books, and more than 170articles to his credit, his papers have appeared inthe most prestigious journals of economics of Har-vard University and University of Chicago. He alsohas the unique distinction of being supervised dur-ing his PhD by nobel Laureate in economics, Pro-fessor Lawrence R klein. His achievements aremany, and if i delve in them i might run out ofspace, but to sum it up, in recognition of his serviceshe was awarded the sitar e imtiaz for his contribu-tions in the field of economics and public policy.

ReMeMBeRiNG THoSe yeARS“My father was a police officer, and like all fathers hetoo wanted to see me follow in his footsteps. if not thepolice then he wanted me to at least join the civil serv-ices. 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 imag-ined that i would pursue economics. Being a strictdisciplinarian, my father had inculcated in me, thehabit of reading and so, i would actively read nationaland international news. When i used to read articleson the economy, the world crisis, and other such is-sues, i was fascinated by economics. i realised that inorder to gain a deeper understanding of the worldaround me, i had to study economics. and so, i de-cided to enroll for the economics programme at thekarachi University,” an animated Dr ashfaque said,as he remembered those years fondly.

Were you always so studious, i asked with a smileon my face, and i was genuinely surprised with what hehad in store for me. “i was a very good cricket playerand played league cricket in Pakistan. i have even

played cricket with imran khan, and during my yearsin Canada when i was pursuing my educational degreefrom McMaster University Canada, i had a batting av-erage of 62 playing for the Canadian cricket league. irepresented the Hamilton Fairfield club, and given mygood batting record, i was offered to play for the Cana-dian 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 goback to Pakistan.” He explained that he was pleasantlysurprised at how cricket was followed in Canada, acountry where he least expected the sport to be played.Coming back to his career, he talked about ahmedFaruqui, his teacher at karachi University. “ahmedFaruqui was a bright young man, and studying underhis tutelage greatly benefited me. i was already strongin math, and the rest i found, was merely english.”

Completing his Ma in economics fromkarachi University, Dr ashfaque proceeded to Mc-Master University on a scholarship. after comingback from Canada he joined the Pakistan instituteof Development economics. However, he said,that at that time, for any economist it was a dreamto become part of the planning commission thatwas headed by Professor khurshid ahmed. “i methim, and he asked me to visit the Planning Com-mission as well.” He visited the Planning Commis-sion and they were interested in having hisexpertise. they offered him the position of assis-tant Chief, however, since he belonged to sindh,he was told that he could only continue on anadhoc basis and not in a permanent capacity. “icame back very dejected, it was my lifelong desireto be part of the planning commission. Howeverwhen i look back now, it was for me a blessing indisguise. i am thankful to Meekal aziz ahmed forchanging the course of my thinking, i will neverforget him since he changed the course of my ca-reer,” Dr ashfaque said. i joined PiDe, and look-ing back i can say without an iota of doubt thatPiDe has made me the man i am. From PiDe Drashfaque proceeded to UPenn, and then eventu-ally to Johns Hopkins for his PhD. He was underthe tutelage of nobel Laureate ProfessorLawrence klein. “after completing my PhD, ijoined PiDe again and now started publishingseveral economic papers for the institute everyyear. By 1997, i was the Joint Director of PiDe.”

Look AT STATiSTiCSDr ashfaque has been under scrutiny for supportingthe Musharaf regime and the economic policy makingof that era. His critics argue that the economic devel-opment during the Musharaf era was purely a façade,and real GDP growth in crucial sectors did not takeplace. so i brought this subject up with him and his an-swer was swift, “Clearly then they haven’t looked at thestatistics.” While showing me iMF and World Bank re-ports that have recently been published, he pointed outthat those reports clearly highlight the outstandingeconomic performance of the same era. intriguingly,he joined the government during the nawaz shariftenure in March’98, after he was asked by sartaj azizto join the finance ministry. Following the coup by theMusharaf government, he asked shaukat aziz, to sendhim back to PiDe. “i was appointed by a previous gov-ernment. it only made sense that i should go back toPiDe and they appoint their own people. However,shaukat aziz asked me to wait sometime till he madethe decision.” He said certain people in the bureau-cracy like Moin afzal took a stand in front of the primeminister, and then they formed their economic teamwhich included Dr ishrat Hussain and others. “i usedto brief Gen Musharaf six to seven hours regularly. Hewas briefed so often that Musharaf developed a strongcommand over economic matters. What appealed tome was the fact that he was accessible, he allowed theeconomic team to make decisions independently andhe would always be ready to hear our problems”.

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

Shaping of a policymaker

Dr Ashfaque Hassan, a central pillar of the Musharrafregime’s high-growth economic team, and Dean NUSTBusiness School, talks about himself and his evolution asan economist during an interview with Profit’s Ali Rizvi

Layout Profit 7 pages_Layout 1 12/25/2011 11:51 PM Page 2

HUMans love adrenalin. We like ourcars fast, we like our planes faster,we love the thrill, we love how theheart beats against our chest, as webeat on carelessly against the cur-

rents. We are at heart wild animals captivated by thethrill of the hunt. and here’s where capitalism comesinto play. Capitalism fuels that spirit of recklessness,the uncertainty of life, as we turn it into a pokergame, placing our bets on the odd horse we thinkmight win. While we might think we run the game,

there are many variablesat play, some of them notin our control. there isthe odd probability thatwhile we did bet on theglistening muscular ara-bian horse in the races,the donkey might take therace for whatever reasons.We have in front of us theexample of big organisa-

tions, massive in size and employees, stakeholdersnever thought the empires would ever collapse. Butthat’s the thing about adrenalin. One wrong moveand ‘Poof’ you’re gone. Caput. the car smashesagainst the wall, and all you can do in that momentwhere you see the life slipping out of your hands isto pull up a silly face.

it’s funny how we react after the accidentthough. We get back into the car, it has the samehorsepower, the same engine, everything is the sameand the probability of you getting in the accident isperhaps similar, but then, we’re too afraid and wetake it cautiously. We drive our cars hesitantly in thesecond 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 yourmoving in at 40km/hour.

