Category Archives: National News

General Tyre invests Rs500m in motorcycle tyre plant

Compan­y to tap spare parts market in first phase.  “Due to unfair competition, it becomes extremely hard for us to expand and at the same time make only marginal profits of 2% to 2.5%,” says GT chairperson.

KARACHI: General Tyre (GT) has invested Rs500 million in motorcycle tyre production and plant enhancement, which will also create job opportunities, GT Chief Executive Shahid Hussain revealed during a press conference at the Sheraton hotel on Friday.

“Had this company not existed, the Government of Pakistan would have had to spend more than $200 million annually on the import of the number of tyres produced by GT alone,” GT Chairperson Lt Gen (retd) Ali Kuli Khan Khattak said in the ceremony.

“Importers would have taken advantage of the situation and wreaked further havoc on our country’s fragile economy,” he added.

He said that tyre manufacturing is an expensive and tedious process, which requires a lot of funds to continually expand. “Due to unfair competition, it becomes extremely hard for us to expand and at the same time make only marginal profits of 2% to 2.5%,” he said.

“Pakistan is passing through a critical phase, owing to which many industries have either been shut down or shifted to other countries. We, on the contrary, decided to break this trend and have invested a good amount of money in putting up an ultra-modern motorcycle tyre and tube manufacturing plant,” he added.

Hussain said the company will get into the large motorcycle parts replacement market in the first phase, and then approach selected assembly plants to be one of their suppliers in the next phase.

“We have ensured that grip, style and fuel economy is built into each tyre, as our survey revealed that grip was the most important factor motorcyclists care about. Our tyres have low rolling resistance, which means more kilometres per litre,” he said.

Dr W Flamm, a technical adviser to Continental AG, also spoke on the occasion and said Continental AG has a long term association with GT and will continue to support the company. He also said Continental AG is happy that GT is expanding and has now entered into this field.

Published in The Express Tribune, February 23rd, 2013.

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Indus Motor profits drop 44% as car sales fall

Compan­y announ­ces Rs6 per share interi­m divide­nd.  The company said the sluggish market demand forced it to shut down the plant for 53 days, but it did not lay off any workers.


After a robust fiscal year 2011-12, Indus Motor Company saw a considerable dip of 38% in car sales in first half (July-December) of current fiscal year, which brought down profit after tax by 44% to Rs0.98 billion compared to Rs1.77 billion in the same period of last year.

Sales of Toyota brand, both completely knocked down (CKD) and completely built units (CBU), were down 38% to 14,994 units compared to 24,341 units in the corresponding period last year.

Net sales revenue for the first half of 2012-13 decreased 26% to Rs24 billion compared to Rs33 billion in the corresponding period of previous year.

The company said the sluggish market demand forced it to shut down the plant for 53 days, but it did not lay off any workers.

Indus Motor is not the only car assembler which saw its sales plunge, other two car assemblers – Honda and Suzuki – also faced similar challenges in the first six months of FY13.

Atif Zafar, analyst at JS Global Capital, told The Express Tribune sales of Honda and Suzuki remained weak from July to December 2012. “However, with the obvious decline in import of used cars from January onwards, we must expect a sustained increase in sales of all three car assemblers,” he said.

Another plus point for these Japanese car assemblers was that the Japanese yen had been falling for the past couple of months, which would reduce the import cost of parts and components, he added.

Overall, the domestic auto industry endured a difficult period in the first half of FY13 with sales plunging 30%.

“The industry is thankful to the government for its decision to reduce the age limit of imported used cars from five to three years. This will ensure survival of the local auto industry. It is in the national interest that a stable policy environment is provided for the industry to play a meaningful role in economic development,” said Parvez Ghias, CEO of Indus Motor in a statement.

The board of directors declared an interim dividend of Rs6 per share for the half year compared to Rs8 per share in the same period last year.

Indus Motor said presence of used imported car models in the Corolla category impacted sales of the company and severely restricted its overall market share, which dropped to 25% compared to 30% in the corresponding period last year.

Published in The Express Tribune, February 23rd, 2013.

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Last moves before elections: ECC likely to increase margins for OMCs, dealers

Ban on import of CNG cylind­ers and kits may be lifted.  Seven groups had imported 59 consignments of CNG kits and cylinders despite the restriction and now a summary was being tabled before the ECC for clearance of the cargo. PHOTO: FILE


The Economic Coordination Committee (ECC), which is meeting today (Friday), is likely to give the go-ahead to the proposal for increase in margins of oil marketing companies and dealers, leading to a slight rise in prices of petrol and diesel for consumers.

According to sources, the ECC in its meeting, to be chaired by new Finance Minister Saleem Mandviwalla, will discuss proposed increase of 12.5% (25 paisa per litre) in margin on petrol for OMCs and 17.2% (41 paisa) for dealers. For diesel, a 5.7% (10 paisa per litre) upward revision in margin has been proposed for OMCs, but no change has been sought in dealers’ margin.

At present, OMCs earn a margin of Rs1.98 on every litre of petrol and Rs1.76 on diesel. Dealers collect a margin of Rs2.37 on petrol and Rs2.2 on diesel.

Sources told The Express Tribune the Oil and Gas Regulatory Authority (Ogra) had resisted the upward revision in margins of OMCs and dealers and instead suggested an audit to determine how much profits they were making. The oil and gas regulator was of the view that OMCs and dealers were making hefty profits and any increase in their margins was unjustified.

CNG kits

The ECC is expected to lift the ban on import of compressed natural gas (CNG) cylinders and kits, providing leeway to seven powerful groups and an Italian firm.

Sources in the Ministry of Industries said the seven groups had imported 59 consignments of CNG kits and cylinders despite the restriction and now a summary was being tabled before the ECC for clearance of the cargo.

The Federal Board of Revenue (FBR) has said out of 59 consignments of cylinders, importers have furnished particulars of bills of lading and purchase orders for 26 consignments. Though the bank concerned has verified the bills of lading, no verification of purchase orders has been given.

Accordingly, it said, dates for letters of credit, bank contract or bank agreement for pending consignments of CNG cylinders were not available with the FBR.

The ECC will also take up the proposal calling for removing the restriction on Landi Renzo Pakistan, part of an Italian group, which imports CNG cylinders and kits for export. The company is engaged in the manufacture and assembly of CNG kits. It imports CNG cylinders and parts/components of cylinders and kits.

