Food and clothing: Prices keep rising, but consumption rises faster

Pakist­anis are eating more food and buying more clothe­s, and not caring about inflat­ion.  11% is the increase in per capita volume of clothes bought by Pakistanis over the last nine years. PHOTO: MUHAMMAD JAVAID/EXPRESS

KARACHI: 

Pakistanis are increasingly spending more and more money on food and clothing, and it is not just because prices are rising: the data now shows that they are buying higher volumes, particularly in food.


In an analysis conducted by The Express Tribune using data generated by the Pakistan Bureau of Statistics, it is becoming increasingly evident that even though prices of food and clothing have skyrocketed over the past decade, the ability of most Pakistanis to keep buying has – for the most part – kept pace (though for some income groups, that has come at the expense of their ability to save).


Between 2002 and 2011, food prices have increased at an average rate of about 11.2%. Spending on food, however, has risen by over 12% per year during that same period. That may not sound like much of a difference, but that means that the average household consumes 6.8% more food than it did a decade ago. Factor in the fact that the average household size has declined during that time and one gets the following statistic: the average Pakistani consumed 17.2% more food in 2011 than they did in 2002.


This massive expansion of food consumption, meanwhile, has fuelled a boom in the sector. Food companies listed on the Karachi Stock Exchange saw their revenues more than double between 2006 and 2010. During that same period, their pre-tax profits more than tripled.


An increased sign of prosperity is also the fact that Pakistanis now buy more meat: expenditure on meat, fish and poultry now constitutes about 10% of all spending on food, up from 9.3% a decade ago. The fastest rise has been in poultry. Pakistanis have increased their per capita consumption of chicken by about 130% during this past decade. This is despite the fact that prices of chicken have shot up 120% during that same period.


It is this dual expansion of per capita consumption and prices that has resulted in the more visible competition among food companies to advertise their products to consumers.


The story in clothing and footwear expenditures is also interesting. The difference in total spending and price rises, at first glance does not appear to be much. Between 2002 and 2011, spending on clothes and footwear rose by 7.4% per year, while prices rose by 7.2% per year. Yet, given the decrease in household size, the per capita volume of clothes bought by Pakistanis increased by nearly 11% during that period.


The fortunes of clothing companies have similarly soared. Between 2006 and 2010, the local sales revenues of clothing manufacturers listed on the Karachi Stock Exchange jumped by an average of 29% per year, much faster than even their own export sales, which rose by about 22% per year during that period. Profits have more than quadrupled during that time.


And those figures precede the recent boom in lawn sales. Sources in the advertising industry say that more than 100 brands of lawn clothing carried out advertising campaigns in 2011 alone.


There has also been a very significant change in buying behaviour: the fastest increase in demand has been for readymade clothing, with a decline in the relative importance of tailored clothes. The average demand for such clothes has increased by an astonishing 81% during the past decade, which suggests that far more Pakistani consumers prefer the convenience of buying off the rack rather than spending time haggling with tailors.


Published in The Express Tribune, July 30th, 2012.

Real estate: The Pakistani housing and accommodation market

Econom­ists say the real estate market dances to its own tune.  Rs 2693 is how much a Pakistani family spends on average on rent every month.

KARACHI: 

In Pakistan, average monthly expenditure on rent per household has increased at an annual rate of over 13% for the last nine years, according to the Pakistan Bureau of Statistics (PBS).


A look at the Household Integrated Economic Survey (HIES) released by the PBS reveals that an average Pakistani family spent Rs888 every month on house rent in 2001-02; which rose to Rs2,693 in 2010-11; signifying an annualised increase of 13.12% over a period of nine years.


Interestingly, in the same period, annual rise in average house rent in rural areas was 2.7% higher than the corresponding increase in urban areas – even though 85.63% of the populace of rural areas lives in owner-occupied houses. In contrast, 75.79% of the urban population lives in houses that they own.


Urban housing


The highest number of people living in rented houses in urban areas belongs to the third quintile of the population in terms of income distribution at 22.38%. The third quintile in income distribution is representative of the middle class in a society.


The lowest number of people living in rented houses in urban areas – 15.93% – belongs to the fifth quintile of the income distribution. This suggests that the richest people in urban areas are most likely to own the house they live in.


The HIES figures also reveal that the poorest people, belonging to the first quintile in urban areas, end up spending 83% more on house rent as compared to a comparable group living in rural areas. Similarly, the richest people belonging to the fifth quintile living in urban areas tend to spend 220% more on average house rent per household, as compared to a comparable segment of the population living in rural areas.


Home ownership and per-capita incomes


“Rise in per-capita income does not seem to display any correlation with the percentage of owner-occupied houses in Pakistan,” economist Kaiser Bengali said, while talking to The Express Tribune. “In many cases, someone who works as a peon and earns a low monthly income can still own a house in Pakistan. This is so because people belonging to certain professions – such as the civil service, military, police, government teachers, journalists etc – receive free or subsidised land from the government or other trusts.”


Data supports Bengali’s view. Pakistan’s Gross National Income (GNI) per capita, formerly known as the Gross National Product per capita, increased by 9.62% annually between 2002 and 2011; but the number of persons living in owner-occupied houses over the same period remained almost stagnant at around 79% of the population.


Bengali says an overwhelming majority of Pakistanis can afford to live in their own houses because the free-market mechanism does not actually operate in the country’s real estate sector. Many people receive land on subsidised rates, he informs us, because of professional affiliations. “The government announces housing schemes regularly for its employees in different ministries and departments. That enables people to acquire land at negligible costs,” he says; adding that land is the primary expense in real estate, because physical structures can be built gradually over an extended period of time.


Published in The Express Tribune, July 30th, 2012.

Energy project: Turkmenistan seeks investors for TAPI gas pipeline

The energy-rich state plans to sell the projec­t to intern­ationa­l oil and gas majors in autumn.  Turkmenistan on Wednesday signed agreements with India and Pakistan to deliver gas through a new pipeline. DESIGN: FAIZAN DAWOOD

ASHGABAT: 

Turkmenistan said on Saturday that it would try to recruit international investors for a new gas pipeline project that would link Central and South Asia.


The energy-rich state plans to pitch the project to international oil and gas majors and financial institutions in the autumn, the Neitralny Turkmenistan newspaper reported.


The plan for a TAPI (Turkmenistan-Afghanistan-Pakistan-India) natural gas pipeline, which is backed by the Asian Development Bank, is regarded with suspicion by some analysts.


However the United States has praised the project for boosting regional peace and prosperity.


Deputy Prime Minister Yagshygeldi Kakayev announced plans on Friday for “a series of meetings with representatives of leading international oil and gas companies and financial institutions”, the news report said.


He said the meetings planned for September and October would discuss “questions concerning the financing of the TAPI project and the creation of a consortium”.


“A presentation of the TAPI project is planned to be held in Singapore, New York and London, which are major business and financial centres of southeastern Asia, America and Europe,” the newspaper said.


The report said that all the countries involved in the project, plus the Asian Development Bank, would take part in the presentations.


In May, Turkmenistan signed agreements with India and Pakistan to deliver gas through the new 1,700-kilometre pipeline, the first contracts in the ambitious project.


Turkmenistan has the world’s fourth-largest gas reserves and India and Pakistan are both eager to tap this source through the pipeline.


Much of the pipeline will go through Afghanistan which neighbours both Turkmenistan and Pakistan but remains wracked by violence and instability.


Published in The Express Tribune, July 29th, 2012.

RBS boss says bank faces fines over Libor scandal

rbs 400LONDON: Royal Bank of Scotland faces the prospect of fines linked to the Libor interest rate-rigging scandal, chief executive Stephen Hester said in a newspaper interview published on Monday.

“RBS is one of the banks tied up in Libor. We’ll have our day in that particular spotlight as well,” Hester told The Guardian newspaper.

Hester said he was not aware of the size of the RBS fine but added that the investigation by British regulator, the Financial Services Authority was “in process.”

RBS, which is 82-percent government-owned after a vast bailout at the height of the global financial crisis, will report its first-half results on Friday.

In June, Barclays became the first bank to be fined as part of a global probe into suspected manipulation of the twin interest rates that are crucial to the operation of short-term financing and global markets.

Barclays was fined £290 million ($452 million, 360 million euros) by British and US regulators for attempted manipulation of Libor and Euribor interbank interest rates between 2005 and 2009.

The fallout saw the resignations of three Barclays executives, including CEO Bob Diamond and some analysts are predicting that Barclays could face lawsuits costing it billions of pounds (dollars) in costs and fines.

Hester told The Guardian that the Libor fines would centre on the conduct of a “handful” of employees at the affected banks.

“Even though, when all the Libor (fines) are out, most of it is going to be around the wrongdoings of a handful of people at a number of banks,” he told the newspaper.

“Those wrongdoings taint a whole industry beyond the handful of people and that makes it a huge problem.”

Copyright AFP (Agence France-Presse), 2012

Almost there: Etisalat to pay $100m less in PTCL row, says official

 Pakistan and UAE negotiate a new settlement deal . DESIGN: FAIZAN DAWOOD

KARACHI: 

Pakistan and the United Arab Emirates (UAE) have finally resolved the dispute over the outstanding payment of $800 million under the privatisation deal for the Pakistan Telecommunication Company Limited (PTCL) in which the Emirates Telecommunication Corporation, branded trade name Etisalat acquired a 26% stake at a total cost of $2.6 billion in 2006, said the Adviser to Prime Minister on Textiles Dr Mirza Ikhtiar Baig on Saturday.


Speaking at a meeting of the Pakistan-UAE Business Council of the Federation of Pakistan Chambers of Commerce and Industry at the federation house, Baig said that Pakistan was going to forgo $100 million under the final settlement and will receive $700 million for tranches – securities offered as part of a transaction.


Etisalat withheld $800 million due to non-transfer of 136 properties in the name of the PTCL because of litigation and encroachments. “In lieu of the properties not transferred to PTCL because of pending cases, Pakistan will forgo $100 million and will receive $700 million,” Baig said.


However, he did not specify the period over which Pakistan is going to receive the outstanding payment.


Presenting the minutes of the 10th Pakistan-UAE Joint Ministerial Commission meeting held in Abu Dhabi on February 26-27 earlier this year, Baig said it was decided by the foreign ministers of both countries to undertake a thorough evaluation of the disputed properties to determine their net worth.


“Pakistan got the evaluation done by the National Bank of Pakistan (NBP). Its estimate of the net value was in the vicinity of $80 million. But Etisalat refused to accept it, and instead hired international surveyors for an independent evaluation. Their estimate is around $100 million,” he said, adding that the difference of $20 million in the estimates of the NBP and independent surveyors was not substantial.


In March, The Khaleej Times quoted Baig as saying that there were only two contentious properties in major Pakistani cities, as the rest of the disputed assets had already been cleared.


When The Express Tribune contacted PTCL, a spokesperson for the company refused to offer comment, saying it was up to the governments of Pakistan and the UAE to resolve the dispute. “It’s been a long-standing stance of the PTCL that the dispute over the outstanding payment of $800 million is something strictly between the governments. We have nothing to say in this regard.”


Etisalat paid $1.4 billion initially while the rest of $1.2 billion was scheduled to be paid in six equal biannual instalments.


An affiliate of UAE’s Etisalat, the PTCL is the third largest mobile operator in Pakistan and enjoys a 19% market share in the cellular phone market.


Published in The Express Tribune, July 29th, 2012.

Savings: As Pakistanis earn more, households can afford to save less

Financ­ial sector firms offer a wider array of produc­ts to custom­ers with more money to invest.  9.2% of income was saved, on average, by Pakistani households in 2011.

KARACHI: 

Pakistanis are saving less of their incomes today than they did a decade ago, but the total volume of their savings has still increased, resulting in a massive boom in financial services.


This phenomenon is underpinned by a somewhat paradoxical fact: as Pakistani incomes have risen, the average household savings rate has declined, resulting in what is now a very obvious and sustained boom in consumer demand.


According to data compiled from the Household Integrated Economic Survey, compiled by the Pakistan Bureau of Statistics, the average household savings rate in Pakistan went down from nearly 31% of income in 2002 to just over 9.2% in 2011. As with most aggregations, this number hides several important variations.


For the top two income strata, representing about 40% of the population, this decline has been largely due to the fact that they are consuming more. Urban Pakistanis in the top quintile of the population have seen the nominal amount of monthly savings go up by almost 85% between 2002 and 2011, despite the fact that the nominal increase in their incomes during that period was lower, at 68%. In essence, the urban middle class has the best of both worlds: they are saving more and they are consuming more.


The middle three income groups – about 60% of the population – have seen their nominal savings stay flat, even as their incomes have gone up at a pace that is often at par with inflation.


Given the decrease in average household size from almost 7 people per household to just under 6.4, the total number of households has increased, as has the amount available for savings. And that, in large part, has helped a financial sector boom that – but for a brief interruption in 2008 and 2009 – has largely continued unabated.


Deposits at banks have grown at an average annual rate of 15.4% during the decade ending December 31, 2011, reaching over Rs6.3 trillion. Profits at banks, meanwhile, have also soared, reaching a record high of Rs113 billion in 2011. Over the past decade, the sector’s profitability has increased at an average rate of close to 27% per year.


Yet banks are not the only industry that has benefited from the increased ability of the Pakistani middle class to save. The asset management industry in Pakistan was virtually non-existent in 2001. Since then, however, it has soared, currently managing close to Rs313 billion in assets, though that number is down from the 2008 peak.


As they become more affluent, it is becoming increasingly profitable to provide financial services to Pakistanis. Insurance companies now manage approximately Rs502 billion in assets, more than double what they managed just five years ago. Somewhat surprisingly, profitability at insurance companies is down by almost 50%, as many of them ramp up their sales efforts to gain more customers.


And advertising for financial services is now getting more sophisticated and more ambitious. Jubilee Insurance, for instance, seeks to explain the benefit of insurance to the average middle class customer through television, print and outdoor advertisements. Burj Bank has a nationwide television campaign to promote its services. And even asset management companies are taking out front page ads in national newspapers.


Yet despite the recent bonanza, there are many who – far from gaining from the expansion of the financial sector – are rapidly losing the ability to participate in it.


The rupee amount of savings per month in the bottom 20% of rural households dropped 91% during the past decade and it is not hard to see why: while their incomes rose by 7.7% per year during that time, inflation rose at a much faster pace of 10% per year, causing their real incomes to decline. This, in turn, meant that they have less capacity to save. The poor in Pakistan are rapidly losing the ability to build up their own safety net.


Published in The Express Tribune, July 30th, 2012.

Air France-KLM halves operating loss on cost cutting

Written by Shoaib-ur-Rehman Siddiqui

air france-klmPARIS: Air France-KLM beat expectations by halving its operating loss in the second quarter as cost-cutting begins to bear fruit, and told unions there was no alternative to restructuring plans now hinging on the support of French pilots.

The Franco-Dutch group, which last week failed to win a key ballot of cabin unions, said operating losses fell in the second quarter to 66 million euros ($81.6 million) from 145 million a year earlier as it managed to squeeze non-fuel costs.

Revenues grew 4.5 percent to 6.5 billion euros.

Shares in the airline, formed from a merger of French and Dutch carriers in 2004, shot up 13 percent to 4.40 euros as management stuck to its guns on restructuring and issued forecasts implying smaller then expected losses for the year.

Analysts said the tough stand on restructuring after the cabin crew vote lifted shares alongside forecasts of an improved operating profit of at least 195 million euros in the second half. Some Air France unions say the measures are excessive.

“The on-going union discussions are critical to a successful turnaround and Air France-KLM, but see value at current levels based on these better than expected result,” analysts at Goodbody said.

“These results demonstrate how crucial the success of the Transform 2015 plan is to the turnaround of the group,” Chairman and Chief Executive Jean-Cyril Spinetta said in a statement.

Net losses widened to 895 million euros from 197 million, hit by a 365 million euro restructuring charge and a drop in the value of the airline’s fuel hedging contracts.

Snared between low-cost rivals in Europe and Gulf carriers taking chunks of its long-haul premium business, Air France-KLM is urging staff at its strike-prone French network to swap greater efficiency for a pledge to avoid compulsory job cuts.

Cabin crew unions last week rejected proposals to cut 5,122 posts through voluntary measures, but Air France-KLM said it still expected to meet its target of boosting productivity 20 percent between 2011 and 2014 by imposing savings.

Ground staff have already accepted the plan, leaving crucial decisions in the hands of pilots who are due to vote in August.

“What is clear is that we don’t have a choice: the measures we proposed are meant to ensure the survival of the company and its recovery in coming years,” Finance Director Philippe Calavia told reporters.

“The majority of our colleagues have understood this.”

Air France-KLM, 15 percent owned by the French government, faces a delicate task pushing through its proposals as the country’s new Socialist government wades into a series of industrial disputes to try to prevent redundancies.

Air France-KLM kept investors guessing over a possible codeshare arrangement with Abu Dhabi’s Etihad, which announced a similar deal with Irish airline Aer Lingus on Monday.

“We are looking at how we can co-operate with Etihad,” Spinetta said. He declined to comment in detail on the talks but told Reuters any deal would not involve exchanging stakes.

Ryanair, Europe’s largest budget carrier which is bidding for Aer Lingus, disappointed its investors with a slide in second-quarter profits, highlighting the fragile economic backdrop as traditional carriers try to stem losses.

In Dublin, Ryanair shares fell 2 percent.

Passenger business has improved and summer bookings are “positively oriented” but cargo suffered from the weak global economy, Air France-KLM said.

Its unit costs declined 1.3 percent after stripping out currency and fuel prices.

Analysts were on average expecting operating losses of 216 million and a net loss of 211 million on revenues of 6.45 billion, according to Thomson Reuters I/B/E/S consensus data.

Indonesia lowers power lines to deter train surfers

indonesia flag 400JAKARTA: Indonesia has lowered overhead power cables on a busy train line into Jakarta to stop people travelling on carriage roofs, officials said Monday, in a move critics said was dangerous and irresponsible.

State-run rail operator PT Kereta Api Indonesia said it began lowering cables Friday by around one metre (three feet) on sections of the 59-kilometre (37-mile) route between Jakarta and Bogor city.

“This measure has proven to be very effective and cheap. Nobody dares to sit on the roof because they are afraid of being electrocuted,” the company’s security official Ahmad Sujadi told AFP.

Work on the rest of the line was due to be finished by August 10, he said.

Commuters hitching a free ride on carriage roofs is a big problem for the rail operator, which has tried several measures to deter the practice, especially during peak hours when carriages are crammed.

These have included spraying paint on roof surfers, installing poles that deliver a painful whack, stationing dogs on train roofs, and hanging boulders above the tracks to knock off “atapers”, or “roofers” in the local slang.

The National Commission on Human Rights said the latest measure was not the right way to tackle the problem of fare dodgers.

“It is irresponsible of the operator to trap people in such a dangerous way,” the commission’s deputy chairman, Nur Kholis, told AFP.

“This is not the best solution to deter people from going on the roof. If the operator provides more carriages and improves the facilities it is unlikely people will go on the roof,” he said.

Rights groups have criticised other measures used by the rail operator, saying they compromise public safety and discriminate against the poor, many of whom rely on the overcrowded trains to get to work.

Copyright AFP (Agence France-Presse), 2012

Income disparity: The very uneven rise in Pakistani incomes

How the urban middle class has contin­ued to prospe­r, even as the rural poor sink furthe­r.  For every period during the past decade, the real (inflation-adjusted) incomes of the top quintile of urban Pakistani households has continued to rise, while that of the bottom quintile of rural Pakistanis has continued to fall.

KARACHI: 

While per capita income in Pakistan has unquestionably increased rapidly over the past decade, that growth hides a disturbing fact: even as household incomes for the urban middle class have continued to rise, the rural poor have continued to see their real incomes decline.


Using data from the Household Integrated Economic Survey, compiled by the Pakistan Bureau of Statistics, The Express Tribune has put together a special report on income and consumption patterns among Pakistani households. We have utilised the numbers from the 2002, 2006, 2008, and 2011 reports – the latest four available.


Our analysis revealed a shocking fact: for every period during the past decade, the real (inflation-adjusted) incomes of the top quintile of urban Pakistani households has continued to rise, while that of the bottom quintile of rural Pakistanis has continued to fall. This trend holds true during every single interval examined: between 2002 and 2006, when the economy was expanding rapidly; between 2006 and 2008, when it was tapering off; and even between 2008 and 2011, when the economy slowed down almost to a halt.


The implications of this fact are troubling. It means that, for the poorest Pakistanis, even the rapid economic growth of the Musharraf era has meant nothing. Their incomes continued to fall in real terms, even as the rest of their compatriots continued to grow richer – some of them stupendously so.


Uneven all around


That growth in Pakistan is uneven is a fact that is observable even through anecdotal evidence. Empirical data, however, points to some interesting details.


For instance, over the past decade, the regions that have seen the fastest income growth are urban Punjab and urban Khyber-Pakhtunkhwa, where the top quintile in particular has done remarkably well, seeing their incomes rise by 3.79% per year in real terms. Simply put, even after accounting for inflation, the average middle class household in urban Punjab or Khyber-Pakhtunkhwa was 40% richer in 2011 than they were in 2002.