now, the thing is, let’s try to understand theanalogy i’ve tried to present here. imagine the caris the economy and you are the driver. in the ab-

sence of cops, or in the event that you’ve paid themoff, you’d love to hit the paddle, to see how it accel-erates. You whiz past the 120km mark and you’retempted for some more, so you floor the paddle aseverything blurs past you and your vehicle gain’smomentum. You feel your heart beating againstyour chest, you know, you’ll beat the rest, you’llreach the destination sooner than anticipated andthoughts of a happy future occupy your mind. so,you’re cruising, at 180km/hour, loving the per-formance of your car, honking as you overtake therest, and arrogantly wear your Ray Bans and just asyou had thought of turning on the stereo a truckmoves in your lane, it’s too late to stop the car. and,your car smashes into the rear of the truck as itthrows you towards the windscreen, and it’s toolate. You’d be lucky if you survive, and if you do, it’lltake some time for you to build your car.

now strange enough, this is the thing aboutcapitalism. You need to be careful and rein inyour temptations. You need to ride smooth, andyou’ll have a safe exit. if you try to outsmartyourself, the likelihood is you’ll crash. the globaleconomic recession is one that can be attributedto the innate pride of human’s that they couldtest the limits of an engine that could only takeyou so far. sooner rather than later, this had tohappen. Which is why if you’re an investor howabout you play it safe in the first place thanjumping off a twenty story skyscraper becausefate played it tough with you?

However reckless capitalism may sound there’sa reason it collapsed, and the reason is our inherenturge to fuel our adrenalin. institutions and corpora-tions need to play a greater role for the effective al-location of resources, and to resuscitate the economyall you need are safe drivers. a word of advice for theaverage joe? a favourite quote from a movie my sonmade me watch some time back, which goes some-thing like this, ‘We're the middle children of history.no purpose or place. We have no Great War. noGreat Depression. Our great war is a spiritual war.Our great depression is our lives. We've all beenraised on television to believe that one day we'd allbe millionaires, and movie gods, and rock stars, butwe 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 upmillionaires, but we won’t end up losing everythingwe spent ages constructing.

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

THe World Bank Group’s deci-sion to support Pakistan’spoverty reduction and devel-opment agenda comes at acrucial time for islamabad,

where senior government officials havelately taken to talking up the economyeven as most important indicators presentcause for worry. Firstly, the bank’s deci-sion eases concerns about bottlenecks indonor inflow in the post-iMF environ-ment. traditionally, multi- and bi-lateraldonors tend to see the Fund as the classiclending litmus test for engaging withstruggling countries in the economicsouth. Minus the Fund, securing funds be-comes that much more difficult.

and perhaps more importantly, thefunding, if properly channeled, will easepressure on the PsDP. it is not commonlyknown that a big chunk of the developmentbudget is financed through foreign assis-tance. in times like the present cycle of

stagflation, when the government’s fiscalspace is reduced, the PsDP comes underintense pressure. not only are indigenousfunds diverted to non-development heads,but foreign assistance meant to bankrollthe PsDP is used elsewhere. that lowgrowth and high unemployment actuallydemand a more focused use of the develop-ment fund is simply ignored.

therefore, the World Bank’s commit-ment to ‘ensure continued attention to crit-ical social services like education, healthand safety nets for vulnerable populations’is appreciated. these investments are nec-essary, and it is just because they havebeen ignored far too often in the past thatwe are in the present quagmire. at thesame time, the government must mobilisethe other important factor of the PsDP byinitiating targeted fiscal expansion to stim-ulate the job market. it is when the econ-omy is weak that the development budgetis most important.

World Bank,

donors and PSDP

There is an inherentself-destructive streakin modern financialcapitalism

Spirit of capitalist reck-lessness

Javed Gilani

E D I T O R I A L

Very visible ‘arms’ of the govt

In the recent episode ofalmighty iMF summoning es-teemed members of the gov-ernment, assurances wereexchanged with respect to the

restructuring of the trading Corpora-tion of Pakistan(tCP), Utility storesCorporation and PassCO. Oneproudly proclaims itself to be the trad-ing arm of the government, based onwhich the remaining two can be ex-trapolated to be the “selling” and the“storing” arms of the government.

a recent controversy has draggedthis troika into the writer’s notice. tCP’recent cancellation of sugar tenders,based on the latter being quoted at ahigher than market price, has come witha cost. if one were to believe the tradingarm’s ‘feeling cheated’ sentiments, a fairview should also be taken of the lossessugar millers have had to incur. Giventhat the quoted price was aroundRs66/kg and the prevailing marketprice was Rs59-62, the tCP has bene-fited from its own red tape and con-nivance by canceling the tender whenthe market price came down toRs50/kg. the losses or foregone incomeof the millers on account of the sugarhold up ranges from Rs2.1-2.4 million.Conversely, this amount has beenquoted in the defense of the govern-ment’s ‘business arm’ as the loss the na-tional exchequer would have to incurhad this transaction passed through.

at the outset, it just seems wrong

for a government body to be calling it-self a business arm as it completelyand utterly trashes the entire conceptof the public good. simply put, thegovernment should not be in the max-imising profit game at all. and so this‘public’ private limited company hasbeen making profits close to Rs2 bil-lion and above annually since FY-09.Given that their primary objective is toprovide goods at affordable prices tothe common man, regular profitsimply that they have been buying atlow prices and selling at higher.

and that is where the remainingarms come into play. One provides ad-ditional storage capacity where as theother serves as a retail outlet whenprices are skyrocketing. and guesswhat, everyone goes home with someportion of the profit in their pocket.On the funding side, the affiliationwith government comes in handy ascredit is cheap and easy to obtain, as

the former clearly of-fers a risk free win-dow to invest in.Over the last 3-4years, governmentborrowing undercommodity opera-tions has ranged between Rs300-400billion. although this may seem like apaltry sum given that public and pri-vate borrowing run in trillions, onemust keep in mind that this sum is re-served for the troika’s use solely.

if the government really cared aboutthe availability of commodities in gen-eral, the wheat support price would nothave been fixed at Rs1050/maund, es-pecially when the cost of wheat produc-tion in Punjab and sindh lie aboveRs1,020/maund. Moreover, distortionshave also been created in the cottonmarket as the government has recentlyannounced its intention to purchase cot-ton, in order to ‘stabilise’ prices, ie, save

them from falling anylower. if one is anysmarter by now, theywould clearly knowthat lower prices aregenerally good for thepopulation at large

which by the way does need to clothe it-self. and that this is another classic at-tempt at buy low to sell high. this is thelowest the cotton prices have touched inthe last year and a half. a possible im-pact may be further denting of alreadydescending textile exports as competi-tiveness gets hampered in a low-demandenvironment abroad. But yes, one muststill complement the dear tCP for pro-viding some brain and entrepreneurshipto our hyper intelligent government.