Nandipur power project

The ECC will take a decision on a summary, submitted by the Ministry of Water and Power, seeking government guarantees for borrowing Rs23 billion from domestic banks, which will be spent on the construction of 425-megawatt Nandipur power project.

The government is raising funds from domestic sources after Chinese banks refused financing for the project.

“Chinese contractor Dongfang Electric Corporation has expressed its willingness to implement the project if the government arranges financing from local resources,” an official of the water and power ministry said.

Total finances required for the combined-cycle power plant, to be installed in Nandipur near Gujranwala, is Rs57 billion.

Published in The Express Tribune, February 22nd, 2013.

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Fear of criticism: ECC scraps plan to deregulate oil freight margin

Allows Byco to charge 15 paisa as crude transp­ort cost from consum­ers. Rejecting the deregulation of freight margin, ECC members argued that the move would lead to varying oil prices in the country, which would spark criticism from political parties. DESIGN: SAMRA AMIR


The Economic Coordination Committee (ECC) of the cabinet has scrapped a plan to deregulate inland freight equalisation margin on petroleum products, meaning oil prices will stay uniform across the country.

According to sources, the ECC in its meeting held on Friday was asked to either deregulate freight margin on petroleum products or allow Byco Oil to charge 15 paisa per litre as crude transportation charges to recover the operational cost of Single Point Mooring from consumers.

Rejecting the deregulation of freight margin, ECC members argued that the move would lead to varying oil prices in the country, which would spark criticism from political parties.

However, the ECC gave the go-ahead to recovery of 15 paisa per litre as transportation charges only from the consumers, who would be paying an estimated Rs150 million per annum to Byco for taking delivery of crude oil through a 15km pipeline, sources said.

The ECC gave the approval despite opposition from the finance ministry and Federal Board of Revenue (FBR). The ministry argued that Byco was its defaulter as it had not deposited petroleum levy collected on sales of oil products. Therefore, it should not be allowed to impose transportation charges on consumers.

Finance secretary, supported by FBR chairman, asked the ECC to defer the matter until next meeting.

“The approval of transportation cost is going to open a Pandora’s Box as no other refinery depending on imported crude, except for Pak Arab Refinery (Parco), is enjoying this facility,” an official commented.

Parco is getting this facility because of being in the middle of the country where crude oil reaches through an 875km pipeline.

Sources said Attock Refinery Limited was also collecting crude transportation cost because it relied on domestic crude and had to get supplies from different fields.

Pakistan Refinery Limited and National Refinery Limited are processing imported crude and have pipelines spread over 20 km. “These refineries will also come up with a demand to allow collection of transportation charges from consumers,” the official said.

The Oil and Gas Regulatory Authority (Ogra) also opposed the transportation charges, stressing that commercial business should be fair and transparent. It argued that there should be no subsidy for a specific refinery and consumers should not be overburdened.

The ECC, in its meeting in April last year, had already granted seven and a half years of tax holiday to Byco despite its failure to start the refinery by the stipulated time of end-2011. Byco had sought a 20-year tax holiday.

The ECC also gave one-year extension, allowing Byco to complete the refinery by the end of 2012.

The management of Byco contended that it would receive imported crude oil at the Single Point Mooring installed 15 km into the sea along the coast of Balochistan, therefore, it would not be causing any additional burden on the exchequer.

Initially, Byco Petroleum Pakistan, formerly Bosicor Pakistan, had set up an oil refinery with a capacity of 35,000 barrels per day at Hub, Balochistan in 2004. Recently, Byco Oil Pakistan completed another refinery of 120,000 barrels per day, which is close to the earlier refinery at Hub.

Published in The Express Tribune, February 23rd, 2013.

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Loan shark?: Despite past failure, World Bank offers another loan

Undete­rred by failur­e of first tax reform­s projec­t, agency propos­es anothe­r progra­mme.  Despite coming away empty-handed, the country is nonetheless paying a 3.5% mark-up on the borrowed amount. ILLUSTRATION: JAMAL KHURSHID


A team of World Bank ‘consultants’ has arrived in Pakistan to convince decision makers to avail a $300 million loan for a second phase of tax reforms. The group was also involved in the first phase of the same project, which the World Bank itself admitted was a “failed” one.

After the abortive $149 million Tax Administration Reforms Project, known as TARP-I, the World Bank has sent more or less the same team to devise a roadmap for TARP-II. Sources say that the project objectives will be more or less the same – enhancing tax revenues and introducing reforms in the tax machinery.

Michel Zarnowiecki, an expert in customs affairs, and William Mayville, an adviser on human resources training, are again in town to ‘tell’ how Pakistan can upgrade customs and border management in Pakistan and how it can strengthen its human resources base.

These two areas formed major components of the failed TARP-I initiative, which continued for almost seven years without achieving anything significant. Due to its disappointing outcomes, the World Bank, in diplomatic language, had admitted that the programme was “moderately unsatisfactory”, wherein the World Bank’s was “moderately unsatisfactory”, and the borrower’s performance was “unsatisfactory”.

Against the initial promise of $149 million, the World Bank’s actual disbursement was reduced to only $47.6 million. Despite coming away empty-handed, the country is nonetheless paying a 3.5% mark-up on the borrowed amount.

According to an official in the finance ministry, international lending agencies have been sucking the country dy. “Most of the money they give in the name of reforms is flown back to them as loan fees, consultant fees, and training and programme management fees,” he criticised.

The World Bank deducted $2.2 million (almost 5%) from the loan it earlier extended in the name of ‘capitalised charges’ and ‘loan origination fee’. Similarly, consultant services consumed $7.3 million, our sources said.

When Pakistan availed the TARP-I in 2004, its tax-to-GDP ratio was 11.5%. It slipped to a dismal 8.6% by the end of the first phase of the project. Another important objective – increasing electronic tax returns filers – remains an area where the Federal Board of Revenue’s (FBR) entire data is suspicious. As against 1.5 million supposed tax filers, the actual number was just above 800,000.  According to another objective, tax arrears were supposed to be reduced. Instead of a reduction, the actual figure shot upwards many times the baseline.

The TARP-I team forced Pakistan to implement a ‘voluntary compliance’ method, instead of letting tax authorities go after taxpayers. Voluntary compliance means taxpayers declare their own taxable assets, instead of the authorities going after their personal accounts. According to an FBR official, this was the biggest flaw in the first phase of the project, which was subsequently exploited by tax dodgers.