The worst off, somewhat surprisingly, was rural Sindh, where incomes for the bottom 20% of households declined by an average of 4.42% per year in real terms for the past decade. The poor in rural Balochistan did surprisingly well, growing at close to 4% per year in real terms, but that was because Balochistan’s incomes started from an abysmally low base and were playing catch up with the rest of the country.


Variation in the middle


The real difference between the various periods of economic growth, then, comes from what happens to the overwhelming majority of Pakistanis who are not in the middle class, but not destitute either. It is their fortunes that vary the most depending on what happens to the GDP growth rate. It was this middle, for instance, that suffered the most when the economy was slowing down in 2007 and 2008; more so even than the poor. The top 20% were the least affected, seeing their incomes decline by an average of only 0.5% per year in real terms during those two years.


The income data also shows the motivation of people to migrate to urban areas: average incomes in urban areas are about 42% higher than in rural areas. These differences are especially magnified in the middle three income groups, representing about 60% of the population. And even when the household income differences are not large, individual prosperity is likely to be higher in urban areas, since household sizes are lower, meaning there are fewer people sharing the same amount of money.


For those wondering about the record of the current administration, their record is somewhat surprising. Despite the fact that the ruling Pakistan Peoples Party relies mostly on rural voters for its electoral success, the party has actually been better for urban areas. Incomes in urban areas rose by an average of 1.1% per year in real terms during the first three years of the PPP government, compared to a 0.8% real decline per year in rural areas.


Published in The Express Tribune, July 30th, 2012.

Cotton export orders in jeopardy

TDAP fails to regist­er raw cotton export contra­cts.  TDAP fails to register raw cotton export contracts. DESIGN: CREATIVE COMMONS

ISLAMABAD: 

Pakistan Cotton Ginners Association (PCGA) fears that Pakistan may lose raw cotton export following the Trade Development Authority of Pakistan’s (TDAP) inability to start registration of export contracts.


Talking to The Express Tribune, Pakistan Cotton Ginners Association Executive Member Ihsanul-Haq said that TDAP had not started registration of raw cotton export contracts which may result in Pakistan losing opportunity to export to destinations including India.


“We were expecting that cotton exports will jump after early record production,” he said adding that delay in export had also caused lowering prices of commodity in local markets.


“Farmers were also upset due to low cotton prices due to delay in export of raw cotton,” he said. Farmers are expected to lean toward sowing another crop due to the delay in payment and low margin.


He said that as per reports some Pakistani exporters had finalised contracts of 1,000 tons of cotton export to India and are waiting for the registration.


“The delay in registration of cotton yarn exports will not only block exports to India but will affect new contracts as well,” he said adding that there is no ban placed on export of cotton to India by Commerce Ministry but TDAP says that Trade Policy 2009 has become ineffective and therefore registration could not start.


He appealed to Ministry of Commerce to direct TDAP to start registration of contracts so that export could start once again. “Cotton export will not only bring foreign exchange but stabilise prices in the local market and encourage the grower to grow the crop,” he added.


15 million bales is the cotton production target for fiscal 2012, 1% higher than last year despite floods and severe rains in Punjab and Sindh.


Pakistan earned $ 425 million from cotton export while $320 million was spent on importing it in financial year 2012, according to media reports.


Published in The Express Tribune, July 29th, 2012. 

Egypt sells 3.5bn pounds of reopened bonds

Written by Shoaib-ur-Rehman Siddiqui

t-billCAIRO: Egypt’s central bank sold 3.5 billion Egyptian pounds ($576.616 million) in reopened three and seven-year bonds on Monday, the same amount it had sought, the bank said.

The average yield on 2 billion pounds of reopened three-year bonds was 16.15 percent, with a range of 16.07 to 16.18 percent, the same average on three-year bonds sold on July 16.

The average yield on 1.5 billion pounds of reopened seven-year bonds was 16.89 percent, with the range from 16.85 to 16.91 percent. That was over the average yield of 16.85 percent on bonds of the same maturity sold on July 16.

The three-year bonds maturing on July 3, 2015, carry a coupon of 16.15 percent. The seven-year bonds, which mature on April 3, 2019, carry a 16.85 percent coupon.

Settlement will take place on July 31. Government bonds are sold by the central bank on behalf of the finance ministry.

Trade and sound economic policy can promote peace

It has genera­lly been argued that war with a tradin­g ally is econom­ic suicid­e.  It has generally been argued that war with a trading ally is economic suicide. ILLUSTRATION: JAMAL KHURSHID

KARACHI: 

What kinds of policy choices make conflicts more or less likely? While the answers to this question are not definitive and exact, research that attempts to answer this question generally takes as a starting point those features of economies that are believed to increase the likelihood of conflict and then points to the failure of governments to address them.


Indeed, according to research conducted by Harvard University, many of the structural factors that are associated with conflict – low levels of education and high dependence on natural resources – are themselves in part a function of government policies.


Political scientist William Reno for example describes ways in which political leaders take deliberate actions to undermine their economies (and their governments) in order to enrich themselves personally. By weakening state institutions (in some cases signaled by fiscal collapse) and destroying infrastructure for production, leaders may make rebellion or violence more attractive: they reduce the direct costs as well as the opportunity costs of violence.


The impact of government policies, however, may be more contentious when they are undertaken with the express intention of fostering economic development. There is for example much anecdotal evidence that the structural adjustment (or “austerity”) programmes implemented throughout the 1980s and 1990s spawned civil conflicts. These policies, while formally implemented by governments, were strongly promoted by international financial institutions such as the World Bank and the IMF, who made the granting of loans conditional upon the adoption of their policies. Even now, a significant cross-section of Pakistanis – wrongly or rightly so – feel that IMF policies are not in their best interest. In a number of countries – such as Venezuela and Morocco – such programmes led directly to street violence. But can the rise in civil wars also be put down to these policies? Surprisingly, when the World Bank turned to study civil wars it did not attempt to study the role of the structural adjustment programmes it helped impose.


However studies by the World Bank or the WIDER research group to look at the effects of policies consistent with structural adjustment have found no direct relationship between these policies and conflict.


Trade and war


Researchers have put some effort into trying to find out whether international trade increases or decreases the likelihood of conflicts (so far no comparable work has been done to find links between internal trade and civil war). The results of this research matter for foreign policy. If, for example, the US increases trading relations with China will this lead to a greater risk of conflict – perhaps by strengthening China and giving it commercial power over the US or, by introducing interdependence and stronger mutual interests, will it reduce risks? Both positions have been put forward by political scientists and advocated by policy makers.


Liberal theorists focus more on the gains to both parties from trade. They argue that where trade is mutually beneficial, to fight with a trading partner would be committing “commercial suicide.” Related arguments claim that, through exchange, trading partners develop greater understanding for each others’ cultures. Political philosophers, meanwhile, suggest that trade reduces the risk of conflict because trade alters cultures.


The belief that the net effects of trade and cross-investment will be to reduce violent conflicts has found considerable support among policy makers. In Europe for example the view motivated the creation of the European Coal and Steel Community in 1951, later to develop into the European Union. The logic is also supported by empirical research that demonstrates that once proximity is taken into account, states that trade with each other are indeed less likely to fight each other. Maybe this, more than any other, is reason enough why India and Pakistan should promote mutual trade.


Published in The Express Tribune, July 30th, 2012.

Japan’s Hitachi Q1 beats forecast, warns of China pain

Written by Shoaib-ur-Rehman Siddiqui

hitachi TOKYO: Hitachi Ltd, Japan’s largest industrial electronics maker, posted a better-than-expected quarterly profit due to strong sales in its power and automotive systems business, but warned of possible turbulence from the slowdown in China.

The sprawling conglomerate, whose products range from excavators to thermal power plants, posted an operating profit of 63.6 billion yen ($808.85 million) in the April-to-June quarter, up from 52.4 billion yen a year earlier.

The result topped the average forecast of 59.5 billion yen by four analysts polled by Thomson Reuters I/B/E/S.

An economic slowdown in China is taking a toll on a growing number of companies, with a series of profit warnings highlighting how weakness in the world’s second-largest economy is hitting earnings. Construction equipment sales in China slumped more than 40 percent in the first quarter, Hitachi said.

“We think it will take until at least January for demand to recover in China’s construction equipment market. This is not just the case for our Hitachi Construction Machinery, but also for Komatsu Ltd and Caterpillar,” Hitachi Executive Vice President Toyoaki Nakamura told reporters after the company’s earnings announcement.

Analysts estimate that China will account for 10 percent of Hitachi’s overall sales this business year and Europe 8 percent.

Hitachi kept its annual forecast for a 480 billion-yen operating profit for the year ending March, below the average estimate of 500.6 billion yen in a poll of 22 analysts surveyed by Thomson Reuters I/B/E/S.

China’s central bank cut its policy rates in June for the first time since the global financial crisis as data for April and May suggested growth was weakening more than previously thought. The country is due for a once-in-a-decade change in its top political leadership in late 2012.

“We were expecting some improvement beginning in the fall as the new political leadership (in China) puts in place more economic policies…but the scope of China’s market has grown and what has worked before may not be the case again,” Nakamura said.

NEW GROWTH AREAS

In a bid to avoid the fate of other electronics makers in Japan, Hitachi has scaled back its unprofitable consumer electronics division and shifted its focus towards growth areas such as infrastructure, including rail systems and urban planning.

Hitachi’s automotive division, which makes engine and control systems for cars, has benefited from growing vehicle demand in emerging economies. The division posted an operating profit of 9.3 billion yen in the quarter, more than tripling from a year earlier.

The power systems division, which together with the auto segment made up 20 percent of overall sales, posted a profit of 2.4 billion yen compared with a loss of 3.2 billion yen a year earlier.

The company plans to stop producing its own TV sets later this year after merging its loss-making small-panel display operations with those of Sony Corp and Toshiba Corp last year.

Hitachi said last week that it won a 4.5 billion-pound ($7-billion) contract to build intercity trains in Britain, despite the debt crisis in Europe.

The company has also invested in new segments such as cloud computing and social infrastructure systems.

Still, Hitachi’s operating margin was just above 4 percent in the previous year, lagging behind global counterparts such as General Electric Co and Siemens AG whose margins were around 14 and 10 percent respectively, Thomson Reuters data shows.

Hitachi has vowed to more than double its margins through aggressive cost-cutting in all of its 900 subsidiaries and moving its focus to high-profit global infrastructure orders.

The company logged a record net profit of 347.2 billion yen in the previous year, boosted by the sale of its hard drive business to Western Digital Corp.

Hitachi’s main domestic rivals Toshiba and Mitsubishi Electric are due to announce their quarterly earnings on Tuesday. Panasonic Corp also reports on the same day.

Shares of Hitachi ended up 0.4 percent at 456 yen before its results. Tokyo’s benchmark Nikkei traded 0.8 percent higher.

Rice exporters asked to tap potential markets

Condit­ion for the export­er to be a member of REAP to be abolis­hed.  Condition for the exporter to be a member of REAP to be abolished. PHOTO: FILE

LAHORE: 

The Ministry of Commerce will support rice exporters and remove the obstacles faced by them, but at the same time the traders should try to tap potential markets like Iraq to increase exports of the country, said Federal Commerce Secretary Munir Qureshi.


Speaking at an Iftar reception organised by the Rice Exporters Association of Pakistan (REAP) on Friday evening, Qureshi praised associations of businessmen and traders for playing an important role in strengthening different sectors and ensuring their progress. However, he said he would take appropriate steps to abolish the condition for the rice exporter to be a member of REAP.


Qureshi also pointed out that he would look into the issue of barter trade with Iran, which could be a big market for Pakistani rice. But he agreed that there were some complications in currency exchange with Iran due to US sanctions on Tehran.


He said Iraq was a big market for Pakistani rice, but the exporters should trace those elements which were bringing bad name to the country by selling adulterated or substandard rice. “Such people damage the whole sector for the sake of some extra profit.”


Regarding geographical identification (GI) laws, the issue raised by the REAP chairman in his welcome speech, the secretary said he would look into it next week. He advised the rice exporters to sit with basmati growers to resolve the issue of trademark in an amicable way.


Inviting the rice exporters to Islamabad for deliberations, Qureshi said they should guide the ministry how to tackle different issues like what type of foreign seed should be allowed for sowing.


Published in The Express Tribune, July 29th, 2012.

FPCCI against trade agreement with UAE

FTA will ruin local indust­ry with foreig­n, cheap produc­ts: Sheran­i.  An FTA allows unlimited purchases and sales of goods and services between countries without the imposition of trade barriers .

KARACHI: 

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday opposed the signing of a Free Trade Agreement (FTA) with the United Arab Emirates (UAE) which, its office-bearers said, would ruin the local industry by inundating the domestic market with foreign, cheap products.


“An FTA with the UAE is clearly against the interests of Pakistan. Therefore, we are going to oppose it as representatives of the chambers of commerce and industry of the country,” FPCCI President Haji Fazal Kadir Khan Sherani said after listening to the views of the FPCCI Pakistan-UAE Business Council.


Ideally, an FTA allows unlimited purchases and sales of goods and services between countries without the imposition of trade barriers.


Attendees at the meeting were informed that the UAE was eager to sign the FTA. While some participants said that an agreement with a ‘limited scope’, meaning volume controls of sorts, was possible with the UAE, the majority opinion against the FTA prevailed eventually.


The FPCCI’s Pakistan-UAE Business Council also decided to hold the inaugural meeting of the council in early October, so that the UAE delegation could attend the Expo Pakistan, the biggest trade fair in Pakistan, which would take place on October 4-7.


The council was set up at the 10th Pakistan-UAE Joint Ministerial Commission meeting held in Abu Dhabi on February 26-27. It has 10 members from each side, representing the largest companies with business stakes in both countries. Members from Pakistan include the Jang Group, Warid, Emirates, Etihad, Bank Alfalah, Habib Metro Bank and Pakistan Telecommunication Company Limited besides companies from rice and oil sectors.


The UAE injected foreign direct investment (FDI) of $284.2 million into Pakistan in 2010-11, highest after the United States, which was $238.9 million. However, its FDI decreased to $36.6 million in 2011-12.


Published in The Express Tribune, July 29th, 2012.

Constant Stimulus: ‘Printing currency not the answer’

Pakist­an has printe­d new curren­cy notes worth Rs592 billio­n during June 2011 to July 2012.  Pakistan has printed new currency notes worth Rs592 billion during June 2011 to July 2012.

ISLAMABAD: 

The government has resorted to continuous printing of currency notes to generate liquidity and cover expenses in financial year 2012-13, causing core inflation accelerate to 11.4 percent in June 2012, according to Confederation of Asia-Pacific Chambers of Commerce & Industry (CACCI) Vice President Tariq Sayeed.


He said that Pakistan has printed new currency notes worth Rs592 billion during June 2011 to July 2012, which is not the solution to overcome the problem, adding that the government resorted to continuous printing of currency equivalent to 2.4% of the GDP to generate liquidity.


He said that unfortunately, the State Bank of Pakistan is being treated as a printing press for making currency notes worth billions of rupees every day when it should be taken as an institution providing monetary stability for the country. This simply shows lack of proper economic planning, Sayeed said.


Published in The Express Tribune, July 29th, 2012.

Weekly Review: Activity dwindles with the onset of Ramazan

Compan­y-specif­ic news flows domina­ted the week.  Company-specific news flows dominated the week.

KARACHI: 

Market activity slowed down significantly with the start of Ramazan as the benchmark KSE-100 index remained range-bound throughout the week, closing down 38 points or 0.3% during the week ended July 24.


Trading hours are cut down till 2pm in Ramazan and this has historically seen activity dwindle. The KSE-100 index traded in a range of 130 points throughout the week and remained largely unaffected due to lack of major news flows.


An easing of tensions on the political front and the hopes of receiving foreign aid in the form of the Coalition Support Fund kept investors interested, but the reduced trading hours and lack of news flows meant that average volumes fell 54% to 56 million against the previous week.


Company specific news flows dominated proceedings at the bourse during the week. Fauji Fertilizer Company announced earnings of Rs5 per share for the second quarter ended June 30, and surprised investors with a cash payout of Rs5 per share. As a result, the company outperformed the index by 1.1% during the week.


However, there was glum news for the other major fertiliser producer, Engro Fertilizers, as it revealed that it received gas for 44 days in the first six months of 2012 due to shortage in the Sui Northern Gas Pipelines network.


Engro also requested banks to restructure its debt and increase the repayment period by two and a half years, for the debt incurred to set up the company’s Enven plant. Investors reacted harshly to the news and resulted in the stock underperforming the market by 1.1% during the week.


Pakistan Telecommunications Limited was also in the news during the week after it announced its second Voluntary Separation Scheme (VSS) for 16,000 employees, incurring a cost or Rs8 to 10 billion. The stock plummeted on the announcement and shed 4.9% of its value during the week.


The power and oil sector also took some limelight as the government announced it will start paying independent power producers for their electricity, which in turn would result in payment to Pakistan State Oil. The company outperformed the broader market by 1.3% as a result.


Foreigners were net buyers during the week, of $4.2 million worth of equity, but failed to make a major impact on the market. Lower volumes meant that average daily values also slumped by 50% to Rs2 billion traded per day. Market capitalisation dropped 0.2% to Rs3.70 trillion by the end of the week.


What to expect?


Market activity can be expected to remain low throughout the month of Ramazan, however the ongoing results season will keep investors interested and provide support to market volumes. The disbursement of foreign funds will also provide a boost to the market as currently the country’s foreign reserves are low.


Published in The Express Tribune, July 29th, 2012.

Steady in Europe, wait on policymakers

Written by Shoaib-ur-Rehman Siddiqui

us-bondLONDON: US Treasuries were steady in Europe on Monday, reversing some overnight gains as hopes policymakers in the United States and Europe will take further policy steps buoyed riskier assets.

A few market players expect the US Federal Reserve to adopt more quantitative easing at its two-day policy meeting starting on, although many think additional measures are more likely later this year.

But expectations have grown that the ECB will take action to lower Spanish and Italian borrowing costs at its meeting on Thursday after President Mario Draghi said last week he would do whatever it takes to save the euro. Those comments were echoed by German Chancellor Angela Merkel.

However the risk is that now expectations are so high – with safe-haven Bund yields at their highest levels in over three weeks, the ECB may disappoint.

“There was some good buying in Asia but we’ve seen a big seller in Europe,” one trader said. “The ECB are playing the communication tool – talking it rather than walking it – but overall at some point they have to do what the US is doing and take some bonds out of the market.”

Ten-year Treasury yields were little changed at 1.55 percent after rising as high as 1.59 percent on Friday, the most since in three weeks. The T-note future was 1/32 higher at 134-05.

“Of course, we all have to see what will come of policy meetings. But if I have to bet, the 10-year Treasury yield is likely to peak around 1.6 percent,” said Arihiro Nagata, manager of foreign bonds at Sumitomo Mitsui Banking Corp.

“Now investors are holding off buying ahead of the ECB but after that they will likely come to buy unless the ECB comes with a real surprise. In addition, corporate bond issue will dwindle in August so the market’s demand-supply balance will be favourable,” he added.

Telecommunication technology: New base price to be set for 3G auction

Oversi­ght commit­tee will also be formed to ensure transp­arency.  The process of 3G auction had started in November 2011, which was originally planned to be completed by March this year. PHOTO: FILE

ISLAMABAD: 

In two equally significant moves, the government has decided to determine a fresh base price for auction of 3G spectrum licences and constitute an independent oversight committee to allay increasing transparency concerns in about a billion-dollar deal.


The new base price for the 3G licence will be determined by a consultant of international repute that will be hired soon through an advertisement, according to sources in the Ministry of Information Technology.


Prime Minister Raja Pervez Ashraf has already issued directives for publishing advertisements for hiring the consultant, who will design the auction programme.


Earlier, the Pakistan Telecommunication Authority (PTA) had set the base price at $210 million for the 3G licence with bid earnest money of $31.5 million without hiring a consultant. By this account, the total base price of three licences stood at $630 million while the government expected to fetch a maximum $900 million to $1 billion.


However, information technology experts and parliamentary panels on IT termed the value too low, arguing that the auction could earn at least $2 to $3 billion keeping in view the country’s population.


Senator Pervez Rasheed, the spokesman for the PML-N, had also questioned the transparency of 3G auction by pointing out in a Senate session that the $210 million base price was much lower than $290 million fixed for 2G licence.


The sources said the premier has given a four-month deadline to complete the transaction, which was originally planned to be completed by March this year. The process of 3G auction had started in November 2011 and then prime minister Yousaf Raza Gilani had also given a four-month deadline.


According to the sources, the government has decided to form an oversight committee that will work as a watchdog to monitor the consultant and PTA to ensure transparency. They added the government will soon issue a notification in this regard. The committee will comprise one member each from the media, civil society and Transparency International Pakistan.


Terms of reference of the committee are not immediately clear. It is also not clear whether its members will be allowed to sit in meetings of the Auction Supervisory Committee (ASC), headed by Finance Minister Dr Abdul Hafeez Shaikh. The ASC was also constituted to ensure transparency and take the auction process forward in a coordinated way.