The writer is an economicanalyst and freelance financial

journalist. She can be reached atsakina.husain@gmail.com

Sakina Husain

For comments, queries and contributions, write to:

email: profit@pakistantoday.com.pk Ph: 042-36298305-10 fax: 042-36298302 website: www.pakistantoday.com.pk

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M o n d a y, 2 6 D e c e m b e r, 2 0 1 1

The governmentshould not be in themaximising profitgame at all

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MAHeeN SyeDSub-Editor

Re-structuring of FBS

this is with regards to the news reports, ‘Govt forms Pakistan Bureau ofstatistics’ published on 24th December. the re-structuring of Federal Bu-reau of statistics (FBs), was a long-awaited issue and has now has been set-tled by the present government. But it is still to be seen whetherestablishment of an autonomous body will prove to be a pre-requisite in theavailability of reliable official statistics or not? it can also be noted that theofficials of FBs, while collecting official statistics through different kinds ofsurveys, etc, did not have any kind of authority or force, like the one vestedin Police, military and judiciary, except that they were employees of the gov-ernment. to an enumerator, being the focal person who collects data andrestructuring of the department is not quite an issue. But for the respon-dent, being the member of a more or less conservative society, it matters toomuch that the person who wants to get certain important information,which can lead him to face taxation on his income, belongs to either a gov-ernment owned body or private.

OMER FAROOQ

PAKISTAN BUREAU OF STATISTICSISLAMAbAd

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04news

Pirana Advertising Ceo, imran irshad

Agencies can and should partner with HRcompanies. These companies should havea division that manages the recruitment ofnew graduates for advertising agencies

ShAhID KhURShEED

I t was certainly perilous news thatPakistan is at no 145 in HumanDevelopment index (HDi). But it isnot the only set back we are facingat international level. UnDP has

many cryptograms of shocks for us. allthese shocks and terrors are framed byus, our ancestors, and our own rulers. ineducation index we are ranked 165th inthe list of 179 countries. in literacy, weare at the 160th spot out of 182 countries.

DEFINING EDUCATION

education is a set of knowledge andbehaviour, but literacy has been com-monly defined as the ability to read andwrite with an adequate level of profi-ciency that is necessary for communica-tion. More recently however, literacy hastaken on several meanings. technologicalliteracy, mathematical literacy, and visualliteracy are just a few examples. While itmay be difficult to gauge the degree towhich literacy has an impact on an indi-vidual’s overall happiness, one can easilyinfer that an increase in literacy will leadto the improvement of an individual’s life

and the physical development of soci-eties. education is a composite term andits material aspect is literacy.

HDI IS A YARDSTICK

the Human Development index(HDi) is a yardstick to evaluate the levelof uplifting the masses in each countryby UnDP. it is an amalgamated statisticused to rank countries by level of"human development" and distinguish“very high human development", "highhuman development", "medium humandevelopment", and "low human develop-ment" countries. the Human Develop-ment index (HDi) is a proportionalmeasure of life expectancy, literacy, ed-ucation and standards of living for coun-tries worldwide. it is a standard meansof measuring well-being, especially childwelfare. it is used to distinguish whetherthe country is a developed, developing oran under-developed country, and also tomeasure the impact of economic policieson quality of life. there are also HDi forstates, cities, villages, etc. by local organ-isations and companies. the assortmentof all this infra structure makes the finalportrait of a country in the shape of her

ranking. “Ranking” connotes howcivilised a country is in the eyes of inter-national community.

EDUCATION INDEX

With an effusive deliberated under-standing, the United nations publishesa Human Development index every year,which consists of the education index,GDP index and Life expectancy index.these three components measure theeducational attainment, GDP per capitaand life expectancy respectively. the pi-oneers had thought that uneven environ-ment always polluted the human mindand if we wanted to save the next gener-ation from conflict and wars; they mightacquire education.

the education index is measured bythe adult literacy rate (with two-thirdsweighting) and the combined primary,secondary, and tertiary gross enrollmentratio (with one-third weighting). the adultliteracy rate gives an indication of the abil-ity to read and write, while the GeR givesan indication of the level of educationfrom kindergarten to postgraduate educa-tion. education is a major component ofwell-being and is used in the measure ofeconomic development and quality of life,which is a key factor in determiningwhether a country is a developed, develop-ing, or underdeveloped country.

evolution of human understandingthis thought process took thousands of

years to evolve. From Dark ages to enlight-enment, from Crucifixion of Jesus Christ tothe heart transplant by Christian Bernard,from the discovery of gun powder to the sil-icon chip, man learned the blessings oflearning and knowledge. He also learnedthat minds could be changed and chan-nelised with effective education. Conflicts,encounters, battles and wars can be avoidedby virtue of wise and prudent thinking.

DEVELOPMENT OF UNDP

During World War – ii, on Janu-ary 1st 1942, twenty six nations signed

the atlantic Charter which paved theway to Un. On 25th of april 1945 a UnConference on international organisa-tion began in san Francisco attendedby fifty governments and more thanthree hundred nGO members whohelped in drafting the Un Charter andfinally United nations came intobeing on 24th of October 1945 with anaim to prevent a third world war. thehorrible experience of nagasaki andHiroshima was there. in January1946, 1st meeting of the Un was heldin West - minister – Central - Hall, inLondon. among 51 signatories, fivewere permanent security Councilmembers and 46 other countries. Butsoon it was realised that better humandevelopment is the only way to thinkpeacefully. since man did not succeedin the past to contain himself accord-ing to his limitations therefore a battleor a war always remained crucial forhim to know his actual worth. Unitednations Development Programme(UnDP), founded on 22nd november1965, is the United nations global de-velopment network. it advocates forchange and connects countries toknowledge, experience and resourcesto help people build a better life.UnDP operates in 177 out of 193 Unmember countries, working with na-tions on their own solutions to globaland national development challenges.