“Due to an ‘imported’ self assessment scheme, the FBR has failed to reintroduce audits despite making three separate efforts in the recent past,” an official said. “Every time the FBR wants to initiate an audit, taxpayers challenge it in court on the grounds of ‘self assessment’.”

The Washington-based lending agency has already given $3 million for a project preparation facility (PPF) for TARP-II. Most of that amount will be paid to the same consultants who designed the first (faulty) programme.

While defending the proposed programme, the FBR says the next phase of tax reforms will look at areas which were not visited in the earlier phase of reforms. FBR Chairman Ali Arshad Hakeem said the handling of the first phase was the main cause of failure.

The Planning Commission has already opposed TARP-II, our sources said.

Published in The Express Tribune, February 23rd, 2013.

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‘Pakistan should focus on long-term solutions’

US says Islama­bad should not go ahead with Iran-Pakist­an projec­t.  “We believe there are better ways and more secure ways, and more cost-efficient ways for Pakistan to get its power,” says Nuland. ILLUSTRATION: JAMAL KHURSHID

WASHINGTON: The United States said that there were “better and more cost-effective” ways for Pakistan to address its energy needs than projects like the Iran-Pakistan gas pipeline deal.

“We understand that Pakistan has significant energy needs and requirements, but there are other long-term solutions to Pakistan’s energy needs that we believe will have better potential for success and will better meet Pakistan’s needs than spending scarce resources on projects like this,” US State Department Spokesperson Victoria Nuland told reporters at the daily press briefing on Thursday.

She was responding to a question about press reports that Pakistan will face US sanctions if it went ahead with the IP pipeline project. “Let me just say broadly that we will continue our dialogue with Pakistan with regard to Iran,” Nuland said.

The United States, she added, was involved in many ways to help Pakistan address its energy needs, including ones that will add some 900 megawatts (MW) of power to the grid by 2013, enough power to supply an estimated two million households.

When asked if the proposed gas pipeline with Pakistan comes under the sanctionable items, Nuland said as these are being developed, she is not in a position to make that assessment. “But we believe there are better ways and more secure ways, and more cost-efficient ways for Pakistan to get its power,” she added.

Published in The Express Tribune, February 23rd, 2013.

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Motorcycle industry: Dawood Yamaha to set up factory in Afghanistan

The motorc­ycle indust­ry in Afghan­istan expect­s a strong growth.  The agreement will strengthen the already close cooperation between DYL and EAL, as both were engaged since 2009 in the motorcycle industry in Afghanistan. PHOTO:


Dawood Yamaha Motorcycles (DYL), Pakistan and Ehsanullah Afghan (EAL), Afghanistan today signed an agreement to establish a motorcycle manufacturing facility in Afghanistan.

The agreement will strengthen the already close cooperation between DYL and EAL, as both were engaged since 2009 in the motorcycle industry in Afghanistan. The motorcycle industry in Afghanistan expects a strong growth and a new technical collaboration agreement will further enhance the business of EAL in Afghanistan in providing affordable and high-quality motorcycles in Afghanistan.

DYL group is renowned name in the manufacturing and marketing of motorcycles/lube and parts. EAL has a strong base of marketing channels in Afghanistan. The agreement will allow EAL to establish strong footing in manufacturing side as well. The venture marks a significant milestone in collaboration between the two companies as it cements an already excellent cooperation between the two partners.

Published in The Express Tribune, February 23rd, 2013.

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Scrutiny of poll candidates: SC to decide fate of defaulters says SBP Governor

Challe­nges exist but foreig­n curren­cy reserv­es suffic­ient, assure­s SBP govern­or.  Says SBP will only provide the most recent data on defaulters to the Election Commission of Pakistan for scrutiny of candidates. PHOTO: MOHAMMAD NOMAN/EXPRESS


The fate of bank loan defaulters in the past four decades will be decided by the Supreme Court, SBP Governor Yaseen Anwar revealed on Thursday.

The State Bank of Pakistan (SBP) will only provide the most recent data on defaulters to the Election Commission of Pakistan for scrutiny of candidates, Anwar said while briefing the Senate Standing Committee on Finance over the SBP’s role in the verification of candidates’ data before the upcoming polls.

He went on to add that the country’s central bank will only provide information about those defaulters whose names appear on the Central Information Bureau list, which is regularly updated by inputs from all other banks.

He, however, added that some of the banks, for instance the National Bank of Pakistan, were not online, which may cause delays in the provision of timely information sharing.

Anwar said the matter of past loan defaulters lay with the Supreme Court completely and the SBP was keen to study recommendations of the Justice Jamshed Ali Commission on past loan defaulters.

The apex court had formed the commission in March 2011 after taking suo motu notice of borrowers who had taken loans but later managed to get them waived off.

On Wednesday, the parliamentary panel issued directives to make the Justice Jamshed Commission report public, which pertains to those who got their banks and financial institutions to waive off loans from 1971-2010.

The ECP is in the process of disqualifying those who failed to meet their financial obligations in the past and has vowed to stop them from taking part in upcoming general elections.

However, Anwar clarified that if a bank enters into a resettlement with a borrower, this will not be classified as default. The write-offs under various revival packages and the ones endorsed by the Board of Directors of the banks will also be decided by the apex court in light of the Justice Jamshaid Commission Report, he added.

Economic conditions

While speaking on the current economic conditions, the SBP governor said the country was facing many challenges due to uncertainty on political and economic fronts.

However, he gave assurances that the foreign currency reserves were sufficient to return the International Monetary Fund’s (IMF) loans till June this year. He claimed despite the upcoming $400 million payment to the IMF, there will not be additional pressure on the reserves as the central bank was making efforts to keep the reserves at reasonable levels.

He said to offset the pressure on reserves there was a need to review the possibility of controlling unnecessary imports. Anwar said more than one-thirds of the imports were of oil and a change of $5 in crude oil price results into $750 million additional annual payments. He said, “According to our assessment, oil prices will remain stable in the short-term”.

The central bank governor said the SBP has tightened currency speculators but the rupee was still under pressure due to lower interest rates, depleting foreign currency reserves and higher inflation.

“There cannot be lower interest rates and strong currency at the same time. It’s a trade off between the both,” he explained. “If the interest rates are increased by 3% today, the rupee will be strengthened (against the US dollar).”

