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Monthly January 2012

Value Chain (Jan 12)

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A Business Magazine covering Global And National, Commerce including Economy, trade and Industry, Agriculture, Banking and Finance as well as other regular features which makes it a complete business magazine.

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Page 1: Value Chain (Jan 12)

Mon

thly

January 2012

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ContributorsLiteratureHistroyCommodities Review

Health

Agriculture

Economy

CCBenazir Bhutto: a legend that continues to inspireEvaporating investment flows—the unheaded warning An opportunity that is worth capitalizing on

Denying harsh realities-a self-deluding pastimeWho ruled the world?

Stress Ulcars

PoliticsRisks embedded in over-popularityPolitical solutions to economic problems

Risk-aversion isn’t the solution, better risk management is the way forward

Development of fish and poultry in Pakistan

Discovery

Research & Development

Cover Story

Quality based marketing of wheat a need of overhauling

2012: Moving the wheel of economy is the only way forward

Of the hangover of imperial grandeur

Gallup Survey 2011 on Corruption: Good governance needed to root it out

5th Pak microfinance conference – 201148th Independence Day of the Republic of KenyaVoters list authenticationDeveloping communicationPFDC Bridal Week – 2011

s

AwardsNobel Prize Award Ceremony – 2011

Events

Islamic BankingEthical business practices: A recurrent theme in the Quran

Global & National Briefs

Banking & Finance

Increasing regional trade for economic independence--Mian Abrar Ahmad

Strong marketing and research needed for stock market Growth –Ahsan Mehanti

Interview

Voice of Industry

Editorials9-12

13 141516

17-1819-21

23-2425-28

29-30

31-33

35-37

35-37

41-42

43-45

46-50

51-52

54-55

5657585859

60-6162636464-65

Mr. Tariq Iqbal KhanMr. Rauf NizamaniMr. Faizan bin Abdul Majid Mr. Iftikhar Mobeen Mr. Shahid ShamimMr. Mubarak Ahmed etc.Mr. Prof. Dr. Anis Ahmad

Volume - 1 Issue - IX Jan 2012

Retail Price: *PKR 100

Chief EditorDr. Zeeshan [email protected]

EditorNadeem Abdul [email protected]

Deputy EditorJauhar [email protected]

Advisor Editorial TeamA.B [email protected]

Research EditorMustafa Ali [email protected]

Assistant EditorSyed Asif [email protected]

Director MarketingK. Jehangeer [email protected]

VisualizerAli Siddique [email protected]

General ManagerMahmood [email protected]

Bureau ChiefsSyed [email protected]

Ajmal [email protected]

Mumtaz [email protected]

Printed By:Ibn-e-Hassan Printing Press Hockey Stadium, Karachi

Distributed By:Liberty Books (Pvt.) Ltd.021-3567144, 35656568

Hussain News Agency, Karachi021-32723955

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Published By:Fatima Khalid Publications (Pvt) Ltd.Room No. 612, 6th Floor, Clifton Centre, Khayaban-e-Roomi, Clifton, KarachiPh: 021-35293371-72 Email:[email protected]

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FromFrom TeamTeam

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7

Remembering Mr. Jinnah

MFN status for India

Value Chain welcomes the views of its valued readers. Please send us your

views on the address below:

Fatima Khalid Publications (Pvt) Ltd.

Room No. 612, Clifton Centre, Block 5, Clifton, Karachi

Email: [email protected]

The Editor reserves the right to edit your letters for making it brief or for

any linguistic flaws therein

etters to the EditorLL

January 2012

Sir, the editorial about Mr. Jinnah in the December issue of Value Chain should serve as an eye opener for this country’s leadership but certainly won’t because it is in a mad pursuit of enriching itself; no one has any idea of how this country has been wrecked in the past six decades and now stands on the verge of total collapse.But pointing out what the father of the nation taught us by his conduct is indeed an obligation of the saner elements, and, fortunately we are not entirely bankrupt in that vital respect. This is ray of hope that keeps the Pakistanis going while they wait for a better future.Liaquat AliKarachi

All in the name of democracySir, a continuing tragedy, that you have pointed to but only cursorily, is the way our politicians have been using the slogan of democracy entirely to remain in power no matter how they wreck every institution of the state.The current brand of democracy that is being pursued by PPP, PML-N, MQM and ANP, has virtually decimated every institution of the state in a mad pursuit of benefits for the party leaderships. What is far more shocking is the fact that the so-called political analysts are still supporting this brand of democracy without realing that once the economy experiences a total collapse, it is this lot that would be made to stand in line with the politicians to pay for their crimes against the nation and the state.It is time you pointed to the build-up of this tragedy and the long-term damage that a bloody revolution could cause.Shamsher KhanPeshawar

government has created new records of borrowing, the big unanswered question is where does the money go? None of the many sectors of the economy shows any signs of improvement.The worst is the state of state-owned enterprises viz. Pakistan Railway, Pakistan International Airlines, and Pakistan Steel Mills. Each of these mega enterprises has technically become bankrupt since, in the last four years, the coalition partners used them for employing therein hundreds of their favourites thus burdening them with killing loads of manpower.That wasn’t all; the top brass was given to cronies of the coalition parties’ leaders who pocketed the resources of all these companies directly as well as via corrupt tendering and purchase/sale deals and so ensured that these enterprises definitely go to the point of bankruptcy.Now comes the big news; government will privatise these units in 2012. Reason: by mid-2012 these units will be sick to the point where they could be palmed off for few pennies. But the tragedy won’t end at that stage because these units will be sold to party cronies who will buy them from the wealth they squeezed out of these very units. Three cheers for democracy!Shahid JafriKarachi

Public debt – what does it finance?Sir, in the last four years while the PPP

Sir, the views expressed in the article by Mr. Ali Ahmed merit attention in the context of Indo-Pak trade. While there has been criticism of the move to offer India the MFN status based on the past Indo-Pak relationship, it would be imprudent to overlook the fact that ground realities have changed. Now it is in the interest of both to join hands instead of looking elsewhere for market access. It is obligatory on governments in both countries to prioritize regional well being above anything else.Ahmed RashidLahore

Sovereign risk: is it still zero?Sir, the article on sovereign risk was as realistic as it could be given today’s profile of this risk reflected the world over. It is time to rewrite books on macroeconomics to warn the coming generation about the consequences of sustained ill governance of the state as manifested primarily by the US and the whole of Europe.It is indeed tragic that the countries that now have the worst sovereign risk profiles are proclaimed exemplary democracies; a bunch that never tire of telling the rest of the world how impor-tant it is to have a democratic setup for state governance.Democracy is, without any doubt, the least bad system of governance, but not by just anyone. Plato never said that. To be able to govern satisfactorily, the members of a parliament must have the academic and professional credentials required for good governance–a quality that is missing.Absar HussainRawalpindi

Sir, I read with interest the article by Mr. Majyd Aziz. Being an industrialist and for long a key spokesman for Pakistan’s industry, surely he is a good observer of the trends in regional trade, the role of India-Pakistan trade in sustaining both these economies in a global recession, which is not going to be short-lived. His views deserve atten-tion by those with a stake in Pakistan’s economy, especially the policy-makers.Ali NathaniKarachi

Banks’ risk-aversionSir, while there is no doubt that we all confront a recession that caused large-scale bank and business failures there is no solution to this problem except the revival of business and trade to lift up employment which can lift demand and allow industry to operate a full capacity. By becoming risk-averse banks are now blocking that route to economic revival and worsening the recession.Salim AnsariHyderabad

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Global events last month

On Dec. 1, Italy said it was recalling its ambassador to Iran for consultation after the British embassy in Tehran was attacked by protesters.

On Dec. 2 US Vice President Joe Biden urged Turkey to impose new sanctions against Iran.

Standard & Poor’s On Dec. 2 said it had downgraded credit ratings of the big four Australian banks as part of changes to the way it assesses risks.

US has urged South Korea to cut imports of Iranian petrochemicals and reduce crude oil imports from the Gulf states.

On Dec. 2, the prosecutor of Interna-tional Criminal Court asked judges for an arrest warrant for Sudan’s defence minis-ter Abdel Rahim Mohamed Hussein for crimes commited in Darfur.

NASA on Dec. 5 said the Kepler space telescope has confirmed its first-ever planet in a habitable zone outside our solar system.

East African leaders on Dec. 5 demanded that the UN security council clamp down on Eritrea for unprovoked invasions flouting interntional law.

High domestic prices have forced exporters in Thailand to seek at least 50,000 tonnes of cheaper rice from Indian and Pakistani origins to deliver to clients.

The 14th Session of Unido’s Conference held in Vienna elected Pakistan as the External Auditor for a third consecutive year for two years.

British Prime Minister David Cameron threatened on Dec. 6 to block a new European Union treaty designed to save the euro from the debt crisis if London’s demands are not met.

provide emergency liquidity in case the European debt crisis reaches emerging econo-mies.

Addressing an international conference in Germany on Dec. 11, Afghan Presi-dent Hamid Karzai said that foreigners are fuelling the problem of corruption in Afghanistan. He pledged to step up the fight against corruption in return for sustained international support.

According to the Head of Iran’s parliamentary national security committee, Iran will reverse-engineer the US drone it has in its possession , and is in the final stages of unlocking the aircraft’s software secrets and will be in a position to mass produce an aircraft superior to the American drone in the near future.

The US House of Representatives on Dec.14 passed legislation to freeze some Pakistan aid, slap harsh new sanctions on Iran, and endorse indefinite imprisonment of suspected terrorists.

Iran has reopened the trade gate on the Taftan border on Dec.18 and informed Pakistan accordingly. The gate was closed for several months after a suicide attack in Zahidan.

About 4000 supporters of the Communist Party on Dec.18 took to the streets in protest over Russia’s fraud-tainted parliamen-tary vote and demanded a recount and the government’s resignation.

Israel’s defence minister said on Dec.18 ,that Israel and the United States are determined to prevent Iran from obtaining nuclear weapons and do not rule out any option to that end.

Washington said on Dec.20 that Al Qaeda, and not the Taliban was America’s real enemy and that America invaded Afghanistan because Al Qaeda had launched an attack against the United States from Afghanistan.

On Dec. 21, a Chinese scientist Huang Keuxe was sentenced to more than seven years in prison for stealing trade secrets of major US agribusiness firms to benefit China.

According to a leading British civil servant Gus O’ Donnel, Cabinet Secretary, the United Kingdom faces an enormous challenge in maintain the Union in the face of increasing pressure for Scottish independence.

Microsoft co-founder Bill Gates confirmed on Dec. 7 , he is in discussions with China to jointly develop a new and safer kind of nuclear reactor.

US Secretary of State Hillary Clinton on Dec. 8, warned internet firms to avoid offering the “tools of oppression” to authoritarian Middle East regimes trying to crush democracy protests.

Japan has offered a “heartfelt apology” for the systematic mistreatment of Canadian prisoners during World War II.

Provincial Ombudsman Sindh, Mr. Asad Ashraf Malik, has been elected Regional Vice President of International Ombudsman Institution, Vienna.

In his first public remarks on Decem-ber 8, Russian Prime Minister Vladimir Putin accused US of stirring up protests against his 12-year rule and said foreign countries were spending hundreds of millions of dollars to influence Russian elections.

Britain’s defence secretary said on Dec. 8, Britain will not expand its role in Afghanistan to take over from departing US troops. White House is moving ahead with plans to withdraw 33,000 of its near 100,000 troops by next September, raising speculation that British soldiers might be used to pick up any slack.

US Republican presidential candidate Newt Gingrich said on Dec. 8, that Pakistan’s nuclear arsenal was at risk of being seized by extremists who had probably infiltrated Islamabad’s military.

On December 11, Russian President Dmitry Medvedev ordered an investigation into allegations of fraud in Russia’s parliamentary election following protesters demand to annul and rerun the election.

Iranian Oil Minister Rostam Qasemi said on Dec. 11, the European Union will not impose sanctions on Iran’s oil exports because such a measure would harm the global crude market.

More than 800 people were reported missing in the southern Philippines on Dec. 18 after flash floods and landslides swept houses into rivers and out to sea, killing more than 650 people .

According to Washiton Post report the Japanese government is considering a dollar swap arrangement with India to

lobal BriefsG

January 20129

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Global economy last month

IMF said on Dec.1, it would probably lower its global economic growth, but did not expect a double-dip recession in U.S.

European Union on Dec.1 , tightened its sanctions against Tehran and laid out plans for a possible embargo on Iranian oil in response to mounting concerns in the west over OPEC production’s nuclear work.

On Dec. 2 British PM David Cameron threatened to obstruct a Franco-German drive for swift change to the European Union’s treaty intended to help save the euro as he was not convinced the treaty change was needed to reinforce the single currency zone.

On Dec.5, the leaders of France and Germany agreed a master plan for imposing budget disciplane across the eurozone .

On Dec.5, Britain’s financial regulators slapped a record 10.5 million pound fine on HSBC for mis-selling investments to pay care home costs for older customers.

The head of Norvegian Financial Supervisory Authority told Reuters that Norway’s economy will be hard hit if Europe falls back into recession and the nation’s bank must boost their capital buffers to paper for lending losses.

Banladesh’s annual inflation rose to 11.58% in Nov. from 11.42% a month earlier after the government raised fuel charges for the 3rd time since May.

On Dec. 4, Iran warned the West any move to block its oil exports would more than double crude prices with devastating consequences on a fragile global economy.

Portuguese PM Pedro Passo Coelho said on Dec. 4, failure to find a solution to the eurozone crisis could lead to the end of European Union.

Standard & Poor’s on Dec. 7, put a number of large European banks includ-ing French banks BNP Paribas and Societe Generale, Deutsche Bank and Commerzbank of Germany , and Italy’s UniCredit, on review for a possible downgrade after putting the credit ratings of eurozone states on notice.

On Dec. 7, the European Commission decided to cut aid from 2014 to 19 emerg-ing economies including China, India and Brazil.

The Turkish economy expanded a hefty 8.2 percent in the third quarter beating analysts’ forecasts and offering little evidence that measures to engineer a slowdown have been successful. Turkey has been posting strong growth. Its GDP jumped 9.6 percent in the first nine months of 2011.

According to a document released by the US State Department, Pakistan will continue to be among the top three recipients of American aid in the US fiscal year 2012 as well despite serious differences over the Afghan conflict. Afghanistan tops the list with $ 3,213.4 million, followed by Israel $ 3,075 million and Pakistan $ 2,965 million.

Economic Advisor Arkady Dvorkovich said on Dec. 14 that Russia is willing to pump up to $20 billion through the IMF into rescue funding for indebted eurozone countries.

On Dec. 16, South Korea joined a fresh multinational effort to press Iran to scrap its suspected nuclear weapons pro- gramme, adding more than 100 names to a financial blacklist of Iranian firms and individuals. The measures announced did not include a ban on imports of petro-chemicals or crude oil .

On Dec. 18 Iran reportedly signed a deal worth up to $1 billion with Russia’s Tatneft to develop an oil field, a rare example of new foreign investment into the oil and gas sector of a country under ever tighter economic sanctions. Tehran denies the charge many western compa-nies have pulled out of Iran and few companies from elsewhere have shown enthusiasm to take their place.

IMF, according to its chief Christine Legarde, is almost certain to cut its world growth forecast from the 4.0 percent estimated in September 2011 due to the eurozone debt crisis. She urged european to speak with one voice on the debt crisis that has rattled the global financial system.

On Dec. 6, IMF chief Christine Lagarde said, economic growth in the Middle East and North Africa must include all mem-bers of society to fulfil the promise of the Arab Spring.

According to Asian Development Bank, emerging East Asia’s economic momen-tum remained robust, but the region faced greater risks than just three months ago as Europe’s debt problems and a fragile US economy could worsen into another global crisis.

Japan’s foreign reserves hit an all-time high in November after government spent a record sum intervening in currency markets to curb the yen’s gains and help the export-led economy. According to Ministry of Finance, Japan’s reserves rose to $ 1.3 trillion at the end of November compared with $ 1.21 trillion at the end of October.

According to a London-based research group, Brazil has overtaken Britain as the world’s sixth largest economy. The report maintained that the Asian countries were moving up while European countries were slipping down.

European Banking Authority has warned lenders against being so risk- averse as to prompt a credit crunch. It also said regulators would not allow a cut in lending as a means to meeting regula-tory capital targets.

According to Reuters, Standard & Poor’s is reviewing credit ratings on 50 banks in the Middle East and North Africa under a new set of criteria, a move that could result in higher funding costs for lenders already hit by the eurozone crisis and the Arab Spring revolts.

European Union leaders agreed at a summit in Brussels on Dec. 9 that eurozone states and other nations should provide up to 200 billion euros in bilateral loans to the IMF to help it tackle the zone’s debt crisis.

European leaders agreed in Brussels on Dec. 9 to draft a new treaty for deeper eurozone economic integration. Britain refused to join the 17 euro states and nine other EU countries in the fiscal union.

Japan and China have agreed to start formal talks early in 2012 on a free trade pact that would also include South Korea. Japan reportedly also said it was looking to buy Chinese treasury debt.

lobal BriefsGG

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Pak politics last month

Army Chief Gen. Ashfaq Parvez Kayani has permitted Pak troops to respond to any future aggression by US and Nato troops based in Afghanistan with full force regardless of its conseqences.

In a letter sent to Washington, Pakistan has sought punishmeant for and an apology from those responisble for NATO attack on Pak border posts otherwise Pakistan would be constrained to reconsider its partnership in war of terrorism.

Prime Minister Yousuf Raza Gillani on Dec. 2, ordered review of national security paradigm and relations with US and NATO, but at the same time admitted that remaining aligned with Washington was the best way to achieve peace in Afghanistan.

Pakistan has denied report in Wall Street Journal that Pakistani officials gave the go ahead to the NATO air strikes in Mohmand Agency.

On Dec. 5, Government of Pakistan summoned most of its ambassadors stationed in various parts of the world in order to revamp its foreign policy in the aftermath of recent NATO attacks on Pak. Army in Mohmand Agency.

Interior Minister Rehman Malik on Dec.7 urged the US to take action against Mansoor Ijaz for violating US laws and leveling allegations against the country’s civil and military leadership.

The PCNS has sought from the government the details of all the agree-ments and assurances that Pakistan made with and held out to NATO and the US. The Committee has also chalked out a work plan to investigate Memogate scandal and proceed further on the issue of NATO attacks.

Director General, Military Operations told the Federal Cabinet and the Senate’s Defence Committee on Dec. 8, the Government has decided to deploy air defence weapons on the country’s border with Afghanistan to pre-empt fresh attacks.

Former President Gen.(Retd) Pervez Musharraf said on Dec. 11, that winds of change in the country had started blowing. He urged the youth to come forward and play their due role for bringing an end to the politics of liars and gangsters.

In their replies to Supreme Court on Dec. 15 in Memogate Controversy, Army Chief Gen Ashfaq Parvez Kayani declared the “memo” as a reality, saying a conspiracy was being hatched against the army and the national security.

Foreign Minister Hina Rabbani Khar said on Dec. 15 that a move in the US Congress to freeze $700 million assistance to Pakistan would affect the war on terror and the entire responsibility in case of failure would be on the United States.

On Dec.15, US Ambassy in Islamabad was of the view that $ 700 million in military aid to Pakistan has not been cut, but tied to certificate from Defence Secretary that Pakistan is co-operating in the joint efforts to cooperate in elimina-tion of improvised explosive devices.

Prime Minister Syed Yousuf Raza Gilani told US Ambassador Cameron Munter on Dec. 16 that Pakistan’s redlines should be respected, and that the US must ensure respect of national sovereignty and territorial integrity of Pakistan with the guarantee of non- occurrence of transgression of its frontiers in future.

On Dec. 18, speakers at a rally in Lahore held by Difa-e-Pakistan Council condemned NATO air strike on two border posts in Mohmand Agency last month and giving MFN status to India. They warned that the people would take to roads and stage sittings throughout the country if government restored NATO supply lines for the US forces.

On Dec. 19, the Supreme Court took exception to the Dec. 1 media jibe by the former and incumbent law minister and sought Prime Minister’s reply on the action taken against those who , using

official premises, ridiculed, insulted and criticized the judiciary on memo scandal , if whatever uttered was not the stand of the government.

On Dec. 20, ISPR denied asser-tions contained in an article published in daily Independent , UK that DG ,ISI had met Arab leaders and asked permission for a military coup in Pakistan.

Pakistan’s former Ambassdorr to Washington, Mr. Husain Haqqani appeared before the Abbottabad inquiry commission and said that whatever he did during his three-and- a –half year service was in line of Islamabad’s instructions.

In his rejoinder filed in Supreme Court on Dec. 20, the Army Chief Gen. Ashfaq Pervez Kayani temed the memo an attempt to demoralize the Pakistan Army and reiterated his earlier stance that it was a reality and should be probed.

On Dec. 20, the Supreme Court issued directives to Election Commission of Pakistan to finalise voters lists by Feb. 23, 2012 instead of June 2012 and submit fortnightly report in the apex court on progress made in this regard.

On Dec. 22, Senator Azam Swati filed a petition in the Supreme Court with a plea to constitute a high level commission to investigate the Memo- gate scandal and put the name of President Asif Ali Zardari on ECL till the finalization of the case.

According to military sources, Pakistan Army is fed up with President Asif Ali Zardari and wants him out of office, but through legal means and without a repeat of the coup.

The PPP leadership has decided to take stern action against the defence secretary for allegedly ‘not obeying’ instructions of Prime Minister Yousuf Raza Gilani and submitting an affidavit before the Supreme Court in the form of a declaration that his ministry had no “operational control” over the armed forces and the ISI.

The 9-member bench of Supreme Court headed by Chief Justice of Pakistan decided on Dec. 30 that the petitions filed in the memogate case deserve hearing by the Court and appointed a 3-member special bench to hear these petitions.

ational BriefsNN

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January 2012

Pak economy last month

Economic Coordination Committee (ECC) on Dec.1, approved a bailout package of Rs. 6 billion in the form of bank guarantee for Pakistan Steel Mills (PMS).

SECP has proposed paid-up capital requirement up to Rs. 400 million for stock brokerage houses withing 3 years. Value of KSE membership card will not be counted as part of the capital.

World Bank’s new estimates released on Dec.1, placed Pakistan among top 10 recipients of remittances among developing countries fetching $12 bn this year.

KSE members on Dec. 2 unanimously rejected SECP concept paper on “New Broker’s Registration Regime” entailing brokers minimum capital requirement to be enhanced to Rs. 400 mn

Pakistan and IDB have finalised negotia-tion on Country Partnership Strategy worth $3bn for 3 years.

Inaugurating 5th Pak. Microfinance Conference 2011 on Dec. 2, SBP Governor said SBP has developed microfinance strategic framework 2011-15 to boost micro-finance sector. He said SBP will issue regula-tory guidelines to microfinance banks for upscaling of loans and developing reporting structure to assess geographic distribution of microfinance growth.

Pakistan is seeking a soft loan of $ 300 mn from International Development Association (IDA) of the World Bank group for a project aimed at improving irrigation efficiences.

On Dec.1, White House dismissed the notion of offering an apology to Pakistan over NATO air strike.

SBP Governor said on Dec.2, the current dollar-rupee parity is market driven and the situation will normalise soon. He said, dollar demand increased in domestic market due to oil payments of $700 million in last week of November.

FBR has decided to set up an Anti- Money Laundering Wing to exclusively detect, investigate and prosecute those involved in financial crimes and money laundering through transfer of unexplained funds or undisclosed income abroad.

SBP has with immediate effect revised and streamlined the instructions on forward cover facilities being provided by authorized dealers(banks) against imports and foreign loans.

Nuclear scientist Dr. Samar Mubarak Mand and his team have successfully experi-mented to produce gas from coal reserves present in Thar desert. This will be the biggest project of the world in producing gas through coal. Initially this will generate 100 MW of electricity.

On Dec. 23 Pakistan and China signed six bilateral agreements worth $ 700 million including a currency swap agreement to further bolster their existing trade and economic cooperation.

Pakistan is likely to export 8 lakh cotton bales in the fiscal year 2011-12 that would add up to Rs. 20 billion in the national exchequer, while the country is expecting to import one million cotton bales, including 4-5 lac long-staple cotton bales.

Minister of State for Production Khawaja Sheraz Mehmood informed National Assembly on Dec. 20 that the country’s economy was improving with manufacturing sector growing at a rate of 5.19 percent as compared to 2.6 percent last year.

According to State Bank of Pakistan, the services sector’s trade has posted a deficit of 1.16 billion dollar, up by 18 percent, during the first five months of the current fiscal year mainly due to high imports and slowdown in exports.

The World Bank said on Dec. 22 it will lend up to $ 5.5 billion to Pakistan over three years under a new lending strategy focused on boosting the economy and helping the poorer, less-integrated regions, including tribal areas near the Afghan border. The new strategy will cover the 2012 to 2014 fiscal years and include both loans and grant handouts.

According to SBP, foreign direct investment(FDI) fell by 27 percent during five months (July-November) of current fiscal year, mainly due to lack of foreign investors’ interest owing to adverse law and order situation and energy crisis.

According to the World Bank recent report, the real GDP of Pakistan is projected to expand by 3.9 percent in 2011-12 and by 4.2 percent in 2012-13 while the current account may run small deficits despite expected robust exports and remittances.

The export of traditional products increased by over 20 percent to $ 4.367 billion during the first five months of the current financial year against target of $10 bn

ational BriefsNNOn Dec.8, the Federal Cabinet decided to withdraw electricity subsidy on agricultural tube wells across the country and to install energy meters at all tube wells to ensure an optimum recovery of electricity cost. There are more than 300,000 agricultural tube wells across the country and are charged at flat rates subsidized by the power companies, provin-cial and federal governments. The annual subsidy on this account is estimated at about Rs. 5 billion.

Lar Gunnar Wigmark, EU Ambassador and Head of EU Delegation to Pakistan assured Pakistan on Dec. 8, he would play his role to grant access to Pakistani products in EU markets.

The Economic Coordination Committee of the Cabinet on Dec. 12 decided to import 200,000 tons of urea for the Rabi season and constituted two committees for removal of 16 percent sales tax on agriculture tractors and purchase of 200,000tons sugar from Pakistan Sugar Mills Association.

SBP governor Mr. Yaseen Anwar said on Dec. 15 that Pakistan had made all arrangements for timely payment of foreign loans and there is no concern regarding payment of $ 1.2 billion to IMF during current fiscal year. He said that speculation, euro zone crisis and high oil payments are putting pressure on Pak rupee but SBP will not intervene in the market to stabilize the Pak rupee against the dollar.

On Dec.17, SBP Governor clarified he had not said that “SBP will not intervene in the market to stabilize the Pak rupee against dollar”. What he had said was that “ the SBP had not intervened in the market recently and had let the market forces direct the exchange rate thus far”.

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writing a book entitled “The killing fields of Karachi, a city that refuses to surren-der” that sums up the horrible details of the operations carried out against MQM, then an up-coming opposition party in Sindh. To-date not one word of that book has been disputed, nor the statics of those killed in the operations carried out against MQM. The other unforgettable tragedy during her second term in office as Prime Minister was the assassination of her brother Mir Murtiza Bhutto that was never investigated to the end to establish who was behind his tragic assassination. This tragedy still haunts the PPP and the Bhutto family.

Undeniably, this wasn’t the right start for her political career. The other major weakness of her leadership was the inability to come to a working understanding with the private sector, which could have materialized the long-standing promise and slogan of her party – Roti, Kapra aur Makan. That disconnect with the private sector continues to-date, and no party leader appears at all bothered by the consequences thereof as reflected in rising business closures, higher unemployment and increasing poverty that was exploited each time by the party’s opponents.According to her friend and advisor Mark Siegel she did not tolerate any kind of bigotry or intolerance. When she was elected prime minister in 1988, she asked him to represent her government. he initially hesitated, thinking it might be politically difficult for her to have a Jewish lobbyist in America. “Don’t be ridiculous,” she said. “You stood by us when we were fighting for democracy, and you will be with us as we make a new Pakistan.” Mark Siegel remained her advisor and confidant right up to the end and didn’t want her to return to Pakistan in 2007.Linda Bird Francke, another close friend of Ms. Bhutto felt that Ms. Bhutto thought she had a great sense of intimacy, and would often overrule her advisors. During a campaign tour through Peshawar in the 1980s, the turf of her sworn enemy and fundamentalist warlord Gulbadin Hekmatyar, she told Linda “I believe in destiny. God will call me when it is my time.” In hindsight, it seems that this confidence, though the sign of her remarkable courage for which she will be remembered for years, was, at times excessive. But that’s the case with most great personalities, though the admirers they leave behind often have to pay the price for it. Undoubtedly, PPP supporters regret her loss because the present party leadership lacks her political tact and clear vision. Not only that, the leadership also lacks the eloquence she had been blessed with, that won her many political battles. Z.A. Bhutto died very early, and she did not have the chance to learn the art of politics from him, but she proved that she had acquired many of the master skills her illustrious father was known to possess. Tragically, like her father she wasn’t able to develop the insight for distinguishing between friends and foes.

ecember 27, 2007 is the date that reminds you of another great

tragedy in our history of six decades – the assassination of Ms. Benazir Bhutto. But what makes this tragedy twice as shock-ing as the others is the fact that it took place on the same venue where the country’s first Prime Minister was assassi-nated – Liquat Bagh, Rawalpindi – that came to be known as such thereafter. Another aspect common to both tragedies is that, to-date the plotters of these tragedies have not been caught. In the case of assasination of Ms Benazir Bhutto, another tragedy is that her assas-sins have gone scot free despite the fact that her own party has been in power for almost four years, and Mr Asif Ali Zardari – her husband – is the sitting President of Pakistan, who had earlier claimed he knew who her assassins were.These disappointments aside, Ms. Bhutto remains the focus of the admiration of her supporters as well as her opponents for a very special reason – her remarkable ability for rising from the depths of depression and fighting back. The hanging of her illustrious father Prime Minister Z.A. Bhutto was a tragedy that shook Pakistan and its image all over the world but she was not taken aback. She demonstrated by her conduct that as the eldest child of Z.A. Bhutto she knew her responsibilities very well.It is worth remembering that, following the dismissal of her father’s government and his arrest, many within the PPP parted company with her family and covertly joined hands with Gen. Zia to the point of assuring him that, were he to hang Z.A. Bhutto, there will be no major dissent. In a depressing scenario this setup reflected, she stood with her mother and a minority of the party supporter without bending an inch. The fact that at the age of 29, she agreed to become the co-chairperson of her party showed her metal. The 7-year period until she returned to Pakistan from exile was tough but she did not lose her confidence and had the tenacity, vision and courage to revive PPP to a point where, soon after the exit of Gen. Zia – who thought he had destroyed the PPP – she led PPP to victory in the 1988 elections and, despite President Ghulam Ishaque Khan’s efforts, was able to form a coalition which she headed as the Prime Minister.At 35, she was the youngest Prime Minister, and the first in a Muslim state. But she was far too young to be blessed with the experience that her position called for. This inexperience also sometimes came in the way of distinguishing between friends and opportunists – a weakness that let some opportunists take key positions in her party, and caused her government to fall. It was this very weakness that caused her second government to fall. Tragically, both times she was elevated to the office of the Prime Minister, law and order worsened to previously unseen levels and a reputed political analyst and author like A.B.S. Jafri, a close friend and advisor of Z.A. Bhutto went to the extent of

Benazir Bhutto: a legendthat continues to inspireD

EEditorial

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Mr. Tariq Iqbal KhanMr. Rauf NizamaniMr. Faizan bin Abdul Majid Mr. Iftikhar Mobeen Mr. Shahid ShamimMr. Mubarak Ahmed etc.Mr. Prof. Dr. Anis Ahmad

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January 2012

Evaporating investment �ows – the unheaded warning

he year 2011 was an important year for India – its Rupee depreciated against the US Dollar to its lowest

levels ever. It proved that, after becoming a member of the G-20 courtesy its ballooning foreign trade starting 1991 (when prime minister Manmohan Singh became its Finance Minister) the country had become truly vulnerable to global economic ups and downs. Like the other economic super-powers, India too is on the verge of recording a current account deficit – the first since 1991.At November-end, India’s foreign exchange reserves were over $314 billion. But foreign debt repayable in 2012 alone is close to 48% of this otherwise impressive figure. This is the reflection of overreliance on external resources by sidelining the importance of increasing domestic resources to gradually make the economy self-sustaining. Undeniably, India moved in that direction but it over-expanded (considering its other limitations) its industry, and paid inadequate attention to the key sector for a populous coun-try like India – agriculture.As in China, food shortages in India are now triggering street protests and the Minister of Food and Agriculture faced an embarrassing situation on November 26 – a protestor slapped him. Things could be worse for ministers in other South Asian countries, especially Pakistan, if only the ordinary could come close to their ministers of food because food inflation is the common issue in the regional countries. This is a collective failure reflecting lack of vision on the part of politicians – the class that has now confirmed its incapacities globally.Indeed, foreign flows are not to be discouraged but to rely on them excessively is a clear sign of short-sightedness – a disease that is common among politicians who disregard history and developing macroeconomic trends to their own disadvantage. The economic turmoil of the late 1990s and the one going on now had one clear, though ignored message to offer: there is no substitute for minimizing reliance on external resources.However, it was ignored and the race for industrialization, mostly financed by foreign investors, kept gaining pace at the expense of stagnation or slide in agriculture. This was a huge strategic failure since, to their horror many South and South East Asian economies now find over-capacities (courtesy the global recession) in their industrial sectors and an alarming under-capacity of their food and agriculture sectors to meet demand that is rising with annual popula-tion growth rates in excess of 1.5%.Below-capacity operation by the industry is bound to lead to large layoffs; food inflation could make things worse. This is the key emerging challenge that administrations in these economies must confront. What is adding fuel to the fire is the commonly held perception that, while the going was good, many in the administrations benefitted unfairly either by overlooking or by actively encouraging these self-damaging trends. Indications are that, in not too distant future, Asian ‘giants’ could be in trouble if they fail to take immediate steps to up the output of their agriculture sectors. This scenario applies

to Pakistan with greater severity because its industry (that largely is a producer oflow-cost export items) is suffering not so much on account of loss of export orders but due to the crisis in Pakistan’s power generation sector. The crisis is being compounded by what the government is failing to do in the agriculture sector – inactivity as far as retrieving the flood-affected arable land in Sindh is concerned, and delays in import of seeds, fertilizers and pesticides that caused highly undesirable delays in sowing the next crop.The support the state is providing to the agriculture sector takes only the form of fixing ever-higher purchase prices for the crops. In the context of wheat, this policy will have one sure outcome – rise in the CPI which will then impact the entire monetary system. Further reductions in SBP Discount Rate (and as a result, in bank lending rates) would then be at the cost of increasing negative returns to the savers because profit rates on deposits will have to be slashed.Doing that would amount to further discouraging saving and the consequent cut in reliance on external resources that could be possible if only savings increased. As it is, the state now has to rely entirely on domestic savings to plug its continuously soaring fiscal deficit. With lower savings, banks would be pressed even harder than at present, and would further reduce lending to the private sector. As it is, business and industry suffer on account of power shortages and frequent activity-suspending trouble on the streets; how will they react to the suffocation caused by further reduced credit availability isn’t hard to imagine. Yet, the fiscal deficit may still not be met leading to a default – a possibility hinted at by the SBP Annual Report for 2010-11. The bank response referred to above is visible and it is leading to two clear outcomes: closure of business and, if possible, shifting to nearby countries with more stable economic set-ups. But Pakistan, with annual population growth rate of over 2%, can’t afford this; it could lead to greater chaos than we already see on the streets every day. The focus should shift to repairing and augmenting the power and agriculture sectors to ensure optimal capacity use by the industry and food sufficiency, both at the earliest. That alone could reduce risk-aversion in banks.On the financial front, we must accept that any investment flow from the US and EU is unlikely, at least in the medium term. We need to steadily improve the domestic investment environment to encourage Pakistanis – the ones that we keep threatening with dire consequences–to voluntarily bring their wealth back, given the fact that economic prospects almost everywhere else grow darker, virtually by the hour. If history is anything to go by, a totally overhauled taxation regime that taxes fairly, and the state meeting its obligations by offering taxpayers a fair return in terms of ever-improved public services could lure back the black wealth. Tragically though, you see very little being done in this context. It is this attitude of the government that gives its critics a field day but, rather than put its house in order, it ministers and policymakers consume their energies in sheer politicking to cover up their misdeeds.

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s the recession gains momentum, the single most vicious issue that regimes all over the world confront is

escalation in unemployment. In Pakistan, a more worrying dimension of it is the likelihood of a reduction in inward foreign remittances if Pakistanis employed abroad are either laid off, their entry into foreign countries is restricted or the remittances they are sending home are restricted by the governments of countries they are employed in. Should any of these hurdles crop up, the biggest source of net inflows into Pakistan, that the present government keeps citing as one of its great achievements without having done anything to achieve it, may decline at a time when its foreign exchange reserves will deplete as it starts repayment of the borrowing from IMF. There are indications that these bottlenecks are on their way to being implemented by several countries. Recently, a news item in the Middle Eastern press disclosed that the Kuwaiti government has quietly stopped issuing family visas to Pakistanis. Before that, there were hints in the media that the Saudi government had noted with concern the volume of outward remittances by foreign workers. In the Sultanate of Oman new laws now forbid employing foreigners in excess of 20 percent of the total strength of an organization, private or public. Let us not forget that Oman was one of the several Gulf Arab states that witnessed public outrage against high unemployment as well as low salaries in the state offices, and Oman was the only country that sorted out this issue quickly and credibly.In the United Kingdom, the latest trend is that in meetings in state offices it is now emphasized that preference be given to the “English” in appointments in new jobs since England is primarily for the English. Publicly, however, this will not be admitted by government offices because on the surface, such discrimination is a foul practice that is not permitted at all.We can go on blaming the foreign countries as much as we may like but the fact is that in the present circumstances, it is only logical that governments, especially in democracies, be concerned about increasing employment for their nationals – the electorate that elevates political parties to the corridors of power. That in-power regimes will resort to these tactics was highly likely because of political expedi-ency. Given these expected developments, what we should have focused on was creation of job opportunities in Pakistan by at least sustaining the domestic industrial and commercial activity, and also on the employment opportunities that were being created in other countries faced with aging populations e.g. Japan. However, there is no evidence that any significant effort was made in these contexts, which reflects very poorly on our collective perception of the problems we confront, and the vision about consequences of not resolving them. In recent months, there have been many disclosures about the problems that Japan now confronts due to the aging of

An opportunity that is worth capitalizing on A its populations and low birth rate that, over the years, led to

a shortage of younger people to man Japan’s business and industry, as well as civic services. The rising dearth of young workers poses a challenge to continuing activities in all these sectors that Japan can’t afford. Given Japan’s key role in the global economy, and the fact that it is one of the Asian power houses, Japan deserves to be assisted in meeting this challenge. Other Asian countries have an obligation to Japan and given Japan’s enormous help to Pakistan all over the past six decades, Pakistan must do its bit in assisting Japan in this context. Sadly, the in-power regime has not had the time to examine this option.In spite of the burden of the dark shadows that Pakistan is grappling with – allegations of terrorism – its workers in the Middle East have had almost a clean record while serving in business and industry as well as civic services. This is one big plus that could help initiate a dialogue with Japan on this key issue to explore the possibilities of exporting trained work-ers to Japan for employment in all these sectors.There is, however, a difference; the Arab Gulf states do not require as highly skilled workers as does Japan’s economy for the obvious reason that Japan is a massive industrial power that Arab Gulf states are not. What Japan needs are trained workers with a working knowledge of the Japanese language. Both these attributes can be imparted to Pakistani workers if we can find out from the Japanese their requirements.This will have to be a detailed consultative effort followed by purpose-specific action plan to produce workers with the skills that Japan needs. It will also call for reaching a clear under-standing on the maximum job tenors of Pakistani employees to assure Japan that none of the Pakistani work-ers would settle down permanently in Japan.Depending on the requirements to be specified by Japan we could set up a network of vocational training centers to prepare the required manpower on an on-going basis to meet the periodic requirements of Japan. But the one cause that never attracted the attention of either the present regime or that of the previous regime was developing a country-wide network of vocational training centers. Had this network been developed (as done by some of the NGOs such as the SOS Village) we would have been in an ideal position to negotiate with Japan an accord along the above lines. But this shortcoming should not be a stumbling block because it is never too late to make a good beginning, especially one that will serve the national interests as well for a country whose formal educational system (primary schools, secondary schools, technical training institutes, colleges and universities) has consistently been inadequate for the size of its population.In spite of all the errors that we may have made in the past, it is time to explore this possibility with the Japanese govern-ment and implement a plan that can crystallize it without any further delay. It is a great opportunity worth capitalizing on.