The ASC, having three economic ministers as its members, struggled a lot last fiscal year to keep the transaction on track. But despite all efforts it could not ensure transparency and lately the government had to start the whole process from scratch.


Published in The Express Tribune, July 29th, 2012.

Fuel and lighting: High prices, consumerism eat up more of people’s incomes

Househ­old spendi­ng on this catego­ry surges 178% in a decade.  Rs 1470 is how much a Pakistani household currently spends on fuel and lighting every month on average, up from Rs529 in 2001-02. PHOTO: FILE

KARACHI: 

Average monthly spending on fuel and lighting by a Pakistani household has increased by 178% to Rs1,470 from Rs529 over the past decade, mainly due to a sharp increase in prices of petroleum products, electricity and gas as well as change in consumption patterns, a comparison of Pakistan Bureau of Statistics’ figures for 2010-11 and 2001-02 shows.


In the fuel and lighting category, bulk of the expenditure was made on electricity, firewood and gas, which made up 90% of total spending of a household in the category, while the rest was spent on candles, charcoal and farm waste.


People in urban centres spent up to 95% on electricity and gas while rural residents consumed 60% of their income on power and gas. Rural people also spent a big amount on firewood, dung cakes and kerosene oil, accounting for up to 40% of their total expenditure.


However, in rural areas, the share of electricity and gas had been increasing while demand for kerosene had declined. The use of firewood had been stagnant for the last 10 years.


Analysts are of the view that the major reason for the increase in expenditure was the rise in fuel and electricity prices, especially over the last few years.


JS Global Capital analyst Atif Zafar pointed out that prices of electricity had increased sharply in the last few years as the government gradually reduced subsidies from the power sector, which pushed up household spending.


“Another factor was the rise in consumerism which shot up during General Musharraf’s regime,” said Zafar. “Surge in sales of fridges, deep freezers, microwave ovens, geysers and air conditioners contributed to the increase in gas and electricity consumption, especially in urban centres.”


The lowest quintile of population spent Rs968 on fuel and lighting while the top quintile spent Rs2,079. This meant that the top 20% of population spent 54% more than the lowest 20%.


Average urban spending on electricity and gas stood at Rs1,691 per month, up 20% compared to the rural average of Rs1,354. The reason given for heavy expenditure in urban centres was high consumption of electricity, which accounted for most of the spending.


Province-wise breakdown


Punjab – The most populous province of the country spent the highest amount among all provinces on fuel and lighting in 2010-11. Its average monthly spending stood at Rs1,582.


Interestingly, both urban and rural figures of Punjab were higher than the national average. Average urban expenditure was 13% more than the country’s urban average while rural expenditure was 4% higher than the national average.


Commenting on the consumption pattern in Punjab, Invest Capital Markets analyst Khurram Schehzad said the reason for high consumption of electricity and gas was the province’s growing economy and better infrastructure compared to other provinces.


“Punjab is more than half of our economy and the increase in demand for electricity there is a good sign,” he added.


Khyber-Pakhtunkhwa – Contrary to the common perception that Sindh should come after Punjab because of its bigger economy and bustling cities like Karachi and Hyderabad, Khyber-Pakhtunkhwa came second as people in this north-western province spent more on fuel and lighting.


Average monthly expenditure in the province was Rs1,572, up 6.5% from the national average. Urban average stood at Rs1,610 while rural average was Rs1,564, which showed a very narrow difference between urban and rural spending.


Balochistan – Even this less developed province’s spending on fuel and lighting was more than Sindh. Households spent an average Rs1,221, down 17% from the national average. Its urban and rural expenditures stood at Rs1,262 and Rs1,209 respectively.


Sindh – Average expenditure on fuel and lighting in the province was Rs1,184, down 19% from the national average. Its urban average was Rs1,352, but the rural average was the lowest at Rs1,000.


“The slow growth in electricity and gas consumption in Sindh reflects lower infrastructure spending compared to Punjab,” Schehzad said.


Published in The Express Tribune, July 30th, 2012.

Kenya central bank seeks to mop up 107mn via repos

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kenya22NAIROBI: Kenya’s central banks sought to soak up 9 billion shilling ($106.7 million) in excess liquidity from the market on Monday using repurchase agreements (repos).

Traders had expected the shilling to come under pressure from the dollar due to a surge in liquidity that could make it slightly cheaper to fund long dollar positions.

The weighted average interbank rate fell to 11.2 percent on Friday, from 13 percent on Thursday, mainly due to redemption of government debt that has matured.

Vodafone Spain brings back handset subsidies for summer

Written by Shoaib-ur-Rehman Siddiqui

vodafone 400MADRID: Vodafone’s Spanish division is bringing back cut-price smartphones for new customers for a limited time, the firm said on Monday, prompted by a mass client exodus in recent months after scrapping handset subsidies in the recession-hit country.

“We always launch new promotions during summertime and this year we have decided to include the cost of the phone in the tariff, but the promotion is only temporary, until Sept. 15,” a Vodafone spokesman said.

Vodafone and Telefonica, with almost 70 percent market share between them, have suffered huge drops in client numbers since they decided to use Spain as a dry run for a new business model that cuts subsidies for smartphones.

Vodafone has lost over 600,000 mobile clients since April, when it stopped slashing prices on smartphones, while Telefonica’s Movistar lost 572,000 in April and May, according to data from Spain’s telecoms regulator.

The firms have felt the heat from France Telecom’s Orange , which decided not to follow the market leaders in cutting subsidies and has attracted new customers, with 23,000 new clients signing up in May.

A Telefonica source said the company would not follow Vodafone’s lead and subsidise smartphones, but Telefonica does have an offer in place designed to stop Orange sapping too much of its market share.

“We have a promotion in place for Orange clients who want to sign up with Telefonica. They get a free handset and if necessary we will pay any penalty Orange could charge them for changing their operator early,” the source said.

DHL wins ‘best place to work’ award

Nine out of 10 employ­ees show commit­ment to compan­y.  DHL Express Pakistan CEO Sarfaraz Siddiqui said all employees of the company – from the senior heads to the delivery riders – are given a voice and everyone is treated equally.

KARACHI: 

DHL Express has won the ‘Best Place to Work’ award with about 9 out of every 10 employees of the company displaying a positive attitude and commitment to the company, which is 30% higher than the global engagement standard.


The winners of The Express Tribune ‘2012 Best Place to Work’ study were announced by Engage Consulting, a leadership and HR consulting firm, out of more than 200 companies, which were invited to participate in the study.


Commenting on the success, DHL Express Pakistan CEO Sarfaraz Siddiqui said all employees of the company – from the senior heads to the delivery riders – are given a voice and everyone is treated equally. All team members are engaged on a weekly basis, every Monday at 9am, to review the past week’s performance and set targets for the coming week. Most importantly, everything is transparent and measured, and decisions are based on merit.


“You have to genuinely show them [employees] action, lead with a positive attitude and totally engage in the business. When people trust you, they go the extra mile for you,” Siddiqui said.


DHL Express Pakistan has achieved on-time delivery rate of 98%, making it the best DHL franchise across the world. It has doubled the revenue and increased profits by more than 60% over the past four years.


“It is absolute pleasure to see DHL Pakistan winning The Express Tribune ‘2012 Best Place to Work’ award,” Siddiqui said, noting that engaging people was the key to transforming the company.


DHL has not only grown exponentially, but has also set a benchmark for other companies in Pakistan and globally to follow,” said Paul Keijzer, CEO of Engage Consulting.


The runners-up for the award were Procter & Gamble (P&G) and ICI Pakistan respectively. P&G showed 84% employee engagement while ICI followed closely behind with 83%, both having improved their engagement levels by around 12% from 2010.


Both companies made a coordinated and determined effort to engage their employees.


“We are delighted with the outcome as this is a reassurance of our continued commitment and effort to making our beloved company the best place to work through small things, which make a big difference,” said Asif Malik, VP Human Resources and Life Sciences, ICI.


The ‘best place to work’ survey is based on people who knows and can best judge a company – their current employees. So what makes a workplace the best place to work?


“Company leaders and line managers, who are able to create a trustful relationship with their employees and recognise them for their contribution are more likely to create an environment where people want to go the extra mile and are willing to stay with the company,” said Shala Agha, Associate Director People Insights, Engage Consulting.


The ‘best place to work’ study aims to highlight trends in employee expectation, retention, motivation and engagement levels.


The writer is marketing coordinator at Engage Consulting


Published in The Express Tribune, July 29th, 2012.

HSBC profits slide after taking $2.bn charges

hsbc copyLONDON: HSBC on Monday said its first-half profit fell after Europe’s biggest bank took a $2.0 billion-hit to cover penalties from a money-laundering scandal in the United States and insurance mis-selling claims.

Earnings after tax dropped 8.0 percent to $8.44 billion (6.88 billion euros) in the six months to June, compared with the same period last year, the Asia-focused bank said in a results statement .

HSBC took a provision of $700 million to cover fines for failing to apply anti-money laundering rules, apologised again for the scandal and warned the overall cost could be “significantly higher.”

The bank said it also set aside $1.3 billion in the first half to compensate clients in Britain who were mis-sold insurance.

The London-based lender said it continued to cooperate with authorities after US lawmakers last month accused it of failing to apply anti-laundering rules, benefiting Iran, terrorists and drug dealers.

“It is not possible at this time for HSBC to know the terms on which a resolution of the ongoing investigations could be achieved or the form or timing of any such resolution,” it said.

“Based on the facts currently known, HSBC has recognised a provision of $700 million, which reflects HSBC’s best estimate of the aggregate amount of fines and penalties that are likely to be imposed in connection with these matters.

“There is a high degree of uncertainty in making this estimate and it is possible that the amounts when finally determined could be higher, possibly significantly higher.”

HSBC was thrown into crisis last month when a US Senate report found that it had allowed affiliates in countries such as Mexico, Saudi Arabia and Bangladesh to move billions of dollars in suspect funds into the United States without adequate controls.

Lawmakers said money laundered through HSBC-linked accounts benefited Mexican drug lords and terrorist networks, and skirted US sanctions on Iran.

HSBC apologised again on Monday for the crisis which has already sparked the resignation of its head of compliance David Bagley.

“We apologise for our past mistakes in relation to anti-money laundering controls and it is a priority for senior management to build on steps already taken to manage risk and ensure compliance more effectively,” chief executive Stuart Gulliver said.

Copyright AFP (Agence France-Presse), 2012

UAE’s du telecom Q2 profits jump 57.1pc

uae-flag 400DUBAI: The UAE’s second largest telecommunications operator, du, reported Monday a 57.1 percent jump in net profit for the second quarter to June on a rising customer base and falling operating costs.

The company, which began operations in 2007, said its net profit rose to 651 million dirhams ($177.4 million) compared to 414 million dirhams ($112 million). The net profit figure for Q2 to June was before deducting a 50 percent standard royalty fee.

It said revenues during the period were up 12.9 percent to 2.452 billion dirhams ($668.1 million).

The company’s mobile customers grew 20 percent to 5.733 million in the said period, compared with 4.776 million in the corresponding period of last year.

But the growth in its fixed line customers, including Internet and cable television, was at 10.6 percent to 547,000, it added.

Operating expenses dropped to 733 million dirhams ($199.7 million), or were at 29.9 percent of revenue, down from 35.2 percent of earnings in the corresponding period last year.

“The second quarter remained strong for du, with continued healthy customer additions, particularly in the high-value post-paid segment, which now represents nearly eight percent of our mobile customer base,” said Osman Sultan, du’s chief executive officer.

The firm is 39.5 percent-owned by the UAE federal government, 20.075 percent by Abu Dhabi’s Mubadala Development Company, 19.5 percent by Emirates Communications and Technology Company, while the rest is held by public shareholders.

It is listed on the Dubai Financial Market where its shares closed 1.26 percent up on Monday.

Copyright AFP (Agence France-Presse), 2012

Bailout: Steel Mills turnaround a big challenge, says PM

Says making PSM profit­able is a daunti­ng task for the new manage­ment.  Says making PSM profitable is a daunting task for the new management. PHOTO: FILE

ISLAMABAD: 

Prime Minister Raja Pervaiz Ashraf said on Thursday that despite fresh bailout package, turning around the loss-making Pakistan Steel Mills (PSM) remained a daunting task for the new management due to highly competitive market.


The premier’s comments came 48 hours after the Economic Coordination Committee of the Cabinet (ECC) approved new injection of Rs8.6 billion to the mills. The PSM which was in profit till 2008 has so far accumulated Rs71.3 billion in losses.


While chairing a high level meeting on Thursday to review the new business plan of PSM, the prime minister expressed his confidence in the new management, as its CEO Muhammad Javed was heading the PSM when it was earning profits a few years ago.


“I am very keen to see PSM developing into a self-reliant and profitable national enterprise and I am sure that it will stand on its feet after fresh structural reforms,” he said.


The PSM chief briefed the meeting that in the first phase, the capacity of the PSM would be increased up to 55% and the management’s target is to attain the 80% of the production by the end of 2013.


CEO further informed that the management’s preference is to use local iron ore for steel production and major chunk would come from Balochistan.


Published in The Express Tribune, July 27th, 2012.

Change in strategy: After a decade, Pizza Hut eats up ‘all you can eat’ deal

The countr­y’s larges­t pizza food chain aims to increa­se its target market.  The US-based restaurant chain is the largest pizza chain operating in Pakistan with a network of 44 outlets across the country. PHOTO: FILE

KARACHI: 

After at least a decade, Pizza Hut has decided to eat up its famous all you can eat deal.


The food chain has come up with a new deal namely Ramadan Fiesta all you can eat with a slightly reduced per head cost. However, the catch is that you are limited to one regular pizza.


The US-based restaurant chain is the largest pizza chain operating in Pakistan with a network of 44 outlets across the country and no direct dine-in competitor.


The famous deal had ballooned to Rs799 plus tax totalling to Rs930 right before its death in the final 15 days of Ramazan in 2011. The price gradually rose from Rs599 plus tax in 2010, Rs699 plus tax at the start of Ramazan in 2011 and then jacked up by another Rs100 in the final 15 days of the holy month due to its high demand.


“There was not a single empty table at their Clifton, Zamzama and Gulshan-e-Iqbal branches during Iftaar last year,” said Ammar Ahmed, a regular diner at Pizza Hut in Ramazan for the past many years. You need to be at the branch at least an hour before Iftaar to have any chance of getting a table, said the Karachiite.


The restaurant is now offering one regular pizza, one salad and bottomless soft drinks for Rs595 plus tax per person this Ramazan.


“The new deal is affordable for the average income society,” said Pizza Hut Pakistan General Manager Marketing Marya Khan. The food chain aims to increase its target market by being more affordable to the average income class of the society.


Khan claims no one in the market is able to compete with the deal they are offering.


The localities of Defence and Clifton in Karachi serve as a hub for pizza outlets as some local and international pizza outlets –Domino’s, Papa Johns and start-ups like 14th Street Pizza, Stone Baked and New York Style Pizza of US-style pizza – operate in the same area but focus more on delivery than dine-in. 14th Street, arguably the highest growing chain of the lot, is exclusively available only in Defence and Clifton. Pizza Hut’s Clifton outlet is one of the highest revenue making branch across the country, showing the high demand of the cuisine in the area.


Industry experts told The Express Tribune that the restaurant business will not be able to increase prices this time around and will opt for a price cut this Ramazan because of cut-throat competition thanks to the dozens of restaurants that have opened.


“The trend we have noticed is that one regular pizza is more than enough for an average consumer,” Khan added while explaining the new deal. Additionally, if one can’t consume the entire pizza, they can take the leftover pizza home, she said. The official mentioned this as another issue in the previous deal. “A lot of food used to be wasted in the all you can eat deal,” Khan said. Khan was quick to deny that they reduced the price due to pressure from competition. “There were no financial pressures to reduce the price,” she said.


Asked if changing the deal made any difference to sales, Khan said, “It’s too early to comment about the impact of this deal on our sales. “Based on the feedback from our restaurants, we are getting more transactions,” she said. We will be able to give exact comparison after recording weekend sales,” she added.


Published in The Express Tribune, July 27th, 2012.

CNN chief quits, says ‘new thinking’ needed

WASHINGTON: CNN Worldwide president Jim Walton announced Friday he is quitting the job at the end of the year, saying the struggling cable network needs “new thinking.”


Walton said in a statement released by CNN that he would leave on December 31 after 10 years at the helm of CNN, the longest-running of the cable news channels and a unit of Time Warner.


“I am proud of what we have accomplished together over these last 10 years,” he said.


But he also maintained that “CNN needs new thinking. That starts with a new leader who brings a different perspective, different experiences and a new plan, one who will build on our great foundation and will commit to seeing it through.”


Phil Kent, chairman of Turner Broadcasting, said Walton’s “vision has modernized and globalized our legacy news brand, enhanced CNN’s journalistic standing, positioned it at the forefront of multi-platform branded news content and challenged the organization to think bigger, reach further and do better. “


The news comes with CNN’s rating hitting their lowest levels in two decades, behind Fox News Channel and MSNBC.


Time Warner chief Jeff Bewkes praised Walton’s service.


“When Jim Walton assumed the presidency of CNN in 2003, it was underperforming and earnings were in serious decline,” he said.


“Since then, he and CNN have tripled earnings, doubled margin and delivered annual growth of 15 percent… I respect him personally and professionally and support the decision he and Phil Kent have reached.”

Copyright AFP (Agence France-Presse), 2012

Caught in the act: Govt may constitute panel to revisit poverty calculations

Curren­t figure­s depict a declin­e in povert­y, contra­ry to ground realit­ies.  FUDGED DATA?: 4.8% is the purported decline in the incidence of poverty in 2011, according to the HIES. ILLUSTRATION: JAMAL KHURSHID

ISLAMABAD: 

The government will likely constitute a panel to review the existing methodology behind poverty calculations, after official figures anomalously depicted a decline in the incidence of poverty in 2011; despite sluggish growth in the economy and double-digit inflation over five consecutive years.


A summary to this effect has been moved to the Deputy Chairman of the Planning Commission for deliberation, sources in the Planning Commission told The Express Tribune.


The need to constitute the panel arose after the consumption-based methodology used in the calculation showed a 4.8% ‘decline’ in the incidence of poverty. According to the findings of the Household Integrated Economic Survey (HIES) 2011, the incidence of poverty purportedly decreased from 17.2% in 2008, to 12.4% in 2011. According to the HIES, average per capita monthly expenditures rose by 57.5%, while average per capita monthly income grew 55.5% between 2008 and 2011.


After these figures were officially announced, the government found itself in a tight spot when asked to explain how over seven million Pakistanis were suddenly transported above the poverty line. It has so far desisted from giving its own explanation for the misreporting of poverty figures.


The committee’s proposed mandate is to review the methodology, which is currently based on consumption. According to the method used, if a person is able to consume 2,350 calories per day – which cost Rs1,745 per month – then the individual is assumed to be living above the poverty line.


This methodology had been introduced during Pervez Musharraf’s regime, and had instantly led to a ‘decline’ in poverty figures by over 11 percentage points. During the same period, though, as poverty ‘declined’, inequality was calculated as having risen in the country. This meant that there were fewer poor persons in the country, but wealth was not distributed equally across income groups.


But according to the HIES, not only did poverty fall, but inequality also diminished in 2011. This effectively meant that there were lesser poor persons in the country, and that the nation’s wealth was more equitably distributed. Even a cursory analysis of independent economic data reveals that this is certainly not the case.


The GM Arif Committee – constituted by the Planning Commission to crunch poverty-related numbers – has also recommended analysing this ‘unique’ trend, yielded by the current calculations, in greater detail.


Independent economists, including authorities on poverty, are of the view that the existing methodology was designed in a way that poverty figures would keep declining over the years, irrespective of ground realities. This would benefit electioneering and score brownie points for the government when its economic policies came under review.


Officials in the Planning Commission are also critical of the modern calculation method, and expressed a mock fear that “a day will come when officially there will be no poor in the country.” Sarcasm aside, they complained that such practices are extremely damaging to the already hurt credibility of official statistics.


One of the alternatives to the existing methodology is shifting to a multi-dimensional poverty index; which covers health, sanitation and education indicators in the calculation of poverty. A similar index is currently in use by the United Nations. But the results of such a comprehensive methodology may not serve vested interests. According to the UN’s Multi-Dimensional Poverty Index, half of Pakistan’s population currently lives below the poverty line.


It remains to be seen whether the government will acknowledge the sufferings of this segment and reformulate policy to ameliorate the situation, or continue to find comfort in falsified numbers that allow it to make claims of non-existent betterment in the economic state of the country.


Published in The Express Tribune, July 28th, 2012. 

Apple considering investment in Twitter: report

nexus3344NEW YORK: Computer and smartphone maker Apple has been discussing with social media company Twitter the possibility of making a significant investment in it, The New York Times reported late Friday.

Citing unnamed “people briefed on the matter,” the newspaper said Apple was considering investing into Twitter hundreds of millions of dollars, which could increase Twitter’s valuation from $8.4 billion to more than $10 billion.

The contacts between the two companies’ executives were notformal negotiations, and there were no assurances the two sides will come to an agreement, the report said.