Published in The Express Tribune, February 22nd, 2013.

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As flour prices surge, Sindh High Court takes notice

Petiti­oner says shorta­ge in Hydera­bad market­s artifi­cial.  “The court should order NAB, FBR, RTOs and the Anti Corruption Cell to investigate and make the assets of all food officials public,” Kondhar pleaded.

HYDERABAD: The Sindh High Court has taken up a case concerning the hike in flour prices and artificial shortages of the commodity, which has allegedly been created by the food department in collusion with traders. A panel on Thursday has issued notices to 41 respondents on the petition filed by advocate Shahid Hussain Kondhar. The lawyer has implicated food officials in the corruption case and has asked that they be held accountable.

Kondhar pointed to the recent upsurge in flour price and asked the court to take notice of “black market practices” and implementation of the rates decided by the government.

The chief secretary of Sindh, the food secretary, the food directors of Karachi, Hyderabad, Mirpurkhas, Sukkur and Larkana regions, district food controllers of all the 27 districts, the National Accountability Board (NAB) chairman, the Federal Board of Revenue (FBR), the Anti Corruption Cell and regional taxation officers (RTOs) are among those the court has issued notices to.

“The court should order NAB, FBR, RTOs and the Anti Corruption Cell to investigate and make the assets of all food officials public,” Kondhar pleaded. “All officials should also be held responsible for failing to implement the official flour price, thereby allowing hoarders and profiteers to fleece the people.”

Hyderabad and its adjoining districts have witnessed a sharp rise in the price of flour for over a month starting early January till mid February. It was being sold at over Rs40 per kilogramme (kg) against the government rate of Rs33.50. In addition to the high prices, flour was also short in the market.

According to Javed Qureshi, president of the Atta Chakki Owners Association, the food department sold over 100,000 bags of 100 kg wheat at Rs2,800 per bag to Hyderabad’s flour mills in December 2012. However, this distribution policy was changed in January. “In January we got just over 27,000 bags of 100 kg from the warehouses of the food department, forcing us to buy from the open market on rates as high as Rs3,600 per 100 kg,” said Qureshi, whose association carried out month-long protests until their supply was doubled and flour price was reduced to Rs36 per kg.

Published in The Express Tribune, February 23rd, 2013.

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Market watch: Telecom, foreign buying help bourse breach 18,000

Benchm­ark KSE-100 index gains 153 points.  Telecoms were boosted by news that the courts had approved the rise in international call rates.

KARACHI: The local bourse breached the psychological level of 18,000 points, boosted by buying from foreign fund managers in the last few days. The telecom sector remained on investors’ radar after the court’s decision in the international clearing house case was passed in their favour.

The Karachi Stock Exchange’s (KSE) benchmark 100-share index gained 0.86% or 153.25 points to end at 18.074.27 point level. Trade volumes climbed to 369 million shares compared with Thursday’s tally of 350 million shares, mostly in telecoms companies. Both Pakistan Telecommunication Company and Engro Corporation closed at their upper limit.

Telecoms were boosted by news that the courts had approved the rise in international call rates. Engro Corporation, which traded lacklustre during the first session, closed at its upper lock in the second session after media reported government’s approval of a short-term gas allocation plan for the Enven urea plant.

Some correction was witnessed in oil stocks due to falling international oil prices, said equity dealer Samar Iqbal at Topline Securities.

The value of shares traded during the day was Rs9.41 billion.

Nishat Mills climbed Rs3.33 to close at Rs72.36 after its earnings announcement, which was higher than market consensus, whereas foreign buying in MCB Bank drove the stock to hit its upper lock.

WorldCall Telecom was the volume leader with 45.8 million shares gaining Rs0.14 to finish at Rs3.84. It was followed by Telecard with 31.62 million shares gaining Re1 to close at Rs7.1 and Pakistan Telecommunication Company with 29.82 million shares climbing Rs1.14 to close at Rs23.97, hitting its upper limit of 5%.

Foreign institutional investors were net buyers of Rs187.58 million, according to data maintained by the National Clearing Company of Pakistan Limited.

With the market above 18,000-level and the earnings season close to its end, going forward, political uncertainty may cause the bourse to trade volatile.

Published in The Express Tribune, February 23rd, 2013.

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Gas allocation: Textiles win as govt moves captive power up priority list

Decisi­on contra­dicts earlie­r cabine­t decisi­on which accord­ed captiv­e power fourth priori­ty.  ECC allowed clearance of 59 consignments of CNG cylinders and kits that influential people had imported despite the ban. PHOTO: FILE

The federal government succumbed on Thursday to influence from the textile lobby as it moved the captive power industry up the priority list for gas allocation, contradicting the federal cabinet’s earlier decision.

In his capacity as chairman of the Economic Coordination Committee (ECC) of the cabinet, newly appointed Finance Minister Saleem Mandviwala took many decisions in Thursday’s meeting which supplanted the judgments of the federal cabinet and his predecessor Hafeez Shaikh.

According to key officials who attended the ECC meeting, the proceedings set the stage for influential lobbies to take advantage of the fluid situation and many more decisions are expected to come before the government completes its constitutional term in the next three weeks. Seemingly in a hurry, Mandviwala also called the next ECC meeting on Tuesday, officials confirmed.

Mandviwala replaced Shaikh as finance minister earlier this week after the latter was reportedly ousted by the president.

While overruling a decision of the federal cabinet, the ECC amended the Natural Gas Load Management Plan, moved captive power plants up to third priority – one notch up from its earlier position. Captive power plants had earlier been given fourth priority, alongside the cement sector.

The federal cabinet had given first priority to domestic and commercial sectors. The power sector had been accorded second priority, followed by general industries at third and captive power plants and the cement sector at fourth priority. The CNG sector was accorded the last place on the priority list.

An official of the Ministry of Petroleum and Natural resources insisted that captive power plants had erroneously been placed at the second last position in the minutes of the cabinet meeting.

However, sources claimed that the finance minister and the adviser to the prime minister on petroleum had a one-on-one meeting prior to the ECC meeting. They added that the ECC was used as a ‘rubber stamp’ and almost all the decisions were made without any discussion. Apart from one, all decisions were made on petroleum ministry requests or summaries.

While superseding the decision taken by the ECC under former finance minister Dr Abdul Hafeez Shaikh, Mandviwala ordered the reopening of the import of CNG cylinders and kits, which the government had banned to discourage the use of gas.