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January 2012

ecember 9 has become another land- mark day in British history. That day

the British prime minister withdrew from the Eurozone deliberations and thereafter the passage of an otherwise unanimously agreed a resolution to levy a new 0.05 percent tax on all financial transactions. The tax is intended to raise additional resources for the 27 EU member states as part of the EU strategy to reduce reliance on sovereign debt. That resolution was passed by a majority of 26 to 1 making Britain the odd exception.To many observers, British prime minister’s walkout from the proceedings reminded them of the blunder committed 56 years ago by another Conserva-tive prime minister – Anthony Eden – when he decided that Britain should opt out of the European Community, which Britain regrets to-date because it lost the opportunity to assume a key role in this club when it was being formed. Instead of sustaining its key role that Britain acquired after the victory at Waterloo and by joining Europe in defeating the Nazi Germany, it gradually diluted it. Today, European politicians have come to the conclusion that “when it comes to Europe our countries are on two different planets.” This manifests a huge but consistent failure of British diplomacy. However, this time, besides the tactless backing of his own party’s backbenchers, the British prime Minister had received what eventually proved very unreliable assurances of support from nine other EU members who had agreed to form a quasi-European Free Trade Forum. The backing out of these nine EU members indicates how, over the years, Britain lost its clout by opting to be a peripheral rather than a key player in EU policy-making. Reputed observers in the British media described the event as the “defining moment” of David Cameron’s premiership without his even recognizing it was happening. In their view, a diplomat, especially a prime minister, must not do anything impulsive if he/she is to avoid being excluded from decision-making at a multi-national forum. Deputy premier and leader of Liberal Democratic Party in the coalition government, Nick Clegg, immediately criticized the prime minister’s stand on this critical issue but, oddly, did not opt for dissociating his party from the coali-tion, giving the impression that he too does not consider this issue to have critical importance for Britain. Britain’s dilemma (that owes itself entirely to the visionless politicking over the past six decades) is that it steadily lost its status as an industrial hub. The loss of the empire, and along with it supply of cheap raw materials, steadily lowered the competitiveness of British industry and its exports. What this scenario called for was modernization of the industrial base to improve its efficiency in terms of resource use and cutting waste.

Instead, this tragedy was made worse by the labour unions that obstructed all efforts at modernizing Britain’s industrial base because it implied cutting the use of human labour. This visionless tendency was supported by Britain’s Labour Party in the name of democracy and civil liberty although what was needed was balancing of civil liberty with Britain’s long-term interests, and the person who played the most questionable role therein was prime minister Harold Wilson – a premier finally forced to exit politics on strong suspicions of being a foreign agent.

Now Britain’s main revenue and employment generating sector is its financial services sector. Despite its questionable conduct (as in fact of this sector everywhere), it continues to rule the roost because questionable practices of trade unions in the industrial sector virtually shut the industries. Britain’s being at the top of the global textile, electronics, automobile and shipping sectors is now a part of history.By walking out of EU’s legislative process, Britain has put itself in a position where it will be unable to influence many other decisions that will affect Britain – a move it will regret for a decade or, perhaps, more. According to foreign policy experts, Britain has sacrificed its long-term interests to satisfy the demands of its financial services sector, which was the driver of the ongoing worst post-WW-II recession.The assumption that by refusing to fall in line by imposing the EU-demanded tax on financial transactions Britain may have sustained London’s attraction as the prime location for financial services may turn into a myth. The scenario being visualized by market observers is that European banks may shift their offices to other EU capitals. Were that possibility to crystallize, it could pose serious problems for Britain from the tax revenue and employment points of view.David Cameron had hoped that his in-camera parleys with the French President and German Chancellor over softening the terms of the tax levy and the proposed regulations of the Basle Accord-III would succeed. But that was overambi-tious. Given Britain’s present standing in the EU and the pressures EU leadership is under, this outcome was highly unlikely. It is no surprise then that, on his return to London, David Cameron took two hours to prepare himself for appearing before the press. Reason: he was not expecting the outcome he suddenly had to justify. Interestingly enough, the deputy premier opted to stay away from the press conference. While political leaderships in countries like Pakistan bother more about personal interests, leaderships in former imperial powers still suffer from a sense of supremacy that they lost decades ago. What makes it worse is that even their present leadership that saw nothing of their imperial grandeur also can’t get rid its hangover. In fact this handicapped leadership wants to revive imperialism. Remember invasion of Libya?

Of the hangover of imperial grandeurD

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Risks embedded in over-popularity

n December 25, Pakistan Tehreek-e- Insaf (PTI) once again attracted a massive crowd to its public meeting

near the Quaid’s mausoleum in Karachi. Indeed, PTI Chair-man Imran Khan has had a clean record in politics and the expectation is that he will live up to that record even when his party gains sizeable public support but, to begin with, the belated popularity of PTI owes itself, to a large extent, to the administrative mess created by the present leadership of the PPP and PML-N. The void this mess has created leaves the masses with fewer options and, for the present, PTI seems to be the better among those available now. But while PTI’s public meetings have been massive, it would be naive on the part of its leader-ship to over-look the fact that, with popularity come a variety of risks, the biggest of them being the exhaustion of public patience with unclear promises.

O

Therefore, to become a strong contender for being elevated to the corridors of power to deliver its promised better governances, what PTI needs to do quickly (which it hasn’t done as yet) is to come up with fairly specific alternatives to the way the state has been managed thus far. This is impera-tive for fulfilling its promise of building a ‘new’ Pakistan or the one ‘envisaged by the Quaid’.Before the public meeting at Karachi, the PTI chairman had promised to announce specific plans for revamping the system, but the party chairman ended up listing the proposed policies that he will place before the electorate for its approval. Indeed, public meetings are not the venues for seeking approval for the policies of the future, but if the policies (by all means in installments) are disclosed over a period of time, in each public meeting reaction to the disclosed policies can be obtained. This isn’t the case thus far.The key promise of the PTI is dispensation of justice in all matters and at all levels to ensure transparency in the

conduct of the state. That is indeed a noble cause because that alone can, over a period of time, bring about a credibly equitable distribution of wealth and eliminate poverty – the mother of all ills. But the imperative therefor is cleansing of the lower judiciary and bureaucracy at all levels, which won’t be an easy task because its ways can’t be mended overnight; nor can its bulk be replaced as quickly. Given this undeniable reality, it sounds excessively optimis-tic to promise the elimination of corruption in 90 days, as done by Imran Khan. It is promises like these that begin to undermine confidence in political parties – a reality that Imran Khan must accept and proceed accordingly. The fact that not just people but politicians too are reposing confi-dence in PTI is encouraging but would prove equally demanding, when it will comes to delivering on promises like the 90-day remedy for corruption.This warning is not intended to discourage PTI but only to trigger a sense of urgency for developing corrective strate-gies and plans that are both credible and practicable given the way things stand courtesy the mess left behind by the Musharraf regime and the one that is being created by the present regime. The other aspect that the PTI chairman must be conscious of is that, while doing everything to make the system much more judicious for the under-privileged is undoubtedly a just cause, it would be unwise to ignore the upper classes. In his address he said something to this effect when he mentioned that the system will be revamped to ensure that the less-privileged reap its benefits, not the rest. Justice demands

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Standard & Poor’s On Dec. 2 said it had downgraded credit ratings of the big four Australian banks as part of changes to the way it assesses risks.

US has urged South Korea to cut imports of Iranian petrochemicals and reduce crude oil imports from the Gulf states.

On Dec. 2, the prosecutor of Interna-tional Criminal Court asked judges for an arrest warrant for Sudan’s defence minis-ter Abdel Rahim Mohamed Hussein for crimes commited in Darfur.

NASA on Dec. 5 said the Kepler space telescope has confirmed its first-ever planet in a habitable zone outside our solar system.

East African leaders on Dec. 5 demanded that the UN security council clamp down on Eritrea for unprovoked invasions flouting interntional law.

High domestic prices have forced exporters in Thailand to seek at least 50,000 tonnes of cheaper rice from Indian and Pakistani origins to deliver to clients.

The 14th Session of Unido’s Conference held in Vienna elected Pakistan as the External Auditor for a third consecutive year for two years.

British Prime Minister David Cameron threatened on Dec. 6 to block a new European Union treaty designed to save the euro from the debt crisis if London’s demands are not met.

Microsoft co-founder Bill Gates confirmed on Dec. 7 , he is in discussions with China to jointly develop a new and safer kind of nuclear reactor.

US Secretary of State Hillary Clinton on Dec. 8, warned internet firms to avoid offering the “tools of oppression” to authoritarian Middle East regimes trying to crush democracy protests.

Japan has offered a “heartfelt apology” for the systematic mistreatment of Canadian prisoners during World War II.

Provincial Ombudsman Sindh, Mr. Asad Ashraf Malik, has been elected Regional Vice President of International Ombudsman Institution, Vienna.

In his first public remarks on Decem-ber 8, Russian Prime Minister Vladimir Putin accused US of stirring up protests against his 12-year rule and said foreign countries were spending hundreds of millions of dollars to influence Russian elections.

Britain’s defence secretary said on Dec. 8, Britain will not expand its role in Afghanistan to take over from departing US troops. White House is moving ahead with plans to withdraw 33,000 of its near 100,000 troops by next September, raising speculation that British soldiers might be used to pick up any slack.

US Republican presidential candidate Newt Gingrich said on Dec. 8, that Pakistan’s nuclear arsenal was at risk of being seized by extremists who had probably infiltrated Islamabad’s military.

On December 11, Russian President Dmitry Medvedev ordered an investigation into allegations of fraud in Russia’s parliamentary election following protesters demand to annul and rerun the election.

Iranian Oil Minister Rostam Qasemi said on Dec. 11, the European Union will not impose sanctions on Iran’s oil exports because such a measure would harm the global crude market.

More than 800 people were reported missing in the southern Philippines on Dec. 18 after flash floods and landslides swept houses into rivers and out to sea, killing more than 650 people .

According to Washiton Post report the Japanese government is considering a dollar swap arrangement with India to

that even within the privileged lot the ones complying with the law and respecting the regulations, are extended all the benefits they merit.The last thing PTI can afford is a class war. Even though in his powerful address in the meeting the respected Makhdoom Javed Hashmi repeatedly called for a revolution, it is worth remembering that revolutions are the most expensive and least desirable ways of bringing about a change. We must not lose our sense of history when calling for a system overhaul. It is worth taking time out and going through Charles Dicken’s “A tale of two cities.”Imran Khan undoubtedly has some admirable pluses; he has had a track record of success in the endeavors he undertook over the years. But the fact that he felt the need to recall all of them in his address showed that he is conscious of the fears his supporters have about his being swayed away by the politicians because he himself is not a politician. That missing attribute can be a plus, but also a minus. If he does stick to his stated policy of transparent screening of his party leaders before giving them party tickets for contesting elections he won’t make the feared errors. But to ensure that politicians don’t ever go off track at anytime, he must prepare and impose very strict codes of ethics that swiftly weed out the violators.The other aspect that needs to be tackled very carefully is the party stand on dealing with the Taliban. PTI stand thus far has been ‘negotiating’ with them. No one would consciously opt for a different course but what needs to be understood clearly is that, not all the Taliban are freedom fighters in the traditional sense. There is a sizeable number of Taliban that has now come to the conclusion that terror is a profitable lifestyle because it brings wealth without working honestly to earn it. Should the PTI prescribe ‘negotiations’ as the route to mend-ing the ways of this lot? History and common sense don’t suggest that.The one very positive aspect of Imran Khan’s address was his emphasis to the need for cleansing the administrative systems – taxation and regulation – that could go a long way in building the confidence of overseas Pakistanis to seriously start invest-ing their savings in Pakistan. This reform must be priority number one right now because, as predicted by the SBP Annual Report, the biggest danger looming over Pakistan in the coming year is default on servicing external debt due to the developing paucity of exchange reserves and steady drying up of external inflows, courtesy the ongoing global economic recession, and the higher country risk associated with Pakistan.In spite of the reservations we may have, PTI deserves our support, especially of the lot that sincerely wants to put Pakistan back on track, because PTI holds out a credible prom-ise.

oliticsPP

January 2012

History of Pakistan Tehreek-e-Insaf:-Pakistan Tehreek-e-Insaf (PTI) was founded by Imran Khan on April 25, 1996 in Lahore, Pakistan with the official slogan of ‘Justice, Humanity and Self Esteem’.-In 1999, when the then Prime Minister Nawaz Sharif, a PML-N politician, was ousted by the Army in a bloodless coup, PTI supported General Musharraf because he believed that General Musharraf would be able to unite the country and lead it forward, away from the internal bickering and impotency of Pakistan's main political parties. Later, he became one of General Musharraf's most vehement critics.-Pakistan Tehreek-e-Insaf's constitution was approved on January 24, 1999 by the Central Executive Committee in Lahore, Pakistan.-In October 2002, Imran Khan ran for office in the National Elections and became a Member of Parliament from Mian-wali, his hometown. PTI supported 2002 referendum, which allowed President Pervez Musharraf to remain in power for another five years.-After Benazir Bhutto was assassinated in 2007 and Nawaz Sharif returned from self-exile, pressure increased upon President Musharraf to hold democratic elections. PTI, in conjunction with many political parties, joined the All Parties Democratic Movement, which was opposed to further military rule. PTI boycotted general elections in 2008.-The Pakistan Tehrik-e-Insaf (PTI) staged a sit-in on April 23, 2011 to block the Nato supplies to Afghanistan in protest against the killing of people in the US drone attacks.-The activists of Pakistan Tehreek-e-Insaaf (PTI) led by its chairman Imran Khan staged a 2 day sit-in on 21-22 May, 2011 at a road leading to Karachi Port to protest transporta-tion of supplies to NATO Forces and drone attacks inside Pakistani territory. -Pakistan Tehreek-e-Insaf (PTI) took out a large rally at the Minar-e-Pakistan ground in Lahore on October 30, 2011. More than 100,000 supporters of PTI gathered as a show of strength in what is traditionally the PML-N stronghold. -Former foreign minister Shah Mehmood Qureshi joined Pakistan Tehreek-e-Insaf in a procession held at Ghotki on 27th November 2011. -Former foreign Minister Khurshid Mahmud Kasuri joined the Pakistan Tehreek-e-Insaf (PTI) in a large procession at Kasoor, Punjab on December 20, 2011. More than 50,000 supporters of PTI gathered. -Veteran political leader of Pakistan Muslim League-Nawaz (PML-N) Makhdoom Javed Hashmi announced his decision to join the Pakistan Tehrik-i-Insaaf (PTI) on 24 December, 2011. He also participated in a massive procession held at Karachi on December 25, 2011. PTI President Imran Khan announced in the procession that former education minister of PPP, Sardar Asif Ahmed Ali is also joining the PTI. The Karachi procession is said to be the turning point in the Pakistani politics as around 200,000 people (according to a safe estimate by the non-state media) gathered in the proces-sion.

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IMF said on Dec.1, it would probably lower its global economic growth, but did not expect a double-dip recession in U.S.

European Union on Dec.1 , tightened its sanctions against Tehran and laid out plans for a possible embargo on Iranian oil in response to mounting concerns in the west over OPEC production’s nuclear work.

On Dec. 2 British PM David Cameron threatened to obstruct a Franco-German drive for swift change to the European Union’s treaty intended to help save the euro as he was not convinced the treaty change was needed to reinforce the single currency zone.

On Dec.5, the leaders of France and Germany agreed a master plan for imposing budget disciplane across the eurozone .

On Dec.5, Britain’s financial regulators slapped a record 10.5 million pound fine on HSBC for mis-selling investments to pay care home costs for older customers.

The head of Norvegian Financial Supervisory Authority told Reuters that Norway’s economy will be hard hit if Europe falls back into recession and the nation’s bank must boost their capital buffers to paper for lending losses.

Banladesh’s annual inflation rose to 11.58% in Nov. from 11.42% a month earlier after the government raised fuel charges for the 3rd time since May.

On Dec. 4, Iran warned the West any move to block its oil exports would more than double crude prices with devastating consequences on a fragile global economy.

Portuguese PM Pedro Passo Coelho said on Dec. 4, failure to find a solution to the eurozone crisis could lead to the end of European Union.

Standard & Poor’s on Dec. 7, put a number of large European banks includ-ing French banks BNP Paribas and Societe Generale, Deutsche Bank and Commerzbank of Germany , and Italy’s UniCredit, on review for a possible downgrade after putting the credit ratings of eurozone states on notice.

On Dec. 7, the European Commission decided to cut aid from 2014 to 19 emerg-ing economies including China, India and Brazil.

The Turkish economy expanded a hefty 8.2 percent in the third quarter beating analysts’ forecasts and offering little evidence that measures to engineer a slowdown have been successful. Turkey has been posting strong growth. Its GDP jumped 9.6 percent in the first nine months of 2011.

According to a document released by the US State Department, Pakistan will continue to be among the top three recipients of American aid in the US fiscal year 2012 as well despite serious differences over the Afghan conflict. Afghanistan tops the list with $ 3,213.4 million, followed by Israel $ 3,075 million and Pakistan $ 2,965 million.

Economic Advisor Arkady Dvorkovich said on Dec. 14 that Russia is willing to pump up to $20 billion through the IMF into rescue funding for indebted eurozone countries.

On Dec. 16, South Korea joined a fresh multinational effort to press Iran to scrap its suspected nuclear weapons pro- gramme, adding more than 100 names to a financial blacklist of Iranian firms and individuals. The measures announced did not include a ban on imports of petro-chemicals or crude oil .

On Dec. 18 Iran reportedly signed a deal worth up to $1 billion with Russia’s Tatneft to develop an oil field, a rare example of new foreign investment into the oil and gas sector of a country under ever tighter economic sanctions. Tehran denies the charge many western compa-nies have pulled out of Iran and few companies from elsewhere have shown enthusiasm to take their place.

IMF, according to its chief Christine Legarde, is almost certain to cut its world growth forecast from the 4.0 percent estimated in September 2011 due to the eurozone debt crisis. She urged european to speak with one voice on the debt crisis that has rattled the global financial system.

O by Faizan bin Abdul Majid

n 8th November, 2011, the Italian PM Silvio Berlus-coni agreed to step down and never run for office

again. In the end, the man who had escaped enough scandals and lawsuits to be the envy of every politician in the world could not overcome markets’ perception of his inability to deal with Italy’s massive government debt and

bring about necessary economic reforms. His replacement, Mario Monti, comes across as a diametri-cally opposite person-ality from the colour-ful ex-PM, being an economist and former European Com- missioner. Monti and his technocrat- heavy cabinet brings what seems to be the most needed to rescue Italy

from its predicament – competence and experience in resolving economic issues. His foremost challenge is to get a budget plan for 2012 approved by the Parliament that would look to increase tax revenues, cut public spending and stimulate economic growth, in order to instill confi-dence among investors that the country will be able to continue servicing its gigantic sovereign debt.Earlier, on 31st October, 2011, the Greek ex-PM George Papandreou was displaced from his post when, with global financial markets nose-diving on Greek sovereign default fears, he announced that the EU bailout plan would be put to a public referendum, effectively putting the economic future of not just Greece but Italy, and consequently the entire Eurozone, to gamble. The decision had to be recalled after enormous pressure from home and abroad, calling into question the amount of serious thought that went into making it in the first place. His replacement is another economist, Lucas Papademos, a former vice president of the European Central Bank. To avoid payments under credit default swaps written on Greek debt, which could fuel further volatility, the Greek government has been in talks with investors to find a ‘voluntary’ compromise to the sovereign debt issue. At the same time, the government needs strict implementation of fiscal reforms. On the latter issue, while an IMF report released in December 2011 has appreciated the new government’s commitment and stance so far, it has also warned about the risk of non-implementation and the potential for increased taxes to kill growth. Markets also continue to be wary of the Greek situation and only a concrete deal with private investors and subsequent imple-mentation of the EU bailout can positively result in at least partial restoration of confidence in Greece.Papandreou’s government wasn’t the first to fall victim to the Eurozone crisis. On 11th October, Slovakia’s first woman PM Iveta Radicova staked her coalition

government’s future by linking a parliamentary vote on expansion of the European Financial Stability Fund to a confidence motion for her government. The parliament voted it down, and as a result the government was effec-tively toppled, although the parliament later approved the EFSF expansion plan by reaching a deal to hold early elections in March next year.However, the Eurozone crisis has not spelled the end for all governments. German chancellor Merkel and French President Sarkozy, as heads of the strongest economies of the Eurozone upon which most of the burden for its rescue and continued existence is expected to fall, have so far tread a delicate line in selling the proposition of burdening their own taxpayers to bail out other countries and getting the requisite support from their legislatures.French banks’ enormous exposure to Italy, and to a lesser extent to Greece, puts them in a very sensitive position. If these countries default, the French banking system could be severely affected, resulting in dire consequences for the economy as a whole. As a result, President Sarkozy has been very active in keeping dialogue going and keeping Germany at the table when bailout plans have been negotiated. Although the French constitution gives the Presi-dent a lot of power, the downside are the steadily declining approval ratings of Mr. Sarkozy coming out of France. This has put his future in the coming elections in doubt-seemingly dependent upon being able to boast of

Political Solutions to Economic Problems

oliticsPP

January 2012

French banks’ enormous ex-

posure to Itlay , and to lesser extent

to Greece, puts them in a very sensi-tive position.

If these coun-tries default.

Outgoing PM Silvio Berlusconi

Greek ex-PM George Papanderous, French President Nicolas Sarkozy along with German Chancallor Angela Mekal

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Page 20: Value Chain (Jan 12)

In their replies to Supreme Court on Dec. 15 in Memogate Controversy, Army Chief Gen Ashfaq Parvez Kayani declared the “memo” as a reality, saying a conspiracy was being hatched against the army and the national security.

Foreign Minister Hina Rabbani Khar said on Dec. 15 that a move in the US Congress to freeze $700 million assistance to Pakistan would affect the war on terror and the entire responsibility in case of failure would be on the United States.

On Dec.15, US Ambassy in Islamabad was of the view that $ 700 million in military aid to Pakistan has not been cut, but tied to certificate from Defence Secretary that Pakistan is co-operating in the joint efforts to cooperate in elimina-tion of improvised explosive devices.

Prime Minister Syed Yousuf Raza Gilani told US Ambassador Cameron Munter on Dec. 16 that Pakistan’s redlines should be respected, and that the US must ensure respect of national sovereignty and territorial integrity of Pakistan with the guarantee of non- occurrence of transgression of its frontiers in future.

On Dec. 18, speakers at a rally in Lahore held by Difa-e-Pakistan Council condemned NATO air strike on two border posts in Mohmand Agency last month and giving MFN status to India. They warned that the people would take to roads and stage sittings throughout the country if government restored NATO supply lines for the US forces.

On Dec. 19, the Supreme Court took exception to the Dec. 1 media jibe by the former and incumbent law minister and sought Prime Minister’s reply on the action taken against those who , using

official premises, ridiculed, insulted and criticized the judiciary on memo scandal , if whatever uttered was not the stand of the government.

On Dec. 20, ISPR denied asser-tions contained in an article published in daily Independent , UK that DG ,ISI had met Arab leaders and asked permission for a military coup in Pakistan.

Pakistan’s former Ambassdorr to Washington, Mr. Husain Haqqani appeared before the Abbottabad inquiry commission and said that whatever he did during his three-and- a –half year service was in line of Islamabad’s instructions.

In his rejoinder filed in Supreme Court on Dec. 20, the Army Chief Gen. Ashfaq Pervez Kayani temed the memo an attempt to demoralize the Pakistan Army and reiterated his earlier stance that it was a reality and should be probed.

On Dec. 20, the Supreme Court issued directives to Election Commission of Pakistan to finalise voters lists by Feb. 23, 2012 instead of June 2012 and submit fortnightly report in the apex court on progress made in this regard.

On Dec. 22, Senator Azam Swati filed a petition in the Supreme Court with a plea to constitute a high level commission to investigate the Memo- gate scandal and put the name of President Asif Ali Zardari on ECL till the finalization of the case.

According to military sources, Pakistan Army is fed up with President Asif Ali Zardari and wants him out of office, but through legal means and without a repeat of the coup.

The PPP leadership has decided to take stern action against the defence secretary for allegedly ‘not obeying’ instructions of Prime Minister Yousuf Raza Gilani and submitting an affidavit before the Supreme Court in the form of a declaration that his ministry had no “operational control” over the armed forces and the ISI.

The 9-member bench of Supreme Court headed by Chief Justice of Pakistan decided on Dec. 30 that the petitions filed in the memogate case deserve hearing by the Court and appointed a 3-member special bench to hear these petitions.

having resolved European economic collapse.The resolution of the Eurozone issue appears impossible without con- siderable German commit- ment. Merkel, Germany’s first female chancellor, heads a stable coalition government since October 2009, but in December 2011 an internal ballot was conducted in junior coali-tion partner Free Demo-cratic Party (FDP) by mem-bers opposed to the Euro-pean Stability Fund, the permanent rescue fund which would entail long

-term German commit- ment to rescuing Eurozone coun-tries. The ballot was, however, defeated and the FDP continues to support the Merket government’s policy on Eurozone bailout, although the FDP’s General Secretary resigned from his post. To appease German lawmakers and public, however, Merkel has continued taking a strong stance of fiscal discipline in bailed out countries, and has been very strict with regards to the overall debt taken on or guaranteed by Germany.The political context of the Eurozone crisis as discussed above highlights the role that democratic processes have played in policy-setting and decision-making in these coun-tries. The need for leadership competent in economics and finance was recognized and met in Italy and Greece, while other governments have also made themselves answerable to the people for faulty policies.The extent of the important role played by politics in finan-cial markets can be observed in how financial history was made earlier this year when, on 5th August, the US suffered its first downgrade ever from the highest credit rating of AAA at the hands of the international credit risk rating agency Standard & Poor’s. The reason cited by S&P was the political brinksmanship and point-scoring displayed by legislators in the face of a pressing need to raise the government’s ‘debt ceiling’ in order to finance committed government payments. Although wrangling between the Democrats and Republicans has continued since, both parties seem to have learned an acceptable level of coopera-tion needed to continue running the country. This was displayed by a USD 1 trillion spending bill that Congress passed on 17th December, hailed as a ‘bipartisan compro-mise’ and an example to be followed of working together to solve the country’s troubles.With global slowdown exposing the structural weaknesses of economic powerhouses, the financial markets have turned their considerable powers of observation and analysis on the words and deeds of political leaders to a greater extent than ever before, serving to highlight the crucial roles these individuals play in deciding the economic destinies of their nations. As a result, mistakes in

oliticsPP

January 2012

Our future eco-nomic outlook and solutions to most of the economic issues facing us, can only be out through comphrehen- sive and con-centrated gov-ernment action.

decision-making are even more highlighted and consequently less tolerated, leading many international observers to express doubts about the competence of elected governments at tackling the important economic and financial issues of their countries.These events demonstrate the role of effectively- functioning democracy in determining the economic future of countries. Policy decisions, when taken through due process of legislation and public debate with an eye to accountability to voters, gives them conservatism, coherence and long-term orientation. They also serve to protect the interests of all the various stakeholders in such decisions rather than merely catering to certain powerful lobbies or interest groups. It also allows the people to decide what sort of approach they would prefer – whether laissez faire choice or strict regulation is the preferred, for example.At the same time, a certain distortion may be introduced in lawmakers’ decision-making perspective by the need to secure their political future by maintaining popular support, face down their opponents and toe the party line. A background in study-ing or making economic decisions and thorough appreciation of their widely-dispersed consequences, especially in a complex, globally integrated economy, may also be needed but missing. These factors underline the limitations of even an efficiently-functioning democracy when it comes to economic decision-making, leading to an inherent political risk to macroeconomic stability in any country, especially in times of depression and crisis.It is sobering for us, as Pakistanis, to remember that the above discussion pertained to the ‘developed countries’, where there is arguably less doubt about the educational qualifications, ethical track records and vested interests of elected officials. We have had the misfortune of reaching the end of our global boom-town phase as an ‘emerging market’ in 2008 with the backdrop of the most widespread and serious global recession and finan-cial volatility in over 7 decades, which threatens to prevent us from following in the footsteps of the BRICS and other potent emerging economies like South Korea, Turkey, and Indonesia in achieving a relatively stable growth stage and permanent rise in general living standards. The additional penalties of being located at a global geopolitical flashpoint, nuclear- state-hood, and international notoriety as a hotbed of religious extremism, remove any lingering doubts about the uniqueness of Pakistan’s situation in the context of developing countries, thus reinforcing the necessity for equally unique solutions to its problems.

BRICs : A grouping of Brazil, Russia, India and China regarded at similar stage of advanced economic development

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Page 21: Value Chain (Jan 12)

Economic Coordination Committee (ECC) on Dec.1, approved a bailout package of Rs. 6 billion in the form of bank guarantee for Pakistan Steel Mills (PMS).

SECP has proposed paid-up capital requirement up to Rs. 400 million for stock brokerage houses withing 3 years. Value of KSE membership card will not be counted as part of the capital.

World Bank’s new estimates released on Dec.1, placed Pakistan among top 10 recipients of remittances among developing countries fetching $12 bn this year.

KSE members on Dec. 2 unanimously rejected SECP concept paper on “New Broker’s Registration Regime” entailing brokers minimum capital requirement to be enhanced to Rs. 400 mn

Pakistan and IDB have finalised negotia-tion on Country Partnership Strategy worth $3bn for 3 years.

Inaugurating 5th Pak. Microfinance Conference 2011 on Dec. 2, SBP Governor said SBP has developed microfinance strategic framework 2011-15 to boost micro-finance sector. He said SBP will issue regula-tory guidelines to microfinance banks for upscaling of loans and developing reporting structure to assess geographic distribution of microfinance growth.

Pakistan is seeking a soft loan of $ 300 mn from International Development Association (IDA) of the World Bank group for a project aimed at improving irrigation efficiences.

On Dec.1, White House dismissed the notion of offering an apology to Pakistan over NATO air strike.

SBP Governor said on Dec.2, the current dollar-rupee parity is market driven and the situation will normalise soon. He said, dollar demand increased in domestic market due to oil payments of $700 million in last week of November.

FBR has decided to set up an Anti- Money Laundering Wing to exclusively detect, investigate and prosecute those involved in financial crimes and money laundering through transfer of unexplained funds or undisclosed income abroad.

SBP has with immediate effect revised and streamlined the instructions on forward cover facilities being provided by authorized dealers(banks) against imports and foreign loans.

Nuclear scientist Dr. Samar Mubarak Mand and his team have successfully experi-mented to produce gas from coal reserves present in Thar desert. This will be the biggest project of the world in producing gas through coal. Initially this will generate 100 MW of electricity.

On Dec. 23 Pakistan and China signed six bilateral agreements worth $ 700 million including a currency swap agreement to further bolster their existing trade and economic cooperation.

Pakistan is likely to export 8 lakh cotton bales in the fiscal year 2011-12 that would add up to Rs. 20 billion in the national exchequer, while the country is expecting to import one million cotton bales, including 4-5 lac long-staple cotton bales.

Minister of State for Production Khawaja Sheraz Mehmood informed National Assembly on Dec. 20 that the country’s economy was improving with manufacturing sector growing at a rate of 5.19 percent as compared to 2.6 percent last year.

According to State Bank of Pakistan, the services sector’s trade has posted a deficit of 1.16 billion dollar, up by 18 percent, during the first five months of the current fiscal year mainly due to high imports and slowdown in exports.

The World Bank said on Dec. 22 it will lend up to $ 5.5 billion to Pakistan over three years under a new lending strategy focused on boosting the economy and helping the poorer, less-integrated regions, including tribal areas near the Afghan border. The new strategy will cover the 2012 to 2014 fiscal years and include both loans and grant handouts.

According to SBP, foreign direct investment(FDI) fell by 27 percent during five months (July-November) of current fiscal year, mainly due to lack of foreign investors’ interest owing to adverse law and order situation and energy crisis.

According to the World Bank recent report, the real GDP of Pakistan is projected to expand by 3.9 percent in 2011-12 and by 4.2 percent in 2012-13 while the current account may run small deficits despite expected robust exports and remittances.

The export of traditional products increased by over 20 percent to $ 4.367 billion during the first five months of the current financial year against target of $10 bn

On Dec.8, the Federal Cabinet decided to withdraw electricity subsidy on agricultural tube wells across the country and to install energy meters at all tube wells to ensure an optimum recovery of electricity cost. There are more than 300,000 agricultural tube wells across the country and are charged at flat rates subsidized by the power companies, provin-cial and federal governments. The annual subsidy on this account is estimated at about Rs. 5 billion.

Lar Gunnar Wigmark, EU Ambassador and Head of EU Delegation to Pakistan assured Pakistan on Dec. 8, he would play his role to grant access to Pakistani products in EU markets.

The Economic Coordination Committee of the Cabinet on Dec. 12 decided to import 200,000 tons of urea for the Rabi season and constituted two committees for removal of 16 percent sales tax on agriculture tractors and purchase of 200,000tons sugar from Pakistan Sugar Mills Association.

SBP governor Mr. Yaseen Anwar said on Dec. 15 that Pakistan had made all arrangements for timely payment of foreign loans and there is no concern regarding payment of $ 1.2 billion to IMF during current fiscal year. He said that speculation, euro zone crisis and high oil payments are putting pressure on Pak rupee but SBP will not intervene in the market to stabilize the Pak rupee against the dollar.

On Dec.17, SBP Governor clarified he had not said that “SBP will not intervene in the market to stabilize the Pak rupee against dollar”. What he had said was that “ the SBP had not intervened in the market recently and had let the market forces direct the exchange rate thus far”.

oliticsPP

January 2012

Mr Faizan bin Abdul Majid is Risk Analyst at Bank Al-Falah Ltd., a graduate student at IBA and CFA level 3 candidate.

At the same time, investment in cost efficiency through efficient management of human resources and supply chains is also needed to make organizations more resilient to political risks. In the meantime, given the usual lack of grace under fire displayed by governments at crunch time, in particular when fiscal austerity and retrenchment are called for, we can only keep our fingers crossed that much-needed responsible decision-making would come from ours before the music stops.

Develop a risk policy that sets the acceptable level of various risks and sets out various objective or subjective tools to help assess risk levels.Identify risks to the organization’s business model, core competencies and supply chains that may arise due to change in laws, regulations and government levies.Hedge or mitigate risks identified that exceed acceptable levels in a cost-efficient manner, and development of contingency plans with regards to possible changes in important regulatory factors affecting the business.

Like any country, our future economic outlook and solutions to most of the economic issues facing us – such as a burgeoning government deficit caused by low tax revenues and dismal performance of state-owned enter-prises, massive domestic government borrowing and consequent crowding out of the private sector from the credit market, threats to key economic sectors including power and agriculture, an unfavourable balance of payments, exchange rate fluctuations, the unattractiveness to foreign investment due to security risks, and the battle with inflation in the face of relentlessly increasing money supply and frequent supply-side shocks, can only be out through comprehensive and concentrated government action. Tough decisions aimed at fiscal austerity, broaden-ing of the tax net, restructuring of SOE’s for greater efficiency, and realignment of incentives to the private sector with broad national interests are the need of the hour. At the same time, however, the government is faced with urgent political problems, such as keeping together its coalition partners, fending off attacks from the opposi-tion, and trying to rescue faltering foreign relations. As the situation in other countries amply demonstrates, economic realities often take a back seat to political expe-diency, so there is a risk that policies in the greater national interest that may alienate some interest groups from the government may continue to be put off.In the prevailing uncertainty, the private sector must continue to monitor the political situation closely. At the same time, more focus is needed on a risk management approach for all businesses, employing a three-step approach to:

2011 Worst Year for Trade and IndustryEngineer Sohail Lashari, Chairman, Pakistan Industrial and Traders Associations Front ( PIAF ) has termed the year 2011 as the worst year for trade and industry which is likely to eclipse the entire economic activity in 2012 as well if the future business-related policies were made without private sector consultation. He said that an acute shortage of gas, electricity, repeated increases in the prices of petroleum products and issuance of anti-trade and anti-industry SROs by the FBR were the prominent features that kept the entire economy hostage during the year 2011.Mr. Lashari said that despite repeated appeals to the government, no heed was paid to the construction of mega water reservoirs in the country for ensuring cheaper electricity to the trade and industry and resultantly the prices of electricity were almost doubled that pushed the export oriented industry to the wall. Instead, preference was given to rental power projects that have eaten up a staggering amount of Rs. 50 billion during 2011, he regret-ted. The PIAF Chairman observed that no work was done to complete Iran-Pakistan gas pipeline which is the shortest possible solution to overcome the problem of gas shortage. Similarly, no reforms were initiated for the public sector enterprises that are eating up Rs. 400 billion annually from

21

Mr. Lashari said that the loss borne by Pakistan Steel Mills had reached Rs. 104 billion while the production came down to 15 percent as against 82 percent in 2007-08. Similarly, IA suffered a loss of Rs. 1.5 billion per month in 2011 while Pakistan Railways faced huge losses on many counts with a number of trains put off the track either permanently or temporarily disbanded. Had a little atten-tion been paid towards creating economic activity in the country, the unemployment graph would have been much lower today, he added.

Engr. Sohail Lashari

Page 22: Value Chain (Jan 12)

Wishing you a Happy & Prosperous

Wishing you a Happy & Prosperous

609, Clifton Centre, Khayaban-e-Roomi, Block-5, Clifton, Karachi. Tel : 021-35293377-80, Fax : 35293382URL:http://www.kgtraders.org

Karachi Hyderabad Sukkur Rahimyarkhan Multan Gujranwala Faisalabad Lahore Islamabad

6

writing a book entitled “The killing fields of Karachi, a city that refuses to surren-der” that sums up the horrible details of the operations carried out against MQM, then an up-coming opposition party in Sindh. To-date not one word of that book has been disputed, nor the statics of those killed in the operations carried out against MQM. The other unforgettable tragedy during her second term in office as Prime Minister was the assassination of her brother Mir Murtiza Bhutto that was never investigated to the end to establish who was behind his tragic assassination. This tragedy still haunts the PPP and the Bhutto family.