DIVISIONS OF UNDP

THE PIONEERS DIVIDED THEIR JOB INTO FOL-LOWING GROUPS OR FIELDS:-

n education indexn Democracy indexn Freedom Housen Gini coefficientn Gender Parity indexn Gender-related Development indexn Gender empowerment Measuren Genuine Progress indicatorn Global Peace indexn Legatum Prosperity indexn Living Planet indexn Gross national happinessn Happy Planet indexn Physical quality-of-life indexn Human development (humanity)n Child Development indexn satisfaction with Life index

n Genuine progress indicatorn Multidimensional Poverty index

EDUCATION INDEX RANKING

in education index, australia, Cuba,new Zealand, Finland and Denmark areat the first spot with 0.993 marks eachthen there are Canada, norway, southkorea, ireland and netherlands are fromno 6 – 10 respectively. From 11 to 60most of the countries belong to europeminus Barbados at no 16, Us at 20,kazakhstan at 23, Uruguay at 31, Japanat 34, israel at 36, argentina at 37, an-tigua and Barbuda at 38, Guyana at 39,Venezuela at 46, tonga at 47, Chili at 48,kirghizstan at 49. all of these countriesare non Muslim states. around Pakistan,geographically, in the list about educa-tion index, China is at no 97, sri Lankaat 107, india at 145, nepal at 151, Bhutanat 162, Bangladesh at 163. Here Bhutanand Bangladesh are our next door neigh-bours as saaRC countries.

Mongolia; in the Gobi desert , the birthplace of Genghis khan and Hulagu is at no53, Libya the Berber tribes of Carthage at59, Maldives, at no 80, all are in better po-sition. this would not result in any causefor sanguinity in our neck of the woods.

We are in the proximity ofafghanistan and 13 african countriesMozambique, Cote d’lvoire, Benin, Gam-bia, Central african Republic, senegal,ethiopia, sierra Leon, Guinea, Chad,Mali, Burkina Faso and niger. Our reli-gious philosophy opens with the word of‘iqra’ and we have been advised to go asfar as China in the search of knowledge.all Russian state which left the UssR areranked at decent positions. it means thatthose termed ‘kafirs and Mushriks’ werein favour of education more than socalled Muslim rulers. all countriesaround ex-UssR like Finland, Lithuania,estonia, Latvia, Belarus, Ukraine et al.

in literacy first 18 positions go to exRussian bloc except Barbados. no tradi-tional Muslim country is before BruneiDarussalam which is at no 71 exceptsome Russian states, Bosnia Herzegovinaand albania. after Pakistan all areafrican countries except afghanistan andBangladesh. China is at 68, india at 137,nepal at 150, Bangladesh at 163 andBhutan at 168. From 138 to 159, fourcountries nepal, Haiti, Papua newGuinea and Yemen are non african coun-tries. it means that Pakistan is in thecluster of 45 african countries. it is in-deed a pity that Pakistan a country whichboasts itself to be a nuclear state lags sofar behind other nations in terms of liter-acy and education.

Who knows, who knows notg Pakistan ranks 165th in the Education index outof 179 countries, while it ranks 160th in the literacy index

JASwANT SINgh

A sia’s economic dynamism is begin-ning to find a parallel in the region’sdiplomacy, particularly where secu-

rity is concerned. indeed, we may now be“present at the creation,” as former Us sec-retary of state Dean acheson called hismemoir, which described the constructionof the post-World War ii global securityorder. this time, what is being created is asecurity order for asia that reflects its new-found primacy in world affairs, though whatthat order will ultimately look like remainsto be determined.

security has moved to the top of the re-gional agenda not only in response to China’srise, but also because america and the Westwill be leaving a gaping hole in asia’s securityarchitecture when they remove their troopsfrom afghanistan, without first having estab-lished peace there. Perhaps of greater impor-tance for long-term security, the Us-Pakistanrelationship continues to plumb new depths,while iran’s relations with the West go frombad to worse, marred most recently by themob invasion of the British embassy intehran in november.

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

a coherent cooperative framework to en-hance their security. For example, aus-tralia’s Labour government has agreed tosell natural uranium to india, reversing apolicy that had been in place ever sinceindia developed its nuclear-weapons capac-ity. almost simultaneously, Us PresidentBarack Obama announced the stationing ofUs Marines in northern australia. no onehas explicitly linked the two moves, but theyare arguably related strategically, as aus-tralia seeks to boost its ties with both the Usand asia’s other giant, india.

india and the Us have also beenstrengthening their strategic relations withJapan, not only bilaterally, but also in aunique trilateral way, which Us Deputy sec-retary of state William Burns has suggestedcould “reshape the international system.”Burns, and much of the rest of america’sforeign-policy establishment, now thinksthat india’s regional influence has becomecomprehensive; its “Look east” strategy, an-nounced earlier this year, is being translatedinto “act east” policies.

so far, india’s security relations withJapan and south korea are somewhat un-derstated. But that is changing. During in-dian Defense Minister a. k. antony’s recentvisit to tokyo, it was agreed that Japan and

india would hold their first-ever joint navaland air force exercise in 2012. this elevatesbilateral defense cooperation to the role ofprimary national-security tool, most impor-tantly for Japan, which has broadened itsstrategic horizon beyond its immediate sur-roundings and the country’s longstandingalliance with the Us.

indeed, Japan and india have nowagreed to cooperate on “maritime securityissues, including anti-piracy measures, free-dom of navigation” and on “maintaining thesecurity of the sea Lanes of Communicationto facilitate unhindered trade, bilaterally aswell as multilaterally with regional neigh-bors” – meaning, of course, China.

a “Japan-india Defense Policy Dia-logue” will be held in tokyo in early 2012,and staff-level talks are to take place be-tween Japan’s Ground self-Defense Forceand the indian army, along with staff ex-changes between the Japanese air self-De-fense Force and the indian air Force.indeed, Japan and india are beginning tobuild the type of comprehensive military co-operation that has long characterizedJapan’s ties with the Us.

this development will, undoubtedly, dis-turb China, which has been making evermore strident moves toward regional

suzerainty. Chinese assertiveness, most of itcurrently focused on the country’s claims tothe south China sea, has been a wake-up callabout the type of regional order that Chinawould establish if it had the power. Fears arerunning so high that 15 of the 18 countries atthe recent east asian Cooperation meetingin Bali singled out China’s behavior concern-ing the south China sea as a threat.

the core issue is maritime security –and not only in the south China sea. “theindian Ocean,” says the Us author Robertkaplan, is “where the rivalry between theUnited states and China in the Pacific inter-locks with the regional rivalry betweenChina and india, and also with america’sfight against islamic terrorism in the Middleeast, which includes america’s attempt tocontain iran.” india’s and China’s rival as-pirations to be acknowledged as regionalGreat Powers, as well as their quest for en-ergy security, are compelling both countriesto seek greater maritime security. india,however, has a clear advantage, as its recentLook east policies show that it can forge en-hanced security ties not only with the Us,but also with the region’s other key powers– even indonesia. stephen P. Cohen, arenowned analyst of india, has argued that,since the country gained independence, its

“officials have inculcated the precepts ofGeorge Washington’s Farewell address of1796: that india, like the United states, in-habits its own geographical sphere, in india’scase between the Himalayas and the Wideindian Ocean, and thus [it] is in a position ofboth dominance and detachment. Duringthe Cold War, this meant non-engagement;now it means that indians see themselveswith their own separate status as a risingpower.” the problem, of course, is thatChina views itself the same way. so, how areasia’s two giants to live in neighborly accordwithout encroaching on the other’s space?so far, the response has been to construct aregional security structure with no Chineseparticipation. that need not be the case, butthe current impulse behind today’s asian se-curity diplomacy will not change unlessChina rethinks its attitude towards its neigh-bors. Otherwise, its leaders will find them-selves present at the creation of a regionalorder that holds little appeal for them.