In a paradoxical summary, the petroleum ministry wrote the import will further put pressure on gas resources but the move was necessary to promote the export of CNG kits. It also allowed clearance of 59 consignments of CNG cylinders and kits that influential people had imported despite the ban. The officials claimed that an Italian company and importers paid huge money in kickbacks.

The groups which will benefit from the decision include Messes Mehr Brothers Ltd, M/S Zam Zam Gas, M/S Cres Resource, M/S Gas Inn, M/S Madni CNG, M/S Seven Star CNG station and M/S Satelite Gas 2. The Italian firm M/S Landi Renzo Pakistan is engaged in the manufacturing and assembly of CNG kits.

Published in The Express Tribune, February 23rd, 2013.

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Shale gas exploration poses threat to ground water

Planni­ng Commis­sion propos­es strict safegu­ards to counte­r enviro­nmenta­l risks.  51 trillion cubic feet are the estimated shale gas reserves in Pakistan. PHOTO: FILE

ISLAMABAD: The Planning Commission has warned of high risks of contaminating ground water during extraction of shale gas and has asked the government to put in place strict regulations and proper safeguards to counter environmental hazards.

In a report submitted to the cabinet in its recent meeting, the commission observed that chemicals used in hydraulic fracturing would contaminate ground water with high level of methane component in water wells.

“Pakistan being an agrarian country must be mindful of this fact and exploration of shale gas should only be allowed under tight regulations and close monitoring,” the commission said in the report.

Agreeing with apprehensions of the commission, members of the cabinet stressed that exploration of shale gas should be undertaken with strict regulations and monitoring to avoid harmful effects on environment.

However, the commission cited example of the United States where thousands of wells had been drilled for extracting shale gas, but water contamination had been reported in only a few cases. This means that with proper safeguards and oversight, shale gas can be explored and produced in a safe manner and without any environmental hazard.

It suggested that the estimate of 51 trillion cubic feet of shale gas reserves in Pakistan, given by the US Energy Information Administration, should be verified through surveys and data acquisition to pave the way for preparing a comprehensive package to tap the potential.

Similarly, information pertaining to economic development (hydraulic fracturing, fracturing, pipeline, terminal, transportation, environmental impact, regulatory requirements, etc) along with required technological investment should be elucidated for proper analysis and decision-making.

Cabinet members told the commission that reliable data could be acquired once pilot projects of shale gas exploration were initiated. Similarly, information pertaining to economic parameters like well cost, number of wells, production profiles and processing plants would also be known from the data gathered from pilot wells.

In the report, the commission noted that the US was considered the pioneer and had taken lead in extracting vast shale gas deposits, which has led to a decline in natural gas prices globally.

“Shale gas has increasingly become the game changer for USA and it will meet 40% of gas requirements of the country in the near future. The explosive growth of shale gas in USA has sparked a global race to harness this potential,” it said.

The commission stressed that before finalising the shale gas framework strategy, a professional delegation could visit an operational shale gas facility in the US and make recommendations for developing the framework.

Published in The Express Tribune, February 23rd, 2013.

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Corporate results: Nishat Mills’ earnings up 50%

Moreov­er, higher yarn demand from China bodes well for the textil­e compan­y .  On a consolidated basis, the company managed to double its profits to Rs4.91 billion in the period.


Nishat Mills – the flagship company of the Nishat Group – reported a profit of Rs2.86 billion in the July to December period of the fiscal year 2012-13, up 50.5% from Rs1.9 billion in the corresponding half of fiscal 2012 on back of stronger margins and higher exports where rupee depreciation played its part.

On a consolidated basis, the company managed to double its profits to Rs4.91 billion in the period.

“The result was above analyst expectations due to higher than estimated revenue growth,” reported Zeeshan Afzal, analyst at Topline Securities.

According to a notice sent to the Karachi Stock Exchange, the textile company’s revenue clocked in at Rs26.32 billion in the period, up 22% compared to Rs21.62 billion in the corresponding half of previous fiscal, attributable to stable cotton prices and 9% depreciation in rupee’s value as 80% of its sales are in the export market.

Increased demand of yarn from China had been the major catalyst in driving textile exports in fiscal 2013. Textile exports in the first six months of current financial year touched $6.46 billion, depicting a growth of 8.6% year-on-year. International cotton prices averaged Rs6,525 per maund in the period, whereas local prices averaged Rs6,000 per maund.  One maund is equal to 37.325 kilogramme.

Higher yarn exports coupled with a depreciating rupee had been the main reason for the growth in textile exports, said Bilal Qamar, analyst at JS Global Capital, in the brokerage firm’s review of the textile industry for the period.

Yarn primary margins were up 20% in the second quarter, due to 8% higher yarn prices amid flat cotton prices due to abundant supply. Nishat Mills’ sales volume peaked in the second quarter of fiscal 2011, however volumes in the first quarter of fiscal 2013 were up 17%. According to Elixir Securities, yarn volumes clocked in at around 10 million kg in the outgoing quarter.

Absence of inventory losses and favourable textile prices in the region improved company gross margins by 230 basis points to 16.7% in the first six months of fiscal 2013 compared to 14.3% in first half of fiscal 2012.

On the flipside, 14% decline in other income to Rs1.394 billion, primarily due to lesser dividend from Pakgen Power and Lalpir Power diluted the earnings.

Nishat Mills’ present investment portfolio stands at Rs30 billion, or Rs85 per share, and the company is trading at a 20% discount to its portfolio value.


The textile sector is likely to remain in the limelight due to a better export outlook, given the recent European Union relief package. Nishat Mills can benefit with the initiation of the package as 27 items of the 75 items under the package are related to the textile industry.

Furthermore, improvement in gas supply during the second half of fiscal 2013 (post-winter season) coupled with tie-up of new discoveries will not only reduce fuel/power cost but will also enable the sector to reap the benefits of recently granted EU duty waiver.

Published in The Express Tribune, February 23rd, 2013.

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Planning ahead: UAE company to set up coal-based power plants in Karachi

Burj Power will invest up to $700 millio­n in four projec­ts.  Electricity produced by the coal-based plants will cost approximately half of what electricity costs if generated using oil. PHOTO: FILE


UAE-based Burj Power will invest up to $700 million in developing four coal-based power plants of 125 megawatts (MW) each at Port Qasim, Burj Power CEO Shahzad Qasim said on Thursday.