Undeniably, this wasn’t the right start for her political career. The other major weakness of her leadership was the inability to come to a working understanding with the private sector, which could have materialized the long-standing promise and slogan of her party – Roti, Kapra aur Makan. That disconnect with the private sector continues to-date, and no party leader appears at all bothered by the consequences thereof as reflected in rising business closures, higher unemployment and increasing poverty that was exploited each time by the party’s opponents.According to her friend and advisor Mark Siegel she did not tolerate any kind of bigotry or intolerance. When she was elected prime minister in 1988, she asked him to represent her government. he initially hesitated, thinking it might be politically difficult for her to have a Jewish lobbyist in America. “Don’t be ridiculous,” she said. “You stood by us when we were fighting for democracy, and you will be with us as we make a new Pakistan.” Mark Siegel remained her advisor and confidant right up to the end and didn’t want her to return to Pakistan in 2007.Linda Bird Francke, another close friend of Ms. Bhutto felt that Ms. Bhutto thought she had a great sense of intimacy, and would often overrule her advisors. During a campaign tour through Peshawar in the 1980s, the turf of her sworn enemy and fundamentalist warlord Gulbadin Hekmatyar, she told Linda “I believe in destiny. God will call me when it is my time.” In hindsight, it seems that this confidence, though the sign of her remarkable courage for which she will be remembered for years, was, at times excessive. But that’s the case with most great personalities, though the admirers they leave behind often have to pay the price for it. Undoubtedly, PPP supporters regret her loss because the present party leadership lacks her political tact and clear vision. Not only that, the leadership also lacks the eloquence she had been blessed with, that won her many political battles. Z.A. Bhutto died very early, and she did not have the chance to learn the art of politics from him, but she proved that she had acquired many of the master skills her illustrious father was known to possess. Tragically, like her father she wasn’t able to develop the insight for distinguishing between friends and foes.

ecember 27, 2007 is the date that reminds you of another great

tragedy in our history of six decades – the assassination of Ms. Benazir Bhutto. But what makes this tragedy twice as shock-ing as the others is the fact that it took place on the same venue where the country’s first Prime Minister was assassi-nated – Liquat Bagh, Rawalpindi – that came to be known as such thereafter. Another aspect common to both tragedies is that, to-date the plotters of these tragedies have not been caught. In the case of assasination of Ms Benazir Bhutto, another tragedy is that her assas-sins have gone scot free despite the fact that her own party has been in power for almost four years, and Mr Asif Ali Zardari – her husband – is the sitting President of Pakistan, who had earlier claimed he knew who her assassins were.These disappointments aside, Ms. Bhutto remains the focus of the admiration of her supporters as well as her opponents for a very special reason – her remarkable ability for rising from the depths of depression and fighting back. The hanging of her illustrious father Prime Minister Z.A. Bhutto was a tragedy that shook Pakistan and its image all over the world but she was not taken aback. She demonstrated by her conduct that as the eldest child of Z.A. Bhutto she knew her responsibilities very well.It is worth remembering that, following the dismissal of her father’s government and his arrest, many within the PPP parted company with her family and covertly joined hands with Gen. Zia to the point of assuring him that, were he to hang Z.A. Bhutto, there will be no major dissent. In a depressing scenario this setup reflected, she stood with her mother and a minority of the party supporter without bending an inch. The fact that at the age of 29, she agreed to become the co-chairperson of her party showed her metal. The 7-year period until she returned to Pakistan from exile was tough but she did not lose her confidence and had the tenacity, vision and courage to revive PPP to a point where, soon after the exit of Gen. Zia – who thought he had destroyed the PPP – she led PPP to victory in the 1988 elections and, despite President Ghulam Ishaque Khan’s efforts, was able to form a coalition which she headed as the Prime Minister.At 35, she was the youngest Prime Minister, and the first in a Muslim state. But she was far too young to be blessed with the experience that her position called for. This inexperience also sometimes came in the way of distinguishing between friends and opportunists – a weakness that let some opportunists take key positions in her party, and caused her government to fall. It was this very weakness that caused her second government to fall. Tragically, both times she was elevated to the office of the Prime Minister, law and order worsened to previously unseen levels and a reputed political analyst and author like A.B.S. Jafri, a close friend and advisor of Z.A. Bhutto went to the extent of

Page 23: Value Chain (Jan 12)

he Annual Report of the State Bank of Pakistan (SBP) has, traditionally, been the least biased report on the perfor-

mance of the government of the time. This year, this key report too was published with non-traditional delay – in December instead of October. But it was forthright in describing the state of the economy, pointing to the flaws therein that reflected bad governance by saying “in the final analysis, all the economic problems highlighted above can be traced to poor governance.” In the last four years, oddly three out of four SBP Governors expressed regrets over gover-nance; it reflects on the capacity of the present regime to manage the economy that was suffering the consequences of the global recession and devastating floods in 2010 and 2011.According to SBP, “Pakistan fared poor ly when compared to its neighbours in South Asia” because the economy grew only by 2.4 percent in FY11. While floods kept, nearly 6.6 million of Pakistan’s manpower was jobless for 2 to 3 months and, capital stock worth $2.6bn (1.2 percent of GDP) was lost, there was a lot that could be done (but was not) to prop up economic growth.Estimates of the Planning Commission suggest that about 3-4 percent of GDP may have been lost due to power outages in FY11, with a concentrated impact on the manufacturing sector but the strategy adopted by the government to tackle the issue – commissioning of the RPP “was misplaced as Pakistan is operating well below its installed capacity due to the circular debt.” Consequently the manufacturing sector suffered a big setback and registered a negative growth (of negative 0.1 percent) over FY10.Growth in services was 4.1 percent. Though lower than the target 4.7 percent, it still accounted for 90 percent of real GDP growth – an odd event in an economy in which, traditionally, bulk of the growth was accounted for by the real sector. Partly, this development also reflected the growing risk-aversion in the banking sector that caused credit expansions to virtually freeze. What the SBP report did not mention as clearly was the fact that risk- aversion in Pakistan’s banking sector also con- tributed to a negative sentiment among investors and decline in foreign investment flows. But the bigger share of the blame lies with the government because loss-making PSEs – Pakistan Railways, PIA and Pakistan Steel (“classical examples of the heavy cost of poor governance” according to the SBP) added to risk percep-tion and dampened the incentive for investment. Together, these trends contributed to a significant reduction in the growth rate of investment to 13.4 percent – lowest since FY74; this will have adverse con- sequences because slow-down in expansion of the country’s industrial base will increase the number of the unemployed because population growth is still among the highest in the world. It is indeed amazing that a regime that prides in calling itself the “peoples” regime is not bothered about the future of the people. That this goes on day

Denying harsh realities – a self-deluding pastime T

by A.B Shahid

in day out is the nation’s greatest tragedy. Fiscal management was at its worst when one looks at the rise in public debt which posted an increase of Rs 1.763 trillion in FY11, pushing up the public debt to Rs 11 trillion or nearly 60.9 percent of the GDP, and interest payments jumped to almost one-third of the GDP.The government failed in all its fiscal reform strategies – the imposition of General Sales Tax, enlarging the tax net to also cover the agri- culture sector, phasing out of subsidies (which, in fact, were tripled) and restructuring of public sector enter-prises – all meant to increase the tax revenue and contain its waste. Even the realized tax revenue of Rs 1.7 trillion fell short of the target by as much as Rs 160 billion. As a matter of fact, the tax collection figure announced by the FBR was later contested and FBR admitted that due to a complex process of “consolidation” it was initially over-stated. One stark reflection of the failure of the state to deliver is the trend in tax collection. The year-on-year increase in taxes could not even keep pace with nominal GDP (the base for taxation), which means tax revenues actually fell in real terms. The paucity of funds this trend created led to excessive borrow-ing. As a consequence, throughout FY11 the government kept o n slashing its planned public sector development

outlay and also resorted to bank borrowing that set a new record. During FY11 foreign inflows dropped by a hefty 45.8 percent, and accord-ing to SBP, the funding received during FY11 was largely utilized “for the servicing of external debt”, not for a productive use.The only plus was that external debt servic-ing was timely and no mishaps took place but much of the credit therefor goes to Pakistanis em- ployed abroad; they remit-ted much more via the banking channel, and thus official exchange reserves sufficed to service the external debt.

B u t things don’t appear as satisfactory as w e enter 2012.W h i l e external debt servicing will go up by $ 1 . 4 billion over its last year level on a c c o u n t of repayments to the IMF, besides a rise in the trade and current account deficits t h e payment for expenses incurred on account of the coalition forces stationed in Afghanistan will be repaid by the US govern-ment with a delay that is hard to predict; that’s the high cost of having strategic allies like the US and depending on them. In early December, SBP had expressed its worries over this developing gap but (perhaps under government pressure) it then diluted its stance. But realities don’t change even if we try to project to the public their softer profiles. What is more likely is that, to our collective dismay, we may end up unprepared for facing up to them when they surface. Given the current profile of governance and the concern shown so far for reforms in the taxation system and public sector enterprises, government will find it hard to contain the

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its populations and low birth rate that, over the years, led to a shortage of younger people to man Japan’s business and industry, as well as civic services. The rising dearth of young workers poses a challenge to continuing activities in all these sectors that Japan can’t afford. Given Japan’s key role in the global economy, and the fact that it is one of the Asian power houses, Japan deserves to be assisted in meeting this challenge. Other Asian countries have an obligation to Japan and given Japan’s enormous help to Pakistan all over the past six decades, Pakistan must do its bit in assisting Japan in this context. Sadly, the in-power regime has not had the time to examine this option.In spite of the burden of the dark shadows that Pakistan is grappling with – allegations of terrorism – its workers in the Middle East have had almost a clean record while serving in business and industry as well as civic services. This is one big plus that could help initiate a dialogue with Japan on this key issue to explore the possibilities of exporting trained work-ers to Japan for employment in all these sectors.There is, however, a difference; the Arab Gulf states do not require as highly skilled workers as does Japan’s economy for the obvious reason that Japan is a massive industrial power that Arab Gulf states are not. What Japan needs are trained workers with a working knowledge of the Japanese language. Both these attributes can be imparted to Pakistani workers if we can find out from the Japanese their requirements.This will have to be a detailed consultative effort followed by purpose-specific action plan to produce workers with the skills that Japan needs. It will also call for reaching a clear under-standing on the maximum job tenors of Pakistani employees to assure Japan that none of the Pakistani work-ers would settle down permanently in Japan.Depending on the requirements to be specified by Japan we could set up a network of vocational training centers to prepare the required manpower on an on-going basis to meet the periodic requirements of Japan. But the one cause that never attracted the attention of either the present regime or that of the previous regime was developing a country-wide network of vocational training centers. Had this network been developed (as done by some of the NGOs such as the SOS Village) we would have been in an ideal position to negotiate with Japan an accord along the above lines. But this shortcoming should not be a stumbling block because it is never too late to make a good beginning, especially one that will serve the national interests as well for a country whose formal educational system (primary schools, secondary schools, technical training institutes, colleges and universities) has consistently been inadequate for the size of its population.In spite of all the errors that we may have made in the past, it is time to explore this possibility with the Japanese govern-ment and implement a plan that can crystallize it without any further delay. It is a great opportunity worth capitalizing on.

ress Release fiscal deficit, which stood at 6.6 percent of the GDP at the end of FY11 against its target of 4 percent. According to the SBP, “in the current state of Pakistan’s economy, there is no wiggle room left.” Having said that, the SBP also goes on to add that, “even if preliminary steps are taken soon, the magnitude of the task is such that results will not be forthcoming in the near future; hence, financing fiscal deficit gap in FY12 will be very challenging.”Real GDP Growth (percent)Years Countries B’Desh China India Pakistan S. Lanka2006 6.5 12.7 9.5 5.8 7.72007 6.3 14.2 10.0 6.8 6.82008 6.0 9.6 6.2 3.7 6.02009 5.9 9.2 6.8 1.7 3.52010 6.4 10.3 10.1 3.8 8.02011 6.3 9.5 7.8 2.4 P 7.0This scenario is made even tougher by the fact that the IMF still hasn’t issued a Letter of Comfort to help Pakistan negotiate with the Asian Development Bank and the World Bank. With dim prospects for external funding, the burden will once again fall on domestic sources. But with CPI still in double digits, chances of a significant rise in savings are dim and hence of the government getting more of these savings via the banking sector. The fact is that the regime wasted its time in mere politicking while the economy steadily slipped. Throughout the past four years observers have been pointing to the unabated rise in government’s current expenditure that is being funded out of ever higher debt, in fact, higher currency printing that has kept inflation in double digits. In FY11 rise in inflation hit a year-on-year high of 21.3 percent that had clearly obvious though undocumented, consequences in terms of rising poverty.It has been suggestted by analysts that the poverty line may have crossed the 40 percent line (or even higher), which explains why the Economic Planning Commission has yet to come out with its latest estimate of the poverty line. This is another example of how realities are being denied but the fact is that it is no longer possible to deny them; they manifest themselves in the public demonstrations that go on in one or the other town of Pakistan.The failure in expanding the domestic energy base, that began in the Musharraf era continued during the past four years and is now worsening the economic and investment scenario. Power load-shedding is taking its toll on the economy as a whole; it is forcing the industry to operate below its capacity and has been forced to lay off thousands of daily wage, contracted as well as regular employees, which is adding to frustrations and felling dissent. How severe is the energy crisis is reflected by the fact that Pakistan was rated 166 in the context of electricity supply.Energy shortages are impacting not just commercial and indus-trial activity but domestic life as well but its worst impact is yet to crystallize when CNG stations may be shut down for a month in Sindh. This could hit millions of citizens dependent on CNG-based transport vehicles. SBP blames weak governance for the ongoing slide in the economy when it says that “cross-country comparison shows that institutional weakness at all levels of government (judiciary; civil service; law enforcement; regulatory bodies and agencies for oversight and accountability) are directly responsible for poor economic growth. These institutions, put together, make up the governance structure of an economy.” SBP’s stand is

justified on the findings of the recent World Bank report wherein, in the context of ease of doing business, Pakistan slipped from 96th to 105th place in global ranking, and in the listed 185 countries. Therefore SBP has recom- mended that the “political leadership must take credible steps to stop the slide.” This is a repeat of what every Pakistani has been saying for the past four years. What is visible though is a harsh reality – the one thing the political leadership is least bothered about is economic uplift; it doesn’t have time for addressing the woes that are crippling the economy. Least bothered about the mess it has created over the past nearly four years, the sole concern of the coalition is to somehow stay in power for another year. The regime is least concerned about whether it has the credentials anymore to stay in power. The regime faults all those who point to the fact that, via its reckless conduct thus far, it has lost the credentials for staying in office. What it refuses to do is look inside its own shirt. The logic of its spokespersons is that the regime has the right to stay in power because it has been elected by the people. Whether the regime fulfilled its obligations to the electorate or failed in that effort during its term is inconsequential.What the regime routinely keeps emphasizing is the peoples’ “mandate” it holds and the wholly unquestionable authority of the parliament although NADRA’s disclosures about accuracy of the electoral rolls (basis of the 2008 elections) are shocking. According to the Election Commission of Pakistan, roughly 78 million were on the electoral rolls, 45 percent of the entries in these rolls were unverifiable, and just one third of the voters cast their vote. Impliedly, just about 18 percent (one-third of the remaining 55 percent of genuine voters) elected the parliament, and coalition parties received about 60 percent of the votes cast. Effectively, the coalition parties got just about 11 percent of the genuine votes. So much for the acclaimed peoples’ “mandate” that the regime has! Even if this limited mandate is taken as credible, what has the regime done so far for the benefit of the electorate and the state? In spite of its performance that has been criticised everywhere newspapers supplements on the birthday of the Father of the Nation were filled with state-sponsored advertisements claim-ing success that are invisible on the ground. They marked yet another effort in denying realities about poor state of adminis-tration that is hurting economic growth.

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ecember 9 has become another land- mark day in British history. That day

the British prime minister withdrew from the Eurozone deliberations and thereafter the passage of an otherwise unanimously agreed a resolution to levy a new 0.05 percent tax on all financial transactions. The tax is intended to raise additional resources for the 27 EU member states as part of the EU strategy to reduce reliance on sovereign debt. That resolution was passed by a majority of 26 to 1 making Britain the odd exception.To many observers, British prime minister’s walkout from the proceedings reminded them of the blunder committed 56 years ago by another Conserva-tive prime minister – Anthony Eden – when he decided that Britain should opt out of the European Community, which Britain regrets to-date because it lost the opportunity to assume a key role in this club when it was being formed. Instead of sustaining its key role that Britain acquired after the victory at Waterloo and by joining Europe in defeating the Nazi Germany, it gradually diluted it. Today, European politicians have come to the conclusion that “when it comes to Europe our countries are on two different planets.” This manifests a huge but consistent failure of British diplomacy. However, this time, besides the tactless backing of his own party’s backbenchers, the British prime Minister had received what eventually proved very unreliable assurances of support from nine other EU members who had agreed to form a quasi-European Free Trade Forum. The backing out of these nine EU members indicates how, over the years, Britain lost its clout by opting to be a peripheral rather than a key player in EU policy-making. Reputed observers in the British media described the event as the “defining moment” of David Cameron’s premiership without his even recognizing it was happening. In their view, a diplomat, especially a prime minister, must not do anything impulsive if he/she is to avoid being excluded from decision-making at a multi-national forum. Deputy premier and leader of Liberal Democratic Party in the coalition government, Nick Clegg, immediately criticized the prime minister’s stand on this critical issue but, oddly, did not opt for dissociating his party from the coali-tion, giving the impression that he too does not consider this issue to have critical importance for Britain. Britain’s dilemma (that owes itself entirely to the visionless politicking over the past six decades) is that it steadily lost its status as an industrial hub. The loss of the empire, and along with it supply of cheap raw materials, steadily lowered the competitiveness of British industry and its exports. What this scenario called for was modernization of the industrial base to improve its efficiency in terms of resource use and cutting waste.

Instead, this tragedy was made worse by the labour unions that obstructed all efforts at modernizing Britain’s industrial base because it implied cutting the use of human labour. This visionless tendency was supported by Britain’s Labour Party in the name of democracy and civil liberty although what was needed was balancing of civil liberty with Britain’s long-term interests, and the person who played the most questionable role therein was prime minister Harold Wilson – a premier finally forced to exit politics on strong suspicions of being a foreign agent.

Now Britain’s main revenue and employment generating sector is its financial services sector. Despite its questionable conduct (as in fact of this sector everywhere), it continues to rule the roost because questionable practices of trade unions in the industrial sector virtually shut the industries. Britain’s being at the top of the global textile, electronics, automobile and shipping sectors is now a part of history.By walking out of EU’s legislative process, Britain has put itself in a position where it will be unable to influence many other decisions that will affect Britain – a move it will regret for a decade or, perhaps, more. According to foreign policy experts, Britain has sacrificed its long-term interests to satisfy the demands of its financial services sector, which was the driver of the ongoing worst post-WW-II recession.The assumption that by refusing to fall in line by imposing the EU-demanded tax on financial transactions Britain may have sustained London’s attraction as the prime location for financial services may turn into a myth. The scenario being visualized by market observers is that European banks may shift their offices to other EU capitals. Were that possibility to crystallize, it could pose serious problems for Britain from the tax revenue and employment points of view.David Cameron had hoped that his in-camera parleys with the French President and German Chancellor over softening the terms of the tax levy and the proposed regulations of the Basle Accord-III would succeed. But that was overambi-tious. Given Britain’s present standing in the EU and the pressures EU leadership is under, this outcome was highly unlikely. It is no surprise then that, on his return to London, David Cameron took two hours to prepare himself for appearing before the press. Reason: he was not expecting the outcome he suddenly had to justify. Interestingly enough, the deputy premier opted to stay away from the press conference. While political leaderships in countries like Pakistan bother more about personal interests, leaderships in former imperial powers still suffer from a sense of supremacy that they lost decades ago. What makes it worse is that even their present leadership that saw nothing of their imperial grandeur also can’t get rid its hangover. In fact this handicapped leadership wants to revive imperialism. Remember invasion of Libya?

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he US is mired in an unemployment crisis, Europe faces double-dip recession, and Japan's economy has

experienced two decades of stagnation. Under such circum-stances a logical policy by governments in developed coun-tries would concentrate all efforts on improving their domestic situation. However in reality, economic resources have been diverted into costly military issues.In the US, military expenditure has risen 10 times as fast as household consumption, while government non-military expenditure has fallen. This continues a longer trend. Since the beginning of the 21st century, US GDP, in inflation-adjusted terms, has increased by 21 percent, US govern-ment non-military spending by 11 percent, and US personal consumption by 28 percent, while military expenditure increased by 52 percent. The US is the world's strongest military power. It states its economy is the world's most competitive, although it clearly faces current difficulties. Increased productive expenditure on R&D, innovation and infrastructure would therefore seem called for rather than higher military expenditure financed by large and destabilizing US budget deficits. But instead of US government investment rising, it has fallen as a percentage of GDP since the beginning of the financial crisis in parallel with rising military spending. Similarly the UK government spent $450 million on military action in Libya at the same time as it made massive cuts at home. Such economic steps are in line with "neo-con" thinking. This school of thought, despite its protestations to the contrary, actually lacks confidence in US ability to compete in peaceful economic development. It notes that on World Bank data the US economy has fallen from 39 percent of global GDP in 1960 to 23 percent in 2010 and a parallel decline of large US companies - in the last seven years the share of revenue of US corporations in the Forbes Global 2000, the world's largest companies, has fallen from 39 percent to 31 percent.The neo-cons argue that as the US is losing its once- domi-nant position in economic competition, questions should be transferred from the economy to the military field where the US is strongest. China is the main enemy in such think-ing, as it is the country which has been most successful economically. Majority of the US population believe the Iraq war was a mistake and want a withdrawal from Afghanistan. The logic of the Occupy Wall Street movement, by calling for increased spending on US job creation, supports reductions in military expenditure.Do you remember the Troubled Asset Relief Program (TARP) bailout? The American people were absolutely outraged that the federal government spent 700 billion dollars bailing out the "too big to fail" banks. Well, that bailout was pocket change compared to what the Federal Reserve did. The Federal Reserve actually handed

Who Ruled the World?

T by Iftikhar Mobeen

more than 16 trillion dollars in nearly interest-free money to the "too big to fail" banks between 2007 and 2010. Keep in mind that the GDP of the United States for the entire year of 2010 was only 14.58 trillion dollars.The total U.S. national debt is only a bit above 15 trillion dollars right now. So 16 trillion dollars is an almost inconceivable amount of money.The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs - was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled. Add up guarantees and lending limits and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that yearAccording to the Government Accountibility Office (GAO) audit, $16.1 trillion in secret loans were made by the Federal Reserve Bank between December 1, 2007 and July 21, 2010. The following list of firms and the amount of money that they received was taken directly from page 131 of the GAO audit report:Citigroup - $2.513 trillion; Morgan Stanley - $2.041 trillion; Merrill Lynch - $1.949 trillion; Bank of America - $1.344 trillion; Barclays PLC - $868 billion; Bear Sterns - $853 billion; Goldman Sachs - $814 billion; Royal Bank of Scot-land - $541 billion; JP Morgan Chase - $391 billion; Deutsche Bank - $354 billion; UBS - $287 billion; Credit Suisse - $262 billion; Lehman Brothers - $183 billion; Bank of Scotland - $181 billion; BNP Paribas - $175 billion; Wells Fargo - $159 billion; Dexia - $159 billion; Wacho-via - $142 billion; Dresdner Bank - $135 billion; Societe Generale - $124 billion."All Other Borrowers" - $2.639 trillion.In addition, it turns out that trillions of dollars of this bailout money actually went overseas. According to the GAO audit, approximately $3.08 trillion went to foreign banks in Europe and in Asia. Also, it is important to remember that many of these bailout loans were made at below market interest rates, and this enabled many of these financial institutions to rake in huge profits.While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrow-ing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to

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a press release at the time.The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion.Today, the "too big to fail" banks are larger than ever. The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.Most Americans do not realize this, that the Federal Reserve is not part of the government. In fact, The Federal Reserve has admitted that they are a privately owned institution in court many times.In Europe each time a new player is presented we find he is a Goldman Sachs’ alumnus. Recent entries are Mario Monti “appointed” PM of Italy, Lucas Papademas “appointed” PM of Greece and Mario Dragahi “appointed” President of the European Central Bank (ECB). The banks blatantly control governments and agencies presenting with an oligarchy, which controls most of the nations on the planet. What has happened in this process is that Goldman Sachs, JPMorgan Chase and other mega-banking has retained power for decades. They control all the players in the field, so the outcome is always in their favor. The bankers and others in turn are paid via billions of dollars in bonuses. Banks are now bank holding companies having become that to avoid failure as brokerage firms. That is the case in the US, UK and Europe.Funding costs on a 10-year bond level are up and they look like they are going to stay there. Major countries are still paying close to 7%, which is the highest funding cost since the creation of the euro. The spread between French and German rates is about 2%, which is unheard of. The euro continues to be hammered vs. the dollar and the same is happening worldwide in stock markets. Most two-year paper has risen in yield over the past month. France is paying close to 4% versus 40% in Germany and in the US 28%. In Europe these bond markets could not function without the assistance of the ECB and the money and credit creation of sovereign governments, some banks are showing desperate signs. The biggest bank in Italy, Unibank, has to refinance $51 billion of bonds shortly. Their bond yields are now over 10%. Only the ECB can bail them out like the Fed bailed out banks in the US and Europe three years ago.This transpires 70% of Americans are unaware of the seriousness of what is taking place in Europe. Wait until 2012. Banks alone have to raise $660 billion of maturing debt, most 10-year paper is selling above 7-1/4%, which is a sign that they all need the help; Greece, Ireland and Portu-gal have already received. Remember, we are talking $6 trillion just to bail these countries out and to keep their economies going sideways. The solvent countries cannot

come up with that kind of money without failing them-selves. You have to ask why did the bankers let things go so far? They deliberately impeded the system, because they cannot be that stupid. Then there is the matter of capital flight. This year Greek banks have lost 20% of their deposits. We hope they bought gold and silver. We ask are Italian and Spanish deposits next? Over in Hungary, Moody’s has cut their debt to non-investment grade. The situation is unsustainable, but we wouldn’t be surprised if this phase lasted into late January. Remember, Europe virtu-ally closes down from December 7th until January 10th. Thus the future of the European banking system is in dire trouble. We wonder how many derivative failures there are and what their consequences could be? At last we heard from the US government, US bank exposure was $670 billion, mostly in credit default swaps. If the six European countries default on their debt, US banks cannot possibly stay solvent. The knack on contagion could take the US banking system down with it. In Europe there is no ques-tion that all European banks will have to be recapitalized by the countries in which they do business. In fact, it has already begun, just as it did in the US three years ago. That makes their currencies worth much less and gold and silver worth much more. This is the greatest risk the EU has ever faced and as yet no one has any solutions. The euro and the entire 27-country union are at risk. This as we predicted has no solution. The weaker states have to be cut loose and the euro has to be phased out. Article 123 of the EU Treaty, prohibiting mon-etary financing or central bank funding of govern- ment, is illegal. That certainly is a stopper. That means the euro zone

and the EU are trapped by their treaty and would have to change the treaty and, of course, the outcome would be massive inflation. If they stick to the treaty the euro will collapse. All they want is survival. On the other hand, Germans are unwilling to sacrifice their credibility or to abandon the legal path. Crisis or no crisis, there is no reason to break the rules for those who have already broken them. Mon-etary inflation is the direct result of bailout and purging the system is the only solution for the long-term. We do not think Germany will abandon the rules and their principals. That means

they are prepared to cut loose the six insolvents and hope the core euro nations can hold together. It is not only infla-tion, but credibility and trust as well.A parallel logic operates in Europe. Sections of the media attempt to blame the continent's debt crisis on "lazy Euro-peans." But in fact the crisis is worst in southern (Conti)

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Europe which has longer working weeks and lower social protection than in north European countries such as Germany.A lot of confusion exists in the US and Europe about China. Their popu- lations know China is growing and becoming an increasingly impor- tant factor in the world. But as this is a recent develop ment they do not yet know what China wants. Despite such confusion, and while these economic and political develop- ments in the US and Europe center on domestic issues, they will affect China. "Neo-con" policies would face China with a military buildup. But if move- ments seeking to redirect resources from military spending to job creation and social welfare are successful, this will benefit everyone.

expected to touch 10,000 MW in another two years, according to a report prepared by the Sustainable Develop-ment Policy Institute of Pakistan (SDPI). The report projects the demand to more than double in 10 years to 42,000 MWThe country has hydel power potential of over 120,000 MW, of which 56,773 MW is exploitable. However, it has only been able to tap 6,703 MW. This is about six per cent of the potential and 32.8 percent of the energy mix.Pakistan plans to buy 1000MW electricity from Tajikistan. Tajik plans to sell electricity to Pakistan from Roghun hydroelectric dam. It is a part of the Central Asia-South Asia Regional Energy and Trade project, also known as CASA-1000. The dam is being built on the Amu Darya River, which also runs through Uzbekistan and benefits Turkmenistan. The project will provide cheapest power that costs around five cents per unit. It envisages a 750-kilometre long High Voltage Direct Current (HVDC) power line to Pakistan through Afghanistan. In the years ahead, Kyrgyzstan will use the transmission line to sell 300MW to Pakistan and Afghanistan. It is for this reason that Pakistan, Afghanistan, the Kyrgyz Repub-lic and Tajikistan have agreed to set up a special purpose vehicle to lay the line through Sangtuda (Tajikistan), Kabul (Afghanistan) and Peshawar (Pakistan).Pakistan: Hub of New “Great Game”In 2007, China and Pakistan inaugurated Gwadar Port in Pakistan’s Balochistan Province along the Arabian Sea, creating the first major point in an “energy corridor” which would eventually bring oil from the Gulf overland through Pakistan into China. China financed the building of the port city for $200 million, with plans to fund billions more worth of railroads, roads, and pipelines which would link Gwadar Port to China. Pakistan is strate-gically placed in the Centre of the new ‘Great (conti)as

Source: Budget of the United States Goverment, Fiscal Year 2012, Historical Table” , - Summary of Receipts, Outlays and Surpluses or deficits :1920-2015. http://www.gpoaccess. gov/usbudget/fy12/hist.html

Since the beginning of 2008, Pakistan’s economic outlook has taken stagnation. Secu-rity concerns stemming from the nation’s role in the War on Terror have created great instability and led to a decline in FDI from a height of approximately $8bn to $3.5bn for the current fiscal year. Concurrently, the insurgency has forced massive capital flight from Pakistan to the Gulf. Combined with high global commodity prices, the dual impact has shocked Pakistan’s economy, with gaping trade deficits, high infla-tion and a crash in the value of the Rupee, which has fallen from 60-1 USD to over 90-1 USD in a few months. For the first time in years, it may have to seek external funding as Balance of Payments support.Pakistan’s industrial sector accounts for about 24% of GDP. Cotton textile production and apparel manufacturing are Pakistan’s largest industries, accounting for about 66% of the merchandise exports and almost 40% of the employed labor force. Other major industries include cement, fertilizer, edible oil, sugar, steel, tobacco, chemicals, machinery, and food processing.If we analyze the economic situation of Pakistan in the last 5-years, World Bank, and SBP reports indicate that GDP growth rate decreased from 5.7 per cent in 2005 to 2.3 per cent in 2011, and inflation climbed from 11 per cent to 27 per cent. During the same time, the external debt witnessed a gargantuan increase of 24 billion dollars and poverty levels deteriorated from 35 percent to 60 percent.Pakistan Power Nirvana?Cheap power is Pakistan's dream. The power shortfall is presently estimated at over 6,000 MW and is increasing. It is

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government’s future by linking a parliamentary vote on expansion of the European Financial Stability Fund to a confidence motion for her government. The parliament voted it down, and as a result the government was effec-tively toppled, although the parliament later approved the EFSF expansion plan by reaching a deal to hold early elections in March next year.However, the Eurozone crisis has not spelled the end for all governments. German chancellor Merkel and French President Sarkozy, as heads of the strongest economies of the Eurozone upon which most of the burden for its rescue and continued existence is expected to fall, have so far tread a delicate line in selling the proposition of burdening their own taxpayers to bail out other countries and getting the requisite support from their legislatures.French banks’ enormous exposure to Italy, and to a lesser extent to Greece, puts them in a very sensitive position. If these countries default, the French banking system could be severely affected, resulting in dire consequences for the economy as a whole. As a result, President Sarkozy has been very active in keeping dialogue going and keeping Germany at the table when bailout plans have been negotiated. Although the French constitution gives the Presi-dent a lot of power, the downside are the steadily declining approval ratings of Mr. Sarkozy coming out of France. This has put his future in the coming elections in doubt-seemingly dependent upon being able to boast of

French banks’ enormous ex-

posure to Itlay , and to lesser extent

to Greece, puts them in a very sensi-tive position.

If these coun-tries default.

Game’, a nomenclature for the great imperial battles over Central Asia in the 19th century. Pakistan is neighbor to Iran, India, China, and Afghanistan, with a coastline on the Arabian Sea. Thus, Pakistan is situated between the oil-rich Middle East and the natural gas-rich Central Asian countries, with two of the fastest growing economies in the world – India and China – as energy-hungry neigh-bors, with the imperial presence of America in neighbor-ing Afghanistan, with its eye focused intensely on neigh-boring Iran. A ‘Great Game’ ensues, drawing in Russia, China, India and America, and the main focus of the game is pipelines.The Gwadar Port city built by Chinese investments is destined to be a central hub in the pipeline politics of the ‘Great Game,’ in particular between the competing pipe-line projects of the Trans-Afghan Pipeline (TAP or TAPI), involving a pipeline bringing natural gas from Turkmenistan through Afghanistan, Pakistan, and into India; and the Iran-Pakistan-India pipeline (IPI).In 2010, Pakistan and Iran signed the agreement, and are willing to either allow India or China to be the beneficiary of the pipeline. Whether going to India or China, Gwadar Port will be a central hub in this project. Pakistan has now been seeking direct help from China on the Iran-Pakistan pipeline project. The U.S., for its part, warned Pakistan against signing onto a pipeline project with Iran, yet Pakistan proceeded with the project .The southern Pakistani province of Balochistan is home to oil, gas, copper, gold, and coal reserves, not to mention, it is the strategic corridor through which the pipeline projects would run, and is home to the strategically signifi-cant port city of Gwadar. For the past fifty years. Balo-chistan has been a major hub of Chinese investment and opportunity, with Chinese companies having poured $15 billion into projects in the province, including the construction of an oil refinery, copper and zinc mines, and of course, Gwadar Port. The two countries have cooperated on a variety of large-scale infrastructure projects in Pakistan, including highways, gold and copper mines, major electricity complexes and power plants, and numerous nuclear power projects. With roughly ten thousand Chinese workers engaged in 120 projects in Pakistan, total Chinese investment, which includes heavy engineering, power generation, mining, and telecommunications--was valued at $4 billion in 2007 and is expected to rise to over $15 billion by 2012.Middle East: Centre of Economic ImportanceGCC, six states of the Gulf Cooperation Council – Saudi Arabia, Kuwait, UAE, Qatar, Bahrain and Oman – as being at the, Centre of the Middle East economically and politi-cally. There are a number of factors involved here. First, of course, is the question of oil. The GCC's supplies of oil and gas are among the highest in the world. The huge levels of surplus capital that have accrued in the region as a result of sales of crude oil, gas and petrochemicals. These ‘petrodol-lars’ have been a key feature in the development of the global financial architecture.

China: The Next Global Power in the Making In early March 2011, China’s National People’s Congress approved its 12th Five-Year Plan. This Plan is likely to go down in history as one of China’s boldest strategic initiatives.In essence, it will change the character of China’s economic model–moving from the export– and investment-led structure of the past 30 years toward a pattern of growth that is driven increasingly by Chinese consumers. This shift will have profound implications for China, the rest of Asia, and the broader global economy.The 12th Five-Year Plan will do precisely that, focusing on major pro-consumption initiatives. China will begin to wean itself from the manufacturing model that has underpinned export- and investment-led growth. While the manufacturing approach served China well for 30 years, its dependence on capital-intensive, labor-saving productivity enhancement makes it incapable of absorbing the country’s massive labor surplus. China’s trade with India, Indonesia, Japan, Pakistan and Vietnam is increasing at a far faster rate than that of the US. Even Australia is heavily dependent on mineral exports to China. The US economy is in no condition to replace China as a market for Asian or Australian commodity and manufacturing exports. The Asian countries must be acutely aware that there is no future advantage in tying themselves to a declining, highly militarized, empire. The age of Asian “comprador capitalists”, willing to sell out national industry and sovereignty in exchange for privileged access to US markets, is ancient history.

January 2012

EEconomy

28

Government of Pakistan market treasury billsTenders for Sale of 3-Months, 6-Months & 12-Months Government of Pakistan Market Treasury Bills were invited by the State Bank of Pakistan, Karachi through Primary Dealers from December 27 to 28, 2011. Bids were opened at 11:30 hours on December 28, 2011 which was received as follows:

Maturity Period

Cut - Off Yield

Weighted Avg. Yield

Realized Amount

Face Value

11.8283 11.8283 200.054 205.500

B I D S R E J E C T E D

11.9019 11.9019 41.566 46.500

241.620 252.000

Out of the above bids, the accepted bids are as under:

Rs. In Millions

Realized Value Face Value03-Month

03-Month

20,952.039 21,530.500 06-Month

06-Month

2,169.605 2,300.000

12-Month

12-Month

41.566 46.500

Total

Total

23,163.210 23,877.000

Page 29: Value Chain (Jan 12)

having resolved European economic collapse.The resolution of the Eurozone issue appears impossible without con- siderable German commit- ment. Merkel, Germany’s first female chancellor, heads a stable coalition government since October 2009, but in December 2011 an internal ballot was conducted in junior coali-tion partner Free Demo-cratic Party (FDP) by mem-bers opposed to the Euro-pean Stability Fund, the permanent rescue fund which would entail long

-term German commit- ment to rescuing Eurozone coun-tries. The ballot was, however, defeated and the FDP continues to support the Merket government’s policy on Eurozone bailout, although the FDP’s General Secretary resigned from his post. To appease German lawmakers and public, however, Merkel has continued taking a strong stance of fiscal discipline in bailed out countries, and has been very strict with regards to the overall debt taken on or guaranteed by Germany.The political context of the Eurozone crisis as discussed above highlights the role that democratic processes have played in policy-setting and decision-making in these coun-tries. The need for leadership competent in economics and finance was recognized and met in Italy and Greece, while other governments have also made themselves answerable to the people for faulty policies.The extent of the important role played by politics in finan-cial markets can be observed in how financial history was made earlier this year when, on 5th August, the US suffered its first downgrade ever from the highest credit rating of AAA at the hands of the international credit risk rating agency Standard & Poor’s. The reason cited by S&P was the political brinksmanship and point-scoring displayed by legislators in the face of a pressing need to raise the government’s ‘debt ceiling’ in order to finance committed government payments. Although wrangling between the Democrats and Republicans has continued since, both parties seem to have learned an acceptable level of coopera-tion needed to continue running the country. This was displayed by a USD 1 trillion spending bill that Congress passed on 17th December, hailed as a ‘bipartisan compro-mise’ and an example to be followed of working together to solve the country’s troubles.With global slowdown exposing the structural weaknesses of economic powerhouses, the financial markets have turned their considerable powers of observation and analysis on the words and deeds of political leaders to a greater extent than ever before, serving to highlight the crucial roles these individuals play in deciding the economic destinies of their nations. As a result, mistakes in

decision-making are even more highlighted and consequently less tolerated, leading many international observers to express doubts about the competence of elected governments at tackling the important economic and financial issues of their countries.These events demonstrate the role of effectively- functioning democracy in determining the economic future of countries. Policy decisions, when taken through due process of legislation and public debate with an eye to accountability to voters, gives them conservatism, coherence and long-term orientation. They also serve to protect the interests of all the various stakeholders in such decisions rather than merely catering to certain powerful lobbies or interest groups. It also allows the people to decide what sort of approach they would prefer – whether laissez faire choice or strict regulation is the preferred, for example.At the same time, a certain distortion may be introduced in lawmakers’ decision-making perspective by the need to secure their political future by maintaining popular support, face down their opponents and toe the party line. A background in study-ing or making economic decisions and thorough appreciation of their widely-dispersed consequences, especially in a complex, globally integrated economy, may also be needed but missing. These factors underline the limitations of even an efficiently-functioning democracy when it comes to economic decision-making, leading to an inherent political risk to macroeconomic stability in any country, especially in times of depression and crisis.It is sobering for us, as Pakistanis, to remember that the above discussion pertained to the ‘developed countries’, where there is arguably less doubt about the educational qualifications, ethical track records and vested interests of elected officials. We have had the misfortune of reaching the end of our global boom-town phase as an ‘emerging market’ in 2008 with the backdrop of the most widespread and serious global recession and finan-cial volatility in over 7 decades, which threatens to prevent us from following in the footsteps of the BRICS and other potent emerging economies like South Korea, Turkey, and Indonesia in achieving a relatively stable growth stage and permanent rise in general living standards. The additional penalties of being located at a global geopolitical flashpoint, nuclear- state-hood, and international notoriety as a hotbed of religious extremism, remove any lingering doubts about the uniqueness of Pakistan’s situation in the context of developing countries, thus reinforcing the necessity for equally unique solutions to its problems.