Apple has already incorporated Twitter features into its software for phones, tablets and computers, The Times said.

Meanwhile, Twitter has assigned more resources into managing its relationship with Apple. the paper noted.

Apple’s share of the US smartphone market was expected to inch up one percentage point to 31 percent this year, while the share for handsets powered by Google-backed Android software was expected to hit 41 percent, according to eMarketer.

On Tuesday, the company reported a rise in its quarterly profit to $8.8 billion on hot iPad sales but the results came up short of lofty Wall Street expectations, prompting its shares to dive.

The profit in the fiscal quarter to June was up 20.5 percent from a year earlier and amounted to $9.32 dollars a share, well below the consensus forecast of $10.36 dollars.

Revenues rose 22.5 percent to $35 billion, also below expectations of more than $37 billion.

Twitter, which allows its members to post brief comments, links or pictures, claims to have more than 140 million active users, with the largest number being in the United States.

A recent survey found one in seven Americans who go online use Twitter and eight percent do so every day.

Copyright AFP (Agence France-Presse), 2012

India’s riot-hit Maruti says Q1 profit dives 23pc

Written by Shoaib-ur-Rehman Siddiqui

NEW DELHI: India’s biggest carmaker Maruti Suzuki Saturday reported a 23 percent plunge in quarterly profit, missing market forecasts as the company struggles to recover from deadly labour unrest.


Maruti said net profit fell to 4.24 billion rupees ($76.6 million) in the first quarter from 5.49 billion rupees a year earlier, marking its fourth straight quarterly profit fall.


Analysts expected Maruti, 54.2 percent owned by Japan’s Suzuki Motor, to post a profit of around 5.0 billion rupees for the three months to June.


“Adverse currency movements, notably the yen-rupee exchange rate, impacted profits negatively,” Maruti said, adding demand for petrol cars suffered “sharp de-growth” as buyers opted for cars powered by cheaper diesel fuel.


The price of importing components and technology from Japan has shot up due a slide in the value of the Indian rupee.


The disappointing results come as Maruti strives to recover from the worst-ever labour unrest in the company’s history on July 18 that left a manager dead and nearly 100 other executives hurt at one of its main plants.


Workers chased managers with iron rods and car parts, smashing limbs and setting fire to parts of the Manesar plant after a row over an employee’s suspension escalated.


The figures released Saturday were for the period up to June 30 and did not reflect the unrest that has forced Maruti to indefinitely shut down the plant which makes the firm’s top-selling cars such as the Swift hatchback.


Maruti, which is battling fierce competition from South Korea’s Hyundai and other rivals, said on Friday it had begun assessing the extent of the damage at the plant and did not know when it would reopen.


“The company will announce its decision to this effect only when it is assured of employee safety,” Maruti said.


Executives caught up in the rioting have said they are fearful of returning to their jobs at the Manesar plant that produces 550,000 vehicles a year — 40 percent of the company’s annual output.


A protracted closure would be a major setback for Maruti, whose profits slid 29 percent last year on the back of labour disputes.


“Their competitors are no doubt going to gain from this shutdown — the likes of Hyundai and General Motors,” Mahantesh Sabarad, an analyst at Fortune Equity Brokers, told AFP.


“If the plant doesn’t restart soon, the company will definitely miss out on some festival sales,” Sabarad added.


Sales of cars and other costly items typically climb during India’s religious holiday period that peaks in October-November when purchasing is seen as auspicious.


Maruti, which sells nearly one out of every two cars in India, has already delayed the launch of a small car because of the Manesar plant’s closure while its shares have tumbled by nearly 10 percent with investors fearful of a lengthy shutdown.


Labour discontent has been mounting in India, especially at carmakers such as Maruti, as inflation pinches pay packets and wide use of cheaper contract workers fuels unhappiness on shop-floors.


Maruti’s problems coincides with a demand slowdown in Asia’s third-largest car market amid high interest rates and as the economy grows at its weakest pace in nine years.


Maruti says it is still looking at the possible causes of the riot, saying “by any account, this is not an ‘industrial relations’ problem in the nature of management-worker differences” over labour conditions.


“Our own workers hitting our managers is unimaginable,” Shinzo Nakanishi, chief executive of Maruti Suzuki, said last week.

Copyright AFP (Agence France-Presse), 2012

Tender awarded for 50,000 tons urea import

Tradin­g Corpor­ation purcha­ses fertil­iser at $419 per ton.  Trading Corporation purchases fertiliser at $419 per ton.

KARACHI: 

The Trading Corporation of Pakistan (TCP), in a tender opened on Friday, awarded contract for import of 50,000 tons of urea at $419.39 per ton including cost and freight to the lowest bidder, Key Trade AG Switzerland.


According to a press release issued by the TCP, nine bids were received in response to the tender floated on July 13. The prices were quoted in the range of $419.39 to $447.39 per ton. Key Trade offered the lowest price of $419.39 per ton for 50,000 tons while conforming to technical specifications and terms and conditions of the tender.


Keeping in view the competitiveness and consonance of the price with international prices of urea, the offer was accepted and the contract was awarded to the lowest bidder, the TCP said. With the award of the tender, the TCP said it had completed procurement of the targeted quantity of 300,000 tons, given by the government, for the current Kharif sowing season.


According to the TCP, out of the earlier contracted quantity of 250,000 tons, around 110,000 tons have arrived and delivered to the National Fertiliser Marketing Limited (NFML). The rest of the shipments of the imported urea are in the pipeline.


Published in The Express Tribune, July 28th, 2012. 

Nepra notifies increase in power tariff for Karachi

KESC to charge Rs2.7 per unit more in August and Septem­ber bills.  Nepra has allowed KESC to charge 1.04 per unit raise in power tariff on account of fuel adjustment for January, Rs0.04 per unit for February and Rs1.60 per unit for March.

ISLAMABAD: 

The National Electric Power Regulatory Authority (Nepra) on Friday notified power tariff increase of Rs2.68 per unit for Karachiites on account of fuel adjustment charges during January to March 2012.


KESC will charge increase from all type of consumers except lifeline and shall be shown separately in the consumer bills of August and September 2012 on the basis of units billed for the months of January to March.


According to notifications issued on Friday, Nepra has allowed KESC to charge 1.04 per unit raise in power tariff on account of fuel adjustment for January, Rs0.04 per unit for February and Rs1.60 per unit for March.


According to the decision, for January, Nepra says that KESC had spent Rs289.84 million on power generation from its own resources and Rs682.233 million on power from external resources. KESC authorities said that it had sold 940.82 units to consumers and faced variation in fuel price by Rs1.03 per unit. KESC submitted that furnace oil cost increased to Rs64,758.91 per ton in January from Rs64,745.94 per ton in December 2011.


Gas price also increased to Rs507.86 per Million British Thermal Unit (MMBTU) against the preceding Rs447.14 per MMBTU. KESC further said that it had purchased around 80% of its total power purchases from National Transmission and Despatch Company (NTDC) which increased its rate to Rs9.19 per unit in January from Rs7.15 per unit.


For March, KESC said that cost of power from its own resources stood at Rs716.398 million, Rs1.069.5 million from external resources. KESC sold 1,121.602 units to consumers and faced variation in fuel price by Rs159.224 per unit.


It further said that furnace oil price hiked to Rs71,843.20 per ton in March from Rs64,745.94 in December 2011. KESC submitted that gas price also increased to Rs5076.86 per MMBTU from Rs447.14 MMBTU owing to application of Gas and Infrastructure Cess by Ministry of Petroleum and Natural Resources. It purchased 79% of its total power purchases from NTDC which increased its price to Rs9.552 per unit in March from Rs7.15 per unit.


Published in The Express Tribune, July 28th, 2012.

Yields climb as Europe, data spur risk-taking

NEW YORK: US Treasuries yields rose to their highest levels in a week on Friday as data showed the US economy cooled in the second quarter, in line with expectations, and as investors absorbed $99 billion in new bond sales this week.


Increased expectations that the European Central Bank will buy bonds of troubled euro zone countries also increased risk-taking and reduced demand for safe haven debt.


Gross domestic product expanded at a 1.5 percent annual rate between April and June, the weakest pace of growth since the third quarter of 2011, the Commerce Department said on Friday.


Treasuries extended price losses as the growth number was not as bad as some analysts and traders had feared, and perhaps unlikely to prompt the Federal Reserve to launch a new round of stimulus when it meets next week.


“The report was a little bit better than what some people feared. I think some people were getting nervous that it would be sub-one percent,” said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia in New York.


Investors will be watching for signs that the Fed will launch a new bond purchase program if the economy continues to weaken, though many analysts and traders see it as unlikely that the central bank will launch a program as soon as next week.


The GDP data nonetheless points to a worsening picture for the US economy in the second half of the year, where investors will also face uncertainty around the November presidential election and the so-called “fiscal cliff” of spending cuts and tax increases that are set to take effect in January 2013.


“The second half of the year is going to be a very challenging one given a lot of the sentiment issues we are dealing with,” said Tom Porcelli, chief US economist at RBC Capital Markets in New York.


Investors are still grappling with $99 billion in new two-year, five-year and seven-year notes sold this week, which is adding to the drop in bond prices, said Comiskey.


“We’re digesting a lot of supply,” he said.


The Federal Reserve also sold $7.93 billion in three-year notes on Friday as part of its Operation Twist program, where it funds purchases of longer-dated debt with sales of short-term notes.


Bonds weakened earlier after French newspaper Le Monde reported that the ECB and euro zone governments were preparing coordinated action to cut Spanish and Italian borrowing costs, boosting demand for riskier assets.


But comments from Germany’s powerful Bundesbank added doubts to hopes of bond purchases, with a spokesman from the bank saying that it regards central bank purchases of sovereign debt as monetary financing of governments, from which the ECB is prohibited by European law.


Benchmark 10-year notes were last down 24/32 in price to yield 1.53 percent, up from 1.44 percent late on Thursday.


Thirty-year bonds fell 2-1/32 in price to yield 2.60 percent, up from 2.50 percent on Thursday.

Italy bank employees strike against job, pay cuts

MILAN/ROME: Workers at top Italian banks UniCredit and Banca Monte dei Paschi di Siena went on strike on Friday to protest against job losses and pay cuts, forcing 80 to 90 percent of branches at the two lenders to remain shut, trade unions said.


The twin strikes, which follow one earlier in July at Intesa Sanpaolo, came as Italian bank executives face pressure to slash costs and shed assets to repair balance sheets hit in the euro zone debt crisis.


“The heavy participation to the strikes also shows that there is a big distance between staff and top executives,” Fabi union leader Lando Maria Sileoni said in a statement.


Workers at Monte Paschi, which has asked for state aid to plug a capital shortfall, are opposed to Chief Executive Fabrizio Viola’s plan to cut 15 percent of the bank’s workforce and close 400 branches out of 3,000.


The over 4,600 job cuts planned by the Siena-based lender include 2,300 back office personnel and 1,300 employees of units that will be sold.


“Bankers cannot possibly think there is room for their compensations while at the same time jobs and salaries … are put into question,” Agostino Megale, Fisac secretary general, said.


Workers at UniCredit, Italy’s biggest bank by assets and which is led by Chief Executive Federico Ghizzoni, are opposed to the suspension of a bonus payment.


Monte Paschi’s head of human resources said in an interview with Reuters the bank would start talks with unions early in August with the aim of reaching an agreement in 50 days.


UniCredit said the bonus payment was tied to its business plan to 2015, which envisages a recovery in profitability, greater labour flexibility and a staff rationalisation.


“The UniCredit group, notwithstanding a very complex year for the entire financial industry, is available to pay a collective bonus to staff which is coherent with is 2015 business plan,” the bank said.


Unions at Intesa Sanpaolo went on strike on July 2 to protest against feared pay cuts after Italy’s biggest retail bank put on hold 4,200 planned layoffs because of the government’s pension reform.

PSO dues: Power ministry asks for release of Rs45 billion

PSO needs money to pay immedi­ately to fuel suppli­ers.  PSO needs immediate release of Rs23.5 billion to retire letters of credit on Friday to ensure supply of 28,000 tons of oil per day to the power sector. PHOTO: FILE

ISLAMABAD: 

The Ministry of Water and Power, in an attempt to avert the fuel crisis, has pressed the Ministry of Finance to immediately release Rs45 billion for Pakistan State Oil (PSO), the oil marketing giant, which is facing the prospect of default on payments to international oil suppliers.


The power ministry made the demand following PSO’s warning to the government on Tuesday that it had to make some payments to the international fuel suppliers by Friday and any default might affect future supplies, said a senior official of the water and power ministry.


“However, no money has been provided so far for retiring letters of credit for oil imports,” the official said and pointed out that the finance ministry had to release the amount on account of subsidy for power consumers.


According to him, the power subsidy of Rs45 billion has been pending since the last financial year. “We are hoping to receive Rs5 to Rs7 billion, but it will not be sufficient to run the energy chain.”


Sources told The Express Tribune that the petroleum and power ministries took up the PSO issue on Wednesday during a meeting of the energy committee, chaired by the prime minister. The petroleum ministry officials told the meeting that PSO was on the verge of collapse due to lack of funds as power companies were not making timely payments to the oil supplier.


Receivables of PSO, mainly from the power companies, have reached an all-time high, standing at Rs237 billion while the company has to pay Rs179 billion to local and international fuel suppliers.


A petroleum ministry official cautioned that if PSO defaulted on international payments on Friday, it would not be able to continue uninterrupted oil supply to power plants, worsening power crisis in the country.


At present, PSO is purchasing furnace oil from Pak Arab Refinery Company (Parco).


“PSO needs immediate release of Rs23.5 billion to retire letters of credit on Friday to ensure supply of 28,000 tons of oil per day to the power sector as directed by Prime Minister Raja Pervez Ashraf,” the official said, quoting a letter sent by PSO to the finance and water and power ministries as well as the energy committee.


PSO has also requested Rs15.5 billion for first 10 days of next month to ensure smooth supply of oil to the power companies.


Published in The Express Tribune, July 27th, 2012.

OGDC directed to initiate independent development schemes

NA body asks the compan­y to avoid duplic­ation of expend­itures.  OGDCL to initiate independent development schemes in Sindh to avoid duplication of the amount.

ISLAMABAD: 

A parliamentary panel on Friday directed the Oil and Gas Development Company Limited (OGDCL) to initiate independent development schemes in Sindh to avoid duplication of the amount.


A meeting of the National Assembly (NA) sub-committee on petroleum and natural resources discussed development and welfare schemes carried out by the oil and gas producing companies in the province.


During the meeting officials of the OGDCL told the committee that the company disbursed Rs320 million for infrastructure development in different areas of Sindh. Officials told that Rs100 million were spent to establish disaster centre in Mirpur Mathelo while Rs465 million spent for a petroleum training centre to award technical training.


Officials informed that for the fiscal year 2012-13, Rs7 million will be spent to provide free medical facilities to the people of Tando Adam, Bobi Kunar, Qadirpur and other areas. They told that Rs880 million will be utilised for different projects of gas supply to different areas.


Officials said that in several areas of the province, projects for education and health were initiated in collaboration with the government. The standing committee directed the managing director of the OGDCL to continue the projects separately as it would be helpful to avoid double-counting of funds.


The committee also expressed its concerns over the installation of air-conditioners in the Tando Adam Khel medical complex and directed the officials to provide generators in remote areas rather than ACs. 


Published in The Express Tribune, July 28th, 2012.

Pakistan Railways unlikely to be revived soon

Modern locomo­tives will take at least a year to arrive.  DEFICIT: Rs45b are the estimated expenses of the railways this year Rs15b are the estimated revenues this year. PHOTO: AFP

LAHORE: 

The precarious condition of Pakistan Railways (PR) is not expected to get better in the next one and a half years as rehabilitated and modern locomotives, which are direly needed, will take at least a year to arrive, says a PR official.


“The corporation needs serious attention of the government because the biggest source of public transport is in danger. Not a single passenger or express train is running in profit and we are bearing losses only to facilitate the people,” said PR Director Public Relations Imtiaz Rizwi while talking to The Express Tribune.


The railways has got a loan of Rs6.1 billion through its ancillary, PR Advisory and Consultancy Services (PRACS), which will be spent on the rehabilitation of 96 locomotives. Besides, tenders for purchase of 75 locomotives are also in process.


“If we start executing these two projects today, we will be able to see some locomotives after a year,” he said.


For this one-year gap, the railways tried to take 50 locomotives on lease from China, but the deal could not go through as Beijing demanded an unbearable cost of $2,600 per locomotive per day, Rizwi said.


The state of cash-strapped PR has once again gone from bad to worse with the locomotives’ strength dropping to around 100. For passenger and express trains, only 90 locomotives are on track and for freight operation only seven locomotives are available, which are nowhere near the demand from both areas, say railway officials.


The number of passenger and express trains, which were more than 400 before the crisis, has dropped below 200, which are being managed with only 90 locomotives. On the other hand, the number of locomotives for freight trains, which were originally around 90 for handling 60 freight trains, has fallen to only 7.


According to the officials, not a single locomotive has been fully revamped and is running with all six traction motors. Most of the locomotives have three or four traction motors, which is the main cause of engine failure during journey.


This has led to hours of delay in arrival and departure of trains and overcrowded platforms. These days, the express trains get late by more than 10 hours in many cases as locomotives, which push the trains, develop faults quite often with no alternative available.


Commenting on frequent delays, Rizwi pointed to the small freight operations. Previously, he said, some 50 to 60 freight trains were on their way on different tracks every time, and the management, in case of failure of any passenger train locomotive, brought the locomotive of a nearby freight train to be attached with the passenger train.


He ruled out any fuel shortage, saying the railway utilised only half of the credit line of Rs2 billion provided by Pakistan State Oil.


This year, expenses of the railways are estimated at Rs45 billion, which are three times the targeted earnings of Rs15 billion. During this financial crunch, the government provides salaries and pensions for railway employees every month.


Published in The Express Tribune, July 28th, 2012.

Reliance may buy $1bn telecoms gear from Samsung: paper

NEW DELHI: India’s Reliance Industries is likely to buy more than $1 billion worth of fourth-generation (4G) telecoms network gear from Samsung Electronics, the Economic Times reported on Saturday.


Reliance’s talks with Samsung are at an advanced stage for supply of LTE network gear and that the two companies have also discussed potential bundling of 4G handsets and devices supply deal within the contract, the paper cited unnamed executives familiar with the matter saying.


Reliance’s Infotel Broadband unit is the only company to have 4G permits for all of India’s 22 telecoms zones. The company won permits in a 2010 state auction, but is yet to launch the high-speed Internet services.


A Reliance Industries spokesman, when contacted by Reuters, said Infotel was in discussions with “numerous potential partners”, but declined to comment on specifics. A spokesman for Samsung’s India unit also declined comment.

Early pay-day: Pakistani sells web start-up for Rs9.5 million

Humour websit­e Gagism was develo­ped by Zafar for fear of being laid off.  Gagism.com hosts comics, jokes and funny images; it earned $15,000 per month in ad revenues prior to acquisition. PHOTO: FILE

KARACHI: 

In yet another example of a successful entrepreneurial spree, a Pakistani blogger – amid fears of losing his job – developed a humour website, attracted huge amount of traffic and sold it for Rs9.5 million ($100,000). All of this happened in just six months.


Melbourne-based firm Westendmoney acquired the Karachi-developed website Gagism.com – a community-driven blog that hosts comics, jokes and funny images – in May 2012. The Australian firm wanted to use Gagism as a humour brand for a much bigger web entity, said Gagism Founder Farrukh Zafar in an email.


Gagism serves as an entertainment portal for those who understand English, Zafar said, thus it caters to a global audience with the US being its largest traffic source followed by Australia, UK and Canada.


Before its acquisition, Gagism was making $15,000 per month in ad revenues while the site even hit one million daily page views in early April, Zafar said.


Zafar and his team members might not have sold the website site if its traffic had not dipped below 400,000 page views a day. That’s when they decided to put the website for sale and posted on Flippa, an online listing site, known for selling and buying websites.


The story of Gagism is a good case study for young IT professionals, who are more interested in start-ups than doing a job. It was job insecurity that led Zafar to become an entrepreneur.


It all started back in October, 2011 when I began thinking about launching a humour website, Zafar said. “The fear of losing my job at LG where I was a Digital Marketing Specialist during the season of mass layoffs, made me work night and day to establish something substantial,” he told The Express Tribune.


Given the financial crisis the company was going through, Zafar said, he was sure that he had to leave that job soon – the recession was getting big on his former employer and downsizing had started taking place, according to him.


“I temporarily started Gagism in October but the traffic was so huge that I had to shut it down, foreseeing the lack of funds to buy a bigger server that could handle the immense traffic that was pouring in,” Zafar said.


Zafar partnered with Salman Saeed; the two re-founded Gagism on December 1, 2011 – after getting their funds together, he said.


“Our main sources of traffic were Facebook, StumbleUpon and Reddit; but in all this time, StumbleUpon was the craziest catalyst that worked at that time,” Zafar said. “StumbleUpon alone, was sending around 80,000 to 90,000 unique visitors on a daily basis, in the very first month,” he said, adding, “With firm support from Facebook and Reddit, we started growing as a community.