Speaking to The Express Tribune after signing a formal agreement with a representative of Harbin Electric International – the technical partner for the project – Qasim said the first plant of 125MW generation capacity will become operational by 2016. “We will try to add one plant annually 2016 onwards, until we achieve 500MW capacity,” he said.

The first phase of the project alone will cost up to $170 million, while the total cost of the project is expected to be between $650 million and $700 million, Qasim noted.

However, he did not state the expected tariff per unit of the electricity generated through the project, saying that Burj Power will approach the National Electric Power Regulatory Authority (Nepra) within the next six months to determine the rate at which it will sell electricity to the Karachi Electricity Supply Company (KESC).

“We have yet to finalise a power purchase agreement with KSEC. After that, Burj and KESC will go to Nepra together for the finalisation of the tariff,” Qasim said. He said that electricity produced by the coal-based plants will cost approximately half of what electricity costs if generated using oil. The project will be constructed near the upcoming coal and clinker terminal being developed at Port Qasim.

Burj Power is a UAE-based power project development and advisory firm, which is developing projects in key markets of the Middle East and Africa. It is also developing three wind power projects in Pakistan. The company is part of the Burj Capital group, which is also involved in the investment banking, retail, agriculture and oil and gas sectors.

Harbin is a Chinese power engineering, manufacturing and construction group with an established base of over 30,000MW of thermal power plants. It was also the engineering, procurement and construction contractor for the recently-completed Bin Qasim Combined Cycle Power Plant, which is producing 560MW of electricity for KESC.

Published in The Express Tribune, February 22nd, 2013.

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ICAP silent about Rs25m penalty by CPP

Accoun­tancy body was penali­sed by CCP for restri­cting traini­ng of non-ICAP studen­ts.  ICAP has not paid the penalty even after one and a half months of the CCP order.


Irish playwright George Bernard Shaw considered silence to be the most perfect expression of scorn. Apparently, top officials of the Institute of Chartered Accountants of Pakistan (ICAP) agree with Shaw, as they continue to keep mum about the January 10 order of the Competition Commission of Pakistan (CCP), which imposed a penalty of Rs25 million on the premier body of chartered accountants for restricting the training of non-ICAP accountancy students by its approved training organisations.

ICAP has not paid the penalty even after one and a half months of the CCP order. Neither has it approached a competent forum to appeal against the order so far. Despite repeated attempts made over the last month, no ICAP official showed willingness to come on the record about the institute’s future course of action to deal with the heavy fine imposed by the anti-trust watchdog.

“I cannot tell you right now whether we are going to pay the penalty or file an appeal against the order,” ICAP Secretary Shoaib Ahmed said while speaking to The Express Tribune last month. He was not available for comment this time.

However, in background conversations with The Express Tribune since the CCP order was passed, officials as well as members of ICAP have claimed that paying the penalty is “out of the question” because the institute’s management still believes it is its right to protect the interests of ICAP students.

“Our students aren’t getting training opportunities that they deserve. Although it’s been going on since 1994, it’s gotten much worse in recent years,” one ICAP official said but requested anonymity because he did not want to be seen talking about the issue publicly.

He was referring to ICAP’s rival accountancy body, the UK-based Association of Chartered Certified Accountants, which came to Pakistan in 1994.

The CCP imposed the Rs25 million penalty on ICAP while declaring that a July 2012 directive of ICAP that asked its member organisations not to engage non-ICAP students as interns or trainees had no legal basis.

Under Section 42 of the Competition Act 2010, the appeal against an order of the CCP can be filed with the Competition Appellate Tribunal within 60 days of the communication of such order. The CCP does not pursue the recovery of penalty until expiry of the time available for filing of appeal. If ICAP continues to violate the CCP order, it will be liable to pay a penalty of Rs1 million everyday afterwards.

According to an official of the CCP, who also did not want to be named because of possible legal implications, the CCP may recover the amount from ICAP under Section 40 of the Competition Act, which includes the recovery of amount as arrears of land revenue or attachment of property.

In addition to the penalties prescribed under the Competition Act, the CCP can also initiate court proceedings against ICAP for failing to comply with its order, as it constitutes a ‘criminal offence,’ the source noted.

“Several accountancy students have approached the CCP to enquire about ICAP’s compliance with the matter. On receipt of any actionable evidence that suggests non-compliance with the order, the CCP will proceed against ICAP in accordance with the law,” the CCP official added.

Published in The Express Tribune, February 23rd, 2013.

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Agriculture university to establish plant diagnostic window

UAF signs MoU with intern­ationa­l NGO to help Pakist­ani farmer­s.  The agrarian productivity can be boosted manifold by transferring modern technologies to the small farmers, says VC UAF. PHOTO: FILE

FAISALABAD: The University of Agriculture Faisalabad (UAF) and the Commonwealth Agricultural Bureau International (CABI) have inked a memorandum of understanding to establish a plant diagnostic window to provide quality information and analyse plant diseases, pest management and nutrient deficiencies for the farming community.

A ceremony was organised in this regard by the Department of Entomology at the UAF. UAF Vice Chancellor Dr Iqrar Ahmad Khan and CABI Regional Director Dr Muhammad Shafiq signed the agreement.

Faculty of Agriculture Dean Professor Dr Muhammad Arshad, Entomology Chairman Professor Dr Jalal Arif, Professor Dr Anjum Sohail and Director External Linkages Professor Dr Ashfaq Chatha were also present.

Speaking on the occasion, Professor Dr Iqrar Ahmad Khan said that UAF’s Department of Entomology, Plant Pathology and Institute of Soil will work together to extend the diagnostic services to the farming community in the form of mobile and stationed plant health clinics.

He said the agrarian productivity can be boosted manifold by transferring modern technologies to the small farmers comprising 90% of the farming community in Pakistan.

He said that a lab for animals was already working at the Faculty of Veterinary Sciences. He called for stepping up efforts to educate the masses about better management to increase their income in particular and to enhance the country’s agricultural production in general.

He said that Pakistan was losing 25% to 40% of its crops in the post-harvest process. Keeping this in view, it is the need of the hour to educate the farmers about latest practices to combat the food security challenges.

Faculty of Agriculture Dean Dr Muhammad Arshad said that the university will make all out efforts to address the productivity issues of the farming community.