Lack of good governance is said to be one of the several factors inhibiting growth and progress of several countries around the world. Self

centeredness, greed, insecurity, ignorance, are some of the traits that contrib-ute to bad governance. Corruption is one of the main obstacles that block the consolidation of good governance. Corruption is a widespread phenomena affecting all societies to different degrees and at different times. It is enigmatic and an intrinsic part of the way the state has operated in many countries rendering it almost impossible and impracticable to remodel and transform itself into a welfare state in line with other developing and developed countries where people enjoy the rights and opportunities they deserve.Where corruption persists millions remain uneducated or under-educated leading to a life of misery and disgrace. Lacs of people die of hunger and disease. A multitude of the masses are deprived of legal cover in case of need. This is all because public money which should have been spent in education, health and other sectors of public welfare are scrupulously looted, directly or indirectly, by those in position of influence and authority. Pakistan is no exception.Hard evidences of corruption are intrinsically difficult to obtain because of the secrecy shrouding the illegal deals but there are several ways which help in providing proxies of the extent of corruption in different fields of human activities. One such source is the surveys conducted by Transparency Inter-national.A recent survey conducted by Gallup Pakistan under the aegis of Transpar-ency International-Pakistan, to measure the perceptions, nature, and extent of corruption being faced by consumers of ten selected public sector departments came up with results which are revealing and eye-opening. Salient features of the findings are reproduced hereunder.1. Police which ranked as the most corrupt sector in 2002, 2006, 2009 and 2010 has improved . In 2011, this sector ranks second with Land Revenue taking the top rank as most corrupt department.2. Education and Military are the least two corrupt departments.3. Corruption in Income Tax, Customs and Tendering & Contracting, ranked at 3rd, 7th and 6th most corrupt in 2011 compared to 8th, 9th and 10th in 2010. 4. Judiciary rank has slipped from 6th most corrupt department to 4th most corrupt department in 2011.The findings were based on a nationally representative survey of over 2,500 Pakistani men and women adults from a cross-section of rural and urban areas of all the four provinces and included persons of various age, education and linguistic backgrounds. The field work was conducted during October 2011. The mode of interview was in-home face to face. The focus of the study was on reputation of corruption among the users of various services in the country including those which are generally considered to deliver a private service, such as education, health, electricity supply or a public service such as police, justice/courts, military, revenue authorities , taxation and customs.Reputation of corruption might be earned by the scale at which an agency deals with the ordinary citizen than the volume of damage it causes to the harmed party. Therefore, the respondents were asked whether they had ever dealt with a given agency and if they had, whether they perceived it as corrupt or clean. Based on this approach the national opinion poll came up with the findings in two parts. Part-1 deals with the percent of people claim-ing they engaged in some business with a list of agencies during the recent 12 months. Part-2 then asks those who had an engagement on whether they found the agency “clean” or “corrupt”.

Gallup Survey 2011 on Corruption: Good governance needed to root it out

Table 1:

ENCOUNTER WITH SERVICE PROVIDERS

Department % of population who say they had an encounter with the agency during last 12 months

Police 18 Electricity Supply

20

Health Dept.

39

Education Dept.

25

Military

3

Judiciary / Courts

6

Revenue / Property Registration

10

Taxation

6 Customs 4

Tendering & Contracting 4

January 2012

EEconomy

29

Question: In the recent 12months, did you or your family get a chance to contact any of the following institutions or not? (Ask separately for each and mention answers in the grid below)

Table 2:

REPUTATION OF CORRUPTION

Department

Electricity Supply

Health Dept.

Education Dept.

Military

Judiciary / Courts

Revenue / Property Registration

Taxation

Customs

Tendering & Contracting

Question: Only ask about those institutions for which the respondent said they encountered the Dept. during last 12 months)

% of encountered population which says 'I felt compelled to pay a bribe'

Police 544515

911

46

625226

43

Page 30: Value Chain (Jan 12)

Rooting out Corruption Rooting out corruption which is rampant in ranks and files is urgent and important. But a crack down on this wide-spread menace is not that easy and simple a task. It requires the will and determination firm enough to be reckoned with. Lust for power and greed are persistent and can be like a contagious disease which run widely and cunningly in corrupt environments. This brings into sharp focus the need for strong and progressive governance systems that ensure fairness, accountability, independent and transpar-ent auditing, and tough legislation, besides corporate and civil culture based on rewarding talent and instilling values and honest work ethics. We need to build our nation with strong systems of ethics and morality which will practically and relentlessly act as deterrents against corruption of all kinds.

2011 Ranking

2010 Ranking

2009 Ranking

2006 Ranking

2002 Ranking

1. Land Administration Police Police Police Police

2. Police Power Power Power Power

3. Taxation Land Admin Health Judiciary / Courts Taxation

4. Judiciary / Courts Education Land Admin Land Admin Judiciary /

Courts

5. Power Local Government Education Taxation Custom

6. Tender ring &Contracting Judiciary Taxation Custom Health

7. Customs Health Judiciary / Courts Health Land Admin

8. Health Taxation Local Govt. Education Education 9. Military Custom Custom Railway Railway 10. Education Tendering &

Contracting Tendering & Contracting

Bank Bank

Comparative Results

Department

% of population who say they had an encounter with the agency during last 12 months

% of encounteredpopulation which says‘I felt complled to pay a bribe’

Police 18 54

Electricity Supply 20 45

Health Dept 39 15

Education Dept 25 9

Military 3 11

Judiciary / Courts 6 46

Revenue / Property Registration 10 62

Taxation 6 52

Customs 4 26Tendering &Contracting 4 43

Table 3

January 2012

EEconomy

30

MATRIX OF PUBLIC ENCOUNTER AND REPUTATION OF CORRUPTION

Education: According to Pakistan Social and Living Measurement (PSLM) Survey data (2010‐11), the overall literacy rate (age 10 years and above) is 58% (69% for male and 46% for female) in 2010-11 compared to 57.4% (69.3% for male and 44.7% for female) in 2008‐09. Literacy remains higher in urban areas (74%) than in rural areas (49%) and more in men (69%) compared to women (58%). When analyzed provincially, literacy rate in Punjab stood at (60%) followed by Sindh (59%), Khyber-Pakhtunkhwa (50%) and Balochistan at (41%). The literacy rate of Punjab has improved considerably during 2004‐05 to 2010‐11. Adult literacy rate (age 15 and above) has also increased from 50% in 2004‐05 to 55% in 2010‐2011.

Health: According to Pakistan Economic Survey 2011 Pakistan stands as one of the world’s most populous countries with a population of 187 million. The annual population growth rate has declined from over 3 percent in 1960s and 1970s to present level of 1.573 percent per annum.

Medical Professionals Available (2010-2011)

MBBS Doctors DentistsNursesPopulation per DoctorPopulation per Dentist Population per Nurse

144,90110,50873,2441,222

16,5842,557

Page 31: Value Chain (Jan 12)

Cover Story

January 2012

As the year 2011 came to a close, everyone wondered without much hope about where we will go from where

we had ended up in 2011 because all indications were that what lies ahead will be tougher than what had been experi-enced. Indeed that’s the case, not just with Pakistan but most other countries on this planet with the exception of a handful such as Canada, Malaysia and Singapore; if Libya had not been bashed for Gaddafi’s defiant stance, it too could be a part of this distinguished group.Forecasts by the IMF, World Bank, Asian Development Bank and IFC are not very encouraging because all these institutions opine that growth will drop further and impact countries in proportion, firstly to their popula-tions and then to their ability to gather more resources to repair the holes in their econo-mies created by living beyond means for extended periods of time.The US and the EU group of countries confront challenges of a variety but the biggest of them is the indebt-edness of the govern-ments and the private sector; that tragedy is worsened by the risk-aversion now characterizing the financial service sectors that aren’t prepared to finance even marginally risky businesses. This tendency (reflecting bankers’ loss of confidence in their lending skills) is aggra-vating the crisis because, unless the wheels of business and industry once again start moving, the worker populations that were laid off by the millions cant’ be reemploy-ed. The damaging outcome of this developing scenario will have consequences for everyone including reluctant bankers.But the worst sufferers will be the in-power regimes who are now being blamed for sleeping over the developing crisis, and quite rightly so. What makes their position worse is the fact that they are focusing more on ‘politicking’ rather than on putting the economies back on track – a tragedy that presents its worst picture in Pakistan.The pre-occupation of both government and the opposi-tion with abusing each other publicly is convincing

2012: Moving the wheel of economyis the only way forward

people that the one thing that our politicians are wholly unfit for is governance – a perception that may damage the image of democracy for long, which won’t be good for the country but politicians will have none other to blame except themselves.What this scenario called for was implementing measures that built confidence in institutions’ delivery capability (e.g. in the power generation sector) to assure the risk-averse bankers that many of the risks they were fearful of won’t be crystallize. How low a priority of the government is this consideration is not too difficult to surmise.The SBP Annual Report for 2010-11 pointed to governance

as the key failure of the sitting regime in re-structuring public sector enterprises, im- position of GST, expansion of the tax net to include agri- culture sector and rationally phasing out the sub-sidies (that in fact tripled). This profile of management of the economy led to excessive indebtedness of the state, which debt servicing accounting for a third of the state revenue.In democracies, gover- nments come and go but what provides continuity to the state all through is the bureaucracy. Coun- tries that nurtured prof- essional, honest and competent bureau- cracies continued to move forward; the best example thereof is

Japan. We, unfortun- ately didn’t do so, and are paying the price for it. The challenges listed above are a reflection of the fact that, not just the politicians but the bureaucracy is as much to blame for the problems we confront.

In spite of these negatives there is always a ray of hope – a truly responsi- bility conscious lot that keeps doing its bit, no matter how bad the times. An example thereof is the group headed by Dr. Samar Mubarak Mand that has successfully completed the gasification of coal in the Thar area. While this committed team has done its job, this success can’t translate into real benefits for the economy unless the state or the private sector provides it the resources to convert coal into gas on mass scale to feed Pakistan’s fuel-starved power generation sector.

31

Page 32: Value Chain (Jan 12)

in day out is the nation’s greatest tragedy. Fiscal management was at its worst when one looks at the rise in public debt which posted an increase of Rs 1.763 trillion in FY11, pushing up the public debt to Rs 11 trillion or nearly 60.9 percent of the GDP, and interest payments jumped to almost one-third of the GDP.The government failed in all its fiscal reform strategies – the imposition of General Sales Tax, enlarging the tax net to also cover the agri- culture sector, phasing out of subsidies (which, in fact, were tripled) and restructuring of public sector enter-prises – all meant to increase the tax revenue and contain its waste. Even the realized tax revenue of Rs 1.7 trillion fell short of the target by as much as Rs 160 billion. As a matter of fact, the tax collection figure announced by the FBR was later contested and FBR admitted that due to a complex process of “consolidation” it was initially over-stated. One stark reflection of the failure of the state to deliver is the trend in tax collection. The year-on-year increase in taxes could not even keep pace with nominal GDP (the base for taxation), which means tax revenues actually fell in real terms. The paucity of funds this trend created led to excessive borrow-ing. As a consequence, throughout FY11 the government kept o n slashing its planned public sector development

outlay and also resorted to bank borrowing that set a new record. During FY11 foreign inflows dropped by a hefty 45.8 percent, and accord-ing to SBP, the funding received during FY11 was largely utilized “for the servicing of external debt”, not for a productive use.The only plus was that external debt servic-ing was timely and no mishaps took place but much of the credit therefor goes to Pakistanis em- ployed abroad; they remit-ted much more via the banking channel, and thus official exchange reserves sufficed to service the external debt.

B u t things don’t appear as satisfactory as w e enter 2012.W h i l e external debt servicing will go up by $ 1 . 4 billion over its last year level on a c c o u n t of repayments to the IMF, besides a rise in the trade and current account deficits t h e payment for expenses incurred on account of the coalition forces stationed in Afghanistan will be repaid by the US govern-ment with a delay that is hard to predict; that’s the high cost of having strategic allies like the US and depending on them. In early December, SBP had expressed its worries over this developing gap but (perhaps under government pressure) it then diluted its stance. But realities don’t change even if we try to project to the public their softer profiles. What is more likely is that, to our collective dismay, we may end up unprepared for facing up to them when they surface. Given the current profile of governance and the concern shown so far for reforms in the taxation system and public sector enterprises, government will find it hard to contain the

Cover Story

January 2012

Regrettably, we don’t see that happening. This does not bode well for 2012. Besides political and social instability, energy shortfall is one of the biggest distractions that is keep investors (domestic as well as foreign) away from Pakistan. This does not reflect well on Pakistan’s democ-racy; if anything, it conveys the economic ignorance of the harsh ground realities in the regime governing Pakistan.While it has been proved all over the world that democra-cies are failing because they allow the incompetent to manage that huge institution called the ‘state’, what is making things worse is a collective loss of a sense of responsibility because the private sector too isn’t living up to its tradition of being more visionary than the state. Isn’t it odd that despite booking NPLs equal to 14 percent of their risk assets, banks are admirably profitable? This develop-ment reflects a wholly self-centered attitude though, in reality, in the long-term it is a reflection of a self-destructive tendency, which is least expected of the bankers.Indeed there were many occasions wherein the state rebuffed fairly rational and equitable propositions of the private sector, but those instances should not permanently damage the innova-tive abilities of the private sector. Nor should this lead to shift- ing of businesses to other countries that is now becoming a favored alternative. In this land of ours there is a lot that hasn’t been discovered and utilized for the benefit of its people. To abandon this land in quest of wealth would be disloyalty of the umpteenth degree. Besides, how many can find a place elsewhere, and on what terms? Those quitting their own land can’t negotiate favorable terms of business anywhere. In the present circumstances we must build a stronger desire for discovering and utilizing what we have been blessed with to cut dependence on external resources. It is time we adopted self-sufficiency as a part of our faith because short of that we cannot emerge from the seemingly bottomless pit of debt that far exceeds our capacity to repay, and thus become a less risky country in the perception of the rest of the world.What is required is the revamping of the entire system that has grown vulnerable to nepotism, corruption, low accountability, and resource waste. Actions required to go about revamping the system to make 2012 a better year include the following:

What makes this imperative is the fact that we will face tough times after we repay on a timely basis our maturing liabilities to foreign lenders wherein the IMF will now be the new entity. According to available statistics and projec-tions, about 2012, things don’t look very promising. Last year (excluding the IMF) external debt servicing cost Pakistan $5.78bn. To this burden will be added $1.4bn repayable to the IMF making the burden $7.18bn. In 2012, imports are expected to touch $41bn and exports (hopefully) could touch $25bn leaving a trade deficit of $16bn. Of this deficit, inward remittances could pay $13bn still leaving a deficit of $3bn. In addition to this net deficit, $7.18bn will have to be paid on account of total external debt servicing. The combined effect of the two will be to pull the foreign exchange reserves down from their current level of $16.7bn to, say $7bn, assuming that the US pays at least a part of the amount due from it for the costs Pakistan has already incurred on account of coalition forces operating in Afghanistan. The big unanswered question is “how will such low reserves help keep the exchange rate of the Rupee at its current level?” Rupee’s exchange rate can be sustained only if external debt servicing can be postponed, at least partly. But repaying these liabilities can be postponed only at the expense of tarnishing Pakistan’s country risk perception even more, which is not an option. The only option is to adopt austerity, self-reliance and collectively cut waste of every kind.

credibly and visibly implement austerity to save both foreign and domestic resources for plugging the expand-ing gaps in the physical infrastructure,re-structure without any further delay the loss-making public sector enterprises for privatisation and better service delivery thereafter; in their current state they will fetch almost nothing, boost growth of energy sector, contain line losses and theft,go headlong for expanding agricultural and industrial sectors in consultation with all their stakeholders to boost national productivity and employment, reduce reliance on imports by supporting import substi-tution sectors,

help cut the genuine costs of the export sector and insist that exporters diversify their foreign markets,in consultation with all business set up nationwide network of vocational training centres to up the size of skilled,revamp all regulations to rid them of anomalies that obstruct growth and create room for corruption and, above all, prevent foreign investment inflows that must now be encouraged,increase the accountability of the banking sector for the drop in economic growth despite which they are profit-able, andsimplify dispute resolution processes to prevent activity slow down, in fact stoppage.

32

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fiscal deficit, which stood at 6.6 percent of the GDP at the end of FY11 against its target of 4 percent. According to the SBP, “in the current state of Pakistan’s economy, there is no wiggle room left.” Having said that, the SBP also goes on to add that, “even if preliminary steps are taken soon, the magnitude of the task is such that results will not be forthcoming in the near future; hence, financing fiscal deficit gap in FY12 will be very challenging.”Real GDP Growth (percent)Years Countries B’Desh China India Pakistan S. Lanka2006 6.5 12.7 9.5 5.8 7.72007 6.3 14.2 10.0 6.8 6.82008 6.0 9.6 6.2 3.7 6.02009 5.9 9.2 6.8 1.7 3.52010 6.4 10.3 10.1 3.8 8.02011 6.3 9.5 7.8 2.4 P 7.0This scenario is made even tougher by the fact that the IMF still hasn’t issued a Letter of Comfort to help Pakistan negotiate with the Asian Development Bank and the World Bank. With dim prospects for external funding, the burden will once again fall on domestic sources. But with CPI still in double digits, chances of a significant rise in savings are dim and hence of the government getting more of these savings via the banking sector. The fact is that the regime wasted its time in mere politicking while the economy steadily slipped. Throughout the past four years observers have been pointing to the unabated rise in government’s current expenditure that is being funded out of ever higher debt, in fact, higher currency printing that has kept inflation in double digits. In FY11 rise in inflation hit a year-on-year high of 21.3 percent that had clearly obvious though undocumented, consequences in terms of rising poverty.It has been suggestted by analysts that the poverty line may have crossed the 40 percent line (or even higher), which explains why the Economic Planning Commission has yet to come out with its latest estimate of the poverty line. This is another example of how realities are being denied but the fact is that it is no longer possible to deny them; they manifest themselves in the public demonstrations that go on in one or the other town of Pakistan.The failure in expanding the domestic energy base, that began in the Musharraf era continued during the past four years and is now worsening the economic and investment scenario. Power load-shedding is taking its toll on the economy as a whole; it is forcing the industry to operate below its capacity and has been forced to lay off thousands of daily wage, contracted as well as regular employees, which is adding to frustrations and felling dissent. How severe is the energy crisis is reflected by the fact that Pakistan was rated 166 in the context of electricity supply.Energy shortages are impacting not just commercial and indus-trial activity but domestic life as well but its worst impact is yet to crystallize when CNG stations may be shut down for a month in Sindh. This could hit millions of citizens dependent on CNG-based transport vehicles. SBP blames weak governance for the ongoing slide in the economy when it says that “cross-country comparison shows that institutional weakness at all levels of government (judiciary; civil service; law enforcement; regulatory bodies and agencies for oversight and accountability) are directly responsible for poor economic growth. These institutions, put together, make up the governance structure of an economy.” SBP’s stand is

justified on the findings of the recent World Bank report wherein, in the context of ease of doing business, Pakistan slipped from 96th to 105th place in global ranking, and in the listed 185 countries. Therefore SBP has recom- mended that the “political leadership must take credible steps to stop the slide.” This is a repeat of what every Pakistani has been saying for the past four years. What is visible though is a harsh reality – the one thing the political leadership is least bothered about is economic uplift; it doesn’t have time for addressing the woes that are crippling the economy. Least bothered about the mess it has created over the past nearly four years, the sole concern of the coalition is to somehow stay in power for another year. The regime is least concerned about whether it has the credentials anymore to stay in power. The regime faults all those who point to the fact that, via its reckless conduct thus far, it has lost the credentials for staying in office. What it refuses to do is look inside its own shirt. The logic of its spokespersons is that the regime has the right to stay in power because it has been elected by the people. Whether the regime fulfilled its obligations to the electorate or failed in that effort during its term is inconsequential.What the regime routinely keeps emphasizing is the peoples’ “mandate” it holds and the wholly unquestionable authority of the parliament although NADRA’s disclosures about accuracy of the electoral rolls (basis of the 2008 elections) are shocking. According to the Election Commission of Pakistan, roughly 78 million were on the electoral rolls, 45 percent of the entries in these rolls were unverifiable, and just one third of the voters cast their vote. Impliedly, just about 18 percent (one-third of the remaining 55 percent of genuine voters) elected the parliament, and coalition parties received about 60 percent of the votes cast. Effectively, the coalition parties got just about 11 percent of the genuine votes. So much for the acclaimed peoples’ “mandate” that the regime has! Even if this limited mandate is taken as credible, what has the regime done so far for the benefit of the electorate and the state? In spite of its performance that has been criticised everywhere newspapers supplements on the birthday of the Father of the Nation were filled with state-sponsored advertisements claim-ing success that are invisible on the ground. They marked yet another effort in denying realities about poor state of adminis-tration that is hurting economic growth.

Cover Story

January 2012

Pakistan is the producer of a whole variety low-cost, daily use goods; that’s an advantage at present because, while demand for expensive and luxury goods has tumbled every-where, that’s not the case with low-cost daily use goods. We can go on exporting these goods but for that we must meet the terms of our trade contracts – quality, quantity and timely shipments. This cannot be ensured unless we priori-tize the industrial sector in energy supply by making a

concerted effort to explain to people that it is preferable to live with gas supply of 8 hours a day in three shifts – 2 hours in the morning, 2 hours in the evening and 4 hours at night – to keep bedrooms warm through the winter, rather than force the closure of industrial unit and then starve because bread earners of the families would be laid off courtesy factory closures.In the end, it is only appro-priate to remind the banking sector that, for much of what may follow they will carry the blame or fame; the choice rests with them. All risks aren’t unmanageable; the flaw is in the banks’ frontlines that lack experience as well as commitment to excelling in good lending. The easiest hing is to classify a loan ad bad; to revive it calls for market knowledge and negotiating abilities using which NPLs can be re-scheduled or re-structured to keep the wheels of the industry moving.A banker’s claim to fame in a recession is not justified by his classifying loans as ‘bad’ but reviving them for delayed by final recovery; that’s what the patient depositors expect. It is tragic that now the yardstick of fame is only profit (earned via high interest rate spread, not via higher lending). Contributing to the economy – helping new business to spring up, existing ones to expand and the troubled ones to revive – is a low priority

This profile of banking manifests a steady decline in bank-ers’ sense of their social responsibilities. It also reflects that bankers no longer see their role as the backbone of the economy, which bankers used to be proud of being in the years gone by. This does not bode well for the future of the economy because if its backbone is not willing to perform its role of bringing together the tsavers and the investors, an economic slide is definite. Loss of faith in the future benefits of saving, and rapid drop in self-sufficiency in terms of foreign trade will make the economy more vulnerable than it now is. Let us hope that this won’t happen in 2012. That all the stake-holders will re-gain consciousness of their respec-tive roles and responsibilities. That they will prioritize collective interests, not individual interests. That the state will act more prudently in making use of the limited resources at its disposal and strive to optimize the output of every penny of taxpayers’ money. Above all, we all will realize the importance of making our due contri-bution to the efforts of the state i.e. honestly pay taxes and then hold the administration accountable for their use in ways that offer optimal collective benefits.Finally, at the expense of repeating it, it must be said that the biggest need of the hour is a credible revamp and rationalization of the disciplines that apply to investment, particularly foreign invest-ment – mechanisms, secu-rity built therein, improve-ment in the energy and power supply scenarios, taxation system and build-ing some rational conces-sions therein.These improvements hold out a promise of attracting investment from the Pakistanis residing abroad. Given the current highly uncertain economic scenario in Europe, they are wary of investing in Europe, but they are no less apprehensive about the uncertainties involved in investing in Pakistan. It is extremely important that their worries are put to rest by credible actions that cleanse the image of the administration in Pakistan.

Rupee at its current level?” Rupee’s ex-change rate can be sus-tained only if external debt servicing can be postponed, at least partly.

Loss of faith in the future ben-efits of saving, and rapid drop in self-sufficiency in terms of for-eign trade will make the economy more vulnerable than it now is.

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more than 16 trillion dollars in nearly interest-free money to the "too big to fail" banks between 2007 and 2010. Keep in mind that the GDP of the United States for the entire year of 2010 was only 14.58 trillion dollars.The total U.S. national debt is only a bit above 15 trillion dollars right now. So 16 trillion dollars is an almost inconceivable amount of money.The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs - was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled. Add up guarantees and lending limits and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that yearAccording to the Government Accountibility Office (GAO) audit, $16.1 trillion in secret loans were made by the Federal Reserve Bank between December 1, 2007 and July 21, 2010. The following list of firms and the amount of money that they received was taken directly from page 131 of the GAO audit report:Citigroup - $2.513 trillion; Morgan Stanley - $2.041 trillion; Merrill Lynch - $1.949 trillion; Bank of America - $1.344 trillion; Barclays PLC - $868 billion; Bear Sterns - $853 billion; Goldman Sachs - $814 billion; Royal Bank of Scot-land - $541 billion; JP Morgan Chase - $391 billion; Deutsche Bank - $354 billion; UBS - $287 billion; Credit Suisse - $262 billion; Lehman Brothers - $183 billion; Bank of Scotland - $181 billion; BNP Paribas - $175 billion; Wells Fargo - $159 billion; Dexia - $159 billion; Wacho-via - $142 billion; Dresdner Bank - $135 billion; Societe Generale - $124 billion."All Other Borrowers" - $2.639 trillion.In addition, it turns out that trillions of dollars of this bailout money actually went overseas. According to the GAO audit, approximately $3.08 trillion went to foreign banks in Europe and in Asia. Also, it is important to remember that many of these bailout loans were made at below market interest rates, and this enabled many of these financial institutions to rake in huge profits.While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrow-ing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to

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Increasing regional trade for economic independence - Mian Abrar Ahmad President, KCCI

Q: What were the main problems the industries in Pakistan faced in 2011? How, in your opinion those problems could be solved in 2012?A: Before I answer your question, let me first share with you some facts on the importance of Karachi as economic engine of Pakistan. Karachi is a city of about 20 million people and generates about 68 percent of tax revenue for the country. Remaining 32% of tax is generated by the rest of the country. Secondly, about 90 percent of our import-export business is handled through Karachi Ports. We export goods and commodities worth 20 million dollars from this city. Vietnam, which is half the size of Karachi, exports goods worth 70 billion dollars. Given the impor-tance it deserves and facilities that it requires, economic managers can make better use of Karachi sea ports and earn much larger volume of revenue.. Now coming to the answer of your question, the biggest problem we faced in 2011 was the worsening law & order situation, coupled with power and gas load sheddings which

hampered smooth running of our industries. As we all know, KESC and other captive power industries (industries which have their own power generation plants like Tapal etc) generate power with the use of natural gas causing shortage of this resource in which we have otherwise been abundant. Resultantly our industries have continued to suffer.We have competitors like India, Bangladesh and China in the global markets. They are dominating the global export market because their production cost is much lower than ours. We need to understand that the natural gas, electricity and banks’ interest rate are our raw material. In India, banks’ interest rate is approx 7%, in China it is about 4% but in Pakistan we pay 14%. Obviously, therefore, our production cost is higher and incompatible with our competitors’ in the global market. If, despite that , we are still standing in the global export market it is only due to the resilience of our trade and industry.. They deserve apprecia-tion that they have managed, not just to survive but (conti)

Interview

January 201235

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January 2012

InterviewOur traders and industrial-ists have great potentials that need to be ex-ploited. With an enabling environment they can revo-lutionize Pakistan’s ex-ports.

also to compete , as far as possible, with those coun-tries in the inter- national market. Only if an enabling environment was provided to our indus- trialists and traders, they could revolutionize Pakistan’s export business. They have a lot of poten- tial that needs to be exploited with adequate facilities.Q: What are your views about KESC and its per- formance?A: KESC was privatized and given to Abraaj group on terms and conditions

favorable to them. However, their performance has not been satisfactory. The terms and conditions on which KESC was given to them are not being followed. They are neither reinvesting their money nor paying the debts. Due to non-payment of the dues consistently, there is a growing perception that they will leave the country with-out clearing the dues of around 100 billion. God knows, who will be responsible for the non-payment.Further, KESC officials are on record to have said that their 98% recovery is from the industries. It is not under-standable, therefore, as to why their needs for electricity are not being met. In our opinion, the government of Pakistan should arrange for a detailed audit of KESC to find out where does their money go .Let me explain how electricity shut down in a processing industry affects all processes of the factory. With the power shut down, the chemical (raw material) freezes in the pipes. To restart the process, we have to clean all pipes thus increasing the wastage of raw material, wast-age of time and labor and consequent increase in the cost of production. The Government needs to take these issues seriously and initiate short and long term plans to overcome them.To a question about non-payment of electricity bills by the industrialists, he said, it is wrong to assume that the industries are not paying their power dues to KESC. We cannot afford to do that because if we do not pay the KESC will simply disconnect the power supply and we have to keep our industries running.Q. There is wide difference in prices of auto and other products assembled in India and Pakistan? Why is it so? Are Indians not making profits?A: The products such as bikes, cars and electrical appli-ances, assembled in Pakistan entail higher cost of produc-tion but in India the production cost is comparatively low. Take the example of cars assembled in India and Paki-stan. The car assembled in India costs Rs. 15 lacs but the same car assembled in Pakistan costs Rs. 21 lacs for obvi-ous reasons.

Q: And the currency rates may also be one of the factors for price differentials?A: Yes, but the impact on this account is not more than 10 to 15 percent.Q: As you know that right now US dollar is touching new heights (approximately 90 Pak rupees are equal to 1US Dollar). What is the impact of the widening gap between US Dollar and Pak Rupee on our trade and economy as a whole? A: It has a negative impact on our economy; it causes infla-tion which is affecting all sectors of our daily life including trade as it reduces the buying power of our currency. Gov-ernment states that our inflation is in single digit but I think our inflation rate is in double figure between 20 and 30. We can improve earnings through foreign trade if we could stabilize and improve our currency rate.Q: What prospects do you foresee for Pakistan’s economy in 2012? A: We may expect better prospects for Pak economy in 2012 provided the issues that inhibit its growth are addressed to and resolved. I think with better economic management and policy designs we can overcome our problems. Given the will and sincere efforts, the issues may settle by 2013 if not in 2012. But at least the process of change should start now. Somebody has to take the initiative. Q: Being an active body of trade and industry, KCCI’s concern is under- standable. What is KCCI doing in this regard?A: First of all, please bear in mind that KCCI is not a decision making authority. As representatives of trade, business and industry, we can only suggest solutions; implementation thereof is the prerogative of the policy makers. When we take an initiative for solving a problem, we face resistance. When we raise the voice for the rights of trade & industry we are served with defama-tion notice worth 100 crore rupees. But this is not going to deter us. We shall fight for our rights till the end. Whatever I say is based on behalf of 15 lac labors, 7 industrial zones and 17000 members.

Karachi Chambers of Commerce & Industry is a representative body of trade and industry compris-ing 17000 members, 7 industrial zones and 15 lac labors with Mr. Mian Abrar Ahmad as its President. KCCI is doing commendable job for boosting busi-ness and industry in Pakistan. ‘Value Chain’ has had an opportunity to have this interview with the KCCI President recently.

We need trade and economic independance

which the West will

never give us. Importers and

expoxters of both India and

Pakistan will gain by giving MFN Status to

India

36

Since the beginning of 2008, Pakistan’s economic outlook has taken stagnation. Secu-rity concerns stemming from the nation’s role in the War on Terror have created great instability and led to a decline in FDI from a height of approximately $8bn to $3.5bn for the current fiscal year. Concurrently, the insurgency has forced massive capital flight from Pakistan to the Gulf. Combined with high global commodity prices, the dual impact has shocked Pakistan’s economy, with gaping trade deficits, high infla-tion and a crash in the value of the Rupee, which has fallen from 60-1 USD to over 90-1 USD in a few months. For the first time in years, it may have to seek external funding as Balance of Payments support.Pakistan’s industrial sector accounts for about 24% of GDP. Cotton textile production and apparel manufacturing are Pakistan’s largest industries, accounting for about 66% of the merchandise exports and almost 40% of the employed labor force. Other major industries include cement, fertilizer, edible oil, sugar, steel, tobacco, chemicals, machinery, and food processing.If we analyze the economic situation of Pakistan in the last 5-years, World Bank, and SBP reports indicate that GDP growth rate decreased from 5.7 per cent in 2005 to 2.3 per cent in 2011, and inflation climbed from 11 per cent to 27 per cent. During the same time, the external debt witnessed a gargantuan increase of 24 billion dollars and poverty levels deteriorated from 35 percent to 60 percent.Pakistan Power Nirvana?Cheap power is Pakistan's dream. The power shortfall is presently estimated at over 6,000 MW and is increasing. It is

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government’s future by linking a parliamentary vote on expansion of the European Financial Stability Fund to a confidence motion for her government. The parliament voted it down, and as a result the government was effec-tively toppled, although the parliament later approved the EFSF expansion plan by reaching a deal to hold early elections in March next year.However, the Eurozone crisis has not spelled the end for all governments. German chancellor Merkel and French President Sarkozy, as heads of the strongest economies of the Eurozone upon which most of the burden for its rescue and continued existence is expected to fall, have so far tread a delicate line in selling the proposition of burdening their own taxpayers to bail out other countries and getting the requisite support from their legislatures.French banks’ enormous exposure to Italy, and to a lesser extent to Greece, puts them in a very sensitive position. If these countries default, the French banking system could be severely affected, resulting in dire consequences for the economy as a whole. As a result, President Sarkozy has been very active in keeping dialogue going and keeping Germany at the table when bailout plans have been negotiated. Although the French constitution gives the Presi-dent a lot of power, the downside are the steadily declining approval ratings of Mr. Sarkozy coming out of France. This has put his future in the coming elections in doubt-seemingly dependent upon being able to boast of

Game’, a nomenclature for the great imperial battles over Central Asia in the 19th century. Pakistan is neighbor to Iran, India, China, and Afghanistan, with a coastline on the Arabian Sea. Thus, Pakistan is situated between the oil-rich Middle East and the natural gas-rich Central Asian countries, with two of the fastest growing economies in the world – India and China – as energy-hungry neigh-bors, with the imperial presence of America in neighbor-ing Afghanistan, with its eye focused intensely on neigh-boring Iran. A ‘Great Game’ ensues, drawing in Russia, China, India and America, and the main focus of the game is pipelines.The Gwadar Port city built by Chinese investments is destined to be a central hub in the pipeline politics of the ‘Great Game,’ in particular between the competing pipe-line projects of the Trans-Afghan Pipeline (TAP or TAPI), involving a pipeline bringing natural gas from Turkmenistan through Afghanistan, Pakistan, and into India; and the Iran-Pakistan-India pipeline (IPI).In 2010, Pakistan and Iran signed the agreement, and are willing to either allow India or China to be the beneficiary of the pipeline. Whether going to India or China, Gwadar Port will be a central hub in this project. Pakistan has now been seeking direct help from China on the Iran-Pakistan pipeline project. The U.S., for its part, warned Pakistan against signing onto a pipeline project with Iran, yet Pakistan proceeded with the project .The southern Pakistani province of Balochistan is home to oil, gas, copper, gold, and coal reserves, not to mention, it is the strategic corridor through which the pipeline projects would run, and is home to the strategically signifi-cant port city of Gwadar. For the past fifty years. Balo-chistan has been a major hub of Chinese investment and opportunity, with Chinese companies having poured $15 billion into projects in the province, including the construction of an oil refinery, copper and zinc mines, and of course, Gwadar Port. The two countries have cooperated on a variety of large-scale infrastructure projects in Pakistan, including highways, gold and copper mines, major electricity complexes and power plants, and numerous nuclear power projects. With roughly ten thousand Chinese workers engaged in 120 projects in Pakistan, total Chinese investment, which includes heavy engineering, power generation, mining, and telecommunications--was valued at $4 billion in 2007 and is expected to rise to over $15 billion by 2012.Middle East: Centre of Economic ImportanceGCC, six states of the Gulf Cooperation Council – Saudi Arabia, Kuwait, UAE, Qatar, Bahrain and Oman – as being at the, Centre of the Middle East economically and politi-cally. There are a number of factors involved here. First, of course, is the question of oil. The GCC's supplies of oil and gas are among the highest in the world. The huge levels of surplus capital that have accrued in the region as a result of sales of crude oil, gas and petrochemicals. These ‘petrodol-lars’ have been a key feature in the development of the global financial architecture.