“When we reached the million view mark; it was all due to StumbleUpon’s traffic floodgates,” Zafar said.


Zafar finally left LG himself to set up Gagism, a move that paid off for Zafar. Even if he kept his job, he wouldn’t earn Rs10 million in just six months with a monthly remuneration of Rs35,000.


The development will also encourage young IT professionals to launch a start-ups instead of working for someone else, especially when they can earn more than what Pakistani IT industry is offering in remuneration – the highest annual salary for IT professionals with three to five years of experience is Rs112,175, according to survey conducted by Pakistan Software Houses Association.


It may however, require some skills and knowledge – apparent in the case of Gagism.


An industry expert told The Express Tribune that acquiring websites with high traffic has become a common practice. The traffic is then diverted to one’s own website –referred to as referral traffic in the IT world.


There are a bunch of young professionals, who share links of their websites on high traffic networking sites and attract millions of visitors to their own site, said an expert. It requires skills though, he added.


“In 2009 and 2010 when Facebook was growing its traffic, users made pages, linked them and ended up with a million users. They, however, couldn’t monetise the traffic,” he added.


Sites like Gagism, lolhappens.com and lulzz.com are a few examples working on this model, the expert said.


Published in The Express Tribune, July 28th, 2012.

Apple buys security firm for $350 million

 SAN FRANCISCO: Apple has bought mobile security firm AuthenTec for around $350 million, giving the gadget maker technology including data protection and fingerprint security for mobile devices.

Documents filed Thursday with regulators showed Apple paid $8 per share for AuthenTec, a Florida-based company started in 1998.

Customers of AuthenTec include Apple’s key rival Samsung, as well as other tech firms such as Alcatel-Lucent, Cisco, Fujitsu and Hewlett-Packard.

The security products are used to “protect individuals and organizations through secure networking, content and data protection, access control and strong fingerprint security on PCs and mobile devices,” according to the AuthenTec website.

It has sold more than 100 million fingerprint sensors and portable electronics, including 15 million mobile phones.

The move comes amid concerns about hacker attacks on mobile devices, especially Apple gadgets or those powered by Google-backed Android software.

Copyright AFP (Agence France-Presse), 2012

Barclays bank says first-half net profits shrink to #70mn


LONDON: Troubled British Bank Barclays said on Friday that interim net profits shrank to #70 million on vast exceptional charges, and apologised again for the Libor rate-rigging scandal that has rocked the group.


Earnings after taxation shrank to the equivalent of 89 million eu
ros or $110 million in the six months to June, compared with #1.5 billion in the same period of the previous year, Barclays said in a results statement.


“We are sorry for the issues that have emerged over recent weeks and recognise that we have disappointed our customers and shareholders,” said Barclays outgoing chairman Marcus Agius, in reference to the Libor affair.


“I speak for all of Barclays’ people when I say how determined we are to regain the full confidence of all our stakeholders; customers and clients, investors, regulators and staff alike.”


The London-listed bank was last month fined #290 million ($451 million, 371 million euros) by British and US regulators after admitting that it attempted to manipulate the Libor and Euribor rates between 2005 and 2009.


The scandal prompted the resignation of chairman Agius and chief executive Bob Diamond, and also sparked a fierce political debate over ethics in the banking sector.

3G licences: Govt to advertise again for hiring consultant

PM asks regula­tor to involv­e expert­s in evalua­tion of compan­ies.  REVENUE: Rs75b is the amount the govt is targeting to fetch through 3G licence auction. DESIGN: ALI DARAB

ISLAMABAD: 

The government on Friday decided to advertise again for hiring a consultant to expedite the process of auction of spectrums for third-generation (3G) telecom services in the country, a move which may further delay the auction process.


The decision to this effect was taken by Prime Minister Raja Pervez Ashraf while chairing a meeting here on the auction of 3G licences, which is expected to fetch about a billion dollars. The premier observed that the process had already been delayed considerably due to unnecessary official procedures, according to the Prime Minister’s House.


The government wanted to complete the transaction before the close of last fiscal year in June in a bid to restrict the widening budget deficit. However, differences over procedures and transparency concerns delayed the process.


The finance ministry has again projected revenues of Rs75 billion from the 3G auction in the current financial year.


The prime minister told the Pakistan Telecommunication Authority (PTA) to also seek a list of experts from the Ministry of Information Technology for evaluation of expressions of interest (EOI) to be received after the advertisement. The PTA assured the premier that a letter would be written to the IT ministry for the list of experts who would be made part of the EOI committee in order to meet transparency requirements.


The PTA’s credibility had been dealt a blow last year when it shortlisted consultants without taking stakeholders into confidence.


According to an official of the IT ministry, the consultant will also review the Information Memorandum – the document that governs the whole transaction. The consultant will have the liberty to rewrite the memorandum, he added.


The PM also made it clear that it was the PTA’s responsibility to carry out the auction of 3G licences in a transparent manner, according to the PM House.


An official of the PM House said at the start of the meeting the premier asked the stakeholders to find a way to complete the transaction and termed it a ‘lifeline for the government’. He also asked the IT and finance ministries as well as the PTA to avoid unnecessary confrontation.


The auction process had been put on the back burner when the Auction Supervisory Committee (ASC) of 3G rejected the PTA’s selected companies for consultancy services due to alleged dubious selection process.


The PTA had shortlisted four parties out of 12 and gave them grades instead of marks. Contrary to the ASC’s direction that an evaluation committee should be formed to shortlist the parties, the PTA itself shortlisted them.


On the PTA’s list, Kalba International Company was on top while the Ministry of Information Technology, which had also shortlisted five companies on the basis of marks, Kalba stood at fifth position.


Similarly, Arthur D Little stood on second position in the PTA’s list while the IT ministry placed it on top of its list.


Published in The Express Tribune, July 28th, 2012. 

Reducing circular debt: TFC issue delayed as law ministry yet to vet guarantees

Financ­e minist­ry presse­s for immedi­ate examin­ation of bank guaran­tees.  HUGE: Rs450b is the total circular debt

ISLAMABAD: 

In an attempt to control the swelling inter-corporate debt, the Ministry of Finance has asked the Ministry of Law to immediately vet bank guarantees to pave the way for issuing term finance certificates (TFCs) worth Rs82 billion, which is aimed at clearing debt of companies in the energy chain.


“The finance ministry has sent a summary to the law ministry, asking it to vet the guarantees to be provided to banks on purchase of TFCs worth Rs82 billion, which will be issued against reserves of the Oil and Gas Development Company (OGDC). However, the law ministry has not examined these so far,” an official of the water and power ministry told The Express Tribune.


The official pointed out that the water and power ministry wants the finance ministry to pursue the guarantee issue with the law ministry while the finance ministry asks the power ministry to perform the task.


In May, President Asif Ali Zardari had given the go-ahead to issue the TFCs in order to reduce the circular debt and improve energy supply. The plan was prepared by the petroleum ministry, which claimed that it could settle the circular debt amounting to Rs450 billion.


Owing to delay on the part of the law ministry, the government has not been able to float TFCs to clear dues of billions of rupees of the independent power producers (IPPs), which have entered into litigation.


Four independent power plants including Sapphire, Hamlore and Orient have filed cases against the government for blocking their dues of Rs40 billion. In a recent meeting held at the water and power ministry, the differences deepened after the IPPs refused to receive payments in installments. They had also threatened to shut down the plants if the dues were not cleared.


“Had TFCs been floated, the situation would not have worsened,” the official said, adding the government had no money to pay to the power plants and was waiting for the issuance of TFCs to generate funds.


Officials of the water and power ministry blame the power distribution companies for being mainly responsible for the unending circular debt. The recovery rate of power bills of these companies was very poor with persistent bad governance, leading to liquidity crunch and making it difficult to even ensure fuel supplies.


For the last few years, the government has also been delaying payment of tariff differential subsidy to the power companies, which has compounded the problem.


“Transmission and distribution losses beyond Nepra determinations are also the major reason behind the build-up of the circular debt,” the ministry official said.


Published in The Express Tribune, July 28th, 2012.

Engro Fertilizers requests extension of loan deadline

Local giant hopes to replac­e SNGPL networ­k with non-networ­k gas fields.  HEAVY EXPENSE: Rs26.5b is the amount Engro Fertilizers has made in principal repayments and interest payments in the last 18 months. PHOTO: FILE

KARACHI: 

Engro Fertilizers has approached banks to “re-profile” its debt and extend the loan repayment dates by about two and a half years, as the company is trying to reach an agreement with the government to shift its $1.1 billion Enven fertiliser plant from the Sui Northern Gas Pipelines Limited (SNGPL) network to non-network gas fields.


Engro Fertilizers – part of Pakistan’s largest private-sector conglomerate Engro Corporation – has to make principal repayments of Rs10 billion and interest payments of Rs8 billion in 2012, Engro Corporation Chief Financial Officer (CFO) Naz Khan said on Thursday.


While ruling out market speculations that Engro Fertilizers may default on its debt repayments in the ongoing calendar year, Khan told The Express Tribune that gas curtailment at Enven had indeed hurt cash flows of Engro Fertilizers, which set up the world’s largest single-train urea plant in 2011 with total production capacity of 1.3 million tons a year.


“We’re running short of cash because the original debt repayment schedule was based on regular gas supplies of 100mmbtu from the SNGPL,” she said, adding that Enven received gas for only five and a half months last year. It has received gas for 44 days in 2012, of which production could take place for 33 days only, as the firing up and shutting down the plant takes considerable time.


Engro Fertilizers has made principal repayments and interest payments amounting to Rs26.5 billion in the last 18 months since Enven became operational.


She says she is optimistic that Engro Fertilizers will be able to strike a deal with the government to shift Enven to non-network gas fields within the next six months. Making arrangements for the treatment of low BTU gas, so that it can be used to produce urea, can take anywhere between six months and two years, Khan added.


“That’s the reason why we have approached banks to reschedule repayments for the interim period, which will be approximately two and a half years. About five payments totalling Rs28 billion are due every six months,” she said.


Engro Fertilizers was allocated 100 mmcfd of gas upon payment of a licence fee after an international competitive bidding conducted by the government. It also enjoys the SNGPL’s guarantee of uninterrupted gas supply with a right to have the first 100 mmcfd of gas production from Qadripur field.


Engro’s alternative non-network gas solution calls for shifting Enven from the Qadirpur field to Lateef and two other adjacent gas fields. Another suggestion that is part of Engro’s proposal is to shift gas supplies of the plant to Mari field which, like many other major gas fields, is located within 50km of Enven.


Khan took pains to explain that no Term Finance Certificate (TFC) repayments will be affected by the proposed restructuring of Engro Fertilizers’ long-term debt. “Engro Corporation has many subsidiaries, and there is no possibility of a default on payments whatsoever,” she said, adding that no major TFC repayments are due in the near future anyway.


“The problem with the fertiliser sector is that it doesn’t enjoy the political clout like the textile and many other lobbies do,” she said, while referring to the recurring gas curtailment problem that has affected the Enven plant since its inception.


Published in The Express Tribune, July 27th, 2012. 

Market watch: Bourse closes dull weak little changed

Benchm­ark KSE-100 index sheds 27 points.  Benchmark KSE-100 index sheds 27 points.

KARACHI: 

The bourse rounded off the first week of trading during Ramazan almost flat. Investors chose to stay sidelined on the last trading day of the week, as major corporate results are yet to be announced. Volumes dipped again to below 60 million shares, marking a slow week overall for the country’s otherwise busiest stock exchange.


The Karachi Stock Exchange’s (KSE) benchmark 100-share index closed down 0.18% or 26.88 points to end at the 14,526.41 points level. Trade volumes plunged to 58 million shares compared with Thursday’s tally of 81 million shares. The value of shares traded during the day was Rs2.11 billion.


“Stocks closed lower amid thin trading on investor concerns for the uncertain macroeconomic situation, security concerns regarding Nato supply routes, and limited foreign interest ahead of the release of pending US Coalition Support Funds,” observed Ahsan Mehanti, from Arif Habib Corp.


“Concerns for the rising circular debt in the energy sector and revenue losses [incurred by the] fertiliser sector due to gas supply worries played a catalyst role in bearish sentiments at the KSE,” he added.


“Food and beverages remained the major outperformers of the day, on expectations of higher sales in the month of Ramazan. National Foods, Mitchell’s Fruit Farms and Shezan all closed at their respective upper limits,” reported Ahmed Rauf, analyst at JS Global.


Shares of 273 companies were traded on Friday. At the end of the day 98 stocks closed higher, 119 declined while 56 remained unchanged.


Pakistan Telecommunication Company (PTCL) was the volume leader with 7.29 million shares losing Rs0.51 to finish at Rs14.26. It was followed by DG Khan Cement (DGKC) with 6.81 million shares gaining Rs0.43 to close at Rs45.90 and Jahangir Siddiqui & Company with 5.89 million shares losing Rs0.18 to close at Rs16.04.


“Investors booked profits in PTCL, after news that its Voluntary Separation Scheme [announced today for its employees] may affect its short-term earnings. Cement stocks like DGKC and Maple Leaf Cement remained in the limelight, as investors expect better June quarter results,” said Topline Securities equity dealer Samar Iqbal.


Foreign institutional investors were buyers of Rs42.53 million and sellers of Rs47.99 million, according to data maintained by the National Clearing Company of Pakistan Limited.


Published in The Express Tribune, July 28th, 2012.

Czech Telefonica Q2 profit seen down 14pc

PRAGUE: Telefonica Czech Republic is expected to post a 14.2 percent annual drop in second-quarter net profit on a continuing decline in fixed-line and mobile revenue, a Reuters poll showed on Tuesday.


The average estimate of 13 analysts in the poll was for net profit of 1.60 billion crowns ($75.78 million), which would mean a drop from 1.87 billion in the same quarter a year ago.


While the Czech unit of the Spanish telecom giant has struggled with lower revenue due to weak consumer spending and price pressures from competition, shares have been buoyed by a high dividend yield and ongoing share buy-back of up to 2 percent of stock.


Kia sees small drop in Q2 net profit

SEOUL: South Korea’s second largest automaker Kia Motors said on Friday its second-quarter net profit fell 2.8 percent from a year earlier due to losses on shareholdings in affiliates.


Net profit in April-June was 1.09 trillion won ($954 million) compared to 1.12 trillion won a year earlier, the company said.


Sales rose 8.4 percent to 12.6 trillion won, while operating profit jumped 18 percent to 1.2 trillion won.


For the first half net profit rose 10.4 percent year-on-year to 2.3 trillion won on the back of strong overseas sales.


The company sold 1.39 million units globally in the first six months, up 12 percent from a year earlier.


Kia is an affiliate of South Korea’s largest automaker Hyundai Motor. The two together form the world’s fifth-largest carmaking group by sales.

Govt assures support for ‘water for fuel’ project

Water fuelli­ng system to be patent­ed and fully develo­ped.  Water fuelling system to be patented and fully developed.

ISLAMABAD: 

A sub-committee of the Cabinet on Thursday reiterated the government’s commitment to support the water fuel kit project to tackle energy crisis in the country.


The committee strongly encouraged the project, as the project designer presented a practical demonstration of a car operating on a water fuelling system. The committee members appreciated the idea of an engineer Waqar Ahmad in introducing the water fuel system for automobiles.


Minister for Religious Affairs Syed Khurshid Ahmad Shah, talking to the media after witnessing the demonstration, assured that the government would provide support to the Ministry of Science and Technology for development of the system. He asked the ministry and the Pakistan Engineering Council to float the feasibility of the project as soon as possible. The system enables the automobiles to consume water to function instead of combusting petrol or compressed natural gas (CNG).


Replying to a question, the minister maintained that the engineer will be provided full security and the idea will be patented to ensure security. The minister said that the Prime Minister Raja Pervez Ashraf and Finance Minister Abdul Hafeez Shaikh considered the project to be of great value for the crisis-hit country.


Federal Minister for Science and Technology Mir Changez Khan Jamali, also present on the occasion said that the idea could be a tremendous step in drafting a counterstrategy for the prevailing energy crisis. “We are making an effort to complete all the remaining work by August 14 as we want to gift this project to the nation on the Pakistan Day,” he said adding that in the next two weeks all ground tests and attached experiments will be completed.


It is interesting to note that the water fuelling system is simple in its technical nature in which the `hydrogen bonding’ present in distilled water will be an acting agent and the hydrogen gas propels the engine. Moreover, the whole system will considerably be cheaper than that of the present fuelling systems of CNG and petroleum. Pakistan may be able to export the system if the country is able to spend enough capital to perfect the technology.


Published in The Express Tribune, July 28th, 2012.

Better Indo-Pak trade ties remain as elusive as ever

As New Delhi drags its feet, Foreig­n Office places morato­rium on furthe­r effort­s.  As New Delhi drags its feet, Foreign Office places moratorium on further efforts. ILLUSTRATION: JAMAL KHURSHID

ISLAMABAD: 

Efforts for normalisation of trade between Pakistan have been dealt a serious blow, partly due to New Delhi’s reluctance in reciprocating moves made by Pakistan to ease trade restrictions. The Pakistani Foreign Office has now curbed efforts, which envisioned bringing the embattled neighbours closer through stronger trade ties, saying that slow progress in dialogues on other disputed issues necessitates toning down rapprochement efforts.


“Prospects to abolish the negative list by December this year have considerably dimmed,” sources in the Ministry of Commerce told The Express Tribune.


The Federal Cabinet had given in-principle approval for the abolishment of the negative list, which still contains 1,209 non-tradable items, by December 31; in line with granting the Most Favoured Nation status to Pakistan’s once arch-rival. It had asked the commerce ministry to negotiate with India, in order to seek more relaxations for Pakistani exporters, before trade ties were completely ‘normalised’. The commerce ministry was to report back to the Cabinet after holding another round of commerce secretary-level talks with India.


Sources told The Express Tribune that commerce secretary-level talks to this end were scheduled tentatively for May this year, but were postponed due to the objections raised by the Foreign Office. The Foreign Office had asked the ministry to “go slow” after no significant progress was achieved on other contentious matters, despite repeated rounds of talks.


Both sides had held multiple discussions to arrive at resolutions to the Sir Creek, Siachen, visa relaxation and counter terrorism issues; but no new ground was broken.


Commerce Secretary Munir Qureshi confirmed to The Express Tribune that the talks were not held in May on the Foreign Office’s diktat.


“Trade talks are not independent from other disputed issues, as they form a part of broader Confidence Building Measures,” Qureshi explained, responding to broader objections to the delay caused by lack of progress on matters unrelated to trade.


Pakistan’s decision, to replace the positive list – which had allowed only 1,956 items to be traded across the border – with a negative list In February this year, had been dubbed a giant leap in bilateral trade relations between the two nations. During the Indian commerce minister’s visit to Pakistan in February, both countries had inked three pacts on harmonisation of customs procedures and resolution of quality control issues.


However, contrary to expectations and assurances given by India, Islamabad says it has not yet received concessions it had earlier hoped for.


Our sources said that despite signing various agreements that aimed to allay Pakistan’s concerns regarding non-tariff barriers, India has not done much to make these treaties effective. The sources said India also did not agree to equal duty slabs on products on both sides of the border – a measure Pakistan believes will boost bilateral trade by providing a level playing field to exporters of both nations. Commerce Secretary Qureshi added that non-tariff barriers were also a major concern for Pakistan.


Qureshi also claimed that India has not yet reduced its sensitive list by 30%. The list contains items that carry high duties slabs, aimed at protecting selective industries in the member states of the South Asian Association of Regional Cooperation.


However, he did offer some hope to proponents of Indo-Pak trade, when he said there were indications that the next round of talks may yet be held in September.


Foreign Office spokesman Moazzam Ali Khan was not available for comments.


Published in The Express Tribune, July 27th, 2012. 

India Maruti Q1 net falls 23pc, forth straight quarterly profit drop

NEW DELHI: Maruti Suzuki, India’s biggest carmaker, lagged estimates with a 23 percent fall in fiscal first-quarter profit, its fourth consecutive quarterly profit decline, as a weak local rupee currency pushed up costs.


Maruti, 54.2 percent owned by Japan’s Suzuki Motor Corp , said net profit fell to 4.24 billion rupees ($76.4 million) for the three months to June from 5.49 billion rupees a year earlier.


“Adverse currency movements, notably the Yen-rupee exchange rate, impacted profits negatively,” Maruti, which imports many components from Japan, said in a statement.


Net sales for the quarter rose 27.5 percent to 105.3 billion rupees from a year earlier.


Analysts expected a net profit of 4.85 billion rupees for the quarter on revenue of 101.10 billion rupees, according to Thomson Reuters I/B/E/S.


Maruti faces months of supply woes and a slump in market share and sales as a lockout at a key factory enters its second week after violent clashes between workers and management left one company official dead.


The shutdown at the Manesar plant threatens a replay of a dismal 2011 when labour unrest battered the company’s sales, market share and profit.


The results released on Saturday are for the three months to end-June, and as such are not affected by the shutdown.


The latest labour problems add to Maruti’s woes at a time when it is fighting an industry-wide slowdown in sales as the Indian economy grows at its slowest pace in nine years, while a weakening rupee has made it even worse for an industry that depends on imports for key raw materials.