Jaswant Singh, a former Indian financeminister, foreign minister, and defenseminister, is the author of Jinnah: India– Partition – Independence. A version

of this article was first published inProject Syndicate

Present at the Asian creation

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news

CORPORATE CORNERSecretary Commercevisits indus Motor Company

KARACHI: Federal secretary Commerce, MrZafar Mahmood, paid a visit to indus MotorCompany (iMC). He discussed about possiblechanges in the coming trade policy in thebackground of MFn status being granted to indiaand its impact on Pakistan’s auto industry. Hecomplimented indus Motors on its vital role insupporting the auto industry and parts suppliersin this challenging environment. Mr Zafaracknowledged the challenges faced by the localauto manufacturing industry and assured thecompany of his ministry’s full support. He statedthat the government would work closely with theauto industry and private sector and try to solvethe issues faced by it. pRESS RELEASE

Dr Marilyn wyatt awards scholarshipsto Gilgit-Baltistan studentsGILGIT: as part of the Us government’slong-term efforts to improve the quality ofbasic education in Pakistan, UsaiD throughits Pre-service teacher education Programme

(Pre-steP) held a scholarship awardceremony at the karakorum internationalUniversity in Gilgit. During the ceremony, 64students currently enrolled at the karakuraminternational University and GovernmentColleges of education received scholarships.Dr Marilyn Wyatt, the Us ambassador’s wife,joined government of Gilgit-Baltistan officialsand faculty of teacher education institutions toaward scholarships to talented studentsenrolled in recently approved associateDegree in education (aDe) and Bachelor ofeducation (Bed) (Hons) programmes inGilgit-Baltistan. “Our shared efforts toimprove education in Gilgit-Baltistan are asymbol of the long and productive partnershipbetween the government of Pakistan and thegovernment of the United states.” said DrMarilyn Wyatt. pRESS RELEASE

8th convocationceremony of Bahria University

ISLAMABAD: 8th convocation ceremony ofBahria University islamabad was held on atJinnah Convention Centre. admiral Mohammad

asif sandila, Chief of naval staff, presided as theChief Guest, who conferred the degrees to 793graduating students in various disciplinesincluding BBa, Bse, BCe, Bs, Ms, MsC and Ba.seventeen gold medals and fifteen silver medalswere also awarded to the outstanding students asrecognition of their remarkable achievement intheir respective academic programs. Felicitatingthe graduating students, admiral asif sandila,expressed his deep admiration for the strenuoushard work put in by them. pRESS RELEASE

kolson distributesbiscuits among flood victims

UMERKOT: kolson (Lotte Confectionery Co Ltd)distributed biscuits among the flood victims ofChhor Cantonment, District Umerkot. thisdistribution of biscuits was performed by kolson’srepresentatives who stretched out theirhumanitarian efforts to over 25 locations,including remote villages like new islamabad,Maulvi sanaullah Goth, sabir Goth and Haveliarisar, in collaboration with sina-a non-governmental organisation. Lotte Group alwaysvalues its Corporate social Responsibilities andhas always been at the forefront for the nation at

the critical time of need. pRESS RELEASE

PiP hosts strategic workshopto address energy challengesKARACHI: the Petroleum institute of Pakistan(PiP) organised a strategic workshop at theDefence 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 countryon the basis of recommendations in PiP’s 15-yearPakistan energy Outlook (PeO) documentpublished earlier this year. CeO, PiP saleemPiracha and representatives of leading up- anddownstream oil and gas companies alsoparticipated in the workshop. pRESS RELEASE

Internet is the best tool presentlyavailable to connect people; thereis no better medium at removinggeographical constraints

wateen Telecom Ceo, Naeem Zamindar

KARAchI: picture shows Mr Rizwan Marchant of QatarAirways along with the consul General of the State ofQatar Mr Rashid bin Shafeea Al Marri, and otherdiplomats at a reception on the occasion of theanniversary of the National day for the accession ofSheikh Jassim bin Mohammed bin thani, the founder ofSatate of Qatar at a local hotel. PRESS RELEASE

LONDONREUtERS

E UROPe faces another year ofdismal economic performance in2012 that will weigh on globalgrowth, but emerging marketsand the United states should at

least keep the world economy moving inthe right direction.

there are several reasons why nextyear may be nothing to look forward to,according to Reuters polls from the lastfew months. Many of the world's biggestdeveloped economies are heading into re-cession, global stock markets look set torecoup only a fraction of their heavy lossesin 2011, oil prices will head lower, andasset managers are unsure where best toinvest. and these could be the best-casescenarios. Most economists base their as-sumptions on the hope that the eurozone's sovereign debt crisis will not boilover into a new global economic crisis,having already dented growth in major ex-porters to europe. still, most of the majoremerging market economies like Braziland China should pick up speed later nextyear. all of them have suffered from slow-ing economies in recent months, causedmainly by tightening monetary policy inthe face of high inflation.

"it's important to stress the worldeconomy is still growing. But it's a tale oftwo worlds," said Gerard Lyons, chiefeconomist at standard Chartered Bank.

"the storyline for 2012 is that europedrags the world down in the first half ofthe year, and China drags it up in the sec-ond half of the year."

enormous political risks cloud theoutlook further, with elections and lead-ership changes in the most powerfulcountries and the prospect of continuingturmoil in the Middle east.

still, there are glimmers of hope. the

United states' economy has performedbetter than most had hoped over the lastquarter, and Reuters' polls of economistsshow it growing around 2.2 per cent in2012, compared with zero growth in theeuro zone. "the big unknown in europeand the U.s. is that big companies, withbalance sheets in good shape, have theability to invest at home if they want. it'smore likely that will take place in the U.s.rather than europe," said Lyons.