January 2012

InterviewQ: What is your perception about the increasing circular debt?A: It is the duty of the government and its economic man-agers to contain and control the increasing circular debt. Unfortunately this is not being done. KCCI is a facilitator and our job is to facilitate them in arriving at better solutions; we cannot dictate the government for what to do and how to do. I hope the Government would do something to facilitate the traders in their efforts to increase the revenue.Q: There has been a heated debate on whether or not to give MFN status by Pakistan to India? What is your stance on this proposition?A: I think, we should have given this status to India 10 years back. India gave us this status in 1996. We initiated our exports to India just after they gave this status to us although we did not give them the same economic status. We can increase exports in various sectors via competitive price and quality standards. We have better and modern-ized textile industry as compared to Indian textile industry and we have better standards for international export. So we grabbed the opportunity and quickly started exporting textile goods to Indian market and established our brands over there. Then they imposed non tariff barrier on our exports as we didn’t gave them the MFN status.We suggested to the govern- ment to give MFN status to India as it is necessary for the bilateral trade between our two countries. It is very beneficial for us and let me clarify how. When in a bilateral trade, we give India a market of 180 million consumers and get 1.3 billion consumers’ market in exchange our traders are not so brainless that they will let their Indian counterparts to dominate the common market of India and Pakistan. We have various better brands and we can establish them in massive Indian market. Importers and exporters of both the countries will stand to benefit from this decision. And in case of Indian dominance in our market, we can impose anti-dumping duties according to the WTO rules. We need trade and economic independence, not aid. We need to understand that Europeans and Americans will never ever give us economic freedom. They have imposed trade barriers and quotas on us. We can’t export any prod-uct or commodity more than pre-decided limit. They allowed Vietnam, Singapore and even Bangladesh to export freely. For instance Bangladesh imports textile raw material from us and then exports it to America on double the price after value addition. Westerners have made us addicted to the aid the benefits of which never passed on to the common man. They always order you to “Do More” in exchange for aid which is often left unfulfilled. The corrupt politicians utilize the aid for their own

interests. We need to achieve economic independence. The Euro-pean countries have 47% ratio of regional trade whereas we have only 7% of regional trade ratio. We can trade with SAARC countries, Central Asian countries, Iran, Turkey and Afghanistan. We have recently signed an agreement to build “Pak-Afghanistan Trade Chamber” to boost trade ties between both countries. Similarly we have built a “Bombay-Karachi Trade Chamber” to initiate trade between these two unique port cities. Karachi generates about 68% of the tax revenue for Pakistan whereas Bombay generates 43% of taxes for India. We should boost our regional trade to increase our exports.Q: Are you satisfied with the level of taxes imposed by the government on the industrialists? A: Taxes are important and essential for the economy of any country. Governments in every country around the world impose taxes and their citizens pay them honestly for the progress of country. It is the right of government to impose tax on its citizens and they should pay it

honestly as national responsibil-ity. In Pakistan, the tax net should be broadened and docu-mented. New sectors should be identified and included in the tax net. For instance, agriculture sector should be taxed and I think agriculture should also generate the same amount of taxes as other industries are generating. Tax filing system should be made simple and convenient.Q: What is the main reason for our current problems? A: Lack of planning. We are not

interested in making plans to overcome our issues. We have no vision for future. For example, according to an estimate, our natural gas reserves will end in 2018-2020, worsening our energy crisis. What is the alternative? Are there any plans in place? Certainly not. We should go for other sources of energy like coal reserves, solar and wind energy. Thar coal reserves are the second largest reserves in the world and we should take benefit of this natural gift.Q: One last question. How the present rift and rupture between Pak-US relations is affecting the trade between the two countries and what price will Pakistani industries have to pay if we terminate our relations with USA due to the recent NATO attack in Mohmand Agency?A: In my view, it is necessary for us to stand on our own feet. Dependence for aid from America should be discour-aged and stopped. We tested our nuclear bomb despite the fear of sanctions and embargo. If we can become atomic power despite fears and bans, we could also get economic freedom. Increasing regional trade is a way forward. And the solution lies in regional trade.

Mian Abrar Ahmad explaining a point to interviewers

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ack of good governance is said to be one of the several factors inhibiting growth and progress of several countries around the world. Self

centeredness, greed, insecurity, ignorance, are some of the traits that contrib-ute to bad governance. Corruption is one of the main obstacles that block the consolidation of good governance. Corruption is a widespread phenomena affecting all societies to different degrees and at different times. It is enigmatic and an intrinsic part of the way the state has operated in many countries rendering it almost impossible and impracticable to remodel and transform itself into a welfare state in line with other developing and developed countries where people enjoy the rights and opportunities they deserve.Where corruption persists millions remain uneducated or under-educated leading to a life of misery and disgrace. Lacs of people die of hunger and disease. A multitude of the masses are deprived of legal cover in case of need. This is all because public money which should have been spent in education, health and other sectors of public welfare are scrupulously looted, directly or indirectly, by those in position of influence and authority. Pakistan is no exception.Hard evidences of corruption are intrinsically difficult to obtain because of the secrecy shrouding the illegal deals but there are several ways which help in providing proxies of the extent of corruption in different fields of human activities. One such source is the surveys conducted by Transparency Inter-national.A recent survey conducted by Gallup Pakistan under the aegis of Transpar-ency International-Pakistan, to measure the perceptions, nature, and extent of corruption being faced by consumers of ten selected public sector departments came up with results which are revealing and eye-opening. Salient features of the findings are reproduced hereunder.1. Police which ranked as the most corrupt sector in 2002, 2006, 2009 and 2010 has improved . In 2011, this sector ranks second with Land Revenue taking the top rank as most corrupt department.2. Education and Military are the least two corrupt departments.3. Corruption in Income Tax, Customs and Tendering & Contracting, ranked at 3rd, 7th and 6th most corrupt in 2011 compared to 8th, 9th and 10th in 2010. 4. Judiciary rank has slipped from 6th most corrupt department to 4th most corrupt department in 2011.The findings were based on a nationally representative survey of over 2,500 Pakistani men and women adults from a cross-section of rural and urban areas of all the four provinces and included persons of various age, education and linguistic backgrounds. The field work was conducted during October 2011. The mode of interview was in-home face to face. The focus of the study was on reputation of corruption among the users of various services in the country including those which are generally considered to deliver a private service, such as education, health, electricity supply or a public service such as police, justice/courts, military, revenue authorities , taxation and customs.Reputation of corruption might be earned by the scale at which an agency deals with the ordinary citizen than the volume of damage it causes to the harmed party. Therefore, the respondents were asked whether they had ever dealt with a given agency and if they had, whether they perceived it as corrupt or clean. Based on this approach the national opinion poll came up with the findings in two parts. Part-1 deals with the percent of people claim-ing they engaged in some business with a list of agencies during the recent 12 months. Part-2 then asks those who had an engagement on whether they found the agency “clean” or “corrupt”.

January 2012

ince end-2007, bankers are discovering that the outcome of lending was often not the one they had

initially envisaged. The current recession therefore led to creation of a variety of stresses the brunt of which is being borne by banks across the globe. The primary outcome of these stresses has been a rapid march back into the shell. Banks are exhibiting a level of risk-aversion that is escalating the recession because even bankable lending propositions are being rejected. What banks overlook is the fact that if economic activ-ity is not revived, they don’t stand any chance of recov-ering their non-performing loans (NPLs). They don’t appreciate the fact that, even for auctioning the default-ing borrowers’ collateral, there have to be signs of an up-surge in economic activity to convince the bidders to buy the assets being auctioned. What is more sensible though is to revive failed businesses because that is the most convincing indicator of economic revival.Instead, banks in Pakistan have opted to lend more to the state via investing in government’s short- and long-term debt papers. Lending to the state is not odd; all banks do that but the aspect that banks seem to ignore (to their own ultimate despair) is that, for credit to be repaid, it must be utilized in a manner whereby it produces optimal returns. Bank man- agers should know (better than anyone else) about the capacity of governments, especially populist governments, to do just that – gener-ate optimal returns from borrowed funds.Banks cannot afford to forget that, while political regimes will keep coming and going, banks will continue to carry the burden of remedying the negative after-effects of the policies of these regimes; no political party will come to their rescue in time of need. But the feeling one gets is that bankers don’t read history and learn lessons from it to guide them while taking decisions whose outcome will impact the future. This is the unfortunate aspect of what today’s banking looks like.The ongoing crisis has established beyond any doubt that sovereign lending is no longer zero-risk lending. As a matter of fact it never was, though the text books

kept claiming that it was. In 1980s, American banks (flush with deposits of the oil exporting Middle Eastern countries as the outcome of oil price rise triggered by Saudi Arabia’s King Faisal) began sovereign lending to the Latin American countries. By mid-1980s, these loans went sour and were nick-named as MBA (Mexico, Brazil and Argentina) loans since their feasibilities and repayment prospects were assessed by bankers holding MBA degrees obtained from American business schools and universities. By 1990, these loans resulted in record losses to US banks. Citibank, one of the biggest banks, recorded the biggest-ever loss suffered by a US corporate in history until 1990. These loans were eventually ‘sold’, and the last loan was sold for just 19 cent out of every $1 of principle amount disbursed 17 years ago, with no income earned in this period. This is recorded history of how the bankers sometimes made reckless lending decisions. It is also worth remem-bering that banks cannot force governments to repay; this applies even more to governments abroad.

The key consideration in lending to a sovereign should be its record of credibly manifesting its moral and constitutional sense of responsibility by ensuring the honest and optimal use of every penny of taxpayers’ money. Regimes that display just overt or, in fact, no such sense, are most unlikely to use money effectively, gener-ate a repayment capacity therefrom, or repay. In fact, less than responsible regimes borrow afresh to repay maturing debt, which implies permanent

blocking of saver funds with little in terms of benefit to the citizens.Contrary thereto, industrial and commercial borrowers are not beyond the reach of their lending bankers, and also agree to banks’ monitoring of the use of bank credit. Besides, they provide collateral that secures banks’ credit risk. All this is, of course, subject to bank lending being prudent and with the requisite care. Given this level of control, bank loans can go sour essentially because of casual assessment of credit risk by the lending banks and subsequent weak monitoring. That being so, banks’ risk-aversion is a clear indication of their weak in-house risk assessment capabilities. What banks in Pakistan haven’t realized fully is the

Risk-aversion isn’t the solution, better risk management is the way forwardS

by A.B Shahid

BBankin & Financeg

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Rooting out Corruption Rooting out corruption which is rampant in ranks and files is urgent and important. But a crack down on this wide-spread menace is not that easy and simple a task. It requires the will and determination firm enough to be reckoned with. Lust for power and greed are persistent and can be like a contagious disease which run widely and cunningly in corrupt environments. This brings into sharp focus the need for strong and progressive governance systems that ensure fairness, accountability, independent and transpar-ent auditing, and tough legislation, besides corporate and civil culture based on rewarding talent and instilling values and honest work ethics. We need to build our nation with strong systems of ethics and morality which will practically and relentlessly act as deterrents against corruption of all kinds.

Besides the above volatile factors are the external factors including buyers’ preference for weak payment arrangements (contract or collection basis, not Letters of Credit), rise in import duties in importers’ countries, quota restrictions or banning of imports. It is odd that despite these changed risk dynamics, in-house research in banks is both inadequate and improperly focused. Instead, the frontline in banks relies on input from customers or informal sources, which amounts to relying on weak, un-verifiable market trends and conse-quent high-risk lending.Laying guidelines is the first step; far more demanding is the effort to credibly ensure that the guidelines are followed in letter and spirit, which implies vigilant micro and macro monitoring of the risk asset portfo-lio, from the frontline up to the Board Executive Com-mittee and Board level. But loan loss provisioning during 2008-10 indicates that, largely, it was the fallout from unintended increase in exposures due to the rapid depreciation of the Rupee whereby the Rupee values of foreign currency denominated transactions/ loans rose well in excess of borrowers’ repayment capacity. While, it was partly the result of monitoring lapses, the bigger issue is “did banks that took such exposures have the systems and the capacity to manage this risk?” Besides, did these banks visualize the impending fallout from

rising trade deficit beginning 2003-04? That trend could obviously not be reversed by foreign inflows since Pakistan was facing

civil strife in two of its four provinces, with little signs of its being contained in the near future.Rising trade deficit indicated excessive imports and rapid contraction of the import-substitution sector when the

world headed for a recession. It was a disaster that was building-up but was

not accepted because bankers, seem- ingly at all levels, lacked the capacity for taking a macro view of the impending tragedy. This tragedy was compounded

by the fact that banks often took over-optimistic view of the managerial abilities of their borrowers, as proved by their subsequent failure to sell on credit and recover their receivables to repay bank credit. The scenario was worsened by the unregulated agencies for asset valuation, loss assessment, and goods custody, clearing, forwarding, and transportation. Banks over-looked that their interest was at stake. Because these agencies aren’t regulated by a code of conduct that defines their duties and penalties for not performing them, not all of these agencies were likely to perform their functions in a committed fashion, although many of them did so and very well. The regulatory code of conduct called for caution–bank’s routine oversight of all these activities. Risk is central to bank lending; it can’t be eliminated. Banks can only reduce its quantum and probability to

BBankin & Finance

January 2012

gimpact of markets uncertainties after their being de-regulated, which has increased speculation and vola-tility, and so multiplied the need for in-house market research and trend analyses to verify the truth in the glossy stories of the prospective borrowers. Instead of remedying their internal flaws, banks opted for not lending. That credit to private sector is virtually at a standstill is borne out by media reports and un-ending complaints on this issue by trade associations.Banks are also ignoring reports of business closure and the flight of capital. Both trends are worrisome; they foretell bad days – increased public unrest, social chaos, lawlessness, and a possible collapse of the economy and the state. The current profile of politicking in Paki-stan doesn’t show any signs of a return to sensibility and remedial actions to put the economy on track again. By falling prey to risk-aversion, and virtually freezing credit to the private sector, banks are contrib-uting to the build-up of the chaos even though they believe they are keeping out of the fray though that’s pure self-deception. That’s not how the ‘best’ decision-makers in a society should act; it is time to improve risk assessment capabilities and get going with lending to business and industry.Bankers who went through the earlier recessions are better placed to confront the current crisis due to their experience. Banks with such experienced hands have an advantage; it is time for them to go back to the basics and perfect the art of risk assessment and management. That’s the only option.What is an appropriate risk?The answer to this question has two dimensions: qualitative and quanti- tative; the first lays down the policy guidelines that should apply to lend-ing in general and so specify prefer-ences for the bank selected:

Economic sectors and sub-sectorsTransactions-types that may be financed within each sector or sub-sector and maximum size of each transaction-type Collateral mix i.e. risk-specific combinations of liquid, near liquid and non-liquid assets to be accepted as security

RiskManagement

Manage

Mea

sure

Evaluate

Assess

But this logical starting point can lead to nothing in terms of improved risk management setup if these guidelines are laid down without conducting market research that is specific to the bank’s own risk portfolio and identifies sectors that are expected to grow in the medium term as well as those likely to contract due to domestic factors including excess growth, over-capacity, increased competition especially from cheaper imports, adverse exchange rate movements and the resultant hike in landed cost of imported raw materials/inputs, inter-est rate rise, higher import/export tariffs, or bans being imposed on import of raw materials or export of finished goods.

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people that the one thing that our politicians are wholly unfit for is governance – a perception that may damage the image of democracy for long, which won’t be good for the country but politicians will have none other to blame except themselves.What this scenario called for was implementing measures that built confidence in institutions’ delivery capability (e.g. in the power generation sector) to assure the risk-averse bankers that many of the risks they were fearful of won’t be crystallize. How low a priority of the government is this consideration is not too difficult to surmise.The SBP Annual Report for 2010-11 pointed to governance

as the key failure of the sitting regime in re-structuring public sector enterprises, im- position of GST, expansion of the tax net to include agri- culture sector and rationally phasing out the sub-sidies (that in fact tripled). This profile of management of the economy led to excessive indebtedness of the state, which debt servicing accounting for a third of the state revenue.In democracies, gover- nments come and go but what provides continuity to the state all through is the bureaucracy. Coun- tries that nurtured prof- essional, honest and competent bureau- cracies continued to move forward; the best example thereof is

Japan. We, unfortun- ately didn’t do so, and are paying the price for it. The challenges listed above are a reflection of the fact that, not just the politicians but the bureaucracy is as much to blame for the problems we confront.

In spite of these negatives there is always a ray of hope – a truly responsi- bility conscious lot that keeps doing its bit, no matter how bad the times. An example thereof is the group headed by Dr. Samar Mubarak Mand that has successfully completed the gasification of coal in the Thar area. While this committed team has done its job, this success can’t translate into real benefits for the economy unless the state or the private sector provides it the resources to convert coal into gas on mass scale to feed Pakistan’s fuel-starved power generation sector.

Bank sector bluesPakistan: Directorate General of Intelligence and Investigation Inland Revenue has unearthed a new fraud technique being used by some rich persons who are using bank accounts of their poor non-taxpayer employees and other accounts for carrying out “benami bank transactions” to avoid documen-tation of their business activities and thus avoid falling in the FBR’s tax net. Sources told Business Recorder here on Friday that some rich persons have been involved in massive concealment of taxable income by carrying out benami banking transactions with the help of low paid employees who are not even taxpayers.The reason why this criminal technique works is inadequate inquiries by banks while opening the accounts of the non-tax paying employees of big businesses.

riefsBB

BBankin & Finance

January 2012

gthe levels that banks can manage. This is done by struc-turing transactions prudently and using appropriate safeguards against likely risk via risk-hedging contracts and obtaining risk-based collateral. What often deluded banks into bad lending were the ‘high’ returns and collateral values (overly distorted by speculative markets) that could ‘compensate’ for losses likely from the failure of transactions financed by banks; this blind optimism caused the disasters that continue to bleed banks. The crisis in the financial services sector would have been a surprise if bankers appreciated the value of reading history because (according to the Economist) there were at least 124 bank-centred global crises since 1970, all preceded by booms in house prices and stock markets, large capital inflows and rising public debt. It is worth noting that scepticism about the behaviour of profit-driven markets is like second nature to the giants of financial economics; bankers must also adopt and practice its crucial value.However, within the narrow parameters of their scep-ticism, banks must spot viable opportunities; banks must survive for their own sake besides serving as the key mechanisms that keep societies prospering within manageable limits. So long as there is demand, it must be supplied implying thereby the need to sustain stake-holders at both ends; banks must help both categories of stakeholders to balance their expectations, and keep the system intact for all the stakeholders who must survive and meet their obligations to each other and banks.One simple example of the many ways in which banks can minimize the current chaos in the financial services sector is by refining customer databases Within its customer base every bank has some caus-ing others to default on their loans; by identifying such customers the bank can push them to fully or partly pay the defaulters, and thus settle loans that otherwise appear to be turning sour.

Overseas Pakistani workers remitted an amount of $5,239.99 million in the first five months (July–November 2011) of the current fiscal year 2011‐12 (FY12), showing an impressive growth of 18.33 percent or $811.69 million when compared with $4,428.30 million received during the same period of last fiscal year.The inflow of remittances in July-November, 2011 from Saudi Arabia, UAE, USA, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK, and EU coun-tries amounted to $1,364.36 million, $1,167.25 million, $975.12 million, $600.04 million, $594.30 million and $160.26 million respectively as compared with the inflow of $935.76 million, $1,045.32 million, $841.32 million, $530.30 million, $496.09 million and $147.57 million respectively in July-November 2010. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first five months of current fiscal year (July-November 2011) amounted to $378.66 million as against $431.93 million received in the first five months of last fiscal year (July- November 2010).The monthly average remittances for the July‐November 2011 period comes out to $1,048.00 million as compared to $885.66 million during the same corresponding period of the last fiscal year, registering an increase of 18.33 percent.In November 2011, the inflow of remittances from Saudi Arabia, UAE, USA, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK, and EU countries amounted to $218.98 million, $204.13 million, $179.77 million, $113.89 million, $107.38 million and $30.45 million respectively as compared with the inflow of $171.45 million, $225.75 million, $175.05 million, $113.39 million, $102.85 million and $30.50 million respectively in November, 2010. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during November 2011 amounted to $70.32 million as against $107.9 million received in the same month (November 2010) of last fiscal year.

Workers’ remittances

SBP conducted its Open Market Operations under Repo Sale contracts of Government of Pakistan Market Treasury Bills on December 14, 2011. Bids received & accepted are given below:Bid range: 2-Days Repo Sale (Mop up) 10.00% - 10.45%

(Mop-Up) Amount Offered(Rs. in million)

Amount Accepted(Rs. in million)

Rate ofReturn(% p.a)

02-Days

Total

27,500.00

27,500.00

22,500.00

22,500.00

10.29

Open Market Operations

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What makes this imperative is the fact that we will face tough times after we repay on a timely basis our maturing liabilities to foreign lenders wherein the IMF will now be the new entity. According to available statistics and projec-tions, about 2012, things don’t look very promising. Last year (excluding the IMF) external debt servicing cost Pakistan $5.78bn. To this burden will be added $1.4bn repayable to the IMF making the burden $7.18bn. In 2012, imports are expected to touch $41bn and exports (hopefully) could touch $25bn leaving a trade deficit of $16bn. Of this deficit, inward remittances could pay $13bn still leaving a deficit of $3bn. In addition to this net deficit, $7.18bn will have to be paid on account of total external debt servicing. The combined effect of the two will be to pull the foreign exchange reserves down from their current level of $16.7bn to, say $7bn, assuming that the US pays at least a part of the amount due from it for the costs Pakistan has already incurred on account of coalition forces operating in Afghanistan. The big unanswered question is “how will such low reserves help keep the exchange rate of the Rupee at its current level?” Rupee’s exchange rate can be sustained only if external debt servicing can be postponed, at least partly. But repaying these liabilities can be postponed only at the expense of tarnishing Pakistan’s country risk perception even more, which is not an option. The only option is to adopt austerity, self-reliance and collectively cut waste of every kind.

he concepts of Islamic finance, Islamic economics and Islamic banking as part of global ethical business

practices are not a contemporary discovery. They are the recurrent themes in the Holy Quran and have been talked about and discussed at length, globally, repeatedly and emphatically. However, it is not too long when the idea transcended from mere rhetoric to realism though a wide majority of the people still consider of it as one, primarily, related only to the Muslims. When we talk about Islamic business ethics or ethical values as such, some people think these are to be practiced when an ideal Islamic state is created. It is also claimed that these values are adhered to by the Muslims only. Islamic ethical values are not a monopoly of the Muslims. They are the life-blood for the whole of humanity belonging to any caste or creed and living in any part of the world. Whatever core values we have happen to be core values relevant to and needed for the whole community of nations around the world. It is important therefore that efforts are made to give the idea a global dimension by popularizing the concept of Islamic finance as the ethical way of doing business for achieving economic development , not just for the Muslims but for the masses at large the world over.Islamic financing offers a way of life given to humanity to

live ethically. This is a perfect model, a paradigm shift from the capitalist to a pure communal to a global approach towards ethical business practices. Ethical business presup-poses the need for ethical behavior. Capitalism which has dominated the world economic order has failed in provid-ing people with ethical behavior. The current global protests in all major commercial cities of the world, condemning the capitalist system, prove its inability to provide economic justice to people in the so-called devel-oped world. After the failure of capitalist economic model and fall of former Soviet Union, Islamic business model and financial system deserves to be tested and applied for the benefit of humanity. Hence, even those who call them-selves as secular feel a need to have ethics in their own area. It is heartening to note that during the last 15 years or so the world in general and the West in particular have realized the need for infusing ethics in business practices and have started incorporating ethics at professional levels, be it engineering, medical science , management , computing or any other areas covering aspects of human activity. Global ethics implies certain standards or benchmarks which are acceptable to all, be they the Muslims, the atheists, the Christians, the Buddhists, the Jews or those (Conti)

Ethical Business Practices: A Recurrent �eme in the Quran

T

by Prof. Dr. Anis Ahmad

IIslamic Bankin

January 2012

g

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This profile of banking manifests a steady decline in bank-ers’ sense of their social responsibilities. It also reflects that bankers no longer see their role as the backbone of the economy, which bankers used to be proud of being in the years gone by. This does not bode well for the future of the economy because if its backbone is not willing to perform its role of bringing together the tsavers and the investors, an economic slide is definite. Loss of faith in the future benefits of saving, and rapid drop in self-sufficiency in terms of foreign trade will make the economy more vulnerable than it now is. Let us hope that this won’t happen in 2012. That all the stake-holders will re-gain consciousness of their respec-tive roles and responsibilities. That they will prioritize collective interests, not individual interests. That the state will act more prudently in making use of the limited resources at its disposal and strive to optimize the output of every penny of taxpayers’ money. Above all, we all will realize the importance of making our due contri-bution to the efforts of the state i.e. honestly pay taxes and then hold the administration accountable for their use in ways that offer optimal collective benefits.Finally, at the expense of repeating it, it must be said that the biggest need of the hour is a credible revamp and rationalization of the disciplines that apply to investment, particularly foreign invest-ment – mechanisms, secu-rity built therein, improve-ment in the energy and power supply scenarios, taxation system and build-ing some rational conces-sions therein.These improvements hold out a promise of attracting investment from the Pakistanis residing abroad. Given the current highly uncertain economic scenario in Europe, they are wary of investing in Europe, but they are no less apprehensive about the uncertainties involved in investing in Pakistan. It is extremely important that their worries are put to rest by credible actions that cleanse the image of the administration in Pakistan.

global human community.The traits for forging global human community are fully reflected in Islamic concept of ‘ibadah the essence, soul and meaning of which are directly integrated and linked with social life. Every single ‘ibadah in Islam calls for social responsibility. If I don’t find my brother in prayer in Fajr or some other prayer, it’s my social responsibility to find out if he is sick or is absent out of town or there is some other reason for his absence. Zakah is also an obliga-tion and an ‘ibadah no different than salah. It is not a secu-lar or religious tax. The purpose obviously is to encourage entrepreneurship and self-reliance in the recipients of Zakah. The system is not supposed to keep them depen-dent on the people of means. On the contrary its objective is to eliminate poverty and make the needy self sufficient. This kind of an attitude and spirit needs to be developed and practiced as part of global ethical behavior. In our business dealings with clients having different religious faith, cultural diversity, ethnicity and language differences, we need to have one and the same ethics which is based on objectives of shari’ah. Unfortunately, our education in different institutions concerning ‘ibadah in conformity with Islamic shari’ah has not gone beyond the literal meaning of the term with little or no importance to the place ethical values must be given in global business relationships. In order to be global in our approach to business relationships we have to focus on global ethical values as our basis and foundation so as to ensure that the client we are dealing with understands he does not necessarily have to be a Muslim to come to us, to share with us and invest in our ventures. Any human being who believes in global ethical values has an obligation to come forward and contribute to observance of shari‘ah objec- tives in letter and spirit. Thus alone would it be possible to achieve economic development based on ethical business practices in conformity with the soul and spirit of Islamic shari‘ah.

Islamic ethical values are not a monopoly of the Muslims. They are the life-blood for the whole of humanity be- longing to any caste or creed and living in any part of the world.

In the global context, one

cannot expect the Muslims to have one prin-

ciple and the followers of

other religions to have for every job a

different prin-ciple.

belonging to any other caste or creed. From Islamic point of view, whatever we do or whatever business we under- take, has to be based on one single ultimate truth- tawhid- essential to create unity in life – meaning thereby that the society so established should essentially represent an ethical family, aware of its corporate, socio- economic and political responsibilities rather than being based on the theories of social devel-opment where you have class, color or race as the basis. Tawhid as a global

value is equally as relevant to the Chinese, the Buddhists, the Christians or the followers of other religions as it is relevant to the Muslims. In the global context, one cannot expect the Muslims to have one principle and the followers of other religions to have for every job a different principle. The benchmark or the standard has to be the same for all in the context of global ethical values.Unity in life is not a theological concept; it is an applied principle and a global value leading to the realization of ‘Adl, of equity, of justice, of giving to a person what is due. “Allah commands you to deliver trusts to those worthy to them.” (Al-Nisa 4:58)Likewise, our economic policies, banking, insurance etc must be human friendly encouraging and promoting sustainability for human life which is one of the primary objectives enunciated in Islamic shari‘ah which emphasizes that life must be protected, preserved and promoted, not discontinued, attacked or harassed. Any activity that vitiates and violates this principle is tantamount to the violation of the objectives of shari‘ah and the principles of human sustainability. We must encourage and promote in human beings an attitude based on reason and rationality. Shari‘ah is based on logic and reason which are not a monopoly of any individual, community or nation. It may be developed, imbibed and practiced by any and all. The humanity today is facing worst ever ethical crisis of our history. We have enslaved ourselves to benchmarks and standards fixed by human intellect which has a clout of limited human reason and confined experiences. Islamic banking and finance, on the other hand, provide us with benchmarks based on the Islamic concept of social justice which encompasses our overall economic, political and social behavior, an attitude of sacrifice for others and willingness to self accountability (ehtesab). What have we done in terms of this corporate social responsibility? How many of the projects have been set up for feeding the hungry, educating the illiterate, healing the ailing humanity? What have we done for providing people with guidance in their religious matters? These and similar other related questions need to be answered as part of global ethical principles and behavior. The objective should be forging a

IIslamic Bankin g

January 2012

Prof. Anis Ahmad is a merito-rious Professor and Vice Chan-cellor, Riphah International University, Islamabad. He is a social scientist of international repute. He has held numerous academic leadership positions, both nationally and inter- nation-ally.

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Interview

January 2012

Q: During the entire year the stock market remained volatile. It also showed a negative trend. What in your opinion are the reasons behind this trend?A: In my opinion, the basic reason behind this is the persis-tent outflow of foreign investment. Around 200 million dollars of foreign investment has been taken away since July 2011. More than 20 million dollars were withdrawn in just 20 days. So this is a very important factor which is disturbing the market activities. The foreign investors do so due to several factors, more important of them being political uncertainties, memogate scandal, President’s sudden departure to Dubai for medical check up and treatment, judiciary issue, reported rift between the army and the presidency etc. Another signifi-cant issue was the global economic turmoil which also affected our stock market. However, Pakistan survived the shock. Pakistani markets went down by around 8 percent as compared to global emerging markets where average fall was around 15-25 percent. I think the situation will improve in a few months and foreign investors will come back with their investment as other emerging markets are still facing a down-ward trend. Our market has the potential to survive and grow. In fact, foreign investors have already started coming in for making investments in our market. Q: The market showed a somewhat positive trend during the month of December. Is this recovery real or artificial? A: If we see the current market trend it is running on multiples of 7 and 8. It shows that our market is one of the cheapest in the world. Dividend yield is around 10 percent which is a better ratio as compared to other countries. our markets offer better opportunities for investors. So, you cannot say that our current position is artificial. Fundamen-tally we have a strong market.Q: The global economic turmoil did affect the Pakistani market but the impact has not been as great as faced by other major economies of the world. What was the reason behind this? Is it due to better policy of our economic managers or there were some other reasons?A: We have had a consistent policy which helped in somewhat neutralizing the ill effects of the global economic downturn. Even the UK market fell by around 20 percent. Although our policy was not very growth oriented yet we survived, thanks to consistency in our policies. Q: How did the current Pak-US rift affect our economy particularly the stock exchange?A: Pak-US strained relations did not affect our market much because we had already taken the correction. There were other issues such as political uncertainties, memogate scandal, Presedent’s illness and his sudden departure to

Dubai, judiciary issues etc. which affected our market stabil-ity and brought the index down by 600 to 800 points. The President is back quashing the rumors about him and the market is now moving towards stability. Similarly the Army Chief ’s recent meeting with the Prime Minister and his telephonic contact with the President of Pakistan also sent positive signals for investors to turn to our markets. There is also speculation that market could hear good news from the tax authorities regarding change of authority for collec-tion of Capital Gain Tax (CGT). Q: There were rumors that to bring the investors back the government will withdraw the CGT but it did not happen. How can we bring the investors back in the market?A: The stock exchange crash of 2008 and the KSE 100 Index dropping down to nearly 4000 points from 15000 eroded the investors’ confidence in the stock exchange market. The imposition of CGT further prompted with-drawal for fear and hassle for filing their income tax returns. Even the small investors (Rs. 3, 00,000 income per year) who did not fall in tax bracket withdrew their investment on this account. Around 20 percent of the investors opted out of the market on similar grounds. The

Strong marketing and research needed for stock market growth – Ahsan MehantiMr. Ahsan Mehanti has rich academic and professional background. He is senior Chartered Accountant and has held senior management positions in different organizations. Presently, he is director , Arif Habib Investment Ltd; Crescent Textile Mills Ltd; and Rozgar Micro Finance Bank. ‘Value Chain’ is grateful to him for affording time for this interview - Editor

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Interview

January 2012

remaining investors also feel hesitant to make investment although the market has still the potential because institu-tions have made investments therein. However, 80 percent big players who trade in value are still present in the market and want to invest. But due to the exit of 20 percent small traders who trade in volumes, big players hesitate in making investments in the market. Q: What steps should be taken by the government and our economic managers to restore the investors’ trust and confidence in our market? A: I think we can bring the investors back and restore their confidence by changing the authority for collection of capital gain tax. It might be helpful if the Government withdraws the CGT and restores the old taxes of KSE instead. Further, stock exchange management should organize road shows to create awareness about the stock exchange business and investment. Similarly SECP should develop mechanism that ensures security of the invest-ment made by the investors. Q: How can the brokers regain the investors’ trust eroded after the events that followed the stock exchange crash in 2008? A: Several steps may be taken to restore the investors’ confi-dence in the brokers. Brokers should strengthen their balance sheet and improve their performance. Similarly SECP should register only those agents who are qualified and are able to fulfill their responsibilities. Agents whose previous record has not been good should be banned. Further, KSE should also come up with a strong marketing team with practicable plans.Q: There should be a minimum capital re- quirement from the broker in order to the secure the investor’s interests. Do you agree? A: There are already certain minimum capital requirements and a Capital Market Protection Fund in the stock market to protect the investors’ interest in case of default by any member. Decisions to compensate the affected investors should be expedited. On their part, the investors should check the brokers’ credibility before making investments.Q: Recently we heard about proposal to impose mini-mum capital requirement of Rupees 400 million. What happened to that? A: Yes, that was up to 400 million rupees proposed by SECP which has been rejected by the brokers. Right now there are 200 brokers in the market of which 150 are active brokers. If SECP’s proposal is implemented, it will hardly leave 10 brokers who can meet the requirement. What will be the future of remaining 190 brokers of the market?

This will erode competition while the brokers’ fee will be tremendously high affecting the volume of trading in the stock market.Q: What is your opinion about giving MFN status to India? Will it benefit our stock exchange business? A: Yes, it will. If their companies enlist here and our com-panies enlist over there then we could find price discover-ies and this will provide a long term benefit to us. Gov-ernment of Pakistan should give guarantees and assur-ances to the Indian investors that there will be no restric-tions on their remittances to their country in any situa-tion. Q: We are witnessing the gas shortages and energy crises. What will be its impact on the fertilizer sector?A: Engro and other major fertilizer producers face gas shortage in winters but it is now accepted in our market as a regular norm. And I think this issue will remain in future also until we borrow gas from other external sources. Q: What future do you foresee of the financial insti-tutions, cement and other sectors in 2012? A: The banking spread is the highest in Pakistan and nobody can stop the growth of banking sector. As far as cement

sector is concerned, the future is bright in view of expansion in its export to India and Afghanistan. However the sector may be adversely affected in case of crisis in the global markets or decline in inter-nal demand.

Q: So it means you are optimistic about these sectors in 2012?A: We see record earnings in oil and gas sector. For instance, PSO showed 86 rupees earning per share. Its share price is currently

around 250 rupees. The biggest oil company in the market having around 70 percent shares is trading on 3x. These companies are performing well and giving record results. In banking sector, we are expecting record results from MCB. Similarly Lucky Cement is providing the highest earning right now. In refinery sector, National Refinery showed EPS of 80 rupees. These big companies are playing monopolistic role in the market and are expected to perform well in 2012. FFBL, FFC and Nishat Mills have also showed highest ever earning per share.

Q: Keeping in veiw the current economic turmoil, do you think that the stock market can again face the crises like those we had in 2005 and 2008? A: Historically speaking, Pakistan’s exports, foreign reserves and remittances right now are on peak. We received remit-tances worth nearly 6 billion dollars during the last six

Mr. Ahsan Mehanti is talking to “Value Chain”

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also to compete , as far as possible, with those coun-tries in the inter- national market. Only if an enabling environment was provided to our indus- trialists and traders, they could revolutionize Pakistan’s export business. They have a lot of poten- tial that needs to be exploited with adequate facilities.Q: What are your views about KESC and its per- formance?A: KESC was privatized and given to Abraaj group on terms and conditions

favorable to them. However, their performance has not been satisfactory. The terms and conditions on which KESC was given to them are not being followed. They are neither reinvesting their money nor paying the debts. Due to non-payment of the dues consistently, there is a growing perception that they will leave the country with-out clearing the dues of around 100 billion. God knows, who will be responsible for the non-payment.Further, KESC officials are on record to have said that their 98% recovery is from the industries. It is not under-standable, therefore, as to why their needs for electricity are not being met. In our opinion, the government of Pakistan should arrange for a detailed audit of KESC to find out where does their money go .Let me explain how electricity shut down in a processing industry affects all processes of the factory. With the power shut down, the chemical (raw material) freezes in the pipes. To restart the process, we have to clean all pipes thus increasing the wastage of raw material, wast-age of time and labor and consequent increase in the cost of production. The Government needs to take these issues seriously and initiate short and long term plans to overcome them.To a question about non-payment of electricity bills by the industrialists, he said, it is wrong to assume that the industries are not paying their power dues to KESC. We cannot afford to do that because if we do not pay the KESC will simply disconnect the power supply and we have to keep our industries running.Q. There is wide difference in prices of auto and other products assembled in India and Pakistan? Why is it so? Are Indians not making profits?A: The products such as bikes, cars and electrical appli-ances, assembled in Pakistan entail higher cost of produc-tion but in India the production cost is comparatively low. Take the example of cars assembled in India and Paki-stan. The car assembled in India costs Rs. 15 lacs but the same car assembled in Pakistan costs Rs. 21 lacs for obvi-ous reasons.

Q: And the currency rates may also be one of the factors for price differentials?A: Yes, but the impact on this account is not more than 10 to 15 percent.Q: As you know that right now US dollar is touching new heights (approximately 90 Pak rupees are equal to 1US Dollar). What is the impact of the widening gap between US Dollar and Pak Rupee on our trade and economy as a whole? A: It has a negative impact on our economy; it causes infla-tion which is affecting all sectors of our daily life including trade as it reduces the buying power of our currency. Gov-ernment states that our inflation is in single digit but I think our inflation rate is in double figure between 20 and 30. We can improve earnings through foreign trade if we could stabilize and improve our currency rate.Q: What prospects do you foresee for Pakistan’s economy in 2012? A: We may expect better prospects for Pak economy in 2012 provided the issues that inhibit its growth are addressed to and resolved. I think with better economic management and policy designs we can overcome our problems. Given the will and sincere efforts, the issues may settle by 2013 if not in 2012. But at least the process of change should start now. Somebody has to take the initiative. Q: Being an active body of trade and industry, KCCI’s concern is under- standable. What is KCCI doing in this regard?A: First of all, please bear in mind that KCCI is not a decision making authority. As representatives of trade, business and industry, we can only suggest solutions; implementation thereof is the prerogative of the policy makers. When we take an initiative for solving a problem, we face resistance. When we raise the voice for the rights of trade & industry we are served with defama-tion notice worth 100 crore rupees. But this is not going to deter us. We shall fight for our rights till the end. Whatever I say is based on behalf of 15 lac labors, 7 industrial zones and 17000 members.