Maruti shares, valued at $5.8 billion, are down more than 9 percent since it announced the shutdown of the Manesar plant on July 18. The stock closed 0.4 percent higher on Friday, underperforming a 1.1 percent rise in the broader market.

ECC approves Rs8b bailout package for Pakistan Steel Mills

Commit­tee also approv­es alloca­tion of newly found gas reserv­es by OGDC to gas compan­ies.  Committee also approves allocation of newly found gas reserves by OGDC to gas companies. PHOTO: FILE


ISLAMABAD: The cabinet’s Economic Coordination Committee (ECC) approved a bailout package worth around Rs8 billion for Pakistan Steel Mills, Express News reported on Tuesday.


A profitable entity until 2011, the accumulative losses of the state-run steel mills have crossed Rs50 billion during the last four years. The unit is causing a loss of Rs550 million per month to the national exchequer.


In a meeting chaired by Finance Minister Abdul Hafeez Shaikh, the committee discussed the funding of Water and Power Development Authority (Wapda) developmental projects.


The ECC also approved allocation of newly found gas reserves by the Oil and Gas Development Company (OGDC) to various gas companies.


During the meeting, the committee reviewed the gas supply from Makori gas field to the Southern Gas Company (SSGC).

All eyes on ECB to come to eurozone’s rescue once more

FRANKFURT: The European Central Bank may have to ride to the eurozone’s rescue again very soon, analysts said Tuesday, as Spain looks set to be the next country sucked down by the never-ending debt crisis.


“Without substantial ECB action, the eurozone may soon lose the ability to control the market panic,” Berenberg Bank economist Christian Schulz wrote in a note to investors.


Spanish borrowing costs have soared to dangerously high levels and bailed-out Greece’s rescue programme appears to be on the rocks just as the the sovereign debt crisis took another turn when ratings agency Moody’s warned it could strip euro kingpin Germany of its coveted triple-A rating.


Moody’s argued that Germany — Europe’s biggest economy which has fared relatively well since the start of the crisis — faces increasingly incalculable risks in a possible Greek exit from the eurozone and soaring costs of potential bailouts for Spain and Italy.


After Greece, Ireland and Portugal were all compelled to seek aid from their European partners, the single currency area’s woes are showing no signs of abating, with Spain expected to be the next domino to fall.


Schulz at Berenberg Bank said Moody’s action laid bare “the limits of Europe’s current strategy” and the ECB, the only player currently capable of acting fast enough, will need to don its fire-fighting helmet once again.


With the eurozone’s public debt and deficit levels well below those of the United States and Japan, Europe has less of a debt problem than a confidence crisis, the analyst said.


And that was “largely because of the reluctance of its central bank to intervene forcefully in market panics. Moody’s rating action may bring the end to this reluctance a little closer,” Schulz argued.


Right from the start of the crisis, the ECB has not hesitated to launch a series of emergency measures.


The central bank quickly reversed last year’s rate hikes and earlier this month cut eurozone borrowing costs to an all-time low of 0.75 percent.


It embarked on a hotly contested programme of buying up the bonds of debt-mired countries, known as the Securities Markets Programme or SMP.


And in two long-term refinancing operations (LTROs) in December and February, it pumped more than 1.0 trillion euros ($1.2 trillion) into the banking system in a bid to avert a dangerous credit squeeze in the 17 countries that share the euro.


ECB officials have never ceased to repeat that such measures are only temporary and merely meant to buy time for governments to tackle the root causes of the crisis — profligate spending.


The SMP programme, for one, has lain virtually dormant since February and there were no signs of the ECB reviving it as recently as last week.


But ECB chief Mario Draghi, in an interview with Le Monde at the weekend, said: “We are very open. We have no taboos.”


The central bank’s governing council is scheduled to hold its next policy meeting on August 2.


The quarter-point rate cut at its last meeting was seen by many as too timid, especially as the bank announced no new emergency measures, so markets are waiting to see what Draghi might deliver next week.


A report by the INET Institute for New Economic Thinking, a group of 17 leading economists who make up the “Council of the Euro Zone Crisis,” called on the ECB to act.


“The ECB must use all tools (conventional and non-conventional) to ensure a more homogeneous transmission of monetary policy,” the economists wrote.


As the International Monetary Fund has suggested, “monetary policy should be accommodative during this emergency period, using both conventional and non-conventional policies to support” economic growth and facilitate the real exchange rate adjustments needed, they said.


Given that the current woes of Spain and Italy were “self-fulfilling fiscal crises, we believe that the ECB could and should be committing to much larger interventions in the market.”

Copyright AFP (Agence France-Presse), 2012

Cleaning up the mess: PSO demotes seven general managers

Action taken follow­ing findin­gs of a four-member invest­igativ­e commit­tee.  ” Yes, the committee has found irregularities in promotion cases and now action has been taken to ensure transparency,” Petroleum Ministry’s Joint Secretary Hamid Asghar DESIGN: MUHAMMAD SUHAIB.

ISLAMABAD: 

The top management of Pakistan State Oil (PSO) has taken action and demoted several general managers who were promoted in violation of the promotion policy set by the Ministry of Petroleum and Natural Resources.


Perks and privileges of the demoted officials have also been withdrawn, say sources.


The action was taken on Monday following findings of a four-member committee constituted by Adviser to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain.


The committee comprised PSO Board of Management Chairman Suhail Wajahat, PSO Managing Director Naeem Yahya Mir, Petroleum Ministry’s Joint Secretary Hamid Asghar and the head of human resource committee of PSO’s board of management.


The committee gave a presentation to Hussain on its findings relating to the promotion cases before taking action.


When approached, committee member Hamid Asghar remarked, “Yes, the committee has found irregularities in promotion cases and now action has been taken to ensure transparency in the whole process of promotion.”


According to the sources, seven general managers have been demoted to the post of deputy general manager. They either failed the tests, interviews or did not meet required criteria of the promotion policy.


In February this year, several deputy general managers had been promoted and made general managers, but many senior officials were ignored, raising eyebrows. Some managers were also promoted to the post of deputy general manager.


Media reports about the promotion of blue-eyed boys prompted the government to press the joint secretary of petroleum ministry to seek a report from PSO, the largest oil marketing company of the country. After assessing the report submitted by the PSO management, it was established that promotions were made by following a ‘pick and choose’ policy ignoring merit and seniority.


According to the sources, the acting managing director gave acting charge of general manager to several junior officers.


“The petroleum ministry had given a promotion policy under which officers had to undergo tests and interviews, but the officers were promoted while ignoring the criteria,” a source said, adding the ministry then formed a four-member committee to conduct tests and interviews.


“Now, two officers have been promoted to the post of senior general manager and six officers have been made general manager after passing tests and interviews,” the source said, adding orders had been issued. New promotions will be made in June 2013.


Talking to The Express Tribune, PSO Managing Director Naeem Yahya Mir stressed, “there is no demotion as they (officers) were on probation. In addition, the process is still not finalised as it needs ratification from the board.”


Published in The Express Tribune, July 24th, 2012. 

Mercedes hires Valmet to build more A-Class cars

Written by Shoaib-ur-Rehman Siddiqui

FRANKFURT: Daimler has awarded independent Finnish car manufacturer Valmet Automotive a contract to build more than 100,000 of its Mercedes-Benz A-Class compact cars from 2013 to 2016, the German automotive group said on Tuesday.


Daimler has received more than 40,000 orders for the A-Class, a volume model critical to its plans to close the gap with larger rivals BMW and Audi, it said.


“Our new compacts are so popular with our customers that the Rastatt and Kecskemet plants are completely utilised. We signed Valmet as an experienced production specialist who will provide us with additional A-Class capacity as of 2013,” Mercedes production chief Wolfgang Bernhard said in a statement.


Daimler said last week that it would invest a further 600 million euros ($727 million) by the end of next year in its Rastatt plant in Germany and add a third shift in October.


Bernstein analyst Max Warburton argues that it was Mercedes decision not to enter all market segments that has contributed primarily to its weak volume gains relative to BMW and Audi, forcing it to rely on higher sales of its existing models.


“Incremental models account for only 15 percent of Mercedes’ growth over the past three years, versus BMW at over 90 percent and Audi at 115 percent,” he wrote in a note earlier this month.


The need to outsource some production to third-party contractors such as Valmet highlights the significant split in the industry between the successful German premium brands and their mass-market European peers, which are suffering from too much spare capacity.


Whereas PSA Peugeot Citroen and General Motors have each said that they aim to close a plant in Western Europe, BMW is in talks with Netherlands-based manufacturer NedCar to build premium Mini subcompacts in addition to two Mini models already built by Magna Steyr in Graz, Austria.


Valmet Automotive, which also makes the Fisker Karma electric vehicle and is 60 percent owned by Finnish conglomerate Metso, said that the new contract with Daimler will allow it next year to call back 300 to 400 employees who had been laid off temporarily. It also hopes to be able to hire hundreds more new employees from 2014.


“We are very excited to manufacture for one of the world’s most recognised automotive brands,” Valmet President Ilpo Korhonen said.

Mutual funds witness highest growth in three years

Money market fund become­s the larges­t catego­ry of the indust­ry.  The equity funds category posted an average return of 13.5%YoY, outperforming the KSE 100-share index by 320 percentage points over the year. The benchmark KSE 100-share index gained 10.4% to 13,801 points.

KARACHI: 

The mutual funds industry rose by an impressive 51% to take its asset value to Rs379 billion in fiscal 2012, the highest gain in the past three business years.


The growth is almost twice compared to the growth of 25% witnessed last year, says a report released by InvestCap.


Major growth was witnessed in income fund, money market, Islamic income and Islamic money market funds, which surged by 124%, 95%, 43% and 22% respectively.


ABL Asset Management and NAFA Funds witnessed the highest growth of 233% and 102% in their asset under management. “The main reason for such growth was introduction of new funds under the umbrella of the company as well as appreciation in the size of income and money market funds of the respective fund managers,” adds the report.


Category-wise


During the financial year, the fixed income funds category of open-ended funds registered an appreciation of a massive 124% to reach at Rs87 billion and contributed 24% to the total open-ended size of the industry against a contribution of 17% in the preceding year.


Money market funds after witnessing tremendous growth of more than 100% during the last two years maintained its high pace upward trajectory with 95% growth in fund size. “With the induction of two new money market funds in the category, net assets of the category reached to Rs150 billion and made it the largest category in the industry,” says the report.


The reason behind this phenomenal growth in money market funds was the investor’s general preference for low-risk better return product, adds the report. “As the central bank kept the discount rate at existing level since October 2011, money market fund managers shifted their investment to six-month papers and received better returns from their investments in treasury bills.


The equity funds category posted an average return of 13.5%YoY, outperforming the KSE 100-share index by 320 percentage points over the year. The benchmark KSE 100-share index gained 10.4% to 13,801 points.


The main reason for the outperformance was superior return of AKD Opportunity Fund. The fund made returns of 32.3% and outperformed the category by 19% and the benchmark 100-share index by 22%, says the report.


Published in The Express Tribune, July 24th, 2012. 

Telenor restructures Indian unit ahead of auction

Written by Shoaib-ur-Rehman Siddiqui

OSLO: Norwegian mobile phone operator Telenor ASA plans to cut 2,000 jobs in India as part of a cost-cutting drive that some analysts saw as a signal it will stay in the country despite recent regulatory problems.


Telenor, which threatened to exit India after it lost its licenses in an industry-wide corruption probe, plans to reallocate resources to more profitable regions in India and brought forward by a year and a half the break-even point for a unit that has never turned a profit.


“By doing this, we believe that we can make (Indian unit) Uninor self-financing, that means cash-flow break-even, within the end of 2013,” Chief Executive Jon Fredrik Baksaas said. “In the previous business plan, this target was the first half of 2015.”


However, Telenor – which has more than 150 million subscribers across Europe and Asia – would only take part in a new licensing process, expected in late August, if it stayed within its self-imposed 155 billion Indian rupee ($2.8 billion) funding cap, Baksaas added.


Uninor is among eight carriers set to lose a total 122 zonal permits in September, after a Supreme Court order to revoke all licences granted in a scandal-tainted 2008 sale.


Still, analysts said the restructuring plans represent a subtle shift in Telenor’s approach, as a restructuring indicates the company is planning for the long haul rather than getting


ready to leave.


“We think Telenor’s language signals its intentions at the upcoming auctions,” Nomura said in a note to clients.


“We expect this be well received by investors as it helps to reduce the uncertainty for potential outcomes from the auction process,” Nomura analysts said. “Expectations may even start to rise that India might hit EBITDA break even ahead of plan.”


COMMITTED FOR NOW


Analysts at DNB also took Telenor’s message as a plan to stay. “As such Telenor remains committed to India for now, and is likely to partake in the upcoming spectrum auction, focusing on circles (zones) where they are doing relatively well.”


In the second quarter, Telenor picked up 2 million customers in India, a slowdown from earlier as the market saturates, and reduced its EBITDA loss to 625 million crowns from 965 million a year.


Telenor shares were among the top performers on the Oslo bourse, rising 2.5 percent on the Indian comments and the firm’s plans to buy back around 47 million shares.


Telenor’s second-quarter operating profit rose 32 percent to 4.29 billion crowns, prompting the company to lift shareholder returns as both its European and Asian operations improved.


The firm will buy back shares worth around 4.7 billion crowns ($771.1 million), improving total returns including the dividend to 12.6 billion crowns from 10.7 billion a year earlier.


For the full year, Telenor continues to expect group-wide revenue excluding India to rise in excess of 4 percent, in line with its guidance from three months ago, and still sees its earnings before interest, tax, depreciation and amortisation (EBITDA) margin in the 35 to 36 percent range.

Oil sales drop 3% as furnace oil demand falls

Petrol consum­ption shows stella­r growth of 21% in FY12.  DEMAND: 45% is the share of furnace oil in total oil consumption 14% is the share of petrol in total oil consumption. PHOTO: FILE

KARACHI: 

Pakistan’s oil consumption has dropped by 3% in fiscal year 2011-12 to 19.1 million tons, compared with 19.7 million tons in the previous year mainly because of a decline in furnace oil consumption in power production, data shows.


Despite electricity shortage, the cash problems due to inter-corporate debt prompted power companies to reduce furnace oil consumption, which fell by 7% to 8.4 million tons. Furnace oil accounts for around 45% of total oil consumption of the country.


According to figures released by the Oil Companies Advisory Committee (OCAC), the power sector consumed 5% less furnace oil as the government increased gas supplies to power companies by 4% in recent months.


Gas is a cheaper source of power generation and power companies have been given priority over others in gas allocation.


Moreover, liquidity constraints with oil marketing companies (OMCs) also led to restricted furnace oil supplies.


Smuggled diesel swamps market


Sales of gas oil, commonly known as high-speed diesel, declined by 1% to 6.8 million tons.


Topline Securities, in a report on Monday, said it believed that in FY12 diesel consumption could have been much higher, had there been no inflow of Iranian diesel through illegal channels. The market was swamped with smuggled diesel from Iran whose share had increased in the past few months, it said.


The research house cited rising price disparity between the two products as the reason behind increasing smuggling because Pakistani diesel cost more than Iranian diesel after continuous rise in taxes on the local product.


Gasoline consumption surges


Gasoline (petrol) sales depicted a robust growth of 21% on the back of growing automobile market and rising gas curtailment for compressed natural gas (CNG) filling stations, prompting consumers to switch to gasoline.


CNG industry officials claim that their gas consumption has dropped by at least 40% because of weekly shutdown of filling stations across the country to cope with gas shortage.


The share of petrol in total oil consumption rose to 14% in FY12 against 12% last year. In FY08, the share was 8%.


Atif Zafar, an analyst at JS Global Capital Limited, linked the decline in overall oil consumption to the problem of circular debt, which has adversely affected production at oil refineries.


Though domestic oil consumption had been declining in recent years, the share of imported oil was increasing because of the cash flow problem at oil refineries, which are not operating at their optimum levels, Zafar added.


Published in The Express Tribune, July 24th, 2012.

Severe inflation affecting business confidence

Survey cautio­ns growth across develo­ped econom­ies has hit a stands­till.  Survey cautions growth across developed economies has hit a standstill. DESIGN: ASAD SALEEM

KARACHI: 

The Global Economic Conditions Survey (Gecs) for the second quarter of 2012, undertaken by the Association of Chartered Certified Accountants and the Institute of Management Accountants, warns that double-digit inflation has dented business confidence on Pakistan.


While most major Gecs markets have held on to some of the confidence gains made in early 2012, Pakistan has not. Nearly half (47%) of all respondents, up from 41% in late 2011, reported losses of confidence and 58% of respondents believe the global economy is either deteriorating or stagnating, up from 53%. That said business confidence in Pakistan appears to be only marginally below the global average.


Severe inflation appears to be at the heart of the confidence problem in Pakistan. Respondents reported the strongest inflationary pressures of any major Gecs market, with 80% citing rising input prices, up from 75% in late 2011. As a result, trade credit conditions have deteriorated substantially and late payment has increased. This has led to some business failures, despite the fact that access to more formal finance appears to be becoming easier.


On the bright side, employment and investment both appear to be increasing. Opportunities highlighted more frequently focus on niche or innovative markets and products as well as collaboration across the supply chain, for instance on quality standards.


Published in The Express Tribune, July 24th, 2012.

Turkey’s Halkbank says Q2 net profit rises 38.5pc

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ISTANBUL: Turkish state-run lender Halkbank said on Tuesday its second-quarter net profit rose 38.5 percent to 709.01 million lira ($389.67 million), beating a Reuters forecast of 608.5 million lira.


The lender’s second-quarter net profit was at 512 million lira in 2011.


Net interest income rose to 1.18 billion lira in the second quarter from 790.9 million lira in the same period a year ago, according to an income statement posted with the Istanbul Stock Exchange. ($1 = 1.8195 Turkish liras)


Market watch: Investor participation drops as Ramazan begins

Benchm­ark KSE-100 index sheds 37 points.  Benchmark KSE-100 index sheds 37 points.

KARACHI: 

Stocks kicked off Monday on a dull note, as punters resumed trading for the first time since the start of the Muslim holy month. The trading day has been shortened to end at 2.00 pm in order to facilitate those fasting, resulting in reserved activity ahead of earnings announcements due this week.


“Pakistan equities closed the day little changed …  on [the] first day of the holy month, with [a] shorter trading day. Lack of participation was very visible, and activity was limited to select names,” commented Elixir Securities analyst Faisal Bilwani.


The Karachi Stock Exchange’s (KSE) benchmark 100-share index shed 0.26% or 37.24 points to end at the 14,527.25 points level. “Stocks closed bearish amid institutional profit-taking in stocks across the board, on concerns for unrest in the city and fall in global stocks on [the] euro-zone debt crisis,” said Ahsan Mehanti from Arif Habib Corp.


Trade volumes plummeted to 28 million shares compared with Friday’s tally of 96 million shares. The value of shares traded during the day was Rs935.17 million.


“Volumes were further damped by the arrival of the month of Ramazan and ongoing political cases being heard in the Supreme Court of Pakistan,” observed JS Global analyst Shakir Padela.


“Broader market failed to generate any interest today, however earnings related excitement will bring fresh liquidity and we see volumes to improve in the days ahead,” added Bilwani.


Shares of 245 companies were traded on Monday. At the end of the day 69 stocks closed higher, 127 declined while 49 remained unchanged.


Jahangir Siddiqui and Company was the volume leader with 3.87 million shares losing Rs0.42 to finish at Rs15.06. It was followed by Fauji Fertilizer (FFC) with 1.57 million shares gaining Rs1.05 to close at Rs118.10 and Descon Oxychem with 1.34 million shares gaining Rs0.36 to close at Rs4.32.


“FFC was able to close the day up 0.9% as investors are taking bets on a high cash payout with the final result expected to be announced early Wednesday morning,” Padela said.


Foreign institutional investors were buyers of Rs54.15 million and sellers of Rs37.57 million, according to data maintained by the National Clearing Company of Pakistan Limited.


Published in The Express Tribune, July 24th, 2012. 

ECC preview: Who is to pay the Rs736 million gas outage cost?

Gas suppli­ers, power produc­ers likely to thrash it out in mediat­ion.  Gas suppliers, power producers likely to thrash it out in mediation. CREATIVE COMMONS

ISLAMABAD: 

In a busy day, the top economic decision making body is expected today to ask gas provider and independent power producer to settle the dispute through mediation, ease tax for Swede Bus Pakistan, decide what to do with surplus wheat and endorse Rs14.6 billion bailout package for Pakistan Steel Mills.


While Ministry of Water and Power and Ministry of Petroleum go at each other over Rs736.8 million losses claimed by Independent Power Producers (IPPs) incurred due to gas curtailment, the Economic Coordination Committee (ECC) of the cabinet may opt to resolve the issue through joint expert mediation between the parties.


Ministry of Water and Power has proposed in a summary that the gas provider Sui Northern Gas Pipeline Limited (SNGPL) should bear the loss of Rs736.8 million incurred by IPPs on account of inadequate gas supplies due to preferential treatment given to industrial consumers.