Financing plans: Govt to collect $1b in cess for funding gas pipeline

Gives firm commit­ment to Iran under cooper­ation agreem­ent.  Around $90 million is required for purchasing pipes, $46 million for setting up a compression station, $56 million for construction work, $35 million for land acquisition and $152 million for paying duties, cost of transport and other procurements. PHOTO: FILE

Pakistan has given firm assurance to Iran under the government-to-government cooperation agreement that it will collect $1 billion through gas infrastructure development cess from consumers to finance the construction of gas pipeline at home, which will lead to a reduction of 20 to 25% in tariff after gas imports start in December 2014.

“Following this guarantee, Iran has committed to providing a loan of $500 million for laying Pakistan’s portion of the Iran-Pakistan (IP) pipeline,” disclosed an official of the Ministry of Finance, who was part of negotiations held this week between Pakistan and Iran in Islamabad.

Total cost of the pipeline, to be constructed by Iranian firm Tadbir Energy, has been projected at $1.5 billion.

According to sources, the government immediately needs $379 million to kick off work on the pipeline from the Iranian border. “Immediate cash flow is of paramount importance as it will provide the basis for initiating work,” the official added.

Around $90 million is required for purchasing pipes, $46 million for setting up a compression station, $56 million for construction work, $35 million for land acquisition and $152 million for paying duties, cost of transport and other procurements.

According to the finance ministry official, the cess will be treated as equity in the project and the government of Pakistan will be the owner of the pipeline. This equity is expected to lead to savings of around $360 million in interest charges and reduction of around 20 to 25% in overall tariff after the start of gas flow. The debt part of the project will comprise 30 to 35% of the pipeline cost.

Financing through cess will slash the dollar component of the cost as a substantial percentage of tax will go to local contractors in Pakistani rupee.

Before the start of construction work, Inter State Gas Systems (ISGS) will enter into an engineering, procurement and construction (EPC) contract with Tadbir Energy. The pipeline will be commissioned before January 1, 2015.

The government of Pakistan will provide sovereign guarantees to Iran against the loan of $500 million, which will form the basis for implementation of EPC contract as per government-to-government agreement.

The cabinet, in its meeting on December 30, 2012, had approved the initial cooperation agreement between the governments of Pakistan and Iran for constructing the pipeline against financing facility of $250 million, with possible increase to $500 million.

It also approved issuance of sovereign guarantees for the financing arrangement. The cabinet gave the green signal to allocating the cess for the project.

Market watch: Bourse continues climb despite strike

Fertil­iser, teleco­m and cement sector­s bolste­r gains.  KSE benchmark 100-share index gained 0.38% or 68.39 points to end at 17,865.61 points.

KARACHI: Even as most of the city remained shut on Monday owing to a strike call, the Karachi Stock Exchange’s (KSE) benchmark 100-share index gained 0.38% or 68.39 points to end at 17,865.61 points.

The rally was helped by positive news flows from multiple sources, prominent among which were expectations that the cement sector would record a surge in earnings due to stronger domestic sales, higher prices and lower input costs. Also featured was news that the Oil and Gas Development Company (OGDC) had signed direct agreements with fertiliser manufacturers for the supply of gas, and increased expectation that telecom companies will record higher revenues following Pakistan Telecommunication Company’s stellar profits on the back of higher international call termination rates.

Trade volumes remained flat at 292 million shares compared with Friday’s tally of 293 million shares. The value of shares traded during the day was Rs7.18 billion.

“Led by Engro and DG Khan Cement (DGKC), the Karachi bourse achieved a new high,” observed Samar Iqbal, equity dealer at Topline Securities. Both Engro and DGKC’s stocks closed at their upper price limits by the end of the day.

“The said agreement [between Engro and OGDC] will allow Engro to receive gas directly from gas fields, reviving financial prospects for its fertiliser business,” reported Sibtain Mustafa from Elixir Securities. “DGKC continued its positive momentum from last closing as news reports of a $45 billion deal between the Abu Dhabi Group and real estate tycoon Malik Riaz brought in fresh interest.”

Shares of 360 companies were traded on Monday. At the end of the day, 147 stocks closed higher, 161 declined while 52 remained unchanged. Pakistan Telecommunication Company was the volume leader with 29.23 million shares, gaining Rs0.82 to finish at Rs22.77. It was followed by Pace (Pakistan) with 26.60 million shares, gaining Rs0.39 to close at Rs4.32 and NIB Bank with 19.83 million shares, gaining Rs0.15 to close at Rs2.88.

“The majority of volumes were focused on third-tier stocks [...] as retail participation continues to rise. Furthermore, news of Ministry of Petroleum agreeing to increase POL margins by Rs0.25 per litre for motor spirit and Rs0.10 per litre for high-sulphur diesel brought interest in listed oil marketing companies near market end,” Mustafa added.

Foreign institutional investors were net buyers of Rs88.51 million worth of shares, according to data maintained by the National Clearing Company of Pakistan Limited.

Strengthening ties: Oxford Business Alumni Network launched in Karachi

Dr Amir Jafri is the presid­ent of the Oxford Busine­ss Alumni. 

KARACHI: The Pakistan branch of the Oxford Business Alumni Network (OBA) was launched Monday evening at the British Deputy High Commission in Karachi.

Speaking at the occasion, the British Deputy High Commissioner in Karachi, Francis Campbell, said that the alumni of Oxford University are a valuable asset for Pakistan. The president of OBA Pakistan, Dr Amir Jafri, said, “We intend to create ties between the business houses of Pakistan and UK.”

Goods worth over Rs10m traded across LoC

Bilate­ral trade was affect­ed due to Indo-Pak tensio­ns along the LoC.  From AJK, seven trucks laden with almonds, dry dates and apples worth Rs5.6 million entered the Indian side of the LoC, says officials. ILLUSTRATION: JAMAL KHURSHID.

MIRPUR: A remarkable output of bilateral cross-LoC trade between Azad Jammu and Kashmir (AJK) and Indian-held Kashmir emerged on Tuesday after the goods, containing permitted items worth over Rs10 million were traded across the line of control (LoC) at the Taitrinote – Chakan-Da-Bagh crossing point on Rawlakot-Poonch route, official sources said.