Interview

January 2012

months. Indeed we have problems like unemployment, war on terror, political uncertainties but it does not mean that Pakistan will also meet the fate as did Greece and other European countries. Around 70 big banks in America were wound up due to the financial crises and recession but we still have companies in Pakistan which are showing record earning results. If we compare our economy with international economies we will find that our unemployment rate is 6 to 7 percent, as against 25 percent in Greece and 15 percent in Italy. So we are still in far better position economically. Q: Pakistan’s foreign reserves have improved considerably but the volume of our debts has also increased. What would you like to say about this?A: The total international debt we have right now is around 60 billion dollars while the domestic debt is around 70 billion dollars. This brings the total debt to 130 billion dollars. If we divide our 200 billion dollar GDP by 130 billion dollar debt, the Debt to GDP ratio will be around 70 percent. America has a 90 percent of GDP to External Debt ratio. 150 percent is now an average ratio in Euro-pean countries. Thus we are in a far better situation than others. Our situation is not better than that of Switzerland but certainly better than that of UK.Q: What is your overall view about 2011 and what pros-pects do you foresee about 2012? A: We are expecting a very bright future of Pakistan in 2012 if there is a positive economic turnaround globally. Similarly Pakistan will face negative results in case of any global recession or economic downturn. We are expecting 4-5 percent growth of stock exchange as well as around 4 percent growth in Pakistan’s GDP if all goes well. Q: There is an impression among local investors that there is a complete dominance and monopoly of big players in our stock market. Is it true? A: Investors should evaluate the company before making any investment. They will not be affected if they make their investments in companies that yield better dividend rates. Q: Has SECP taken any steps to minimize the investor’s risk?A: SECP has identified the minimum qualification for agents but it has not been made mandatory for brokers to publish research reports for guidance of the clients. Personally I feel that SECP should make it mandatory for every brokerage house to have a research head with a predefined minimum qualification who must ensure that the trading on the stock exchange is in line with the research findings and that the investors are aware about the risks and benefits before making their investments.

The agents, research heads and brokers who do not fulfill the requirements should be black- listed. Further as a regulator, SECP should also audit the blacklisted brokers and penalize them if found guilty. SECP should increase the level of accountability to ensure security of investors’ investment. Q: Investors were demanding the margin finance system which is now imposed but trad-ing volume is still low. What is the reason?A: There are too many require- ments of the margin finance system; e.g. the investor has to show his wealth statement and tax statements for banks to monitor them. Banks will force them to

increase or decrease their securities according to the margin. Investors, especially the small investors, are not ready for this system right now. For instance the investors whose income is below rupees 3 lacs will not be willing to show their wealth statements. Banks check the credibility of the investors in their own way. Q: How can we increase the trading volume of stock exchange? A: We can only increase the trading volumes if stock exchange shows any remarkable efficiency. Transaction cost should be decreased. There should be a strong marketing team which could bring investors back and also attract new investors. Collection authority should be changed and investors should be assured that they would not be harassed by the regulating authorities.With these measures, I think the trading volume at the stock exchange may increase.Q: Can we achieve the psychological level of 15000 points as we did in April 2008?A: We can reach that level but we should keep in mind that we are facing a tough competition from national saving schemes. It offers a return of approx 13 percent. Some financial institutions give 2 or 3 percent more but they are very few. Financial institutions giving return of 14 to 15 percent offer tremendous competition for the stock exchange. We can touch the 15000 point level if discount rate is brought down to 6 or 7 percent from currently 12 percent. Q: Do you think the interest rate will be decreased or increased in the next monetary policy?A: Inflation is not in control. However the figure we got last time is slightly better and impressive as it stands at nearly 10. But if the tariff rate of electricity increases and the petroleum prices surge, I think the inflation rate will again touch nearly 12 percent in the next 2 to 3 months. If inflation could be controlled and brought down to 7 percent then we can bring the interest rate down which will cut the cost of doing business.

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oultry and fish are both essential ingredients of human diet. Fishmeal is also essential part of poultry feed.

Fishmeal is made from all the parts of fish which are not required while processing of fish is being done for human consumption, especially processing for export.

Development of �sh & Poultry in PakistanP

POULTRY: Poultry provides the necessary vitamins, minerals, animal proteins and amino acids while most parts of chicken meat are devoid of cholesterol, thus poultry meat is considered to be very healthy for human beings (Medical research says that chicken leg meat, which is very popular in the local population, contains high quantity of cholesterol). In the sub-continent, the chicken was always considered to be a delicacy and was always served to special guests and on special occasions. Up to the early 60s, chicken meat would cost double that of mutton. The situa-tion continued up to the time when broilers were intro-duced by PIA as pioneers. This effort of PIA was primarily to cater to their own needs flight kitchen and to serve their passengers in a better manner, as no standard variety of poultry meat was available locally. The Desi chicken was not suitable for various international dishes, especially French cuisine which required softer breast tissue. The introduction of this farm-produced variety brought a revolution in the industry and, with the passage of time, the farming of this type of poultry gained momentum. Sepa-rate varieties were introduced for meat and eggs. The production of eggs was enhanced through the introduction of layers. Previously, the Desi type of poultry would produce a very small size of egg, and the production per year bird was not more than 100 eggs per bird. In certain cases, the production was much below the above-mentioned standard. The new varieties of layers could produce up to 300 eggs per year per bird, while the size of the egg was also much larger. Similarly the varieties intro-duced in respect of broilers also brought a revolution. Very few projects were established which would rear the Grand-parents. The eggs from Grandparents were mostly imported and large hatcheries would produce chicks from these eggs. Ordinary farmers would purchase one day old chicks from these hatcheries and with proper diet and proper environment, the day-old chicks would mature in 6 weeks’ time, and the average weight of the chicken would exceed 1.5 Kg. After 6 weeks’ time, if this variety of chicken is still kept by the farmer in the farm, the Food Conversion Ratio (FCR) would drop. The ideal FCR is considered to be greater than 60%. If the FCR drops, the profits of the farm may go down and the farm would even run the risk of ending up making a loss. With the advent of improved production of poultry meat and eggs, the supply side of poultry and eggs became reasonable and such supply side provided a balance and stability in the prices of mutton and beef as a cheaper (which was consid-ered to be superior, against the norms of developed world) alternative was available to the general public. Due to these reasons, prices of poultry products did not increase to the extent of mutton and beef in Pakistan during the last

50 years. As a matter of interest, the price of poultry which was double that of mutton during the early 60s, when compared with the present times, then price of these variet-ies of meat are exactly reversed.

FISH: Fish is also considered to be an essential part of human diet. This meat is very nutritious and contains some ingredients which create the necessary resistance against various diseases. Certain fish contains Omega 3 oils which are necessary for healthy skin. (The Omega 6 and 9 which are also necessary for skin health are best obtained from borax and flax seed). In Pakistan no significant progress has been achieved so far in development of fish production and farming. Pakistan produces both fresh and salt-water fish. The fish processing projects have been installed in Karachi Fish harbor and by and large these projects cater to the export market. In Pakistan most of the time the fish, after being caught, is not kept in healthy conditions. Some-times fish vendors sell the fish on hand-carts in the residen-tial areas, which is not a healthy practice as the fish meat deteriorates and produces bacteria very easily. The export market for fish has a lot of issues (which are discussed in the later part of this article), which include uncleanliness from the time of fishing up to export processing, pollution of water in the catching area and issues pertaining to labour which are contrary to the standards of the European Union.If we compare prices of this type of meat with poultry, mutton and beef, then at present good fish meat is out of the reach of the common man. The rate of salmon, mack-erel, red snapper and sole etc. is very high, while the quality of sole and salmon is not comparable to Europe because of the high temperatures of rivers and the sea as like all variet-ies of meat the quality (read taste) is always good where atmospheric temperatures are low. Pakistan produces good quality of hamour but the produc-tion is very low and this variety is only available between Gwadar and the beach of Oman. Fresh water fish is consumed locally and such varieties are not exported.

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gIf Pakistan places proper emphasis on the development of fish farming and fast-growing and more popular varieties in the local population and the varieties which have a potential in the export market, Pakistan may create a stability in the prices of meat and at the same time enhance its export earnings. The operating cost of a fish farm is relatively less as compared to cattle and poultry farming. The most efficient methodology of fish farming is that the proper food chain is created in the farm, and this food chain brings down the cost as inputs in respect of fish feed are lowered and the food chain provides a balanced diet for the fish as well. History & Development of Poultry Industry in PakistanPrior to 1963 the native breed "Desi" was mainly raised which produced a maximum of 100 eggs per year under local conditions. An improved breed "Lyallpur Silver Black" was evolved in 1965-66 in the department of Poultry Husbandry, University of Agriculture, and Faisalabad. The layers of this breed were capable of producing 150 egg/year and gaining 1.4 kg weight in 12 weeks of age under favorable management and feeding conditions.Poultry in Pakistan was kept as backyard business for household needs. In early sixties the need of commercial poultry was felt which resulted in 1963, in the form of a national campaign to enhance the production of feed prod-ucts in the country. Under this campaign the government announced a tax holiday on the income derived from poul-try farming. Pakistan International Airlines (PIA) in collaboration with Shaver Poultry Breeding Farms of Canada started first commercial hatchery in Karachi. Simul-taneously, a commercial poultry feed mill was started by Lever Brothers (Pvt), Pakistan Ltd., at Rahim Yar Khan, which was followed by other pioneers like Arbor Acres Ltd.Special emphasis was laid by the Government on develop-ment of poultry industry in the country during 1965-75. The Government made major policy decisions to provide all possible facilities to poultry industry in the annual devel-opment plans. The incentives provided to poultry farmers/poultry industry included:

The subsequent development of Pakistan’s Poultry Industry can be divided into four phasesPhase 1: The Introductory Period 1965-1970.During this period of poultry development the incentives and a number of catalytic forces shaped the early develop-ment of the poultry industry.The early development of the industry was also character-ized by emerging problems including rising feed costs, disease outbreaks and consumer preferences for Desi birds.

Phase 2: Institutional Development 1971-1975.As poultry production became a significant enterprise in the agricultural economy of Pakistan, the government strengthened institutions serving the new industry. Research services were offered through the Poultry Research Institute with the assistance of UNDP/FAO funds. A dramatic increase in poultry production resulted due to diverted investments from the nationalization of industries in other sectors. At the same time the clustering of production units led to large disease outbreaks and the lack of marketing facilities due to ban on export of poul-try products limited industry growth.

Phase 3: The Production Boom 1976-1980.The government of Sindh followed a policy to attract investment in poultry farming by offering state land under ten year leases. At the same time, the nationalization of other industries contributing the entry of capital into poultry industry, particularly in the Punjab, resulted in the poultry production boom. Commercial egg production increased from 624 million eggs in 1976 to 1223 million eggs in 1980. Broiler production increased from 7.2 million birds to 17.4 million birds during the same period

Phase 4: Depression and Adjustment 1981-1990.Production showed a decreased growth or even depres-sion during early 1980 particularly of increases in the Punjab, Baluchistan and NWFP. However, in the later part of 1980’s starting form 1985 industry seemed to be read-justed with much rise in poultry number particularly in broilers. Faced with disease problems, lower productivity and numerous environmental and climatic difficulties, some of more successful farmers decided to produce under more modernized conditions and to establish their poultry farms in cooler, less polluted area of the country. Breeding farms in Karachi and Punjab thus relocated to Abbotabad, to the base of the Murree Hills and to the Valley of Quetta. The farmers also built houses with controlled environments for breeders, broilers and com-mercial layers. The development of broilers is always better in cooler climates as the birds consume less energy in fighting the environment. In winters, farms in these areas provide heating facilities to achieve better produc-tion.

1991 and onwardsThis period was a disaster due to diseases. Various type of diseases broke all over the country. At national level (conit0

Tax exemption on income derived from poultry farming.Import of flock and incubators was permitted under free list.Allotment of state land on lease for poultry farming at very nominal rates.Established poultry research institutes at Karachi and Rawalpindi through Food and Agricultural Two meatless days were announced to encourage poultry meat consumption.Subsidy on grains to form low cost quality ration, through UNDP-grains.Loan through ADBP for the construction, of poultry sheds.Established directorates of Poultry Production in Karachi and Punjab to provide extension services to the poultry farmers.Establishment of Federal Poultry Board to coordinate government and industry activities in the poultry business.

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ince end-2007, bankers are discovering that the outcome of lending was often not the one they had

initially envisaged. The current recession therefore led to creation of a variety of stresses the brunt of which is being borne by banks across the globe. The primary outcome of these stresses has been a rapid march back into the shell. Banks are exhibiting a level of risk-aversion that is escalating the recession because even bankable lending propositions are being rejected. What banks overlook is the fact that if economic activ-ity is not revived, they don’t stand any chance of recov-ering their non-performing loans (NPLs). They don’t appreciate the fact that, even for auctioning the default-ing borrowers’ collateral, there have to be signs of an up-surge in economic activity to convince the bidders to buy the assets being auctioned. What is more sensible though is to revive failed businesses because that is the most convincing indicator of economic revival.Instead, banks in Pakistan have opted to lend more to the state via investing in government’s short- and long-term debt papers. Lending to the state is not odd; all banks do that but the aspect that banks seem to ignore (to their own ultimate despair) is that, for credit to be repaid, it must be utilized in a manner whereby it produces optimal returns. Bank man- agers should know (better than anyone else) about the capacity of governments, especially populist governments, to do just that – gener-ate optimal returns from borrowed funds.Banks cannot afford to forget that, while political regimes will keep coming and going, banks will continue to carry the burden of remedying the negative after-effects of the policies of these regimes; no political party will come to their rescue in time of need. But the feeling one gets is that bankers don’t read history and learn lessons from it to guide them while taking decisions whose outcome will impact the future. This is the unfortunate aspect of what today’s banking looks like.The ongoing crisis has established beyond any doubt that sovereign lending is no longer zero-risk lending. As a matter of fact it never was, though the text books

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ginstitutes like Poultry Research Institute, Veterinary Research Institute and Agriculture University Faisalabad also did efforts to reduce the incidence of these diseases.In 1995 a new disease called bird flu appeared in Murree and Abbotabad and mortality in parent flock rose up to 80%. In 1996 parent flock increased in number due to absence of planning that resulted in depression in the market and the price of chicks decreased several times its cost of production. This depression in Poultry market continued in 1997 as result of ban on serving of meals in marriage parties that reduced the demand of poultry products in the market up to 40%. Slowly in 1998 it started improving and by increase in price of chick the farmer again made a profit.

FISHING INDUSTRY IN PAKISTAN: Fishery plays an important role in the national economy. It provides employment to about 300,000 fishermen directly. In addition, another 400,000 people are employed in ancillary industries. It is also a major source of export earning. In July-May 2002-03 fish and fishery products valued at US $ 117 million were exported from Pakistan. The Federal Government is responsible for development of Exclusive Economic Zone of Pakistan. In addition, it is also respon-sible for making policies, inter-provincial co- ordination, planning, research, quality control, training, exploratory fishing, stock assessment, fisheries manage- ment, fleet improvement, data collection and export etc.. There are about 16,000 fishing boats in coastal area of Pakistan which operate in shallow coastal waters as well as in offshore areas. These fishing boats undertake fishing trips lasting for few hours to about 25 days depending upon type of fishing. Total production from inland and marine waters is approxi-mately 0.60 M. tons.

FISH HARBOURS OF PAKISTAN: The major fish harbors of Pakistan are:• Karachi Fish Harbor handles about 90% of fish and

seafood catch in Pakistan and 95% of fish and seafood exports from Pakistan.

• Korangi Fish Harbor • Pasni Fish Harbor• Gwadar Fish Harbor

FISH CONSUMPTION: A substantial quantity of fish is consumed locally. In addition, small pelagics and by-catch of trawl fishing is being used for production of fish meal. Remaining balance is exported in salted dried, frozen and chilled form.

FISH EXPORT: Fish and fishery products are processed and exported to over 50 countries. About 30 – 35% of the fish and fishery products are exported to European Union countries. Japan, U. S. A. China, Saudi Arabia, U. A. E. Malaysia, S. Korea, Hong Kong, Sri Lanka and Singapore are other major importing countries. The export data is annexed.• Fish export has showed an increasing trend in the past many years, however, a substantial decrease has occurred during 1998-99 which is attributed mainly due to glut in the international market and because of financial crises in the

Southeast Asian countries. Export of seafood is facing many a problem notably among these are:• Post harvest losses are high due to handling of fish catch

on board and long voyage time.• Congestion at Karachi Fish Harbor. There are more than

17,000 fishing boats operating in Sindh zone.• The storage capacity is only 10,000 tons which is not suffi-

cient to cater the future requirements.• Pakistan is exporter of raw material or semi-processed

fish/seafood.

Marine aquaculture is non-existent; however, fresh water aquaculture is fairly developed.The Government of Pakistan is taking various measures to increase the export of seafood over US$ 500 million within next two years. The measures are:• Up-gradation of fishing vessels to control post harvest

losses.• Provision of modern peeling sheds for providing raw

material to fish processing industry.• Flake ice plants on harbors.• Intensive marketing efforts at international level.• Promotion of marine aquaculture.• Human resource development through training.• Regular monitoring of resources through stock assess-

ment surveys and exploratory fishing.• Procurement of handling and cleaning equipments for

fish harbors.• Construction of coastal highway.

OVERVIEWIn 2001, total world production of fisheries was reported to be 130.2 million tons, of which 37.9 million tons was from aquaculture practices and 92.3 million tons from capture fisher-ies production. China was the leading producer with 42.6 million tons (comprising of 16.5 million tons of capture fisher-ies and 26.1 million tons of aquaculture production). Hence, China’s share in total world fish production is 33% and in aquaculture production it is 69%.In parallel with the increase in production, international trade has continued to grow, and at an accelerating rate in recent years. (Source: FAO) About 38% of world fish production is traded internationally. In 2001, total exports of fish and fishery products were US$ 55.9 billions in value terms. Developing countries, as a whole, supplied slightly more than 50%. Shrimp is the main fish commodity traded in value terms, accounting for about 19% of the total value of internationally traded fishery products. (Source: FAO) In 2001, more than 80% of the total world import value was concentrated in developed countries, in particular in Japan, the USA and in several EU countries. Japan was the major importer accounting for about 23% of total import value. USA was the second main importer with a

Besides the above volatile factors are the external factors including buyers’ preference for weak payment arrangements (contract or collection basis, not Letters of Credit), rise in import duties in importers’ countries, quota restrictions or banning of imports. It is odd that despite these changed risk dynamics, in-house research in banks is both inadequate and improperly focused. Instead, the frontline in banks relies on input from customers or informal sources, which amounts to relying on weak, un-verifiable market trends and conse-quent high-risk lending.Laying guidelines is the first step; far more demanding is the effort to credibly ensure that the guidelines are followed in letter and spirit, which implies vigilant micro and macro monitoring of the risk asset portfo-lio, from the frontline up to the Board Executive Com-mittee and Board level. But loan loss provisioning during 2008-10 indicates that, largely, it was the fallout from unintended increase in exposures due to the rapid depreciation of the Rupee whereby the Rupee values of foreign currency denominated transactions/ loans rose well in excess of borrowers’ repayment capacity. While, it was partly the result of monitoring lapses, the bigger issue is “did banks that took such exposures have the systems and the capacity to manage this risk?” Besides, did these banks visualize the impending fallout from

rising trade deficit beginning 2003-04? That trend could obviously not be reversed by foreign inflows since Pakistan was facing

civil strife in two of its four provinces, with little signs of its being contained in the near future.Rising trade deficit indicated excessive imports and rapid contraction of the import-substitution sector when the

world headed for a recession. It was a disaster that was building-up but was

not accepted because bankers, seem- ingly at all levels, lacked the capacity for taking a macro view of the impending tragedy. This tragedy was compounded

by the fact that banks often took over-optimistic view of the managerial abilities of their borrowers, as proved by their subsequent failure to sell on credit and recover their receivables to repay bank credit. The scenario was worsened by the unregulated agencies for asset valuation, loss assessment, and goods custody, clearing, forwarding, and transportation. Banks over-looked that their interest was at stake. Because these agencies aren’t regulated by a code of conduct that defines their duties and penalties for not performing them, not all of these agencies were likely to perform their functions in a committed fashion, although many of them did so and very well. The regulatory code of conduct called for caution–bank’s routine oversight of all these activities. Risk is central to bank lending; it can’t be eliminated. Banks can only reduce its quantum and probability to

But this logical starting point can lead to nothing in terms of improved risk management setup if these guidelines are laid down without conducting market research that is specific to the bank’s own risk portfolio and identifies sectors that are expected to grow in the medium term as well as those likely to contract due to domestic factors including excess growth, over-capacity, increased competition especially from cheaper imports, adverse exchange rate movements and the resultant hike in landed cost of imported raw materials/inputs, inter-est rate rise, higher import/export tariffs, or bans being imposed on import of raw materials or export of finished goods.

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Bank sector bluesPakistan: Directorate General of Intelligence and Investigation Inland Revenue has unearthed a new fraud technique being used by some rich persons who are using bank accounts of their poor non-taxpayer employees and other accounts for carrying out “benami bank transactions” to avoid documen-tation of their business activities and thus avoid falling in the FBR’s tax net. Sources told Business Recorder here on Friday that some rich persons have been involved in massive concealment of taxable income by carrying out benami banking transactions with the help of low paid employees who are not even taxpayers.The reason why this criminal technique works is inadequate inquiries by banks while opening the accounts of the non-tax paying employees of big businesses.

Overseas Pakistani workers remitted an amount of $5,239.99 million in the first five months (July–November 2011) of the current fiscal year 2011‐12 (FY12), showing an impressive growth of 18.33 percent or $811.69 million when compared with $4,428.30 million received during the same period of last fiscal year.The inflow of remittances in July-November, 2011 from Saudi Arabia, UAE, USA, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK, and EU coun-tries amounted to $1,364.36 million, $1,167.25 million, $975.12 million, $600.04 million, $594.30 million and $160.26 million respectively as compared with the inflow of $935.76 million, $1,045.32 million, $841.32 million, $530.30 million, $496.09 million and $147.57 million respectively in July-November 2010. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first five months of current fiscal year (July-November 2011) amounted to $378.66 million as against $431.93 million received in the first five months of last fiscal year (July- November 2010).The monthly average remittances for the July‐November 2011 period comes out to $1,048.00 million as compared to $885.66 million during the same corresponding period of the last fiscal year, registering an increase of 18.33 percent.In November 2011, the inflow of remittances from Saudi Arabia, UAE, USA, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK, and EU countries amounted to $218.98 million, $204.13 million, $179.77 million, $113.89 million, $107.38 million and $30.45 million respectively as compared with the inflow of $171.45 million, $225.75 million, $175.05 million, $113.39 million, $102.85 million and $30.50 million respectively in November, 2010. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during November 2011 amounted to $70.32 million as against $107.9 million received in the same month (November 2010) of last fiscal year.

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gshare of 17%, followed by Spain, France, Italy, Germany and the UK. (Source: FAO) About 74 percent of world fish production is used for direct human consumption, whereas the remainder (about 26 percent) is utilized for various non-food products, mostly for conversion to fishmeal and oil. As a highly perishable commodity, fish has a significant requirement for processing. More than 60 percent of total world fisheries production underwent some form of processing. The most important of the fish products destined for direct human consumption was fresh fish (a share of 53.7 percent), followed by frozen fish (25.7 percent), canned fish (11.0 percent) and cured fish (9.6 percent).With these overall volumes and trade figures in mind, let us look at Pakistan. We have a total coastline of 1,090 km and a total fishing area of approximately 300,000 sq. kms. Pakistan’s fishing waters are termed as highly rich in marine life with a vast variety of species having commercial value. However, this potential is not reflected in the export earning from fisheries sector. The exports of “Fish and Fish Preparation” were at $134.5 million (with a volume of 93,214 tons) in 2002-03. (Source: EPB) This situation was mainly attributed to unorganized nature of private sector, lack of focus in Government policies and little institutional investment (in public and private sector projects) in this sector. Pakistan’s exports of fishery products stand at about 0.25% of world exports. A rough estimate based on maximum sustain-able yield figures, existing value addition, and foreign bench-marks, puts our total export potential from this sector at around US$ 1.0 billion from existing natural resources. If we include the high potential area of aquaculture, our fisheries sector can yield even higher export earnings.

affects standards of living of this community. In addition, these large socioeconomic groups face economic survival problems due to marine resource mismanagement, decreased landing figures and problems faced by seafood processors (who buy their produce) in export marketing because of poor quality product. Given the changing eating habits and depleting natural resources, world seafood market is termed as mainly “sellers market”. The focus in fishing is shifting from already exploited regions to under-exploited areas because of conservation and environment pressures. Despite such favorable circumstances, Pakistan’s seafood exports have actually decreased during the past decade, with 1992 show-ing highest figures, i.e., US$ 181 million.By adopting modern techniques of fishing and fish process-ing, Pakistan can exploit the huge opportunity that exists in the fisheries sector.

THE STATUS OF FISHERIES AND AQUA-CULTURE IN PAKISTAN: Pakistan is endowed with vast aquatic resources, as indicated in Table 1. Freshwater, brackish water and marine resources could be utilized for aquaculture development as long as economically efficient and environmentally sustainable.

Pakistan’s domestic consumption is termed as one of the lowest in the world, at 1.6 kg per person per year (compared to world average of 16.2 kg per person per year). Hence, most of the produce is exported. There is a great depen-dence on a few species for exports, with very little value addition. Most of the fish catch is from marine sources, which comprises about 70% of total fish exports. Pakistan exports fish mainly to Europe, US, Japan and Middle-Eastern countries. The fisheries sector in Pakistan offers direct employment to over one million people, most of which work as fishermen. There are a large number of fishermen’s villages all along Pakistan’s coast line where fishing is primary source of earnings for centuries. The stagnant fisheries sector directly

Table 1: Inventory of Pakistan’s aquatic resources, by province.

Area in ha Sindh Punjab Baluchistan N.W.F.P Total

Rivers/ streams 160,000 2,940,000 -- 2,408 3,102,408

Canals, drains & abandoned

canals

321,340 23,700 -- 1,763 346,803

Lakes 110,000 6,700 4,047 6,362 127,109

Dams/ reservoirs 97,000 65,800 6,070 26800 195,670

Waterlogged areas 3,000,000 30,000 -- 1,600 3,031,600

Deltaic area 700,000 * -- -- -- 700,000

Flood water area 1,000,000 -- -- -- 1,000,000

Fish farms ** 49,170 10,400 100 560 60,230

Territorial Marine Waters

(km)

352 km x

12 N.Miles

-- 1,129 x 12

N.Miles

-- 1,481 x 12

N.Miles

Source: DOF GOP

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AA riculturegThe main problems being faced by the fishing industry is facing in Pakistan are:

1: Water PollutionPollution on the Coast of Pakistan is mostly limited to the Karachi area. The Karachi fish harbor is severely affected by a variety of pollutants. Spillage of the oils from ships, domestic and industrial waste is causing great harm to our fishing industry.Studies have shown that many chemicals - some of these having carcinogenic qualities -, toxic materials and heavy metals have been found in the marine life. These dangerous substances are also entering the food chain of the people whose diet comprises seafood. Water pollution is not limited to Karachi; it is also affecting the rivers of Pakistan.

2: Over-FishingAnother problem associated with the fishing industry is that of over-fishing of shrimps through out the year, even in the breeding season.

3: Threat of MangrovesMangroves act as a barrier and protect the coastlines from high and low tides. The mangroves that are a breeding ground for fish and shrimps cannot thrive well in polluted sea water. Anonymous 400,000 people are employed in ancillary industries. It is also a major source of export earning but unfortunately the government does not seem serious in solving fishermen problems.Fishermen still in Indian jails have become mentally disabled due to the worse torture of Indian authorities. The relatives of these fishermen in painful conditions keep protesting for the release of their loved ones, but it seems the government has turned a deaf ear to them and their problems.

A host of problemsIn many cases, fisheries rules and regulations and enforce-ment are not efficient; fishing capacity and efforts are not sufficiently limited or controlled. Current management problems include:• Inadequate fisheries regulations: In many fisheries, current rules and regulations are not strong enough to effectively limit fishing capacity and effort to a sustainable level. This is particularly the case for the high seas, where there are few international fishing regulations. • Lack of implementation/enforcement: Even when fisheries regulations exist, they are not always implemented or enforced. For example, many countries have still not ratified, implemented, or enforced international regulations such as the UN Convention on the Law of the Sea and the UN Fish Stocks Agreement. Lack of political will is also responsible for failures to adopt by catch reduction devices.• Failure to follow scientific advice: Many fisheries management bodies do not heed scientific advice on fish quotas. E.g., Atlantic cod, tuna• Flag of Convenience vessels: Countries are either failing to restrict fishing companies from owning and oper-ating FoC vessels, or are not rigorously inspecting FoC vessels landing at their ports. This includes countries with some of the biggest fishing fleets such as the EU, Japan, Korea, and Taiwan. This allows illegal, unreported and unregulated (IUU) fishing to continue.• Lack of traceability: Customs agencies and retailers are not always ensuring that the fish entering their country and shops was caught legally and in a sustainable manner. This means that consumers are unwittingly supporting poor management by purchasing fish from unsustainable fisher-ies.• Too few no-go areas for fishing: Protected areas and no-take zones, where fishing is banned or strictly regulated, can provide essential safe havens where young fish can grow to maturity and reproduce before they are caught. But just 1.2% of the world's oceans have been declared as Marine Protected Areas (MPAs), and 90% of existing MPAs are open to fishing. The current lack of protection is especially worrying for fish spawning grounds and the deep sea, both of which are particularly vulnerable to overfishing.

WWF has identified the following problems being faced by the fishing industry

Fishing problems: Poor fisheries managementManagement oversight, government regulations, and quotas for fisheries are a relatively recent development. But while some countries are now making a huge effort to stem overfishing, much more needs to be done.

January 2012

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global human community.The traits for forging global human community are fully reflected in Islamic concept of ‘ibadah the essence, soul and meaning of which are directly integrated and linked with social life. Every single ‘ibadah in Islam calls for social responsibility. If I don’t find my brother in prayer in Fajr or some other prayer, it’s my social responsibility to find out if he is sick or is absent out of town or there is some other reason for his absence. Zakah is also an obliga-tion and an ‘ibadah no different than salah. It is not a secu-lar or religious tax. The purpose obviously is to encourage entrepreneurship and self-reliance in the recipients of Zakah. The system is not supposed to keep them depen-dent on the people of means. On the contrary its objective is to eliminate poverty and make the needy self sufficient. This kind of an attitude and spirit needs to be developed and practiced as part of global ethical behavior. In our business dealings with clients having different religious faith, cultural diversity, ethnicity and language differences, we need to have one and the same ethics which is based on objectives of shari’ah. Unfortunately, our education in different institutions concerning ‘ibadah in conformity with Islamic shari’ah has not gone beyond the literal meaning of the term with little or no importance to the place ethical values must be given in global business relationships. In order to be global in our approach to business relationships we have to focus on global ethical values as our basis and foundation so as to ensure that the client we are dealing with understands he does not necessarily have to be a Muslim to come to us, to share with us and invest in our ventures. Any human being who believes in global ethical values has an obligation to come forward and contribute to observance of shari‘ah objec- tives in letter and spirit. Thus alone would it be possible to achieve economic development based on ethical business practices in conformity with the soul and spirit of Islamic shari‘ah.

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January 2012

esearch & Develo mentpQuality based marketing of wheat- a need of overhauling

by Qurrat ul ain Afzal, Saqib Arif, Munir Ahmed, Akhlaq Ahmed and Mubarik Ahmed

O f all the crops grown and consumed in Pakistan none is more important than wheat. It takes up about 40%

of the total area under cultivation that engaged 80% farm-ers of the country. Wheat based products, staples of Pakistani diet, are supplying 72% of caloric energy with 60% of protein and carbohydrate intake. For food security and other economic reasons this crop has always remained protected and government has regulated policies related to production, storage, distribution and import/exports. The main focus of these policies has always remained on achieving self-sufficiency and ensuring that low priced supplies are readily available for low income and urban population. These targets were mainly achieved by provid-ing subsidies and maintaining and controlling the stocks for market interventions. However, in the past few years the government has gradually liberalized the trade and has provided room for private sector interventions. The success of government policies is evident by the fact that since independence the wheat production in the country has increased more than six folds. Since independence all the government policies have remained focused on wheat production to achieve self-sufficiency. These policies have remained successful except for the fact that they did not provide any incentive for quality improvement and subsequent efficient utiliza-tion. However, at international level with the advancement in cereal technology the consumer market has changed and thousands of wheat-based value added products have emerged. In Pakistan as a result of single quality procure-ment of all types and grades at one price, there is no substantial quality based segregation visible at public or private sector level. The advancement has, however taken place as a result of multi-national involvement in baking business and increasing demand of variety of biscuits, cakes and breads. However, this progress is at low pace compared to the potential in this sector. All the production is largely marketed at government so called FAQ specifications that were developed around 1942 for catering the wartime requirements except for a few changes to cater the present usage (Table-1). This specification just accommodates the foreign matter content, weevilization, other food grains and damaged / shrivelled grains percentages and are inadequate to pay actual price to the sector. Based on the survey of wheat quality in 1996, the Pakistan Standard Institute now PSQCA legalized wheat quality specifications (Table-2). Despite the fact that the legislated pricing scheme was advancement to pre-existing FAQ the proper standards were not capable to compete with international market. This led to quality of two grade pricing schemes initiated by MINFAL (now working under provincial governments)in 2001-02, when Pakistan had to export its surplus in the international market (Table-3). However for ascertaining the true quality at least the following traits are required to be determined besides the contaminants.:

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Physicochemical parameters Dough characteristics Test weight Water absorption Thousand grain mass Dough development time Hardness Dough stability Damaged and shriveled grains Degree of softening Impurities Dough elasticity Milling quality Dough elongation Moisture content Dough extensibility etc. Protein content Baking characteristics Gluten content & quality Bread loaf volume α-amylase activity Bread crumb firmness Fat acidity Sensory attributes of baked

product Crude fibre and ash content

Cookie diameter etc.

Variation in quality parameters of Pakistani wheatVarious studies have been conducted to analyze the varia-tion in quality parameters of wheat produced in agricul-tural plains of Pakistan. A research group of Grain Qual-ity Testing Laboratory, Pakistan Agricultural Research Council situated in Karachi University is working on different aspects of wheat quality since 2004. Some of the significant findings related to the major wheat quality attributes extracted from their recent research reports are given below:Research Report I:In this study, eight Pakistani hard white spring wheat culti-vars (TJ-83, Abadgar, Anmol, TD-1, Moomal, Imdad, SKD-1, and Mehran) grown at two locations (Nawabshah and Tandojam) for two crop years (2005-06 and 2006-07) were analyzed for their quality attributes to assess the storability and performances during processing. Test weight (TW), thousand kernel weight (TKW), moisture content (MC), protein content (PC), hardness score (HS), wet gluten (WG), dry gluten (DG), gluten index (GI) and falling number (FN) reported between 73.5-79 Kg/hL; 30.2-41.6g; 8.9-12%; 11.4-17%; 52-60; 26-43.9%; 8-13.2%; 20-88 and 439-946s respectively. The cultivars significantly varied in their quality attributes except PC, DG and AC. The variation in PC and AC reported to be significant with the change in location. It was also reported that the cultivars exhibited greater PC, WG, DG and FN when grown at Nawabshah than Tandojam. The white flour (maida) contained ash content and damaged starch with a range of 0.54 to 0.82%and 21 to 24 UCD, respectively.Research Report II:The quality characteristics of twelve wheat varieties i-e V-7005, Sarsabz, V-8004, T.D-l, Moomal, Kiran, Abadgar, Anmol, Mehran, T.J-83, Diamond and Hamal faquir, collected from Wheat Research Institute, Sakrand in June 2004, were studied in this research work. Samples were tested for physiochemical characteristics viz. moisture content, protein content, wet and dry gluten content,

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Dubai, judiciary issues etc. which affected our market stabil-ity and brought the index down by 600 to 800 points. The President is back quashing the rumors about him and the market is now moving towards stability. Similarly the Army Chief ’s recent meeting with the Prime Minister and his telephonic contact with the President of Pakistan also sent positive signals for investors to turn to our markets. There is also speculation that market could hear good news from the tax authorities regarding change of authority for collec-tion of Capital Gain Tax (CGT). Q: There were rumors that to bring the investors back the government will withdraw the CGT but it did not happen. How can we bring the investors back in the market?A: The stock exchange crash of 2008 and the KSE 100 Index dropping down to nearly 4000 points from 15000 eroded the investors’ confidence in the stock exchange market. The imposition of CGT further prompted with-drawal for fear and hassle for filing their income tax returns. Even the small investors (Rs. 3, 00,000 income per year) who did not fall in tax bracket withdrew their investment on this account. Around 20 percent of the investors opted out of the market on similar grounds. The

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gluten index, water binding in wet gluten content, NIR- hardness and falling number. The authors men- tioned that these param-eters may also help to predict end-product suitability. Protein content of all varieties was found in the range of 11.8% -16.0 % that depicts their suitability for almost all types of bread. Moisture and hardness of all varieties reported to vary from 8.8 to 10.2%and 50 to 60 score, respectively. Wheat varieties exhibited a wide range of gluten strength(38.8-75.3) as interpreted by gluten index values. Falling Number of all varieties were greater than 400 seconds. This shows the absence of sprouting in those wheat samples. The authors categorized the varieties as medium, strong and very strong wheat & predicted that these varieties are suitable for all types of breads i.e. flat, leavened & unleavened etc.Research Report III:Some physicochemical and rheological properties of five commercial wheat varieties cultivated in Sindh; Mehran, Kiran, TJ-83, Anmol and Sarsabz has been analyzed in this study. It is displayed in the report that shriveled and broken grains (0.5 to 9.0%), test weight (75 to 79kg/hl), thousand grain mass (31.8 to 42.2g), moisture content (10.3 to 10.8%), protein content (11.9 to 15.5%), wet gluten (23 to 39.7%), dry gluten (7 to 12%), gluten index (36.6 to 85.8), NIR-hardness score (53 to 61), farinograph water absorption (69.1 to 73.3%), dough development time (2 to 4.5min), dough stability (2 to 11min) and degree of softening (30 to 100BU) varied from cultivar to cultivar.Major quality attributes of prevalent wheat varieties grown in Sindh from 2004 to 2010 is summarized in table 4. It is apparent that a wide quality of wheat is being produced in Pakistan as a result of availability in various genotypes and diversified growing conditions. The above mentioned studies have also analyzed the possible sources of variation in each quality parameters but it was not possible to include these factors in this article. Overall findings of these reports are useful for grower, miller, processor, and trader to know the keeping and storage quality as well as suitability for developing the new and desired products.

Table 1. FAQ Specifications for Wheat Procurement by Public Sector AgenciesDefect Tolerence

limit Rejectionlimit

Premium/Recovery for loss excessImpurities

Dirtdust and other ediblematter

1% Over 2%

Over 5%

If 0.5% or less premium would be paid at 1%. Over 1% to 2% recoveryat full value plus cleaning charges @rs.30.00 per 100 bags

Other food grains 3% Over 3% to 5% recovery at half value Over 3% to 4% at half value

Over 3% to 4% at half value. Over 4% to 5% recovery at full value

Damaged Shrieveled 3% Over 5%

Weevilled new crop upto end of AugustSeptember & October November & DecemberJanuary onwards

Nil

1%1%1.5%

Nil

Over 1%Over 2%Over 33%

Weeviled wheat not to be accepted.Over 1% to 2% at full value

Over 5% to 3% full value

Rejection limit mentioned above should also apply to supply of wheat to flour mills and the mills should reject supply only if these limits are exceeded

Table 2. Pakistan Standard Institue Specifications for Wheat (Psi-3747-1996).

Quality Grade Factors

PAK-I PAK-II PAK

Values Applicable

Moisture Content Upto 9.0 > 9.0 to10.0 > 10 to 12.0

Test weight (kg/hI) 76.0 74.1 to 75.9 > 70.0 to 74.0

Foreign Matter (%) Upto 0.5 0.5 to 1.0 > 1.0 to 2.0

Broken and Shrivled (%) Upto 2.0 2.0 to 3.0 > 3 to 5.0

Other Food grains (%) Upto 1.5 > 1.6 to 3.0 > 3 to 5.0

Other Food grains (%) Upto 1.5 > 1 to 3.0 > 3 to 5.0

Damaged grains (%) 0 to 0.5 > 0.5 to 1.0 > 1.1 to 2.0

PAK-I will have full price, where as PAK-II and PAK-III will have 2%and 5% less than full price, respectively.