However, the petroleum ministry has strongly opposed the proposal saying that force majeure event was declared by SNGPL in line with the provisions of Gas Sales Agreement (GSA) between SNGPL and IPPs. The law division has supported the proposal to resolve the issue through Joint Expert Mediation between the gas supplier, power purchaser and IPPs.


IPPs have claimed a loss of Rs735.87 million on account of deduction by power purchaser due to failure to provide the agreed amount of electricity. According to the break-up, Orient power plant faced a loss of Rs234.27 million, Saphire Rs251.60 million and Rs250 million by Saif due to deduction during February to May 2011.


The four gas-based IPPs namely Saif, Saphire, Orient and Hamore with combined generation capacity of 842 megawatts were set up as per the policy for power generation projects 2002. An aggregate of 152 million cubic feet gas per day (mmcfd) gas through SNGPL was allocated to the four by ECC in 2004. This allocation expired on June 30, 2011 following which ECC on June 30, 2011 approved gas allocation of 76 mmcfd till November 30, 2011.


The gas supplier on February 28, 2011 claimed force majeure event under the Gas Sales Agreement owing to its inability to supply gas to the projects due to rupture of pipeline supplying gas from Zamzama gas field and terrorist activity at Maramzai gas field.


The gas supplier modified arrangement and reduced supply to 31 mmcfd against minimum daily quantity of 38 mmcfd till resumption of normal supply from Maramzai gas field. The force majeure was lifted by the gas supplier on May 11, 2011 and full supply of gas was restored to each of the four power producers. Due to this gas curtailment, the power producers were unable to dispatch their full output and capacity payments were reduced by the power purchasers.


The Ministry of Water and Power informed that sponsors of the projects are agitating that the gas supplier, in breach of contract, has failed to supply contractually assured minimum daily quantity of gas whereas at the same time other industrial consumers were supplied gas in preference without any binding commitments and obligations. The power project sponsors argue that any reduction in capacity payments due to non-availability of gas shall have adverse impact on debt servicing which may ultimately lead to default.


Meanwhile, the Revenue Division has proposed the ECC to waive off sales tax at import stage for Swede Bus Pakistan (Pvt) Limited.


Also on the agenda is what to do with 1.2 million tons of wheat stock piled up with Pakistan Agricultural Storage and Services Corporation. Pakistan is negotiating a barter trade deal with Iran to export one million tons of wheat and due to different issues between the two countries, the export has been delayed.


ECC is also expected to endorse the Rs14.6 billion bailout package for Pakistan Steel Mills, allocation of gas from the latest finding in Tal Block’s Makori field and allocation of gas from Oil and Gas Development Company’s NIM West field to Sui Southern Gas Company.


Published in The Express Tribune, July 24th, 2012.

Legal documents approved: Demutualisation of bourses takes a step forward

Regula­tory, commer­cial affair­s of stock exchan­ges separa­ted.  BOARDS OF BOURSES: 6 is the number of directors nominated by SECP 4is the number of directors nominated by exchanges.

ISLAMABAD: 

In a step towards bringing greater transparency to the country’s stock exchanges, the equities market watchdog on Monday approved legal documents aimed at separating regulatory and commercial affairs of the bourses and turning them into profitable corporations.


These documents, including draft of memorandum and articles of association, had been submitted by the stock exchanges under a mandatory requirement of the Stock Exchanges (Corporatisation, Demutualisation and Integration) Act 2012. The approval of the documents by the Securities and Exchange Commission of Pakistan (SECP) has taken the process of corporatisation and demutualisation of the stock markets a step further.


Importantly, the SECP approved revaluation of assets and liabilities of the stock exchanges. The revaluation has been done by chartered accountants hired by the exchanges and would become a base for issuance of shares to existing shareholders, said an SECP official.


Promulgated on May 7, the Stock Exchanges Act provides a framework for the corporatisation, demutualisation and integration of stock exchanges. According to the Act, the demutualisation process will be completed by September 3 this year.


The SECP has also approved authorised and paid-up capital of the exchanges with the number of shares to be issued, names of initial shareholders of the exchanges and the number and value of shares to be allotted to each member of the bourses.


The SECP also approved names of member-directors of the bourses nominated by the exchanges, along with names of SECP-nominated six directors on each stock exchange to act as first directors.


According to the SECP official, the watchdog has decided to retain existing members of the boards. Since SECP-nominated members will be increased to six from existing four, the commission has nominated two additional members on the board of each stock market.


The stock market’s nominated members will come down to four from existing five, thus, the exchanges have removed one member from the existing boards while the rest will continue to perform their duties.


The SECP also approved a detailed five-year development plan for stock markets together with estimates of capital expenditure and sources of finance.


It said demutualisation will bring Pakistani capital market at par with other international jurisdictions and will result in enhanced governance and transparency at the stock exchanges. The process is also expected to attract strategic investors which will not only provide equity and technical expertise but will also result in increased visibility of these exchanges on international capital market forums.


At present, the stock exchanges are operating as non-profit companies with a ‘mutualised’ structure wherein members have ownership as well as trading rights. This structure creates conflict of interest as members predominantly control affairs of the stock exchanges which results in lack of transparency in operations and compromises investor interest.


Published in The Express Tribune, July 24th, 2012.

Simon Property second-quarter earnings rise

NEW YORK: Simon Property Group Inc , the largest US owner of malls and outlet centers, said Tuesday that second-quarter funds from operations (FFO) rose more than 18 percent, as occupancy, sales and rent at its properties increased.


The world’s largest real estate company’s second-quarter FFO rose to $688.8 million, or $1.89 per share, from $583.0 million, or $1.65 per share, a year earlier.


FFO is a real estate investment trust performance measure that usually excludes gains or losses from property sales and removes the effect depreciation has on earnings.  (Reporting By Ilaina Jonas; editing by Jeffrey Benkoe)


After Swiss-based refinery Petroplus filed for insolvency last year.


The refining units, which stopped production on January 10, restarted operations last month under a deal with Royal Dutch Shell, the former owner of the refinery, to deliver 100,000 barrels per day of products.


The refinery, which has a staff of 550, has benefited from improved refining margins in line with lower crude oil prices.


“There are two bids which we believe are relevant and acceptable,” Nicolas Vincent, union coordinator for the refinery told Reuters, adding the unions had examined all offers.


“The refinery workers would not understand if the court did not retain any offers,” Vincent said.


According the Paris Normandie newspaper, the two bids are from foreign companies described as “solid”. French radio Europe 1 said the firms had offered to keep all 550 staff.


France’s new Socialist government has taken an active role in managing the situation as it tries to avoid a wave of factory closures after unemployment hit its highest level since 1999.


Vincent declined to detail the offers, which will be examined by the Rouen commercial court, in northwestern France, from 1200 GMT.


French refiners, in particular, have been struggling for years due to poor margins, weak demand and a surplus of gasoline capacity while the traditional market for French gasoline exports, the United States, has dried up.


Refineries in France have lost 2 billion euros ($2.42 billion) over the last three years, the oil industry lobby says.


France’s plan for a one-off tax on oil inventories announced earlier this month is likely to further damage the competitiveness of the beleaguered refining industry and discourage investments in unprofitable refineries.


The tax is expected to cost the Petit-Couronne plant 8 million euros. ($1 = 0.8253 euros)

Standard Bank partners with Angola’s AAA Activos

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LISBON: South Africa’s Standard Bank said on Tuesday its Angolan unit has entered a strategic partnership with local insurance and fund management firm AAA Activos to pursue growth in the sub-Saharan African country.


Standard Bank added in a statement posted on its website that it will hold 51 percent of the new shareholding structure in Angola under the agreement, with AAA Activos holding the remaining 49 percent.


NAB recommends top FBR officials for Exit Control List

Move comes follow­ing case on Rs47b allege­dly evaded in taxes.  The Rs47 billion includes a principal amount of Rs26 billion owed by five cellular service providers since 2007. FBR tax auditors had pointed out the discrepancy in 2010.

ISLAMABAD: 

In a significant development in the case of Rs47 billion allegedly evaded in taxes by the five telecom companies operating in the country, the National Accountability Bureau (NAB) has recommended the names of three senior officials of  Federal Bureau of Revenue (FBR) be placed on the Exit Control List (ECL).


As per an official handout issued by NAB, the names of former FBR chairman Mumtaz Haider Rizvi, Inland Revenue Member Shahid Hussain Asad, and Chief of Sales Tax/Federal Excise Duty Abdul Sattar Aora, have been forwarded to the Ministry of Interior to be put on the ECL.


The Rs47 billion includes a principal amount of Rs26 billion owed by five cellular service providers since 2007. FBR tax auditors had pointed out the discrepancy in 2010. The cellular companies in question had approached the office of the Commissioner Inland Revenue (CIR) on the matter, which had directed them to pay the tax. Following this, they went to the Appellate Tribunal Inland Revenue. The tribunal upheld the CIR’s decision and again directed the cellular service providers to deposit the tax.


The companies, however, had remained adamant not to pay the amount. They told the chief commissioner of the Large Tax Unit they were ready to pay interconnect charges applicable from July this year, provided the FBR waives off past liabilities worth Rs47 billion.


On July 4, 2012, NAB Chairman Admiral (retd) Fasih Bokhari took suo motu notice of the matter and summoned the FBR chairman to appear in person to explain details about the defaulted amount.


FBR Chairman Mumtaz Haider Rizvi was interrogated for over two hours at the National Accountability Bureau (NAB) headquarters on July 6, and was allowed to leave the premises only after he agreed not to issue a notification to write off the outstanding amount.


“The FBR chairman tried to convince FBR officials that the waiver is in line with the law and said he intended to grant it the very next day. However, he had to retreat once he was confronted with relevant evidence and supporting documents,” the head of the bureau’s media wing, Dr Ayesha Siddiqa, had told The Express Tribune.


Published in The Express Tribune, July 24th, 2012.

Thar coal project Step one complete, expert tells Zardari

Underg­round Coal Gasifi­cation to genera­te power in ten months.  “Pakistan’s huge natural resources need to be exploited to meet energy requirements requirements is satisfied through burning coal to produce energy,” President Zardari. DESIGN: FAIZAN DAWOOD

KARACHI: 

Global Mining of China, Sindh Engro Coal Mining Company and Oracle Coalfields of UK have all completed their feasibilities and with it phase one of their projects.


Briefing the Thar Coal Development Board meeting chaired by President Asif Ali Zardari, Coal and Energy Development Secretary Mohammad Sohail Rajput on Monday said that the four blocks of Thar Coalfield are at an advanced stage.


Global Mining is also scheduled to start mine development activities in Block I by October 2012 which will lead to mine construction of five tons annually by 2015 and power generation of 900MW by financial year 2016. The total composite cost of the project is $3 billion.


Meanwhile, the Oracle Coalfield will initiate mine development phase for its $860 million mining and power project by early 2013.


The president was informed that Sindh Engro Coal Mining Company was pursuing to achieve the financial close for its $3 billion coal mining and power generation project at Block II of Thar coalfield.


About the Underground Coal Gasification project, the meeting was told that the Planning Commission has conducted project appraisal in June 2012 and decided that pilot project comprising one gasifier should be made operational for power generation of eight to 10 MW within 10 to 12 months. Furthermore it was also said at the meeting that fund amounting to Rs1.8 billion to cover the cost of gas purification plant, power generation units and establishment/O&M charges for one year will be provided. The meeting was informed that after the successful power generation, a complete technical review will help in further developing and expanding infrastructure for generation of 100MW of power.


President Zardari while highlighting the impacts of present energy crisis said that the huge natural resources needed to be explored and harnessed to meet the energy requirements of the country.


Published in The Express Tribune, July 24th, 2012.

German industry sees stable 2012 power prices

Written by Shoaib-ur-Rehman Siddiqui

FRANKFURT: Only 30 percent of German industrial players expect electricity prices to keep rising in 2012, while 70 percent believe they will be stable, ZEW’s bi-annual energy prices survey showed on Tuesday.


In the last poll of 200 companies in Europe’s biggest economy six months ago, 47 percent of those surveyed expected prices to rise in 2012.


“This assessment tallies with stable prognoses for primary energy sources in the world market,” said Nikolas Woelfing, energy researcher at the Mannheim, Germany-based institute, known for its business sentiment indicators for the economy.


“According to this line, an increase of power prices up to year-end is unlikely,” he said.


European wholesale power prices monitored by Reuters are currently near 20-month-lows, having been undermined by easing demand due to the euro zone crisis and additional renewable energy capacity.


The price of Germany’s benchmark calendar year 2013 baseload contract for round-the-clock supply next year, at 47.80 euros ($58) per megawatt hour (MWh), has fallen by 9 percent this year.


The companies surveyed by ZEW were active in energy-intensive trade and manufacturing and in local energy distribution.


Some 75 percent of those polled believed oil prices would be steady or lower in the coming six months while coal prices would remain unchanged. Some 65 percent believed gas prices would be stable.


Looking at five years ahead, a majority of those surveyed predicted higher energy prices.


They cited higher global demand for oil, gas and coal and rising costs related to a move towards more renewable energy.


Apart from those main fuel inputs that have an impact on power prices, related carbon emissions rights prices were seen falling not just over the next six months but also over the coming five years.


Half of all respondents believed that carbon prices would not rise above 10 euros a tonne again this year. December 2012 expiry carbon currently costs 7.21 euros.

National Bank of Abu Dhabi Q2 profit edges up, meets estimate

Written by Shoaib-ur-Rehman Siddiqui

DUBAI: National Bank of Abu Dhabi , the largest lender by market value in the United Arab Emirates, reported a 2-percent rise in quarterly profit on Tuesday due to higher net interest income, meeting forecasts.


NBAD had second-quarter net profit of 1.05 billion dirhams ($284.8 million), up from 1.03 billion dirhams in the same period a year earlier, the bank said in a statement.


Analysts had forecast an average profit of 1.031 billion dirhams in a Reuters poll.


Net profit for the first half of the year rose 6.9 percent to 2.08 billion dirhams compared to 1.95 billion dirhams in the opening six months of 2011.


The improvement in top-line revenue was due to higher net interest income and net income from Islamic financing contracts, the bank said, which grew 4.6 percent in the first half of 2012 compared to the same period last year.


“The group has not changed its forecasts for 2012,” said Chief Executive Michael Tomalin who is slated to retire this year. “Assuming continuing current market conditions, (we expect) mid to high single digit growth in earnings for the year with non-performing loans peaking round 3.75 percent of performing loans by year end or early 2013,”


The bank booked net impairment charges of 292 million dirhams in the three months to June 30, a drop of 12 percent on the same period last year. Provisions for the first six months of 2012 were down 13.2 percent due to lower collective provisions and strong recoveries, the statement said.


Non-performing loans increased to 5.34 billion dirhams, accounting for 3.18 percent of the loan book. At the end of the second quarter of 2011, they stood at 4.17 billion dirhams, or 2.65 percent of the loan book.


Operating income for the quarter reached 2.07 billion dirhams, up 3.2 percent over the same period last year. The corresponding period of 2011 yielded 2 billion dirhams.


Loans and advances grew to 162.8 billion dirhams at the end of the second quarter, up 2.1 percent on the end of 2011 and 6.4 percent on the same point last year.


Short-term government deposits worth 27.2 billion dirhams, which had been placed with NBAD in the first quarter, were withdrawn in the second, meaning a 14.5 percent quarter-on-quarter slump in deposits at the bank.


Compared to the end of 2011, deposits were up 5.7 percent to 162.8 billion dirhams.

ING in restructuring talks with EC, Dutch state

Written by Shoaib-ur-Rehman Siddiqui

AMSTERDAM: Dutch bank and insurer ING , forced to sell assets in return for receiving state aid during the financial crisis, said on Tuesday it was in talks with the Dutch state and the European Commission over an amended restructuring plan.


The discussions are not expected to affect ING’s plan to divest its insurance business, but could mean it no longer has to sell its Dutch banking unit, known as WestlandUtrecht, according to analysts, particularly given the current tough financial environment.


“Good progress has been made but more time is needed to come to a final agreement acceptable to all parties,” ING said in a statement.


“We are still firmly behind the plan to divest all the insurance operations,” a spokesman said, but declined to give more details.


ING and the European Commission disagree over the total amount and extent of the state aid ING actually received, and have fought a prolonged legal battle.

Czech central bank to hold rates on Aug 2

Written by Shoaib-ur-Rehman Siddiqui

reatserPRAGUE: The Czech central bank is expected to keep interest rates on hold in August after trimming them to a fresh low in June as the contracting economy gets some help from a weak exchange rate that eases monetary conditions, a Reuters poll showed.

The bank cut the key two-week repo rate to an all-time low of 0.50 percent on June 28 in response to pressure from the poor euro zone economy and budget tightening but did not commit to more easing given the crown currency’s weakness.

Eighteen out of 19 analysts polled by Reuters said they expected the bank to keep rates on hold. One said the bank would deliver a 25 basis point cut.

Of the 18, fourteen said the easing cycle was already at the bottom and the next move in rates would be a hike. The remaining four said the bank would make one more 25-basis point cut by the end of the year before reversing policy.

The government has been on an austerity campaign since it came to power two years ago.

Its fiscal discipline has helped cut government bond yields to record lows but it also hit consumption, helping to send the central European economy to a recession as it recorded two consecutive quarterly contractions in the fourth and the first quarter.

A second round of tax hikes slated for next year has already been approved in the lower house of parliament.

Government policymakers said on July 19 they expected the economy to do worse than they had thought earlier, and said they would refrain from additional tightening needed to stick to fiscal targets because the low-indebted economy could afford some slippage.

The crown currency’s average rate in the third quarter has been 25.44 against the euro, weaker than the bank’s forecast of 24.6, although it recovered some ground since end of June when it hit a 7-month low of 25.980 per euro.

The statistics office is due to release preliminary second quarter GDP data on Aug 14. Most analysts predict the economy continued to contract as external demand for Czech exports slowed and domestic demand remained subdued.

Inflation edged up in June to 3.5 percent from 3.3 percent in May mainly due to food prices, while adjusted inflation excluding fuels, a measure of demand-driven price growth, remained negative.

Factory gate prices (PPI), an early gauge of inflation trends in the economy, fell 0.3 month on month bringing the annual rate to 1.5 percent.

The central bank is expected to release a new macroeconomic forecast at the August meeting and most analysts expect downward revisions in growth forecasts.

Are religious beliefs a drag on economic growth?

An Islami­c econom­ic perspe­ctive on limits to growth of busine­ss.  Islamic banks are on average at least as productive, profitable and efficient as conventional banks. ILLUSTRATION: JAMAL KHURSHID

LONDON: 

Many critics of the religion as a social organisation argue that Islam, like other old religions, stymied business in general and economic activity in particular. One staunch advocate of such a view is Timur Kuran who has written extensively on the negative impact of Islamic contract laws and the division of business and estate consequent to the Islamic law of inheritance. On the surface, Kuran’s view is appealing but a deeper, more objective, look reveals that it is not the institution of religion that is the cause of underdevelopment. Rather, the early stage of development in which many Muslim countries are in has caused the debilitated and enervated commercial sector which Kuran laments.


The argument can be better understood with reference to the slow growth rates in the advanced or developed countries as compared with developing countries and emerging markets, which by and large have much higher growth rates. It would be absurd to conclude from national time series data on growth rates of the countries of the world that the economic development itself is responsible for slower growth in advanced countries. Development of economies and the businesses therein is indeed a complex phenomenon and attributing slower commercial growth to one factor like the institution of religion is at best misleading.


In a country like Pakistan, it can easily be seen that the business community indeed is deeply religious. In fact, most successful business families are probably more religious than the average man on the street. Religion or faith has not deterred them from developing successful businesses. There are of course limits to growth of businesses owned by Muslims, but religion has not proven to be an encumbrance. Even in cases where Muslim owners have shown reluctance to use interest-based finance to expand their businesses, they have managed to find alternative Shari’a compliant methods to finance growth and expansion. In fact, in the contemporary context, non-availability of Shari’a compliant finance can be seen as a limit to growth, rather than the use of Shari’a principles and contracts, as a reason for poor performance or lower productivity of the businesses owned by Sharia sensitive Muslims.


Islamic banking and financial institutions provide a good example of Sharia sensitive business. There are a number of studies comparing efficiency and productivity of Islamic banks with their conventional interest-based counterparts, on the global, regional and national levels. The results of such studies are at best inconclusive, suggesting that Islamic banks are on average at least as productive, profitable and efficient as conventional banks in the jurisdictions wherein they co-exist with conventional banks.


There could be some variations to this general conclusion. For example, some studies suggest that in certain countries Islamic banking operations (in the form of Islamic windows) are more efficient than fully-fledged Islamic banks. One plausible explanation of such a trend is with reference to economies of scale. Conventional banks tend to be significantly larger than Islamic banks in terms of paid up capital and assets under management (AUM). Hence, Islamic windows of conventional banks naturally have a cost advantage over small fully-fledged Islamic banks. Bigger Islamic banks, however, do not suffer from this cost disadvantage. In Pakistan, for example, Meezan Bank is the largest fully-fledged Islamic bank, with paid-up capital of over Rs8 billion and AUM of Rs205 billion, which makes it overall one of the largest banks in the country. The bank has performed exceptionally well, with comparable performance with conventional banks.