THE EURO ZONE QUESTION

european Union leaders took a his-toric step towards greater fiscal integra-tion earlier in December, but economistshave been clear that this would not easea debt crisis entering its third year andstill hogging the headlines in 2012.

Reuters polls show real concern thatleaders are doing far too little to stimu-late growth, with the likes of spain anditaly destined for long and painful reces-sions. the euro zone as a whole, mean-while, is probably in a moderaterecession right now that will last midwayinto 2012. "the euro area continues to bea source of economic and financial insta-bility for the rest of the world," said JuanPerez-Campanero, economist at san-tander, in a research note.

"We could be facing a more perma-nent and lasting decline in growth capac-ity in developed economies and,particularly, the euro area."

Whether spain and italy will need toseek funding from the euro zone's bailoutfacility next year is open to question, witha very slim majority of economists polledthis month - 27 out of 56 - saying not.

and a november survey of 20 topeconomists and former policymakers inacademia and respected research insti-tutes showed 14 of them do not expect the

euro zone to survive in its current form.even in Japan, where economists havedowngraded growth forecasts relent-lessly, the economy is expected to pick upin the fiscal year from april and expand1.8 per cent. Japan should narrowly avoida recession, but polls show little hope itwill emerge from deflation any time soon.

ASSESSING THE ASSETS

the severe uncertainty surrounding2012 is perhaps best reflected by Reuters'asset allocation poll of more than 50 lead-ing investment houses in the Unitedstates, europe and Japan.

investors raised their cash balance tothe highest in a year in December as theyprepared for a jittery 2012, although theyalso moved back into cheap equities,Reuters polls showed on Monday.

the euro zone crisis was the key con-cern of asset managers polled, hence theincreased preference for cash as well asmoves into British and asian sharesrather than european ones.

similarly, the last quarterly stockmarkets poll suggested emerging marketswill easily outperform european share in-dexes in 2012, which will struggle tobounce back to end-2010 levels, nevermind end-2011. With europe headinginto a recession, oil prices look set to fallfrom here. Brent crude will average $105a barrel next year, not far below thisyear's record high average near $111.

"We expect a mild recession acrossthe OeCD next year to put a damper ondemand and consequently prices," DavidWech from Vienna-based consultantsJBC energy said. "nevertheless, the riskto oil prices is definitely on the upsidegiven a still troubled geopolitical environ-ment." economic growth is likely to slowamong the Gulf's wealthy oil exporters

next year, but governments will remainable to spend to counter the impact of anyglobal slump, a Reuters poll showed onWednesday. Respondents cited the eurozone debt crisis and signs of slowinggrowth in China as reasons for the dark-ened economic outlook in the Gulf.

DELAYED CHINESE CHEERS

Whatever the euro zone's future, theeffects of the debt crisis have alreadybeen felt across the world. the europeanUnion is China's biggest export market,and manufacturing data there showdwindling levels of foreign new orders.

indeed, the Chinese economy is nowgrowing at its weakest pace since 2009.in an effort to support it the central bankcut reserve requirements at the end oflast month for the first time in threeyears. economists polled by Reuters afterthis move, however, said the People'sBank of China will refrain from more ag-gressive stimulative policies unlessgrowth falls sharply to below 8 per cent.

similarly, india has been sufferingfrom a pronounced slowdown in growth

and Reuters polls suggest its central bankwill also slacken monetary policy by mid-2012 to counter this, despite stubbornlyhigh inflation. it could be in for a difficultyear. "Looking ahead, the economy facesthe lagged effects of monetary tighten-ing," said Leif eskesen, economist HsBCin singapore. "Moreover, administrativehurdles and domestic policy paralysis areholding back investments and hurtingsentiment." Brazil's central bank onthursday cut its 2011 growth estimate to3.0 per cent, versus its previous estimateof 3.5 per cent, and said 2012 would seegrowth of 3.5 per cent.

Compared with previous years wheregrowth averaged near double-digit rates,that would be a disappointment, althoughstill a fair improvement on the anaemicrates of most developed peers.

Overall, even the slightly depressedgrowth rates from these developing eco-nomic powers will power world growthnext year. "it is positive growth, but thepicture does vary considerably - not justin terms of the first and second half of theyear, but also depending on which part ofthe world you look at," concluded Lyonsfrom standard Chartered.

World economy to trudgeon in 2012 despite Europe: poll

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Markets

UBL is committed to the objectives of financial inclusion in Pakistan

weekly review

kSe gains 2.5pc wow outperforming regional markets by 1pc

g Rumour mills fan bullishsurge in kSe

g 150 scrips advance, 79decline, 83 remainunchanged of total 312scrips traded

g kSe-30 index closes at10409.25

g Jittery kSe gains 54.89 pts onZardari’s return

g 116 advance, 95 decline, 90remain unchanged of total301 scrips traded

g LoPTA, JSCL, eNGRo, DGkC,ffBL the volume leaders

g Pressure on rupee, foreignoutflows knock 69 pts off kSe

g 92 advance, 113 decline, 101remain unchanged of total 306scrips traded

g kSe-30 index loses 101.16 points

g Pressure of rupee limits marketgains

g 119 advance, 72 decline, 98remain unchanged of total 289scrips traded

g kSe-30 index closes at 10360.69

g Jittery kSe posts minor lossg 140 advance, 143 decline, 15

remain unchanged of total 298scrips traded

g overall market sentimentsremain gloomy

KARAChIStAff REpoRt

tHe week began on a positivenote as speculation in domesticpolitics eased somewhat afterthe return of President Zardari.

Concurrently, further impetus came onthe back of rumours related to proposalof kse to collect capital gain tax underthe presumptive tax regime for individual

investors.nonetheless, contrasting views of

government and army on the memogatecontroversy and a current account deficit(CaD) of $2.1 billion reported in 5M keptthe market sentiment fairly cautious.Overall, kse 100 index gained 273points, up 2.5 per cent WoW. Volumesalso improved marginally by 1.4 per centWoW to 45 million shares.

Moreover, local bourse outperformed

the regional markets by one per cent.though, despite the recovery foreignersremained net sellers, offloading sharesworth $8.9 million.SBP annual report: Key projec-tions for FY12: state Bank of Pak-istan (sBP) expects the economy togrow in the range of 3-4 per cent inFY12. the reason highlighted by sBPfor the expected underperformance isits bleak outlook on agriculture sector.

sBP also believes that the fiscal deficittarget of four per cent will not be metas flood in sindh, dengue fever in Pun-jab, upcoming elections and absence ofiMF programme are likely to take theirtoll on expenditures. additionally, in-flows from coalition support fund areuncertain on the back of strained Us-Pak relationship.