Table 3. Partially Implemented Two Grade Systems for Pakistan MediumHard Wheat In 2001.

Quality Grade Factor GRADE -I Export Quality GRADE -II FAQMoisture Content % Upto 9.0 > 9.0-1.0 Test Weight KG/HL 76.0 > 74.1-75.9 Foreign matter Upto 0.5 > 0.5-1 Broken and Shriveled % Upto 2.0 > 2.0-3.0 Other food Grains % Upto 1.5 > 1.5-3.0 Damage Grain % 0 to 0.5 > 0.5-1.0 Gluten (Wet)% 28-29 26-27Protein % 12-13 10-11

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esearch & Develo mentpRR

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esearch & Develo mentp

Table 4. Variations in quality of Pakistani Wheat (2004-10)

S.No.

Quality parameters Range Minimum Maximum

1 Test weight (kg/hL) 73.5 792 Protein conten (%) 11.4 17 3 Wet gluten (%) 23 43.94 Mositure content (%) 8.3 127 Falling number (sec) 400 9468 Ash content (%) 0.54 0.829 Thousand grain mass (gm) 30 43

Research Reports ReferredI. Arif, S., Ahmed, M., and Hasnain, A. 2009. Study of variation in the quality of hard white spring wheat for the development of new product. American-Eurasian Journal of Sustainable Agriculture. 3(4): 755-763.II. Arif, S., Ahmed, M., Ahmad, A., and Afzal, Q.A. 2007. To study major chemical traits in various Sindh wheat varieties for suitable end-use. Sarhad J. Agric. 23(1): 153-156.III. Arif, S., Ahmed, M., and Khanzada, K.K. 2006. Quality evalua-tion of some Sindh (Pakistan) wheat varieties. II. Correlation among various quality traits. Pak. J. Sci. Ind. Res. 49(4): 285-289.

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remaining investors also feel hesitant to make investment although the market has still the potential because institu-tions have made investments therein. However, 80 percent big players who trade in value are still present in the market and want to invest. But due to the exit of 20 percent small traders who trade in volumes, big players hesitate in making investments in the market. Q: What steps should be taken by the government and our economic managers to restore the investors’ trust and confidence in our market? A: I think we can bring the investors back and restore their confidence by changing the authority for collection of capital gain tax. It might be helpful if the Government withdraws the CGT and restores the old taxes of KSE instead. Further, stock exchange management should organize road shows to create awareness about the stock exchange business and investment. Similarly SECP should develop mechanism that ensures security of the invest-ment made by the investors. Q: How can the brokers regain the investors’ trust eroded after the events that followed the stock exchange crash in 2008? A: Several steps may be taken to restore the investors’ confi-dence in the brokers. Brokers should strengthen their balance sheet and improve their performance. Similarly SECP should register only those agents who are qualified and are able to fulfill their responsibilities. Agents whose previous record has not been good should be banned. Further, KSE should also come up with a strong marketing team with practicable plans.Q: There should be a minimum capital re- quirement from the broker in order to the secure the investor’s interests. Do you agree? A: There are already certain minimum capital requirements and a Capital Market Protection Fund in the stock market to protect the investors’ interest in case of default by any member. Decisions to compensate the affected investors should be expedited. On their part, the investors should check the brokers’ credibility before making investments.Q: Recently we heard about proposal to impose mini-mum capital requirement of Rupees 400 million. What happened to that? A: Yes, that was up to 400 million rupees proposed by SECP which has been rejected by the brokers. Right now there are 200 brokers in the market of which 150 are active brokers. If SECP’s proposal is implemented, it will hardly leave 10 brokers who can meet the requirement. What will be the future of remaining 190 brokers of the market?

This will erode competition while the brokers’ fee will be tremendously high affecting the volume of trading in the stock market.Q: What is your opinion about giving MFN status to India? Will it benefit our stock exchange business? A: Yes, it will. If their companies enlist here and our com-panies enlist over there then we could find price discover-ies and this will provide a long term benefit to us. Gov-ernment of Pakistan should give guarantees and assur-ances to the Indian investors that there will be no restric-tions on their remittances to their country in any situa-tion. Q: We are witnessing the gas shortages and energy crises. What will be its impact on the fertilizer sector?A: Engro and other major fertilizer producers face gas shortage in winters but it is now accepted in our market as a regular norm. And I think this issue will remain in future also until we borrow gas from other external sources. Q: What future do you foresee of the financial insti-tutions, cement and other sectors in 2012? A: The banking spread is the highest in Pakistan and nobody can stop the growth of banking sector. As far as cement

sector is concerned, the future is bright in view of expansion in its export to India and Afghanistan. However the sector may be adversely affected in case of crisis in the global markets or decline in inter-nal demand.

Q: So it means you are optimistic about these sectors in 2012?A: We see record earnings in oil and gas sector. For instance, PSO showed 86 rupees earning per share. Its share price is currently

around 250 rupees. The biggest oil company in the market having around 70 percent shares is trading on 3x. These companies are performing well and giving record results. In banking sector, we are expecting record results from MCB. Similarly Lucky Cement is providing the highest earning right now. In refinery sector, National Refinery showed EPS of 80 rupees. These big companies are playing monopolistic role in the market and are expected to perform well in 2012. FFBL, FFC and Nishat Mills have also showed highest ever earning per share.

Q: Keeping in veiw the current economic turmoil, do you think that the stock market can again face the crises like those we had in 2005 and 2008? A: Historically speaking, Pakistan’s exports, foreign reserves and remittances right now are on peak. We received remit-tances worth nearly 6 billion dollars during the last six

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months. Indeed we have problems like unemployment, war on terror, political uncertainties but it does not mean that Pakistan will also meet the fate as did Greece and other European countries. Around 70 big banks in America were wound up due to the financial crises and recession but we still have companies in Pakistan which are showing record earning results. If we compare our economy with international economies we will find that our unemployment rate is 6 to 7 percent, as against 25 percent in Greece and 15 percent in Italy. So we are still in far better position economically. Q: Pakistan’s foreign reserves have improved considerably but the volume of our debts has also increased. What would you like to say about this?A: The total international debt we have right now is around 60 billion dollars while the domestic debt is around 70 billion dollars. This brings the total debt to 130 billion dollars. If we divide our 200 billion dollar GDP by 130 billion dollar debt, the Debt to GDP ratio will be around 70 percent. America has a 90 percent of GDP to External Debt ratio. 150 percent is now an average ratio in Euro-pean countries. Thus we are in a far better situation than others. Our situation is not better than that of Switzerland but certainly better than that of UK.Q: What is your overall view about 2011 and what pros-pects do you foresee about 2012? A: We are expecting a very bright future of Pakistan in 2012 if there is a positive economic turnaround globally. Similarly Pakistan will face negative results in case of any global recession or economic downturn. We are expecting 4-5 percent growth of stock exchange as well as around 4 percent growth in Pakistan’s GDP if all goes well. Q: There is an impression among local investors that there is a complete dominance and monopoly of big players in our stock market. Is it true? A: Investors should evaluate the company before making any investment. They will not be affected if they make their investments in companies that yield better dividend rates. Q: Has SECP taken any steps to minimize the investor’s risk?A: SECP has identified the minimum qualification for agents but it has not been made mandatory for brokers to publish research reports for guidance of the clients. Personally I feel that SECP should make it mandatory for every brokerage house to have a research head with a predefined minimum qualification who must ensure that the trading on the stock exchange is in line with the research findings and that the investors are aware about the risks and benefits before making their investments.

by Shahid Shamim

Stress Ulcers

Stress ulcer also referred to as stress-induced gastritis, stress-related erosive syndrome, stress ulcer syndrome,

and stress-related mucosal disease, can cause mucosal erosions and superficial hemorrhages. It is a common name given to gastritis or peptic ulcer disease in the stom-ach or first part of duodenum (adjoining part of stom-ach). It is usually seen in adults in situations of prolonged illness, accidents, or stress that could be related to job, exams or family issues. Symptoms of stress ulcer are similar to any other gastric-acidity related diseases which include pain in upper abdo-men with burning in food passage, belching, bloating nausea early satiety (a feeling of unusual fullness with very little intake of food) and/or feeling of discomfort. All these are often termed as “dyspepsia”. The dyspepsia in patients with ulcer may be episodic with weeks of pain followed by weeks of no pain at all. Symptoms of ulcer can be present for 15 minutes to 3 hours. They are often induced at night, awakening the person from sleep, how-ever, occurrence is more often not time bound. Drinking cold milk, intake of food, resting or taking antacid medi-cations may relieve symptoms. Study in Pakistan have shown that approximately 15 % of people with complains of dyspepsia have peptic ulcer disease on investigation through endoscopy. Endoscopy is a test in which inside of stomach is visualized by passing a camera tube through mouth. The direct cause of peptic ulcers is the destruction of the gastric or intestinal mucosal lining of the stomach by hydrochloric acid, an acid normally present in the diges-tive juices of the stomach. Infection with the bacterium Helicobacter pylori is thought to play an important role in causing both gastric and duodenal ulcers. Helicobacter pylori may be transmitted from person to person through contaminated food and water. Antibiotics are the most effective treatment for Helicobacter pylori peptic ulcers.Injury of the gastric mucosal lining and weakening of the mucous defenses are also responsible for gastric ulcers. Excess secretion of hydrochloric acid, genetic predisposi-tion, and psychological stress are important contributing factors in the formation and worsening of ulcers. Another major cause of ulcers is the chronic use of anti-inflammatory and pain medications, such as aspirin, ibuprofen, etc.It is often said that stress alone does not cause peptic ulcer, however, people who have factors that make them prone to ulcers get stress-induced gastritis or ulcers when the situation is favorable for these conditions to develop.In USA, about four million adults are diagnosed or treated each year for PUD; one million will be hospitalized for treatment; and 40,000 will have surgery for an ulcer-related condition. About 6,000 Americans die of stomach ulcer-related complications every year.

ealthHH

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POULTRY: Poultry provides the necessary vitamins, minerals, animal proteins and amino acids while most parts of chicken meat are devoid of cholesterol, thus poultry meat is considered to be very healthy for human beings (Medical research says that chicken leg meat, which is very popular in the local population, contains high quantity of cholesterol). In the sub-continent, the chicken was always considered to be a delicacy and was always served to special guests and on special occasions. Up to the early 60s, chicken meat would cost double that of mutton. The situa-tion continued up to the time when broilers were intro-duced by PIA as pioneers. This effort of PIA was primarily to cater to their own needs flight kitchen and to serve their passengers in a better manner, as no standard variety of poultry meat was available locally. The Desi chicken was not suitable for various international dishes, especially French cuisine which required softer breast tissue. The introduction of this farm-produced variety brought a revolution in the industry and, with the passage of time, the farming of this type of poultry gained momentum. Sepa-rate varieties were introduced for meat and eggs. The production of eggs was enhanced through the introduction of layers. Previously, the Desi type of poultry would produce a very small size of egg, and the production per year bird was not more than 100 eggs per bird. In certain cases, the production was much below the above-mentioned standard. The new varieties of layers could produce up to 300 eggs per year per bird, while the size of the egg was also much larger. Similarly the varieties intro-duced in respect of broilers also brought a revolution. Very few projects were established which would rear the Grand-parents. The eggs from Grandparents were mostly imported and large hatcheries would produce chicks from these eggs. Ordinary farmers would purchase one day old chicks from these hatcheries and with proper diet and proper environment, the day-old chicks would mature in 6 weeks’ time, and the average weight of the chicken would exceed 1.5 Kg. After 6 weeks’ time, if this variety of chicken is still kept by the farmer in the farm, the Food Conversion Ratio (FCR) would drop. The ideal FCR is considered to be greater than 60%. If the FCR drops, the profits of the farm may go down and the farm would even run the risk of ending up making a loss. With the advent of improved production of poultry meat and eggs, the supply side of poultry and eggs became reasonable and such supply side provided a balance and stability in the prices of mutton and beef as a cheaper (which was consid-ered to be superior, against the norms of developed world) alternative was available to the general public. Due to these reasons, prices of poultry products did not increase to the extent of mutton and beef in Pakistan during the last

50 years. As a matter of interest, the price of poultry which was double that of mutton during the early 60s, when compared with the present times, then price of these variet-ies of meat are exactly reversed.

FISH: Fish is also considered to be an essential part of human diet. This meat is very nutritious and contains some ingredients which create the necessary resistance against various diseases. Certain fish contains Omega 3 oils which are necessary for healthy skin. (The Omega 6 and 9 which are also necessary for skin health are best obtained from borax and flax seed). In Pakistan no significant progress has been achieved so far in development of fish production and farming. Pakistan produces both fresh and salt-water fish. The fish processing projects have been installed in Karachi Fish harbor and by and large these projects cater to the export market. In Pakistan most of the time the fish, after being caught, is not kept in healthy conditions. Some-times fish vendors sell the fish on hand-carts in the residen-tial areas, which is not a healthy practice as the fish meat deteriorates and produces bacteria very easily. The export market for fish has a lot of issues (which are discussed in the later part of this article), which include uncleanliness from the time of fishing up to export processing, pollution of water in the catching area and issues pertaining to labour which are contrary to the standards of the European Union.If we compare prices of this type of meat with poultry, mutton and beef, then at present good fish meat is out of the reach of the common man. The rate of salmon, mack-erel, red snapper and sole etc. is very high, while the quality of sole and salmon is not comparable to Europe because of the high temperatures of rivers and the sea as like all variet-ies of meat the quality (read taste) is always good where atmospheric temperatures are low. Pakistan produces good quality of hamour but the produc-tion is very low and this variety is only available between Gwadar and the beach of Oman. Fresh water fish is consumed locally and such varieties are not exported.

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Dangers of Peptic UlcerThe dangers and complications associated with ulcer disease are many. Fortunately, not many people will have the complica-tions, but, we do not know which ones will do! Therefore, it is extremely important to understand the magnitude of the prob-lem and take the measures to avoid dangerous complications, including:• Severe bleeding• Perforation “hole” in the stomach or duodenum• Stricture “narrowing” of food passage• Cancer/ MalignancySmall amount of blood in stools or vomiting and/or tarry black colored stools are an indication that the ulcer may have the capacity to bleed severely in future. Perforation or “hole” in the stomach or duodenum presents with severe abdominal pain and patients end-up in emergency operating rooms. Patients with stricture or “narrowing” of stomach or duodenum experi-ence excessive uncontrollable vomiting after almost every meal. Cancer/ Malignancy can mimic the symptoms of ulcer in the region and therefore, it is mandatory to exclude such conditions before labeling oneself as an ulcer patient.Investigation & DiagnosisLike any other disease, the principle of investigations and treatment remains the same: “find and remove cause, treat condition”. The causes and factors that predispose to ulcer disease easily evaluated by attending doctors through focused questions and blood and stool tests for H. Pylori bacteria. Gold standard for confirming or ruling out the diagnosis of an Ulcer is the Endoscopy (a test in which inside of stomach and first part of duodenum is visualized by passing a camera tube through mouth). This is performed as an outpatient procedure and is considered extremely safe in experienced hands. Endos-copy not only confirms the diagnosis, it also confirms the absence or presence of above mentioned complications.TreatmentMost of the cases of ulcer and gastritis are treated conserva-tively through medications. Only a small percentage requires surgical intervention in case of failed medical treatment or development of one of the complications discussed earlier.However, the symptoms should not be taken lightly and should be appropriately and timely investigated to confirm and treat the diagnosed problem. Risk Factors for Developing an Ulcer• Family history of ulcers• Smoking• Excess alcohol consumption• Use of non-steroidal anti-inflammatory pain medications (aspirin) or corticosteroids.

• Zollinger-Ellison syndrome• Improper diet, irregular or skipped meals• Type O blood (for duodenal ulcers)• Stress does not cause an ulcer, but may be a contributing factor

• Chronic disorders such as liver disease, emphysema, rheumatoid arthritis may increase vulnerability to ulcers.

Dr. Shahid ShamimMBBS, FCPS, FRCS (Glasgow), Dip Bioethics Consultant Laparoscopic, General & Bariatric Surgeon is working as Head of Surgery and ER Memon Medical Institute (MMI), Karachi. He is also Assistant Secretary SAARC Surgical Care Society (SSCS) & Chairman, Primary Trauma Care (Sindh)

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The Governor said that SBP will issue regulatory guidelines to microfinance banks for up-scaling of loans, and develop-ing a reporting structure to assess the geographic distribution of microfinance growth. SBP will also review and strengthen its regulatory and supervisory processes to ensure protection of microfinance clients. In the new Microfinance Strategic Framework 2011-15, SBP has laid out a detailed strategy to promote sustainable growth of the sector, he added.Since the inception of microfinance banking in Pakistan, the Governor said, our goal has been to determine the propor-tionality of a regulation before it is put in place. Hence, the regulatory approach has remained gradual and in line with the evolution of the sector, he said and added that our micro-finance regulatory framework has been ranked globally at the top in 2010 and 2011 by UK’s The Economist.

The Governor lauded the role of UKAid and Asian Development Bank in the development of microfinance in Pakistan and said that under the programmes spon-sored by these donors, a number of market interventions are managed by the SBP.He said that Microfinance Credit Guaran-tee Facility, a Pound 10 million guarantee facility of UK’s DFID, was launched by SBP in December 2008 to mobilize wholesale commercial funding for micro-finance providers through partial guaran-tees to commercial banks. The facility has thus far mobilized commercial funding of Rs. 3.225 billion for four microfinance providers for onward lending to around

200,000 new micro borrowers, he added.Emphasizing the importance of financial literacy in recent years, he said that SBP has started a pilot Financial Literacy Program with the private sector as an implementing partner. The program is the first-ever initiative to promote financial literacy among the general public at the national level, he added.Speaking on the occasion, Mr. Nadeem Hussain, President & CEO, Tameer Microfinance Bank, talked about the fascinat-ing advantages of branchless banking, in creating livelihood opportunities and poverty alleviation. He termed branchless banking as key to enhance outreach significantly. He said around 18 – 20 million account holders have access to credit. Excluding the multiple accounts, the number is only 8 – 10 million account holders, he added. Mr. Menin Rodrigues, Chairman of the Conference, Dr. Abdul Wahab, Dean of M.A.Jinnah University, Mr. Akbarali Pesnani, Chairman of the First Microfinance Bank, Mr. Ahmed Jamal, Senior Group Head, Pakistan Poverty Alleviation Fund, Ms Cary Clark, Senior Advisor, Mazars Consulting, and Mr. Ramiz Allahwala, CEO, Gulfstone Training, also spoke on the occasion.

icrofinance, a high profile institutional innovation designed to address poverty alleviation and under-

development issues faced by the people in both developing and transition countries alike, is a subject of critical impor-tance and has attracted attention of the individuals and insti-tutions the world over. There are empirical evidences to substantiate the beneficial effect of microfinance on both income smoothing and increases in income. To discuss the role of microfinance in income generation, poverty alleviation and socio-economic well-being of the people, Shamrock Conferences International organized on December 2, 2011 the 5th Pakistan Microfinance Conference-2011 at Karachi. Mr. Yaseen Anwar, Governor, State Bank of Pakistan was the chief guest who inaugurated the event which featured case studies and deliberation on effective strategies for stretching out to the unreached. Leading experts from the microfinance industry shared their views with the delegates at the conference.In his inaugural address, Mr. Yaseen Anwar, Governor, State Bank of Pakistan, said that the recent development in mobile phone banking is highly encouraging and that the expansion in the retail network of microfinance has been brought about overwhelmingly. Within a span of just two years, there are now almost 18,000 branchless banking outlets surpassing the 10,000 conventional bank branches. Based on the early successes of mobile banking in Pakistan there was an urgent need for continued close co- ordination between the diverse organ- iztions of the microfinance sector to foster a market-driven mobile banking eco-system.The SBP Governor said that the evolution of microfinance has so far remained positive despite the fact that many challenges arose along the way. The microfinance in Pakistan has made good progress but must make major breakthroughs to reach millions of underserved people, he emphasized.He pointed out that despite considerable support from the government, donors and the State Bank of Pakistan, the microfinance sector has only been able to tap a small fraction of the potential market. He said that Pakistan has one of the lowest financial penetration levels in the world with 56 percent adult population totally excluded, and another 32 percent informally served. He said that at present, nine MFBs are operating in Pakistan.They are all privately owned and reflect diversity of ownership and approaches to microfinance banking. Consid-ering that the market has potential and the regulatory frame-work is supportive, the ownership in MFBs has flowed both from local and international investors including banks, devel-opment agencies, investment funds, mobile network opera-tors, and large domestic MFIs.

5th Pakistan Micro�nance Conference - 2011M

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Southeast Asian countries. Export of seafood is facing many a problem notably among these are:• Post harvest losses are high due to handling of fish catch

on board and long voyage time.• Congestion at Karachi Fish Harbor. There are more than

17,000 fishing boats operating in Sindh zone.• The storage capacity is only 10,000 tons which is not suffi-

cient to cater the future requirements.• Pakistan is exporter of raw material or semi-processed

fish/seafood.

Marine aquaculture is non-existent; however, fresh water aquaculture is fairly developed.The Government of Pakistan is taking various measures to increase the export of seafood over US$ 500 million within next two years. The measures are:• Up-gradation of fishing vessels to control post harvest

losses.• Provision of modern peeling sheds for providing raw

material to fish processing industry.• Flake ice plants on harbors.• Intensive marketing efforts at international level.• Promotion of marine aquaculture.• Human resource development through training.• Regular monitoring of resources through stock assess-

ment surveys and exploratory fishing.• Procurement of handling and cleaning equipments for

fish harbors.• Construction of coastal highway.

OVERVIEWIn 2001, total world production of fisheries was reported to be 130.2 million tons, of which 37.9 million tons was from aquaculture practices and 92.3 million tons from capture fisher-ies production. China was the leading producer with 42.6 million tons (comprising of 16.5 million tons of capture fisher-ies and 26.1 million tons of aquaculture production). Hence, China’s share in total world fish production is 33% and in aquaculture production it is 69%.In parallel with the increase in production, international trade has continued to grow, and at an accelerating rate in recent years. (Source: FAO) About 38% of world fish production is traded internationally. In 2001, total exports of fish and fishery products were US$ 55.9 billions in value terms. Developing countries, as a whole, supplied slightly more than 50%. Shrimp is the main fish commodity traded in value terms, accounting for about 19% of the total value of internationally traded fishery products. (Source: FAO) In 2001, more than 80% of the total world import value was concentrated in developed countries, in particular in Japan, the USA and in several EU countries. Japan was the major importer accounting for about 23% of total import value. USA was the second main importer with a

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48th Independence Day of the Republic of Kenya12th December is a red letter day in the history of

Kenya which achieved independence from the British colonial rule in 1963 as a result of long and arduous struggle in which many lives were lost. Late Mzee Jomo Kenyatta, considered by Kenyans as the founding Father of the Nation because of his relentless sstruggle for freedom from the clutches of the British rule, became the first Prime Minister of the new African state. A year later on this particular date, Kenya became a Republic and attained full independence with Late Mzee Jomo Kenyatta as the country’s first President. Covering an area of 582,646 Sq. Kms. with a population of 40 million people Kenya is located in the eastern part of Africa. It shares boundaries with Ethiopia, Somalia, Sudan, Tanzania and Uganda. English has been adopted as the official language. The national language in Kenya is Swahili. Nairobi, its capital, is the transportation hub of Eastern and Central Africa and the largest city between Cairo and Johannesburg.Kenya celebrated its 48th independence day on 12th December 2011.This year’s Independence Day celebration had special significance as it was observed under the new constitution which provided renewed energy, hope and enthusiasm. The new constitutional dispensation was promulgated on 27th August 2010 by H.E.Hon.Mwai Kibaki, President of the Repub-lic of Kenya after being passed by a majority of Kenyans in a national referendum. The country is blessed with rich heritage of plants and animals which allows for a range of economic activities. Kenya is a secular democratic nation which has shaped itself as the biggest economy and democ-racy in the region where people of different ethnic groups and religions, speaking forty differ-ent dialects, live together harmoniously. This has enabled the people of Kenya to coexist and adapt to the socio-economic changes taking place around the world.

The Republic of Kenya is a fully liberalized economy with-out foreign exchange or price controls. There are no restrictions on domestic and foreign borrowing by residents and non-residents. Nairobi Stock Exchange is the most developed stock market in the Eastern and Central African region.It is also strategically located within easy reach of export markets in the region. The country is a prime investment destination in East and Central Africa. It is a signatory to and member of the Multilateral Investment Guarantee Agency, an affiliate of the World Bank which guarantee investors against loss of investment due to political prob-lems in host countries. It is also a signatory to Interna-tional Centre for Settlement of Investment Disputes which is a channel for settling disputes between foreign investors and host governments. The government’s prag-matic economic approach, aimed at encouraging investments—both local and foreign—helped the country achieve remarkable development in various sectors. With its market based economy the country has emerged as the leading East African nation.As has been the case with several new born, developing and under-developed countries, Kenya was also faced with

the problems of poverty, disease and ignorance which posed obstacles to growth and develop-ment of this young nation. The Kenyan leaders set their priorities and addressed them one by one quite successfully. They came up with 5-year development plans, launched them and thoroughly reviewed the same at the end of each. This provided them with an opportunity to take corrective measures in order to achieve the goals of building a just, democratic and prosperous African country based on political stability, social justice, human dignity, coupled with freedom from want, hunger and disease, equal opportuni-

ties and high and growing incomes to be distributed equitably.Population, growing at an estimated rate of 2.5 percent per year was yet another challenge as it was poised to adversely affect the growth momentum. The government addressed the problem successfully along with other measures aimed at accomplishing the objective of build-ing a just, democratic and prosperous African country.The political stability coupled with a pragmatic economic approach followed by the government laid strong founda-tions on which Kenya developed into a vibrant nation. During the last 48 years of its independence, Kenya has made significant strides in all spheres of development. Educated and skilled manpower, developed through years of hard work and dedicated efforts, has turned the coun-try into a manufacturing, commercial and financial hub in eastern and central Africa thus setting examples for many to adopt and emulate.

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3-day workshop was arranged by the Population Coun-cil in Islamabad recently to enhance communication skills

of selected officials from health and population departments from Sindh, Baluchistan and the Punjab. The objective of the workshop was to enable the participants to understand the process of designing and developing communication, advo-cacy and mobilization strategies; develop the concept and process of key interventions to promote birth spacing through health and population programs and the process of IEC material development; understand the importance of audience segmentation for communication planning; put into place steps required to develop communication campaign to reach out to target audience and undertake effective advocacy; successfully design and implement social mobilization activi-tiesThe workshop started with the words of welcome by Ms Seemin Ashfaque, Sr. Program Manager, Population Council and opening remarks by Dr. Ali Mir, Chief of Party(Falah Project)The workshop was conducted by Mr. Fayyaz Baqir, Dr. Arshad Mahmood and Mr. Ozair Hanafi.Mr. Fayyaz Baqir’s presentation was marked by a step by step discussion followed by a comprehensive group work on communication goals. Dr. Arshad Mahmood presented a statistical analysis of reproductive health practices and fertility rate in Pakistan. Mr. Ozair Hanafi made a power-packed presentation on social mobilization, current situation and opportunities. He said that social mobilization is a dynamic process which involves all relevant segments of society in dialogue and coordinated action to promote integrated changes from the individual to the policy level.In her concluding remarks, the Chief Guest Dr. Mumtaz Eskar, Director General, Population Planning Wing , discussed in detail the history, challenges and accomplish- ments of population planning in Pakistan and emergence of birth spacing as the most befitting response to this issue.

Developing CommunicationAIn its meeting held under the chairmanship of former

Chief Justice, Federal Shariat Court Mr. Justice (Retd) Haziquel Khairi on December 8, 2011, Shura Hamdard urged the government to utilize the services of teachers and students of 130 universities of Pakistan in order to establish the authenticity of voters lists to ensure trans-parent general elections. Mrs Sadia Rashid, President, Hamdard Foundation Pakistan was also present in the meeting.

Speaking on the occasion, Prof. Dr. Nasim A. Khan, Vice Chancellor, Hamdard University said that checking and scrutiny of the voters list by the university teachers and students would lend credence to its authenticity. Mr. Haq Nawaz Akhtar, former Chairman, Pakistan Steel Mills suggested that an Institute for Social, Economic and Political Research be formed in which teachers and students of univer-sities be included to scrutinize the voters’ lists. Mr. Mahdi Masud, former ambassador, said that with the help of an independent election Commission and cooperation of politi-cal parties , judiciary and the law enforcing agencies a mecha-nism should be put in place to ensure that finan-cial limits were strictly adhered to election campaign and intimidation and pressure was not used against voters in rural or urban areas should be strictly prohibited. The Chairman Mr. Justice (R) Haziqul Khairi endorsed the sugges-tions put forth by the learned speakers and said that the only way to make general elections free and transparent was to make the Election Com-mission a powerful, independent and complete autonomous body. Others who spoke on the occasion included Prof. Dr. Akhlaque Ahmed, former Pro-Vice Chancellor, University of Karachi, Mr. Zafar Iqbal, Mr. Khalid Ikramullah Khan, Engr. Anwarul Haq Siddiqui, Columnist Mohammad Saeed Siddiqui, Col. (R) Mukhtar A. Butt, Mr. Nusrat Nasrullah, Dr. Wiquar Ahmed Rizvi, Dr. Shakil Faruqi, Mr. Burhanud-din Hasan, Dr. Syed Irtefaq Ali, Dr. Abubakar Sheikh, Mr. Azhar Abbas Hashmi and Prof. Mohammad Rafi.

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Voters List Authentication

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On Chairs (L to R): Zahida Shaikh, Fayyaz Baqir, Ozair Ahmed Hanafi, Ali M. Mir, Mumtaz Eskar, Seemin Ashfaq, Shaista Jabeen, Asma Jatoi, Saeeda Shaikh, Bushra Butt. 1st Row (L to R): Saqib Ali Shaikh, M. Asif Iqbal, M. Arshad Javed, Safdar Murad, Abdullah Sherani, Soail Imran, Zafar Ali Buledi,Allahdino Ansari. 2nd Row (L to R): Usman Ghani , Habib-ur-Rehman, Zahid Baig , Shah Ali Asghar, Tariq Masud, Asif Waheed.

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PFDC Bridal Week 2011

L’Oréal Paris and Pakistan Fashion Design Council presented the “PFDC L’Oréal Paris Bridal Week”, a

platform that endeavored to define and present a mix of contemporary and traditional Pakistani Bridal fashion, jewellery and make-up trends, which together created the ‘look’ for the Bridal Season 2012. The event was held in Lahore recently.The show was attended by celebrities including media and fashion fraternity and buyers/stockists. Prominent design-ers whose creative designs were included in the show were Reama Malik, Emraan Rajput, Maria B, Fahad Hussayn, Nida Azwer, Umer Sayeed, Rouge, Sara Rohail Asghar, Sonia Azhar and Hassan Sheheryar Yasin.Entitled ‘Enchanted’, Karma presented a collection, which derived its inspiration from dark fairy tales, their feared villainesses and beloved heroines. Karma remains for the strong fearless woman who is always the adored star of the show but wears her dark twisted side with pride. It was an ode to the darkly beautiful and the layered luxurious.Inspired by Awadh Dynasty’s rich and royal cultural heritage known for its grandiose traditions and opulence, in the early 18th century in the Sub Continent, Nida Azwer displayed her show of bridal collection, entitled the ‘Awadh Court Collection’. The collection spelt tradition, culture and heritage, in harmony with the designers’ signature style of merging vintage craftsmanship with modern sensibili-ties. Nida’s collection was based in hues of red and pink, ivory and antique gold. While the Awadh Court Collection was predominantly a womenswear collection, this was the first time the designer introduced pieces of menswear couture alongside her bridal wear for women. The label also showcased its exclusive line for children, which was introduced earlier this year and is retailed by the name Nida Azwer Kids. Sufi musician Sanam Marvi sang live for Nida Azwer. Talking about the event, Nida said, “PFDC L’Oréal Paris Bridal Week provided us with an opportunity to be a part in interpreting bridal trends in fashion and beauty and everything within.”

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The showcase by Damas was the third and last solo jewel-lery show at PFDC L’Oréal Paris Bridal Week. The multi-national jewellery brand presented a wide array of its brands including: Marco Bicego, everyday luxury jewellery reflecting Italian craftsmanship; Mikimoto, originator of cultured pearls which reflected the mystery of creation, combining the best of both worlds – traditional elegance with sophisticated modern design; Boudoor, the popular trilogy collection inspired by the different phases of the moon; Nakshatra’s diamond jewellery which reflected a slice of the night sky and the luminosity of countless stars and romance, a tribute to the beauty of the Marquise diamond. In addition to the above, Luca Carati, Fope Pasquale Bruni, Roberto Coin Jawaher, Kiku, Legacy and Manthourah were also a part of this showcase. L’Oréal Pakistan spokesperson Meesha Shafi opened the Damas showcase singing ‘Diamonds are a girl’s best friend’ live on stage.The final show of the last day was by Umer Sayeed, who is often credited as amongst fashion’s design masters in Pakistan. His bridal showcase was opened and closed by actor, musician and model Fawad Khan and actress Mahira Khan Askari, also lead actors of much acclaimed drama serial “Humsafar”.

A host of problemsIn many cases, fisheries rules and regulations and enforce-ment are not efficient; fishing capacity and efforts are not sufficiently limited or controlled. Current management problems include:• Inadequate fisheries regulations: In many fisheries, current rules and regulations are not strong enough to effectively limit fishing capacity and effort to a sustainable level. This is particularly the case for the high seas, where there are few international fishing regulations. • Lack of implementation/enforcement: Even when fisheries regulations exist, they are not always implemented or enforced. For example, many countries have still not ratified, implemented, or enforced international regulations such as the UN Convention on the Law of the Sea and the UN Fish Stocks Agreement. Lack of political will is also responsible for failures to adopt by catch reduction devices.• Failure to follow scientific advice: Many fisheries management bodies do not heed scientific advice on fish quotas. E.g., Atlantic cod, tuna• Flag of Convenience vessels: Countries are either failing to restrict fishing companies from owning and oper-ating FoC vessels, or are not rigorously inspecting FoC vessels landing at their ports. This includes countries with some of the biggest fishing fleets such as the EU, Japan, Korea, and Taiwan. This allows illegal, unreported and unregulated (IUU) fishing to continue.• Lack of traceability: Customs agencies and retailers are not always ensuring that the fish entering their country and shops was caught legally and in a sustainable manner. This means that consumers are unwittingly supporting poor management by purchasing fish from unsustainable fisher-ies.• Too few no-go areas for fishing: Protected areas and no-take zones, where fishing is banned or strictly regulated, can provide essential safe havens where young fish can grow to maturity and reproduce before they are caught. But just 1.2% of the world's oceans have been declared as Marine Protected Areas (MPAs), and 90% of existing MPAs are open to fishing. The current lack of protection is especially worrying for fish spawning grounds and the deep sea, both of which are particularly vulnerable to overfishing.

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f all the crops grown and consumed in Pakistan none is more important than wheat. It takes up about 40%

of the total area under cultivation that engaged 80% farm-ers of the country. Wheat based products, staples of Pakistani diet, are supplying 72% of caloric energy with 60% of protein and carbohydrate intake. For food security and other economic reasons this crop has always remained protected and government has regulated policies related to production, storage, distribution and import/exports. The main focus of these policies has always remained on achieving self-sufficiency and ensuring that low priced supplies are readily available for low income and urban population. These targets were mainly achieved by provid-ing subsidies and maintaining and controlling the stocks for market interventions. However, in the past few years the government has gradually liberalized the trade and has provided room for private sector interventions. The success of government policies is evident by the fact that since independence the wheat production in the country has increased more than six folds. Since independence all the government policies have remained focused on wheat production to achieve self-sufficiency. These policies have remained successful except for the fact that they did not provide any incentive for quality improvement and subsequent efficient utiliza-tion. However, at international level with the advancement in cereal technology the consumer market has changed and thousands of wheat-based value added products have emerged. In Pakistan as a result of single quality procure-ment of all types and grades at one price, there is no substantial quality based segregation visible at public or private sector level. The advancement has, however taken place as a result of multi-national involvement in baking business and increasing demand of variety of biscuits, cakes and breads. However, this progress is at low pace compared to the potential in this sector. All the production is largely marketed at government so called FAQ specifications that were developed around 1942 for catering the wartime requirements except for a few changes to cater the present usage (Table-1). This specification just accommodates the foreign matter content, weevilization, other food grains and damaged / shrivelled grains percentages and are inadequate to pay actual price to the sector. Based on the survey of wheat quality in 1996, the Pakistan Standard Institute now PSQCA legalized wheat quality specifications (Table-2). Despite the fact that the legislated pricing scheme was advancement to pre-existing FAQ the proper standards were not capable to compete with international market. This led to quality of two grade pricing schemes initiated by MINFAL (now working under provincial governments)in 2001-02, when Pakistan had to export its surplus in the international market (Table-3). However for ascertaining the true quality at least the following traits are required to be determined besides the contaminants.:

Variation in quality parameters of Pakistani wheatVarious studies have been conducted to analyze the varia-tion in quality parameters of wheat produced in agricul-tural plains of Pakistan. A research group of Grain Qual-ity Testing Laboratory, Pakistan Agricultural Research Council situated in Karachi University is working on different aspects of wheat quality since 2004. Some of the significant findings related to the major wheat quality attributes extracted from their recent research reports are given below:Research Report I:In this study, eight Pakistani hard white spring wheat culti-vars (TJ-83, Abadgar, Anmol, TD-1, Moomal, Imdad, SKD-1, and Mehran) grown at two locations (Nawabshah and Tandojam) for two crop years (2005-06 and 2006-07) were analyzed for their quality attributes to assess the storability and performances during processing. Test weight (TW), thousand kernel weight (TKW), moisture content (MC), protein content (PC), hardness score (HS), wet gluten (WG), dry gluten (DG), gluten index (GI) and falling number (FN) reported between 73.5-79 Kg/hL; 30.2-41.6g; 8.9-12%; 11.4-17%; 52-60; 26-43.9%; 8-13.2%; 20-88 and 439-946s respectively. The cultivars significantly varied in their quality attributes except PC, DG and AC. The variation in PC and AC reported to be significant with the change in location. It was also reported that the cultivars exhibited greater PC, WG, DG and FN when grown at Nawabshah than Tandojam. The white flour (maida) contained ash content and damaged starch with a range of 0.54 to 0.82%and 21 to 24 UCD, respectively.Research Report II:The quality characteristics of twelve wheat varieties i-e V-7005, Sarsabz, V-8004, T.D-l, Moomal, Kiran, Abadgar, Anmol, Mehran, T.J-83, Diamond and Hamal faquir, collected from Wheat Research Institute, Sakrand in June 2004, were studied in this research work. Samples were tested for physiochemical characteristics viz. moisture content, protein content, wet and dry gluten content,

Nobel Prize Awards Ceremony- 2011T

Nobel Prize for Medicine

Nobel Prize Winner for Peace:

he Nobel Laureates took center stage in Stockholm on December 10, 2011 when they received the Nobel Prize

Medal, Nobel Prize Diploma and document confirming the Nobel Prize amount from King Carl XVI Gustaf of Sweden. In Oslo, the Nobel Peace Prize Laureates received their Nobel Peace Prize from the Chairman of the Norwe-gian Nobel Committee in the presence of King Harald V of Norway. An important part was the presentation of the Nobel Lectures by the Nobel Laureates. In Stockholm, the lectures were presented days before the Nobel Prize Award Ceremony. In Oslo, the Nobel Laureates delivered their lectures during the Nobel Peace Prize Award Ceremony. A brief on the Noble prize and their winners is given here under:Nobel Prize Winner for Peace: According to the will of Alfred Nobel, Nobel Peace Prize is awarded, “to the person who shall have done the most or the best work for fraternity between nations, for the aboli-tion or reduction of standing armies and for the holding and promotion of peace congresses." This year the prize was awarded to three female campaigners, a Yemeni and two Liberians, including Liberia's President "for their non-violent struggle for the safety of women and for women’s rights to full participation in peace-building work". Ellen Johnson-Sirleaf, born in 1938, the first woman freely elected as a head of state in Africa won wide-spread international praise for her work on rebuilding Libe-ria. Similarly Tawakul Karman, age 32, an Islamist journal-ist, dubbed as the "Mother of the Revolution", was a key figure in protests in Yemen's capital, Sanaa, in 2011. Leymah Gbowee, born in 1972, mobilized and organized women across ethnic and religious divides to help bring an end to the war in Liberia in 2003 and to ensure women's participation in elections.Nobel Prize for MedicineThe Prize was awarded to Bruce Beutler and Jules Hoff-mann "for their discoveries concerning the activation of innate immunity" and Ralph Steinman "for his discovery of the dendritic cell and its role in adaptive immunity". Bruce Beutler, born in Chicago in 1957, was credited with key discoveries that answered one of the fundamental ques-tions in immunology: “how we sense infections when they occur”. Jules Hoffmann was born in Luxembourg in 1941. As a student he moved to France. He made his pioneering discovery in 1996, when he and his co-workers investigated how fruit flies combat infections.Ralph Steinman, died on Sept 30, 2011, just days before he could be told of the award. He was a cell biologist, whose research focused on the immune system, including the human immune system in the setting of several diseases. He had used his own discoveries to treat himself for cancer.