In terms of sheer growth, businesses located in or serving large markets are expected to grow faster than those serving small markets. As it happens, there are quite a few Islamic countries with huge populations such as Indonesia with 242 million people, Pakistan with 177 million, Bangladesh with 150 million, and Turkey with 74 million. The future growth of business in such economies is expected to be significantly higher than countries with smaller markets.


Therefore, it could easily be concluded that religious beliefs are not a drag on the economic growth and business development. An array of other economic, social, legal and political factors must remain relevant. However, the market size will remain a major pull factor. Faith-related trends like consumption of Halal products or the use of Islamic financial services should not be seen as a constraint on growth but rather new opportunities for business development and improved profitability.


THE WRITER IS AN ECONOMIST AND A PHD FROM CAMBRIDGE UNIVERSITY.


Published in The Express Tribune, July 23rd, 2012.

Pakistan struggles to meet Millennium Development Goals

The close link betwee­n family planni­ng and econom­ic succes­s.  The close link between family planning and economic success. CREATIVE COMMONS

KARACHI: 

The world celebrated World Population Day on July 11. The London Summit on family planning launched the unprecedented initiative to meet the demand for modern family planning in developing nations with an aim to seek more funding through legislation while pushing governments across the globe to commit more funds and budgets to this cause. The cost is around $4.1 billion per year. The aim is to give 120 million more women access to better family planning by 2020.


Pakistan is the sixth most populous country in the world with a population of around 173 million people. The growing trend of 35% annually can take the tally to mammoth proportions by 2020. Understanding and awareness of long-term impacts to the people of the country remain unknown to policymakers as ignorance and oblivion remains adamant.


By 2050, Pakistan is expected to have around 309 million people, much higher than US with 239 million, Iran with 100 million, Turkey with 99 million, Bangladesh with 258 million, Russia with 109 million. China and India are predicted to be at an astounding 1.4 billion and 1.6 billion respectively. If we look at the geographic size of most countries here, the comparative allocation of budgetary support given to health assurance is far higher and superior elsewhere than in our country, leaving just India behind. In a country with one of the higher population numbers and one of the lowest healthcare percentages in the region, it is imperative to find new ways to improve general and reproductive healthcare, review the government healthcare regulations for amendments, increase the annual budget contribution to the health sector and control the population numbers as the world grows smaller every passing day and less healthier. Surprisingly, the recent budget allocation to health has not addressed this issue adequately.


More interesting is the 2005-2050 world survey analysis, where it is indicated that Pakistan is one of the nine developing nations where projected growth in population will surpass half the world’s projected population increase.


According to a World Bank report in 2006, 22.6 % of population in Pakistan lives below the poverty line, earning less than $1.25 a day. These numbers have risen since then, especially after the recent floods of 2010, raising living costs and creating massive displacements of populations within most affected parts of the country. Adding to that, the massive inflation has further burdened people already affected by rising health issues, diseases and infections, after the post- rain hit impact analysis.


Sadly, we are far from reaching the millennium development goals as over 45% of the population has limited or no access to any form of healthcare. Low priced, better quality healthcare is required to sustain us, as private sector needs to further contribute efforts towards helping people live, in order to eventually create a future healthy population numbers that can contribute to the country , both socially , economically and financially in the long run.


The government must do more to address this menace by conducting strict quality and safety checks over private and government hospitals, ensuring adherence to 100% infection prevention across medical health facilities by rewarding people for their contributions and reprimanding people for negligence.


There is a greater link between family planning and economic success than we have come to know.


“Demographic analysis can help governments target investments to meet the needs of current and future generations,” says the UNFPA report on Population Dynamics in the Least Developed Countries: Challenges and Opportunities for Development and Poverty Reduction. Investments in infrastructure and employment will yield high returns if they are matched by investments in education, skills and health. Fulfilling the unmet need for modern family planning in developing countries would cost $3.6 billion annually, but the latest data available in 2011 showed that this investment would actually lower the cost of maternal and newborn health services by $5.1 billion, resulting in a net total savings of$1.5 billion.


For Pakistan, investing in voluntary family planning today would not only pay dividends now, but would also help the next working generation of young people enjoy opportunities and forge a brighter future.


THE WRITER IS A BANKER AND BROADCASTER FOR FM91


Published in The Express Tribune, July 23rd, 2012.

Japan, TEPCO accused of ignoring nuclear accident risks

Written by Shoaib-ur-Rehman Siddiqui

tepcoTOKYO: Japanese officials and Tokyo Electric Power ignored the risk of an atomic accident because they believed in the “myth of nuclear safety”, a government-backed report on the Fukushima crisis said Monday.

The study, compiled by a panel of scholars, journalists, lawyers and engineers, also said officials were poorly trained to deal with the crisis after the plant’s reactors went into meltdown last year.

“The fundamental problem lies in the fact that utilities, including TEPCO and the government, have failed to see the danger as reality,” it said, adding that “they were bound by a myth of nuclear safety and the notion that severe accidents do not happen at nuclear plants in our country.”

The 450-page report is the fourth inquiry into the worst nuclear accident in a generation, which happened after the huge tsunami of March 2011 crashed into the Fukushima Daiichi nuclear power station.

Reactors went into meltdown, sending clouds of radiation over a wide area, forcing tens of thousands of people from their homes, some possibly for the rest of their lives.

A damning parliamentary study that said the disaster was “man-made” was released earlier this month, following a private report by a group of journalists and scholars.

Tokyo Electric Power, or TEPCO, the operator of the crippled plant, largely cleared itself of blame, saying the size of the earthquake and tsunami was beyond all expectations and could not have reasonably been foreseen.

The latest report said however that TEPCO and the Nuclear and Industrial Safety Agency (NISA) were ill-prepared to cope with a tsunami or severe accidents, and that the government bungled the evacuation.

“Preparedness for a large-scale complex disaster was insufficient; and they were unprepared for the release of a large amount of radioactive materials into the environment,” it added.

The report also took a swipe at former Japanese premier Naoto Kan and his government, saying there was a swirl of bureaucratic confusion in the days following the natural disasters and reactor meltdowns.

Kan’s bid to wrestle the crisis from incompetent nuclear officials did not help, it added.

“More harm was done (than good) as his involvement… could have confused the scene, potentially missing opportunities to make important judgments and creating opportunities for misjudgments,” the report said.

TEPCO did not train employees “to think independently and to act, and lacked flexible and proactive thinking required for crisis response”, the report added.

The latest report backed the government and TEPCO’s findings that the plant’s cooling systems were knocked out by giant waves that slammed into the plant.

Many scientists and activists have disputed this finding, suggesting it was the initial earthquake that damaged the reactors.

A parliamentary report released earlier this month charged that ingrained collusion between TEPCO, the government and regulators — combined with a lack of any effective oversight — led directly to crisis.

“They effectively betrayed the nation’s right to be safe from nuclear accidents. Therefore, we conclude that the accident was clearly ‘man-made’,” said the Fukushima Nuclear Accident Independent Investigation Commission’s report released on July 5.

The independent group of scholars and journalists, who reported their findings in February, said TEPCO could and should have done more.

It also said that had the company had its way, its staff would have been evacuated from the crippled plant and the catastrophe could have spiralled even further out of control.

Japan has seen a wave of anti-nuclear sentiment with weekly protests in the tens of thousands gathering in front of the prime minister’s official residence, which have grown since the approved restart of two reactors.

Copyright AFP (Agence France-Presse), 2012

Apple vs Samsung patent trial kicks off in Australia

Written by Shoaib-ur-Rehman Siddiqui

samsuSYDNEY: Apple Inc and Samsung Electronics Co began the latest round of their long-running global patent war on Monday as an Australian judge started hearing evidence for an anticipated three-month long trial.

Apple and Samsung have been locked in an acrimonious battle across 10 countries involving smartphones and tablets since April 2011, with the Cupertino, California-based company filing a suit in Australia saying the touch-screen technology used in Samsung’s new Galaxy 10.1 tablet violates Apple patents.

The quarrel has triggered expectations that some of the pair’s $5 billion-plus relationship may be up for grabs. Samsung counts Apple as its biggest customer and makes parts central to Apple’s mobile devices.

While any decision in the Australian case is unlikely to have a substantial impact in other jurisdictions like Europe or the United States where the technology giants are also suing each other, the trial proceedings could reshape the legal strategies employed by Apple and Samsung in other countries, lawyers say.

Mark Summerfield, a patent lawyer and senior associate with Melbourne-based law firm Watermark, said “there’s no doubt there’s a strategic and psychological effect” attached to the Australian case. “Courts in other countries will watch what is happening here,” he said.

Apple and Samsung representatives declined to comment on Monday at the hearing.

The Australian case arose in April 2011 when Apple said Samsung copied the design of some of its tablet and smart phone devices. Samsung has since launched a counterclaim in Australia alleging that Apple infringed a number of South Korean technology firm’s data-transmission patents.

The lawsuits from both companies are being heard as one case in the Australian federal court.

Samsung won an early round of the Australian litigation when it succeeded in overturning an injunction on the sale of its Galaxy 10.1 tablet in Australia just before Christmas last year.

But Apple won a heavyweight US round when a judge banned the sale of both Samsung’s Galaxy 10.1 tablet and the Galaxy Nexus phone ahead of a formal trial there. Patent cases are also pending in Britain and Germany.

Summerfield said that unless the two companies come to a global settlement, the Australian case is likely to run until well into 2014 as an appeal to any ruling at the end of the current trial “is a 100 percent certainty”.

Europe fears send US debt yields to new lows

Written by Shoaib-ur-Rehman Siddiqui

us-bondNEW YORK: US Treasuries yields fell to new record lows on Monday as concern that the euro zone’s debt crisis is spiraling out of control led investors to seek out the relative safety of US debt.

US bond yields have fallen this month as economic growth loses traction and as investors increase bets that the Federal Reserve will launch new stimulus in a bid to reignite growth, and encourage new lending.

New fears over Europe’s debt crisis on Monday sparked a rush to safe haven bonds after Murcia on Sunday became the second Spanish region to seek help from the central government, sending Spain’s debt yields to record highs.

“The market is responding to the ongoing stresses in Europe,” said Chris Ahrens, interest rate strategist at UBS in Stamford, Connecticut.

The eastern Valencia region of Spain said on Friday it needed help and media reported more regions are likely to do the same..

A planned visit by Greece’s troika of creditors on Tuesday added to nervousness over the region, with many investors continuing to fear a Greek exit from the euro zone, for which markets are unprepared.

Greece has slid further off course from its fiscal and economic reform targets, and the man in charge of privatizing state enterprises resigned last week in despair at delays. The European Central Bank has also stopped accepting Athens’ bonds as collateral for lending to Greek banks.

US Treasuries have benefited from a relative scarcity of high-grade debt, as well as expectations that the Fed will further support bonds through new debt purchases.

Benchmark 10-year note yields have fallen a full percentage point since March, when they traded as high as 2.40 percent. They traded as low as 1.3977 percent on Monday, 4 basis points below the previous low of 1.44 percent first reached on June 1.

Thirty-year bond yields fell to 2.49 percent, below its previous low of 2.51 percent also reached on June 1.

Spain fears push 10-year US yields to historic low

Written by Shoaib-ur-Rehman Siddiqui

spanish-bondLONDON: US 10-year government bond yields hit historic lows in Europe on Monday as worries that Spain may need a full-blown sovereign bailout prompted investors to seek safe haven assets.

Murcia on Sunday became the second Spanish region to say it would tap an 18-billion-euro government programme to keep its finances afloat. The eastern Valencia region said on Friday it needed help and media reported more regions are likely to do the same..

The news overshadowed approval of a bailout for Spain’s banking sector, worth up to 100 billion euros, agreed on Friday, which along with fresh austerity measures and looser fiscal targets was aimed at avoiding a full bailout that the euro zone can barely afford.

US 10-year government bond yields were last 4.4 basis points lower on the day at 1.4145 percent, having fallen as low as 1.408 percent. That was its lowest level since the early 1800s, according to data compiled by Reuters.

“You’ve got a lot of speculation that Spain is going to need a sovereign bailout,” one trader said. “Markets are usually illiquid this time of the year, but there’s been reasonable volumes in Treasuries so this market feels like it wants to rally.”

Supply pressure coming from auctions of a combined $99 billion in two-, five- and seven-year notes later this week is unlikely to put a break on the rally in US Treasuries as euro zone concerns remain the main market driver, the trader said.

Concerns also mounted again over Greece with international lenders scheduled to gather in Athens to discuss the terms of further rescue payments, after its prime minister said the country was now mired in a “Great Depression”..

The domestic picture also looked supportive for Treasuries. Given the poor state of the US economy, investors expect the Federal Reserve to embark on further monetary easing, but so far Chairman Ben Bernanke refrained from sending clear signals that such a move was imminent.

Brazil’s Bradesco cuts loan growth estimates after profit miss

Banco-BradescoSAO PAULO: Banco Bradesco  cut its lending growth projections for this year as an abrupt economic downturn and a jump in loan delinquencies led Brazil’s second-largest private sector bank to miss second-quarter profit estimates.

The surprising move came as the Osasco, Brazil-based bank signaled plans to boost revenue in areas other than credit. It now expects its loan book to grow 14 percent to 18 percent this year, down from a prior range of 18 percent to 22 percent.

The revision underscores growing caution among local bankers as Brazil enters what could be a second year of below-trend economic growth. The central bank expects bank lending to grow 15 percent this year as consumers continue to rein in debt and the economy cools not long after it appeared to be overheating.

Bradesco missed most profit and operating performance estimates on Monday as the fifth straight quarter of increases in delinquencies forced it to increase bad loan provisions at the fastest pace in at least two years. Despite that, revenue jumped thanks to a more favorable credit mix and a focus by management to boost fee and other types of income.

Second-quarter net income rose 1.7 percent to 2.83 billion reais ($1.40 billion) from a year earlier, Bradesco said on Monday. The number missed the average estimate of 2.92 billion reais in a Reuters poll of 11 analysts.

An increase in fee, insurance and trading-related income helped offset the jump in bad loan provisions and higher payroll expenses. On a quarter-to-quarter basis — the most-widely followed gauge of operational performance by analysts — profit rose 1.4 percent.

Net interest income, the sum of revenue from lending operations and the sale and purchase of financial securities, jumped 16.5 percent from a year earlier, while fee income, or revenue from financial services, climbed 14 percent.

Loans in arrears for more than 90 days, the industry’s benchmark gauge for credit delinquencies, rose within expectations. The so-called default ratio rose to 4.2 percent of Bradesco’s total loans at the end of June from 4.1 percent in the first quarter and 3.7 percent a year earlier.

As a result, the bank set aside more from profits to cover bad loans. Provisions rose 39.8 percent from a year earlier and 10.1 percent from the prior quarter, to 3.41 billion reais.

The bulk-up in provisions pushed return on equity to its lowest level since at least the start of 2010. This profitability measure slid to 20.6 percent from 23.2 percent a year earlier and from 21.4 percent in the prior quarter.

The Reuters poll predicted ROE at 20 percent.

ENCOURAGING SIGNS

Excluding one-time items, earnings rose 1.5 percent to 2.87 billion reais, Bradesco said in a statement. Analysts had expected 2.92 billion reais, according to the poll.

Despite the earnings miss, some numbers showed encouraging signs, which might stoke hopes among investors that the worst is over for a deterioration in the quality of Bradesco’s loan portfolio, Brazil’s economic slowdown and government pressure on the sector to lower borrowing costs.

Since April, Brazil President Dilma Rousseff demanded private-sector banks boost lending and cut rates to help revive an ailing economy. State-controlled banks Banco do Brasil , the nation’s largest, and Caixa Econ?mica Federal were doing so to force their rivals to follow suit.

Still, Bradesco CEO Trabuco’s efforts to improve the quality of his company’s loan book mix paid off. The average interest rate the bank charges for all lending transactions remained stable at 7.9 percent in the quarter, despite a decline in Brazil’s benchmark Selic overnight lending rate to a record low in that time.

Bradesco kept its 2012 projection at 10 percent to 14 percent for growth in net financial margin, or the equivalent to gross financial margin in a nonfinancial company.

The bank is reining in disbursements in riskier segments like auto loans and instead focusing on mortgages and paycheck-deductible lending — two segments that charge lower rates but are less likely to bring about default-related losses.

That is helping to stabilize delinquencies, especially among individuals, the bank added. Bradesco’s ratio for overdue loans between 61 days and 90 days, a predictor of future trends in defaults, remained stable at 1 percent in June for the fourth month in a row.

Bradesco expects fee income to expand this year at 10 percent to 14 percent, from a prior estimate of 8 percent to 12 percent. It stuck with its expectation for growth in payroll, sales and administrative expenses at 8 percent to 12 percent.

The company’s loan book rose 14.1 percent to 364.96 billion reais from a year earlier, about 1.6 percent below forecasts in the analyst poll.

($1 = 2.02 Brazilian reais)

Spain slump deepens as bailout fears grow

Written by Shoaib-ur-Rehman Siddiqui

bankMADRID: Spain’s economy sank deeper into recession in the second quarter, the Bank of Spain said on Monday, as markets spooked by funding problems in the country’s regions pushed it ever closer to a full international bailout.

The economy contracted by 0.4 percent in the three months from April to June having slumped by 0.3 percent in the first quarter of the year, the central bank said in its monthly report.

As Spain’s benchmark 10-year debt yields rose further above the 7 percent level that triggered an unsustainable spiral in borrowing costs for the euro’s zone existing bailout recipients, Economy Minister Luis de Guindos ruled out a full-scale rescue on top of the 100 billion euros earmarked for the country’s banks.

Ministers in Madrid insist there is little more they can do to bring the borrowing costs down, but the central bank’s deputy governor said more austerity was needed.

“(Current market problems) reflect problems in Spain as well as the euro zone,” Fernando Restoy said after a conference in Madrid when asked about market stress.

“We need to continue further along the same line. We need more cuts, more reforms which will restore market confidence and mechanisms which will strengthen the monetary union.”

Earlier, media reports suggested half a dozen regional authorities were ready to follow in the footsteps of Valencia in seeking financial aid.

Prohibitively high refinancing costs have virtually shut all of the 17 regional governments out of international debt markets, forcing the worst hit to seek loans from the central government to meet bond redemptions.

In a sign of mounting concerns among the euro zone’s heavy hitter of the need to shore up Spain, minister De Guindos will travel to Berlin on Tuesday to meet with his German counterpart Wolfgang Schaeuble.

The unease was reflected in Spanish bond prices, which went into free-fall in illiquid markets, with 10-year yields up over 30 basis points at 7.59 percent and two-year yields up almost 90 bps at 6.64 percent.

The cost of insuring Spanish government bonds against default rose to a record high, and the blue-chip stock market index Ibex hit its lowest level since 2003.

Spain slipped into recession for the second time since 2009 in the first quarter and the government said on Friday it expects the economy to continue to shrink well into next year, fuelling market tensions.

The blue-chip stock market index Ibex hit its lowest level since 2003 on Monday while Spanish borrowing costs for five year debt soared to their highest since 1996.

Peugeot, Toyota sign light vehicle deal

Written by Shoaib-ur-Rehman Siddiqui

toyotaPARIS: French carmaker PSA Peugeot Citroen has reached a deal to provide Japan’s Toyota with light commercial vehicles for sale in Europe, the two companies said in a statement Monday.

The deal comes with Peugeot under fire in France after having announced earlier this month plans to cut 8,000 jobs and to close its historic Aulnay plant near Paris because of falling European sales.

The statement said PSA will provide Toyota with medium-sized vans derived from its existing vehicles and the two companies will then work together on developing a new generation of vehicles.

“Under the plan, Toyota Motor Europe is to participate in the development and industrial investment costs for the next generation product,” the statement said.

“There are no plans for the two companies to enter into capital tie-ups or joint production.”

Cooperation is expected to last “beyond 2020,” it added.

No financial details were disclosed.

The statement also made no mention of where the vehicles would be built but Peugeot was known to be looking for a partner for its Sevelnord plant in northern France after Italy’s Fiat pulled out of a joint venture there.

Toyota Motor Europe CEO Didier Leroy said in the statement that the deal was “a good solution … following the recent discontinuation of our own Hiace model.”

Jean-Christophe Quemard, PSA vice-president for programmes, said the agreement will allow both companies to offer “a competitive product for the European market.”

Peugeot chief Philippe Varin was to meet Prime Minister Jean-Marc Ayrault later Monday for talks on the company’s strategy.

Unions at Sevelnord, which employs 2,800 people, welcomed the news.

Jean-François Fabre, a delegate with the FO union, said the agreement was “very important good news.”

“With the withdrawal of Fiat and without replacement production, 600 jobs were at stake. The volume that Toyota represents will allow 300-400 jobs to be saved, which is not negligible,” Fabre said.

Peugeot’s job cuts decision sparked fierce anger among unions, who denounced it as a “declaration of war,” and it also came under sustained fire from the government, including President Francois Hollande who said it was “unacceptable.”

The government is due to present a programme for supporting the auto industry on Wednesday, the same day Peugeot reports its quarterly results.

Copyright AFP (Agence France-Presse), 2012