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

FY12. On the external front, sBP projectscurrent account deficit (CaD) of 1.5-2.5per cent of GDP in FY12 against the initialtarget of 0.6 per cent of GDP.InDIvIDUAL STOCKS: Mixed reac-tion in fertiliser stocks was witnessedamid the uncertainty on gas related is-sues. Fatima and FFBL outperformed themarket by six per cent and two per cent,respectively, while both FFC and engrounperformed by one per cent.

NEw YORKREUtERS

OiL prices rose for a fifthstraight day on Friday, onconcerns about potentialsupply disruptions in iran

and iraq and recent signs of a strength-ening Us economy.

trading volumes were thinned in ashortened session ahead of the Christ-mas holiday. Oil also found supportfrom stronger equities on Wall street,with the s&P 500 index turning posi-tive for the year in a four-day rally toend up for the week, on the recent bet-ter-than-expected economic data. "it'svery thin trading, but stronger equitiesare helping oil stay up today," saidChris Dillman, analyst at tradition en-ergy in stamford, Connecticut. thegovernment on Friday said new Ussingle-family home sales rose to aseven-month high in november, withthe supply on the market at the lowestin 5-1/2 years. the home-sales reportand thursday's data showing a fall ininitial jobless claims last week helpedoffset a separate report on Fridayshowing consumer spending fell for asecond straight month.

Geopolitical uncertainty, especiallyin iraq and iran, also kept investors fo-cused on potential threats to supply.Brent February crude rose 7 cents tosettle at $107.96 a barrel. For the week,Brent rose 4.46 percent, breaking astring of two weekly losses and postingits biggest weekly percentage gain sincethe week to October 14, according toReuters data. Us February crude rose15 cents to settle at $99.68 a barrel,reaching $100.23 intraday. Front-month Us crude rose 6.57 percent forthe week, the biggest weekly gain sincethe week to October 28. Crude tradingvolumes were very thin ahead of theChristmas holiday and the approachingnew year. Us dealings were 76 percentbelow the 30-day average and Brent 69percent under its 30-day average.

speculators cut their net long po-sitions in Us crude oil futures and op-tions in the week to December 20, datafrom the Us Commodity Futures trad-ing Commission showed on Friday.

the spread between Brent and Uscrude narrowed to $8.28 a barrel basedon settlements, and fell as low as $7.60intraday. the Us Congress passed leg-islation containing a provision aimed atforcing a quicker decision by President

Obama on the keystone XL pipeline.analysts say the pipeline, from Canadato refinery and port facilities in texas,would ease a supply glut at the Cushing,Oklahoma, delivery point for the Uscrude contract that has hemmed inprices for the Us benchmark crude. theeuro was little changed against the Usdollar, but the dollar was on track toend the week lower against a currencybasket .DXY. the recent encouragingdata from the United states helped keyindustrial metal copper rise on Friday,but the ongoing worries about europe'seconomy and the region's debt crisislimited gains.THREATS TO OIL SUPPLY:iran's navy will launch a 10-day wargame in the strait of Hormuz on sat-urday, state tV said, raising concernabout a possible closure of the key oilshipping route.

in iraq, a wave of bombings thatkilled in Baghdad on thursday pointedto a deteriorating security situationjust days after the last Us troops leftthe country. "there are lots of reasonsnot to carry a short position into theholidays," said Bill O'Grady, chief mar-ket strategist at Confluence investmentManagement in st. Louis.

United Bank Limited Presidentand Ceo, Atif Bokhari

Oil rises onsupply worries,supportive data

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analysis

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

Ceo Naseeb Networks,Monis Rehman

ShAhAB JAFRY

arisk-on window is perhapsthe best way to bid farewell totrading year ’11, especiallyone not triggered by the usual

Merkozy market talk-up that proveshollow two days into risk trading. Butthere is something eerie about upbeatUs data suddenly de-linking the cross-atlantic nosedive. should i be con-cerned that my crystal ball just doesnot agree with currency strategists onBloomberg, that the domino theory nolonger holds going into the new year?that what happens in europe will nolonger immediately impact commoditycurrencies like the aussie and loonie?Fine, we will likely see a risk rally inearly year trading, but will that owemore to holiday season job trends thanidle money rounded off at year endmaking its way back into the market?

i expect europe to stay centre-stagefor 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, wheresovereign debt problems can be wishedaway, cut-throat austerity across theeurozone is sure to plunge the conti-nent into a steep recession in ’12, de-pressing export activity in emergingmarkets, with a pronounced effect oncommodity currencies just like theaussie and loonie. three, eCB’s loanwindow is little more than anotherform of quantitative easing, condemn-ing the single currency to prolongeddepression. and four, there is no guar-antee banks will not hold the cash forrefinancing needs, especially when lessthan a month after coordinated centralbank initiative to lower dollar borrow-ing cost, european banks have wipedout most intervention gains. alliedirish Bank, Banco santander, Creditagricole and Commerzbank, to name afew, are deeply distressed.

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

wounds for now, and minus a gamechanger, overall sentiment in the three-day trading week is expected to stay pos-itive. still, best see whether euro breaksoff from range bound trading upwards to1.3200/50 level or drops to the1.2940/50 range. Remember, the failedsummit and the desperate funding didnot budge rating agencies from thedowngrade threat.

the pleasant surprise in the Us jobmarket, and subsequent impact on oil isinteresting. Black gold advanced themost in three weeks, up 3.2 per cent atthe slightest window of opportunity inthe world’s largest economy. i still be-lieve oil is over-bid, and has not priced ina potential thunderbolt from the manyproblems in the Gulf – war clouds dark-ening over iran, renewed unrest insaudi’s oil-rich eastern provinces, Libyaunable to restore Gaddafi-era productionlevel and iraq-kuwaiti tension over thesame reason that pushed saddam’s na-tional guard across the border in ’91. Oilwill fly at the slightest hint of increased

tension. How higher prices will im-pact signs of recovery in the Usneeds little elaboration.

the international economyremains too tightly inter-twined to give a clean chit onaccount of improved Ussentiment, that too whenamerican job numbersare known to bedodgy at year-end.in a year when mar-kets remained eventdriven and techni-cal analysts and chartistssuffered the fate ofuncertain markets inuncharted territory,best wind up onevent trading too. the’11 endgame is buy risk.But in the longer term, theeuro-short, with all its im-plications, holds. all saidand done, things have notchanged enough to warrantthe ‘no longer the domino the-ory’ position.