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Ellen Johnson-Sirleaf, Tawakul Karman and Leymah Gbowee

Bruce Beutler, Jules Hoffmann and Ralph Steinman

Nobel Prize Award 2011: Opening Ceremony

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gluten index, water binding in wet gluten content, NIR- hardness and falling number. The authors men- tioned that these param-eters may also help to predict end-product suitability. Protein content of all varieties was found in the range of 11.8% -16.0 % that depicts their suitability for almost all types of bread. Moisture and hardness of all varieties reported to vary from 8.8 to 10.2%and 50 to 60 score, respectively. Wheat varieties exhibited a wide range of gluten strength(38.8-75.3) as interpreted by gluten index values. Falling Number of all varieties were greater than 400 seconds. This shows the absence of sprouting in those wheat samples. The authors categorized the varieties as medium, strong and very strong wheat & predicted that these varieties are suitable for all types of breads i.e. flat, leavened & unleavened etc.Research Report III:Some physicochemical and rheological properties of five commercial wheat varieties cultivated in Sindh; Mehran, Kiran, TJ-83, Anmol and Sarsabz has been analyzed in this study. It is displayed in the report that shriveled and broken grains (0.5 to 9.0%), test weight (75 to 79kg/hl), thousand grain mass (31.8 to 42.2g), moisture content (10.3 to 10.8%), protein content (11.9 to 15.5%), wet gluten (23 to 39.7%), dry gluten (7 to 12%), gluten index (36.6 to 85.8), NIR-hardness score (53 to 61), farinograph water absorption (69.1 to 73.3%), dough development time (2 to 4.5min), dough stability (2 to 11min) and degree of softening (30 to 100BU) varied from cultivar to cultivar.Major quality attributes of prevalent wheat varieties grown in Sindh from 2004 to 2010 is summarized in table 4. It is apparent that a wide quality of wheat is being produced in Pakistan as a result of availability in various genotypes and diversified growing conditions. The above mentioned studies have also analyzed the possible sources of variation in each quality parameters but it was not possible to include these factors in this article. Overall findings of these reports are useful for grower, miller, processor, and trader to know the keeping and storage quality as well as suitability for developing the new and desired products.

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January 2012

wards

M uhammed Sarwer & Nabeel Ahmed Ilyas,Nobel Prize for Literature

Nobel Prize for Chemistry

Nobel Prize for Physics The prize was awarded "for the discovery of the accelerating expansion of the Universe through observations of distant supernovae." One half of the prize was given to Saul Perlmutter while the other half was jointly shared among Brian Schmidt and Adam Riess.Saul Perlmutter, born in 1959 in the United States, is leader of the international Supernova Cosmology Project, which first announced the results in 1998 indicating that the universe will last forever, with its expansion ever accelerating. Brian Schmidt, born in 1967, is a Federation Fellow at the Australian National University's Mount Stromlo Observatory, Canberra. He is leading Mount Stromlo's effort to build the ‘SkyMapper’ telescope. Adam Riess, born in 1969 in Washington, is an astronomer at the Space Telescope Science Institute and a professor at Johns Hopkins University in Baltimore.Nobel Prize for ChemistryThe prize was awarded to Israeli scientist Dan Shechtman “for the discovery of quasicrystals”. Dan Schechtma was born in 1941. Shechtman, from Israel's Technion institute in Haifa, was working in the United States in 1982 when he observed atoms in a crystal he had made form a five-sided pattern that did not repeat itself, defying received wisdom that they must create repetitious patterns.Nobel Prize for LiteratureThe prize was awarded to Sweden's Tomas Transtromer for a canon of poetry, infused with metaphors and images from the nature of his native land and which explores themes including mortality, reality, solitude and redemption. Tomas Transtomer, born in 1931, has sold thousands of volumes in his native Sweden. His work has shifted gradually from nature poetry written in his early 20s toward a darker, personal and more open verse, striving to understand and grapple with the unknowable, searching for transcendence.Nobel Prize for EconomicsThe prize awarded to America’s, Thomas Sargent and Chris-topher Sims, for empirical research on “cause and effect in the macroeconomy”. Thomas Sargent, born in 1943, specialized in the fields of macroeconomics, monetary economics and time series econo-metrics. Christopher Sims, born in 1942, proposed a new method of identifying and interpreting economic shocks in historical data and of analyzing how such shocks are gradually transmitted to different macroeconomic variables. Sims works at Princeton University, US. Christopher Sims and Thomas Sargent, said in their ‘Laureate lecture’ that a decade ago they feared the euro would face problems. The European financial crisis was partly caused because the common European currency, now shared by 17 EU members, didn't have 'clear fiscal backing coordina-tion' when it was created.It may be worth mentioning here that the Nobel Prize has been awarded every year since 1901 for achievements in physics, chemistry, physiology or medicine, literature and for peace. The Nobel Prize is an international award administered by the Nobel Foundation in Stockholm, Sweden.

Nobel Prize for Physics

Nobel Prize for Economics

Adam Riess, Brian Schmidt and Saul Perlmutter

Dan Shechtman receiving Prize from H.M. King Carl XVI

Tomas Tranströmer after receiving Nobel Medal and Diploma

Christopher A. Sims and Thomas J. Sargent after receiving Prize

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January 2012

iscoverMonitoring Desk

NASA's Kepler Mission Con�rms Its First Planet in Habitable Zone of Sun-like StarNASA's Kepler Mission has discovered the first

super-earth orbiting in the habitable zone (habitable zone: the region where liquid water could exist on a planet’s surface) of a star similar to our Sun. The discov-ery announced on December 05, 2011 has been termed by NASA and scientists worldwide as the most important discovery of the year. Kepler 22b is about twice the size of Earth and has temperatures which average around 72 degrees (22 Celsius). It also contains the right atmosphere to potentially support life. Dubbed the "Goldilocks Zone", this is the band where temperatures are just right to allow the existence of surface liquid water throughout its orbit. The planet was originally discovered on Kepler's third day of science operations in mid-2009. The third transit was detected in late 2010. Additional confirmation data was provided by the Spitzer Space Telescope and ground-based observations. Kepler-22b's radius is roughly 2.4 times the radius of Earth, or about 60% that of Neptune. Its mass and surface composition remain unknown, with only some very rough estimates estab-lished: It has less than 124 Earth masses at the 3 sigma confidence limit, and less than 36 Earth masses at 1 sigma confidence. Since it is substantially larger than Earth, it is likely to have a differ-ent composition than Earth and, depending on its actual mass, the planet could be rocky, liquid, or gaseous. If it is mostly ocean with a small rocky core, Natalie Batalha, one of the scientists on the project, speculated "it's not beyond the realm of possibility that life could exist in such an ocean." This possibility of life has spurred NASA to perform research on top candidates for extraterrestrial intelligence."We're getting closer and closer to discovering the so-called 'Goldilocks planet,'" said Pete Worden, director of NASA's Ames Research Center. The

only parameters of the planet's orbit that are currently available are its period which is about 290 days, and its inclination, which is such that it transits the disk of its star as seen from Earth."This is a major milestone on the road to finding Earth's twin," said Douglas Hudgins, Kepler program scientist at NASA Headquarters in Wash-ington. "Kepler's results

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continue to demonstrate the importance of NASA's science missions, which aim to answer some of the biggest questions about our place in the universe."The average distance from Kepler-22b to its host star

Kepler-22 is about 15% less than the distance from Earth to the Sun but the luminosity (light output) of Kepler-22 is about 25% less than that of the Sun. This combination of a shorter average distance from the star and a lower stellar luminosity is consistent with a moderate surface temperature at that distance if we assume that the surface is not subject to extreme greenhouse heating.If the planet is found to move in a highly elliptical orbit, its surface temperature will vary from a higher temperature when close to Kepler-22 to lower when further away. Kepler 22 found at around 600 Light Years Distance from the Earth, and no currently available technology can transport humans 600 Light Years to

the new planet found, even if a newborn travels throughout the lifespan. Light Year is a standard unit to measure the distance in the space (approximately 10 Trillion Kilometers/ 6 Trillion Miles). According to scientific calculations, the best Spaceships available at NASA at the moment, requires 1200 Years to cover the distance of One Light Year. It may be worth mentioning here that NASA Kepler Mission has detected more than 1200 planets. Kepler has very power-ful telescopes and other scientific instruments. Kepler uses a specialized one-meter diameter telescope called a photometer to measure the small changes in brightness caused by the transits. Kepler has the capacity to continuously view and analyze an amount of sky far greater than NASA Hubble Space Telescope.

Jill Tarter, director of the Center for SETI Research, with a graphic showing the newly discovered planet Kepler-22 which NASA says is in the habitable zone where water could exist on the planet's surface. Sou

Page 63: Value Chain (Jan 12)

tress ulcer also referred to as stress-induced gastritis, stress-related erosive syndrome, stress ulcer syndrome,

and stress-related mucosal disease, can cause mucosal erosions and superficial hemorrhages. It is a common name given to gastritis or peptic ulcer disease in the stom-ach or first part of duodenum (adjoining part of stom-ach). It is usually seen in adults in situations of prolonged illness, accidents, or stress that could be related to job, exams or family issues. Symptoms of stress ulcer are similar to any other gastric-acidity related diseases which include pain in upper abdo-men with burning in food passage, belching, bloating nausea early satiety (a feeling of unusual fullness with very little intake of food) and/or feeling of discomfort. All these are often termed as “dyspepsia”. The dyspepsia in patients with ulcer may be episodic with weeks of pain followed by weeks of no pain at all. Symptoms of ulcer can be present for 15 minutes to 3 hours. They are often induced at night, awakening the person from sleep, how-ever, occurrence is more often not time bound. Drinking cold milk, intake of food, resting or taking antacid medi-cations may relieve symptoms. Study in Pakistan have shown that approximately 15 % of people with complains of dyspepsia have peptic ulcer disease on investigation through endoscopy. Endoscopy is a test in which inside of stomach is visualized by passing a camera tube through mouth. The direct cause of peptic ulcers is the destruction of the gastric or intestinal mucosal lining of the stomach by hydrochloric acid, an acid normally present in the diges-tive juices of the stomach. Infection with the bacterium Helicobacter pylori is thought to play an important role in causing both gastric and duodenal ulcers. Helicobacter pylori may be transmitted from person to person through contaminated food and water. Antibiotics are the most effective treatment for Helicobacter pylori peptic ulcers.Injury of the gastric mucosal lining and weakening of the mucous defenses are also responsible for gastric ulcers. Excess secretion of hydrochloric acid, genetic predisposi-tion, and psychological stress are important contributing factors in the formation and worsening of ulcers. Another major cause of ulcers is the chronic use of anti-inflammatory and pain medications, such as aspirin, ibuprofen, etc.It is often said that stress alone does not cause peptic ulcer, however, people who have factors that make them prone to ulcers get stress-induced gastritis or ulcers when the situation is favorable for these conditions to develop.In USA, about four million adults are diagnosed or treated each year for PUD; one million will be hospitalized for treatment; and 40,000 will have surgery for an ulcer-related condition. About 6,000 Americans die of stomach ulcer-related complications every year.

LL iterature

December 2011

Mirza Ghalib: a visionary par excellence F their mark on the pages

of history but the man who put them on this elevated track – Sir Syed – acquired his grand vision from the great visionary Mirza Ghalib; it is this great attribute that places Ghalib ahead of all his contem-poraries. What is as amazing is the fact that Ghalib knew his place in history when he said:

Hain aur bhi duniya mein sukhanwar bohat achcheyKehtey hain ke Ghalib ka hai andaz-e-bayan aur

This was how he accepted the supremacy of the greats like Rumi, Saadi, Hafiz, Jami and Mir Taqi Mir while claiming that he was ‘different’, which he indeed was. An aspect of his poetry that is indeed unique is the way in which, at times, he went about making fun of his beloved. For instance:

Sahab ko apney husn pe kitna ghuroor thaAayena dekh apna sa munh le key reh gayea

The way he went about doing it took remarkably beautiful styles. For instance:

Kabhi neki bhi us ke jee mein gar aa jaye hai mujh seJafayein kar ke apni yad sharma jaye hai mujh se

Mirza Ghalib never composed a ‘naat’ because he thought it amounted to taking on Almighty Allah for He is the one Who alone can do justice to praising the Prophet (PBUH). Only occasionally did he refer to the Prophet (PBUH) in his verses, but when he did so it was absolutely fascinating. For instance:Us ki ummat mein hoon mein, mere rahein kyun kaam bund

Wastey jis Sheh kay ghalig gumbad-e-bedar khulaThis priceless couplet is, in fact, a challenge for the Muslim ummah because it reminds them that they are the followers of the Guide for whom even skies had to part, and make way (the briefest yet the most beautiful reference to Meraj). Should the followers of a Guide like the Prophet (PBUH) find anything an obstruction in their march towards salva tion? It is a pity that the Muslim ummah never reflected on this great event (Meraj) and the inspiring message it holds out for the ummah–a refusal to stay behind in any field that promises human well being and emancipation.Ghalib denied being a wali yet left a treasure of wisdom for mankind’s lasting good but his death by starvation suggests he may have been one, for that’s how walis lived and left a legacy that kept enriching people for years to come. Ask just the Ghazal singers and they will vouch for it.

or years to come, Pakistanis might not remember Mirza Ghalib on his birthday, given the fact that his

birthday coincides with the death anniversary of Bena-zir Bhutto. That’s the impression one gets each year since 2007. As before, this year too no TV channel found it worthwhile to spare a few minutes for Mirza Ghalib although, history shows that he was one of the greatest visionaries that the Indo-Pak sub-continent was blessed with.December 27, 2011 marked the 214th birthday of this great visionary about whom there is consencus over the fact that he never had formal education. Given this background, his grasp over Persian and Urdu languages and his command over theology, philosophy, ethics and history have amazed his critics and admir-ers. In a way, he had explained it in his following couplet:

Yeh masael-e-tasawuff, yeh tera bayan GhalibTujhe hum wali samjhtey jo na badakhuwar hota

His vision about the future and his understanding of man’s nature and his failings, render his poetry virtu-ally timeless; it describes today’s scenario as it did a hundred and fifty years ago. For instance:

Koi ummeed bar nahien aatiKoi soorat nazar nahien aati

Aagey aati thi haal-e-dil pe hansiAb kisi baat par nahien aati

Vision was not just a part of his poetry; it manifested itself in practical ways as well, and the most significant instance thereof was how he guided Sir Syed Ahmed Khan to set up a place of learning for the coming generations to acquire a grasp over modern sciences the deficit of which resulted in the Indians staying far behind the West in every field. He came to this conclu-sion on his visit to Calcutta after the fall of the Mughal empire when he saw the British inventions – electricity, steam boats, telegraph, and modern weaponry. Once convinced by Mirza Ghalib about this need, Sir Syed, a true disciple of Ghalib, made this task the mission of his life. After he successfully turned Aligarh’s Islamia college into a university–the largest in India to-date–Sir Syed often said how he wished Mirza Ghalib was alive to see that his disciple had fulfilled the promise he had made to his guide–Mirza Ghalib. The role this university played in awakening the Mus-lims of India and in the creation of Pakistan is no secret.The creation of Aligarh University was the most important event for the Muslims of India because it triggered among them a desire to not just acquire a grasp over modern sciences but excel in them to become a prominent part of the evolving world. This quest led many of them to rise to places of eminence and leave

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Dangers of Peptic UlcerThe dangers and complications associated with ulcer disease are many. Fortunately, not many people will have the complica-tions, but, we do not know which ones will do! Therefore, it is extremely important to understand the magnitude of the prob-lem and take the measures to avoid dangerous complications, including:• Severe bleeding• Perforation “hole” in the stomach or duodenum• Stricture “narrowing” of food passage• Cancer/ MalignancySmall amount of blood in stools or vomiting and/or tarry black colored stools are an indication that the ulcer may have the capacity to bleed severely in future. Perforation or “hole” in the stomach or duodenum presents with severe abdominal pain and patients end-up in emergency operating rooms. Patients with stricture or “narrowing” of stomach or duodenum experi-ence excessive uncontrollable vomiting after almost every meal. Cancer/ Malignancy can mimic the symptoms of ulcer in the region and therefore, it is mandatory to exclude such conditions before labeling oneself as an ulcer patient.Investigation & DiagnosisLike any other disease, the principle of investigations and treatment remains the same: “find and remove cause, treat condition”. The causes and factors that predispose to ulcer disease easily evaluated by attending doctors through focused questions and blood and stool tests for H. Pylori bacteria. Gold standard for confirming or ruling out the diagnosis of an Ulcer is the Endoscopy (a test in which inside of stomach and first part of duodenum is visualized by passing a camera tube through mouth). This is performed as an outpatient procedure and is considered extremely safe in experienced hands. Endos-copy not only confirms the diagnosis, it also confirms the absence or presence of above mentioned complications.TreatmentMost of the cases of ulcer and gastritis are treated conserva-tively through medications. Only a small percentage requires surgical intervention in case of failed medical treatment or development of one of the complications discussed earlier.However, the symptoms should not be taken lightly and should be appropriately and timely investigated to confirm and treat the diagnosed problem. Risk Factors for Developing an Ulcer• Family history of ulcers• Smoking• Excess alcohol consumption• Use of non-steroidal anti-inflammatory pain medications (aspirin) or corticosteroids.

• Zollinger-Ellison syndrome• Improper diet, irregular or skipped meals• Type O blood (for duodenal ulcers)• Stress does not cause an ulcer, but may be a contributing factor

• Chronic disorders such as liver disease, emphysema, rheumatoid arthritis may increase vulnerability to ulcers.

December 2011

HHistor

action’ that finally split Pakistan. It is hard to forget that on March 26, 1971 when the disastrous army action began in East Pakistan, Z.A. Bhutto said “thank God Pakistan has been saved.” What followed was a reign of terror by both Mukti Bahini and the Pak Army wherein both sides behaved in incredibly shameful manner and killed their adversaries by the thousands. But the massacre was viewed by the West-ern media in a highly biased manner, which did enormous damage to Pakistan’s image. Surely, by December 16, Z.A. Bhutto realized how off the mark he had been but by then it was too late to make amends. How India exploited our political blindness has been aptly described by none other than Lt. Gen. J.F.R. Jacob, Chief of India’s Eastern Command that invaded East Pakistan. In his book “Surrender at Dhaka: Birth of a nation” he says “on the request of the Provisional Government of Bangladesh, the government of India directed the Army to provide assistance to the Mukti Bahini who controlled areas of East Pakistan contagious to our borders. The code name given to guerilla operations in E. Pakistan was ‘Operation Jackpot’. The recruitment and control operations of Mukti Bahini were set up on regional basis with their headquarter located at Calcutta.”‘Jackpot’ conveys how Indians looked at the opportunity of gaining control of East Pakistan, and admitting that Calcutta was the operational headquarter of the Mukti Bahini speaks volumes about India’s role in the break-up of Pakistan. This is followed by details of how Indian Navy and government of West Bengal helped Mukti Bahini in attacking Pakistan Navy to successfully destroy 15 ships, 11 coasters, 7 gun-boats, 11 barges, 2 tankers besides 19 other craft. The full-scale Indo-Pak war that began on December 4 ended just 12 days later when the Chief of Pakistan’s Eastern Command Lt. Gen. A.A.K. Niazai signed the docu-ment of surrender.

ecember 16 marks the date when, 40 years ago, Pakistan was split, with its Eastern wing becoming

Bangladesh. What happened that day was the result of sustained development of economic inequalities between the country’s Western and Eastern wings, and an uncaring attitude thereto manifested by the political and business leadership in West Pakistan.Proceeds of jute export – then the main source of external flows–were being pocketed unfairly by West Pakistan for the development of its industrial infrastructure while 56 percent of Pakistan’s population resided in East Pakistan. The distortion was worsened by appointment of Abdul Monem Khan as the provincial governor in place of Gen. Azam Khan who, in spite of being a non-Bengali, was popular in East Pakistan.The blindness of the political leadership was criminal given the fact that between the two wings of the country lay India that had not reconciled to the creation of Pakistan. India had the potential to exploit the discontent bred by economic dis-parities with great strategic advantage since it could impede transport between East and West Pakistan that it later did.Rising political disconnect was worsened by the exit of Field Marsha Ayub Khan in 1968 and imposition of Martial Law by a General with a questionable track record – Yahya Khan. He had virtually zero sense of the political discon-tent at that time, and even less concern for diluting the tensions it had given rise to. While he did hold general elections in 1970, the fact that elections results in East Pakistan could be distorted by Awami League didn’t bother his regime. Not surprisingly, it happened but by that time Awami League had gained so much clout that holding fresh elections in the constituencies where blatant ballot rigging did take place was impossible because there was naked threat of violence, which precluded any corrective action. But the bigger blunder was Gen. Yahya’s refusal to accede to Awami League demand to hold the first parliamentary session in Dhaka – a move that, unfortunately, had the backing of the PPP. This refusal was the last nail in the coffin of a united Pakistan.The refusal to hold the first parliamentary session in the then East Pakistan helped Awami League to project Gen. Yahya’s regime as a colonial regime. It would be wrong to blame the Awami League for doing so; rationality demanded that this request was acceded to and as things stood, Sheikh Mujib-ur-Rehman had won the right to become the Prime Minister of Pakistan.Very tactlessly, however, this wasn’t done, which led to break down of law and order in East Pakistan. It is hard to forget how the PPP slogan “hum idhar, tum udhar” strengthened the cause of the separatists–the Mukti Bahini–in East Pakistan. It was just the opportunity the then regime in India exploited to the hilt by infiltrating its army into East Pakistan, and led to the disastrous ‘army

What led to creation of BangladeshD

y

Lt. Gen. A.A.K. Niazi signing the document of surrender

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Page 65: Value Chain (Jan 12)

The Governor said that SBP will issue regulatory guidelines to microfinance banks for up-scaling of loans, and develop-ing a reporting structure to assess the geographic distribution of microfinance growth. SBP will also review and strengthen its regulatory and supervisory processes to ensure protection of microfinance clients. In the new Microfinance Strategic Framework 2011-15, SBP has laid out a detailed strategy to promote sustainable growth of the sector, he added.Since the inception of microfinance banking in Pakistan, the Governor said, our goal has been to determine the propor-tionality of a regulation before it is put in place. Hence, the regulatory approach has remained gradual and in line with the evolution of the sector, he said and added that our micro-finance regulatory framework has been ranked globally at the top in 2010 and 2011 by UK’s The Economist.

The Governor lauded the role of UKAid and Asian Development Bank in the development of microfinance in Pakistan and said that under the programmes spon-sored by these donors, a number of market interventions are managed by the SBP.He said that Microfinance Credit Guaran-tee Facility, a Pound 10 million guarantee facility of UK’s DFID, was launched by SBP in December 2008 to mobilize wholesale commercial funding for micro-finance providers through partial guaran-tees to commercial banks. The facility has thus far mobilized commercial funding of Rs. 3.225 billion for four microfinance providers for onward lending to around

200,000 new micro borrowers, he added.Emphasizing the importance of financial literacy in recent years, he said that SBP has started a pilot Financial Literacy Program with the private sector as an implementing partner. The program is the first-ever initiative to promote financial literacy among the general public at the national level, he added.Speaking on the occasion, Mr. Nadeem Hussain, President & CEO, Tameer Microfinance Bank, talked about the fascinat-ing advantages of branchless banking, in creating livelihood opportunities and poverty alleviation. He termed branchless banking as key to enhance outreach significantly. He said around 18 – 20 million account holders have access to credit. Excluding the multiple accounts, the number is only 8 – 10 million account holders, he added. Mr. Menin Rodrigues, Chairman of the Conference, Dr. Abdul Wahab, Dean of M.A.Jinnah University, Mr. Akbarali Pesnani, Chairman of the First Microfinance Bank, Mr. Ahmed Jamal, Senior Group Head, Pakistan Poverty Alleviation Fund, Ms Cary Clark, Senior Advisor, Mazars Consulting, and Mr. Ramiz Allahwala, CEO, Gulfstone Training, also spoke on the occasion.

icrofinance, a high profile institutional innovation designed to address poverty alleviation and under-

development issues faced by the people in both developing and transition countries alike, is a subject of critical impor-tance and has attracted attention of the individuals and insti-tutions the world over. There are empirical evidences to substantiate the beneficial effect of microfinance on both income smoothing and increases in income. To discuss the role of microfinance in income generation, poverty alleviation and socio-economic well-being of the people, Shamrock Conferences International organized on December 2, 2011 the 5th Pakistan Microfinance Conference-2011 at Karachi. Mr. Yaseen Anwar, Governor, State Bank of Pakistan was the chief guest who inaugurated the event which featured case studies and deliberation on effective strategies for stretching out to the unreached. Leading experts from the microfinance industry shared their views with the delegates at the conference.In his inaugural address, Mr. Yaseen Anwar, Governor, State Bank of Pakistan, said that the recent development in mobile phone banking is highly encouraging and that the expansion in the retail network of microfinance has been brought about overwhelmingly. Within a span of just two years, there are now almost 18,000 branchless banking outlets surpassing the 10,000 conventional bank branches. Based on the early successes of mobile banking in Pakistan there was an urgent need for continued close co- ordination between the diverse organ- iztions of the microfinance sector to foster a market-driven mobile banking eco-system.The SBP Governor said that the evolution of microfinance has so far remained positive despite the fact that many challenges arose along the way. The microfinance in Pakistan has made good progress but must make major breakthroughs to reach millions of underserved people, he emphasized.He pointed out that despite considerable support from the government, donors and the State Bank of Pakistan, the microfinance sector has only been able to tap a small fraction of the potential market. He said that Pakistan has one of the lowest financial penetration levels in the world with 56 percent adult population totally excluded, and another 32 percent informally served. He said that at present, nine MFBs are operating in Pakistan.They are all privately owned and reflect diversity of ownership and approaches to microfinance banking. Consid-ering that the market has potential and the regulatory frame-work is supportive, the ownership in MFBs has flowed both from local and international investors including banks, devel-opment agencies, investment funds, mobile network opera-tors, and large domestic MFIs.

Choppy outlook & QE to drive asset prices in 2012

65

CCommodit Reviewy

January 2011

Eurozone Macro View:One scenario for 2012 revolves around Europe slipping into a recessionary period, with the rest of the world shrugging it off and the global economy expanding at a modest pace. On the other hand, things could turn sour quickly if the Eurozone recession turns out deeper than anticipated and acts as a drag on other economies. Either way, we believe major changes in the Euro landscape are the theme of the upcoming calendar year and the single‐currency bloc as we know it may cease to exist in its current form. What remains to be seen is if the exit of one of the periph-eral economies is carried out in an orderly or disorderly fashion. We expect the EURUSD exchange rate to remain under strain during the early part of the year which will likely provide a strong headwind for gold as the USD has lately turned into the investor choice of ‘safe‐haven’. Gold on the other hand has illustrated erratic behavior and has dumped its safe‐haven appeal to move in line with riskier asset classes (equities) and is no longer viewed as a top pick in uncertain times.

Implications of an orderly/disorderly defaultand a break‐up of the EurozoneIn 2011, two Eurozone members officially approached the EU & IMF for a bailout package with both possessing exorbitant debt piles. Portugal and Ireland negotiated two separate aid programs amounting to €78bn and €85bn respectively and began the process of fiscal discipline. The situation is more tenuous in Greece which has consumed its first loan package of €110bn and is seeking another €130bn in finan-cial assistance. We do not rule out the possibility of other economies such as Italy sinking into the same hole. The latter has come increasingly under the radar of late with its bond yields soaring above 7.0%, a level widely viewed as ‘unsustainable’ in the long‐run. However, markets and investors have remained wary that the third‐largest economy in the Eurozone, holding the largest debt‐pile in absolute terms (€1.9trn), is possibly ‘too‐big‐to‐save’. In the event of an orderly/disorderly default, a series of CDS payments would be triggered choking the credit lines of the banking system, reminiscent of the scenes in Sep‐08 after the collapse of Lehman Brothers. The impact of the same on commodities would initially be a negative knee‐jerk reaction. However, over the medium term, we feel that a default/breakup of the Eurozone would eventually invite safe‐haven bids to commodities like gold and push prices higher.

The ECB may be running out of its bag of tricksThe European Central Bank, seen as the only institution with sufficient firepower to resolve the EU debt crisis has so far adopted a peripheral role and has opted to let national governments adopt austerity measures. With bond yields rising, the ECB had opted to intervene in the bond markets to a limited extent and purchase debt of peripheral economies. The Central Bank has also adopted a more accom-modative monetary policy and has lowered its minimum bid rate by 50bps to 1.0%. We think the bank may use other policy tools at its disposal to flush markets with credit, an example of which was seen when ultra‐cheap 3 year loans to European banks were offered which invited an overwhelming response of €489bn. The end aim was for these banks to invest in toxic debt of troubled nations in order to lower the strain on their bond yields. However, banks have expressed reluctance to engage in such strategies and are instead looking to de‐leverage their balance sheets.

US Macro View Our understanding of the US economy keeps us cautiously optimistic as despite the signs of improvement in the past few weeks, the downside risks remain at large. We see economic growth slowing down due to three shocks; a European recession, fiscal tightening and uncertainty ahead of the 2012 elections. In our near‐term horizon, with the Euro under pressure, we expect the USD to continue its upward march and remain the investor asset of choice. However heading into the latter part of the year, the shocks highlighted earlier could take on a more prominent role and force the Fed to launch another bout of quantitative easing.

Gold price moves during 2011 (US$/oz)

1,300

1,400

1,500

1,600

1,700

1,800

1,900

3-Ja

n3-

Feb

6-M

ar6-

Apr

7-M

ay7-

Jun

8-Ju

l8-

Aug

8-Se

p9-

Oct

9-N

ov10

-Dec

Source:

Bloomberg,

KASB

Research

WTI price moves during 2011 (US$/bbl)

75

85

95

105

115

3-Ja

n3-

Feb

6-M

ar6-

Apr

7-M

ay7-

Jun

8-Ju

l8-

Aug

8-Se

p9-

Oct

9-N

ov10

-Dec

Source:

Bloomberg,

KASB

Research

Silver price moves during 2011 (US$/oz)

25

30

35

40

45

50

3-Ja

n

3-Fe

b

6-M

ar

6-Ap

r

7-M

ay

7-Ju

n

8-Ju

l

8-Au

g

8-Se

p

9-O

ct

9-N

ov

10-D

ec

Source:

Bloomberg, KASB

Research

Page 66: Value Chain (Jan 12)

December is a red letter day in the history of Kenya which achieved independence from the

British colonial rule in 1963 as a result of long and arduous struggle in which many lives were lost. Late Mzee Jomo Kenyatta, considered by Kenyans as the founding Father of the Nation because of his relentless sstruggle for freedom from the clutches of the British rule, became the first Prime Minister of the new African state. A year later on this particular date, Kenya became a Republic and attained full independence with Late Mzee Jomo Kenyatta as the country’s first President. Covering an area of 582,646 Sq. Kms. with a population of 40 million people Kenya is located in the eastern part of Africa. It shares boundaries with Ethiopia, Somalia, Sudan, Tanzania and Uganda. English has been adopted as the official language. The national language in Kenya is Swahili. Nairobi, its capital, is the transportation hub of Eastern and Central Africa and the largest city between Cairo and Johannesburg.Kenya celebrated its 48th independence day on 12th December 2011.This year’s Independence Day celebration had special significance as it was observed under the new constitution which provided renewed energy, hope and enthusiasm. The new constitutional dispensation was promulgated on 27th August 2010 by H.E.Hon.Mwai Kibaki, President of the Repub-lic of Kenya after being passed by a majority of Kenyans in a national referendum. The country is blessed with rich heritage of plants and animals which allows for a range of economic activities. Kenya is a secular democratic nation which has shaped itself as the biggest economy and democ-racy in the region where people of different ethnic groups and religions, speaking forty differ-ent dialects, live together harmoniously. This has enabled the people of Kenya to coexist and adapt to the socio-economic changes taking place around the world.

66 January 2011

CCommodit Reviewy

The Fed still appears to hold couple of aces up its sleeveCompared to its European counterpart, the US Federal Reserve has adopted a more proactive approach in restarting the economic engines. The two earlier bouts of quantitative easing (dubbed QE‐I & QE‐II) saw the Fed purchase US$1,750bn and US$600bn respectively of mortgage and treasury debt on the Central Bank’s balance sheet and the influx of liquidity was a major contributor in driving asset prices. Since the expiration of QE‐II, the Fed has somewhat stuck to the sidelines and has offered to keep interest rates near zero till mid‐2013. The Central Bank lately adopted an inventive measure termed ‘Operation Twist’ which saw the Fed alter the structure of its balance sheet by selling short‐term maturity mortgage securities of US$400bn and purchasing an equiva-lent amount of longer‐term paper in order to lower longterm interest rates. However, we feel that the economy will run into a soft patch again through a combination of a weak housing sector, a depressed labor market and a cut in public spending. Hence we eye a third round of QE in 2H12 with a targeted amount of US$600‐800bn

Outlook for GoldHaving surmised our global macro view, we turn our attention towards precious metals. While we affirm that the age‐old safe‐haven status of gold is still intact, we pinpoint that 1H12 could prove to be bumpy ride as risky asset sell‐off will continue in response to headlines emerging from Europe. Heading into 2H12, with QE likely initiated by both Central Banks, we see funds being driven into the commodity and providing the necessary impetus for it to resume its uptrend. Addi-tional support for gold can come in the form of Central Bank’s adding to their gold holdings, as they have done in 2011. Furthermore, the safe‐haven concept is likely to attract investors in the event of a default in the Eurozone and prices could be pushed towards all‐time highs.

Outlook for WTI (Crude Oil)We see demand and supply heading in opposite directions for 2012 as the former will feel the strain of fiscal consolidation in Europe whereas the latter is likely to remain robust as Libyan output gradually comes back online. However, we remain cognizant of the unrest in the MENA region which would keep the geopolitical risk premium for oil high as concerns over Iran’s nuclear program will persist with the possibility of the regime facing economic sanctions. A key determinant of crude oil will be the economic engines of China which have been shaky of late. The Chinese economy could achieve a soft‐landing in 2012, and the repeated monetary tighten-ing could lead to a strain on domestic consumption. For WTI in particular, develop-ments regarding pipeline decisions will also warrant investor attention as earlier reports had indicated that new lines were in the process of being laid out in order to tackle the inventory accumulation at WTI’s delivery point in Cushing, Oklahoma. The purpose was to re‐direct the flow of oil towards the Gulf Coast, which would ease the stockpile buildup and reduce the price differential between Brent and WTI which soared to as high as US$28/bbl in 2011.

Outlook for SilverSilver is likely to tread the paths of its yellow peer while maintaining its historically strong positive correlation. Volatility is likely to remain higher in the industrial metal while usage in applications like appliances and solar panels should be robust going forward. The metal will also chart its direction from developments in the overall macro landscape and impressive numbers in the manufacturing sector could see the metal tread higher.

EURUSD movements in 2011

1.25

1.30

1.35

1.40

1.45

1.50

3-Ja

n3-

Feb

6-M

ar6-

Apr

7-M

ay7-

Jun

8-Ju

l8-

Aug

8-Se

p9-

Oct

9-N

ov10

-Dec

Source:

Bloomberg, KASB

Research

Increase in Central Bank Gold Holdings 2011 (tons)

0

20

40

60

80

100

Thailand Russia Mexico

Source: World Gold Council

Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11

Gold WTI

Source: Bloomberg, KASB Research

Gold & Oil price moves during QE-I and QE-II

QE-I

QE-II

Page 67: Value Chain (Jan 12)
Page 68: Value Chain (Jan 12)

Oréal Paris and Pakistan Fashion Design Council presented the “PFDC L’Oréal Paris Bridal Week”, a

platform that endeavored to define and present a mix of contemporary and traditional Pakistani Bridal fashion, jewellery and make-up trends, which together created the ‘look’ for the Bridal Season 2012. The event was held in Lahore recently.The show was attended by celebrities including media and fashion fraternity and buyers/stockists. Prominent design-ers whose creative designs were included in the show were Reama Malik, Emraan Rajput, Maria B, Fahad Hussayn, Nida Azwer, Umer Sayeed, Rouge, Sara Rohail Asghar, Sonia Azhar and Hassan Sheheryar Yasin.Entitled ‘Enchanted’, Karma presented a collection, which derived its inspiration from dark fairy tales, their feared villainesses and beloved heroines. Karma remains for the strong fearless woman who is always the adored star of the show but wears her dark twisted side with pride. It was an ode to the darkly beautiful and the layered luxurious.Inspired by Awadh Dynasty’s rich and royal cultural heritage known for its grandiose traditions and opulence, in the early 18th century in the Sub Continent, Nida Azwer displayed her show of bridal collection, entitled the ‘Awadh Court Collection’. The collection spelt tradition, culture and heritage, in harmony with the designers’ signature style of merging vintage craftsmanship with modern sensibili-ties. Nida’s collection was based in hues of red and pink, ivory and antique gold. While the Awadh Court Collection was predominantly a womenswear collection, this was the first time the designer introduced pieces of menswear couture alongside her bridal wear for women. The label also showcased its exclusive line for children, which was introduced earlier this year and is retailed by the name Nida Azwer Kids. Sufi musician Sanam Marvi sang live for Nida Azwer. Talking about the event, Nida said, “PFDC L’Oréal Paris Bridal Week provided us with an opportunity to be a part in interpreting bridal trends in fashion and beauty and everything within.”