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

‘No longer the domino theory’

in an interview with our corre-spondent amer sial, Pakistan’sformer ambassador to Worldtrade Organisation Dr Manzoor

ahmad, is of the opinion that the grant-ing of MFn status to india is in Pak-istan’s interests as it will allowdiversification and increase in exports.PROFIT: IS IT In PAKISTAn’SECOnOMIC InTEREST TO GIvEMFn STATUS TO InDIA?MA: Without a doubt it is in Pakistan’sinterest to do so. there are several rea-sons why this decision should have beentaken much earlier. Firstly, Pakistanneeds to diversify its export destinations,as currently 50 per cent of its exports goto either United states or europeanUnion. secondly, our imports from indiacome mostly through third countriesadding to costs. thirdly, all successfultrading nations build on their regionalbase. in contrast, our regional trade isless than five per cent.PROFIT: InDIA’S ECOnOMY ISMUCH LARGER THAnPAKISTAn’S. HOw CAn wECOMPETE AGAInST InDIAnInDUSTRY?MA: the experience of many smalleconomies that developed closer trade re-lations with larger ones shows that it wasa “win-win” situation for both sides. Forthe smaller economy there was the gainof access to a bigger market. For instance,when turkey signed an agreement witheU in 1996 for free movement of indus-trial goods, its exports totaled a mere$11.5 billion. Fast forward fifteen yearsand turkey’s exports to the largest econ-omy in the world have multiplied fivetimes, reaching $61 billion last year. sim-ilarly, Mexican exports to United statesmore than quadrupled after it joinednorth american Free trade area(naFta) in 1994, climbing from $60 bil-lion to $280 billion per year. as for directtrade between Pakistan and india, at thevery least it would help increase ourglobal exports as our input cost wouldcome down.PROFIT: OUR ExPORTERS FACEMAnY nOn-TARIFF BARRIERSwHEn THEY ExPORT TO InDIA.wHAT CAn BE DOnE TO IMPROvE

OUR ExPORTS TO InDIA?MA: Our exporters would need to specif-ically identify such barriers and bringthem to the notice of Ministry of Com-merce. it is a fact that india used to be aclosed economy but it has been graduallyopening up. its imports are now growingat a fast pace. Pakistan should try to ben-efit from this opening of indian economy.an example is when Pakistan started ex-porting cement to india, many exporterscomplained of difficulties in meeting theindian standards because of bureaucratichurdles. However, these problems havebeen resolved to a large extent. now themain problem is non-availability of rail-way carriages. if india allows import ofcement through Wagha border by road,Pakistani exporters may be able to exportup to 10 million tonnes as india is facinga shortage and Pakistani cement is morecompetitive.PROFIT: IT IS KnOwn THATInDIA IS THE wORLD’S BIGGESTUSER OF AnTI-DUMPInGDUTIES. wILL THIS nOT HInDEROUR ExPORTS?MA: it is a fact that india is the world’smost frequent user of anti-dumping du-ties but most measures are appliedagainst China. Despite frequent applica-tion of anti-dumping against Chinese im-ports, their mutual trade has beengrowing rapidly. When india and Chinaagreed to give MFn status to each otherin 1984, their mutual trade was very low.Over the last 20 years, their trade hasgrown from less than $1 billion to over$60 billion in 2011. this is an increase ofover 60-fold. so far there is no knowncase where india has imposed any anti-dumping duties on exports from Pakistan.PROIT: InDIA IS OnE OF THELARGEST AUTOMOBILESMAnUFACTURERS AnD SOME OFITS CARS SUCH AS TATA’S nAnOBRAnDS ARE SOLD AT LESSTHAn $2000 PER UnIT. OURCARS COST MAnY TIMES MORE.HOw CAn wE COMPETEAGAInST THEM?MA: it is true that our automobile indus-try does not have economies of scale andis therefore less competitive than india’s.MFn status, however, is not likely to have

any impact on our auto-industry for theforeseeable future since MFn status doesnot mean that tariff rates will be broughtdown to zero. Currently custom duty andother taxes on imports of vehicles aremore than 100 per cent, which is enoughof protection. import of second-hand cars

is only allowed under special conditionsand it is not likely that they would be im-ported from india. also, it is likely that ourgovernment may place automobiles onnegative list, which is under preparation. Profit: what about pharmaceuticalindustry? India is one of the

largest manufacturers and some ofthe medicines are much cheaperthan those produced in Pakistan.How will our industry competeagainst Indian imports?MA: Pakistan has a smaller pharma in-dustry than india but it is making qualityproducts. it is already exporting medi-cines worth over $150 million to 45 coun-tries and access to the big indian marketwill be an advantage. Furthermore, im-port of medicines into Pakistan is con-trolled through the Drugs (import andexport) Rules, 1976. Pakistan is alreadyallowing import of some high quality life-saving drugs from india. they are muchcheaper than importing from europe.even such common medicines as aspirin,amoxillin, ampicillin, Ciprofloxine,Famotidine, Laxotanil, Renitidin, whoseimport is not allowed are smuggled in,because they are cheaper. allowing im-ports would only legalise the current sit-uation. it will also bring down prices ofessential medicines which would greatlybenefit the poorer section of our society.PROFIT: CAn YOU MEnTIOn THESECTORS wHERE PAKISTAnwILL GAIn AnD wHERE wOULDInDIA BEnEFIT?MA: in my view Pakistan has compara-tive advantage in textiles sector in par-ticular bed-linen and towels. Likewise,in several light engineering productssuch as surgical goods, cutlery andsports goods Pakistan would have anedge and can get a good market share.On the other hand, for heavy machinery,indian manufacturers would be in an ad-vantageous position. For auto-parts,india may replace traditional supplierssuch as thailand and taiwan.PROFIT: wHAT ABOUTAGRICULTURAL GOODS?MA: in agriculture, it is likely to be abalanced picture. in some cases, such ascitrus fruit, mangoes, rice and wheat,Pakistan may have an advantage as itenjoys advantage of better quality. Onthe other hand, india may have an ad-vantage in several other agriculturalproducts such as garlic, red chilies, cap-sicum, beans and soybean-meal. Formost other products, it will vary fromyear to year depending upon harvestconditions. this will stabilise prices,bring down inflation and make theseproducts more available.

Pakistan to benefit by granting MFN

status to India: Dr Manzoor AhmadPakistan to benefit by granting MfN status to india

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