As many as 15 trucks rolled out from the Trade Facilitation Centre (TFC) Poonch city of Indian held Kashmir to Rawalakot AJK carrying bags of banana, chillies and herbs worth Rs4.4 million, according to the sources.

From AJK, seven trucks laden with almonds, dry dates and apples worth Rs5.6 million entered the Indian side of the LoC, they said.

Officials from both sides monitored the exchange of these goods which took place in two phases on Tuesday.

The cross-LoC barter trade through historic Rawalakot-Poonch and Muzaffarabad-Srinagar routes through Taitrinote-Chakan-Da-Bagh and Chakothi-Uri crossing points was started in October 2008 to facilitate the Kashmiri entrepreneurs at both sides to the LoC to exchange the trade of a total of 21 permitted locally-produced items under the barter system.

The cross-LoC trade through Taitrinote-Chakan-Da-Bagh was reportedly affected for few days recently following tension on the LoC due to the reported skirmishes between Indian and Pakistani troops on the LoC.

Gwadar: China appreciates transfer of port operations

“The operat­ion of the port is a new projec­t in China-Pakist­an busine­ss cooper­ation,” says Chines­e offici­al.  Lei pointed out that Chinese companies have actively been taking part in the construction of various projects in different fields. PHOTO: FILE


A Chinese foreign ministry spokesperson said on Tuesday that the transfer of operation of Pakistan’s Gwadar port to a Chinese company will open new avenues of business cooperation between the two countries.

Spokesperson Hong Lei expressed these views when asked to comment on the handing over of Gwadar’s port operation to China.

Lei pointed out that Chinese companies have actively been taking part in the construction of various projects in different fields, he added.

“The operation of the port is a new project in China-Pakistan business cooperation,” he said, adding that it is also “part of bilateral and mutually beneficial cooperation.”

Corporate results: Profits soar at Nestle Pakistan as margins rise again

Gross margin­s rise as Pakist­anis consum­e higher value-added produc­ts.  Nestle is currently on track to invest upwards of CHF320 million ($347 million) in expanding its production capacity within Pakistan as part of a three-year plan.


Profits at Nestle Pakistan shot up in 2012 as the company saw its margins increase for the first time in four years, as more and more consumers from Pakistan’s rising middle class are able to afford some of its higher-margin products.

On Monday, the company announced its financial results for the year ending December 31, 2012 – and it was a remarkably positive report: net revenues were up 22% for the year to Rs79 billion, and profits up an even higher 25.6% to Rs5.9 billion compared to the same period in the previous year.

The strong revenue growth for Nestle is particularly remarkable, considering the fact that it is the largest food and consumer goods company in the country, and yet still shows little sign of a slowdown in growth. Indeed, much of that growth appears to be volumetric, showing that consumers have a higher demand for Nestle’s products rather than revenue increases simply being a function of inflation.

But perhaps most encouraging for the company was its increase in gross profit margins, which rose from 25.8% in 2011 to 27.2% in 2012, suggesting that the company is selling more of its higher-margin products. At least some of that higher margin, however, was eroded by higher logistics and distribution costs.

Part of the reason for those higher costs is the installation of more refrigerators as more of its chilled products get sold (mostly yogurt). But another part of it may be that the company is expanding its distribution network into areas where transportation infrastructure is poor and cost of getting products to customers is higher, driving up its overall average.

Nonetheless, Nestle’s size in Pakistan – though miniscule by global standards – appears to insulate it from the kinds of risks that some of its smaller competitors face. Engro Foods, for instance, has somewhat higher distribution costs as a percentage of revenues than Nestle.

Nestle Pakistan’s Swiss parent is the world’s largest food company, with a wide array of products: from those that are commodity-like, to higher-margin products like health foods and chocolates. In Pakistan, however, Nestle has, until recently, been primarily a dairy company. Indeed, until the early 2000s, Nestle’s presence in the country was incorporated as Nestle Milkpak Ltd, named after its signature product. It remains the largest player in the dairy market, collecting milk from an estimated 190,000 farmers spread over 145,000 square kilometres in Punjab and Sindh.

Over the past few years, the company has expanded its product portfolio in Pakistan to include fruit juices, breakfast cereals, instant noodles and confectionaries. But it is still a small proportion of its global portfolio.

Nestle’s ability to rapidly grow its revenues and profits despite being the biggest player in Pakistan appears to be indicative of the tremendous room for growth in the Pakistani market. Consumer spending is expanding as the country’s middle class grows on the back of rapid urbanisation, and increasing household incomes as more and more young people enter the workforce.

Even the advent of a strong local rival in the form of Engro Foods does not appear to have dented Nestle’s growth prospects. In earlier conversations with The Express Tribune, officials at both Nestle and Engro Foods are keen to downplay any talk of a rivalry between the two companies, insisting that there is plenty of room for both to grow. Considering the blowout growth at both firms, there appears to be considerable merit to their argument.

The global giant is currently on track to invest upwards of CHF320 million ($347 million) in expanding its production capacity within Pakistan as part of a three-year plan.

Nestle Pakistan officials were unavailable for comments.

Sui Southern’s fortunes hinge on Sindh High Court decision

Announ­ces Rs2.58b profit, but says this is subjec­t to verdic­t.  In case the petition is decided against the company, it will incur a loss of Rs4.413 billion for the year instead of a profit.


Sui Southern Gas Company (SSGC) has posted a profit after tax of Rs2.58 billion for fiscal 2012, against Rs4.72 billion earned in the previous fiscal year. Earnings per share (EPS) clocked in at Rs2.93 per share, against Rs5.36 per share in the same period of the previous year.

The company has said in its annual results statement that the results are subject to change, depending on the decision of the Sindh High Court on a petition filed by SSGC.

In case the petition is decided against the company, it will incur a loss of Rs4.413 billion for the year instead of a profit. However, if the petition is decided in favour of the company and all contentions put forward by the company are accepted, the net profit for 2011-12 will increase further by Rs2.430 billion, the company secretary said in the result report.

When asked why the company’s profits took a hit in 2012, the SSGC replied that it operates with a fixed rate of return (before financial charges and tax) of 17% per annum on the net average of its fixed operating assets under a tariff regime governed by the Oil and Gas Regulatory Authority (Ogra).

However, its actual return (before financial charges and tax) is fast declining owing to Ogra’s refusal to enhance the limit that can be charged under the unaccounted-for-gas (UFG) head and certain other benchmarks fixed by the authority.

Since the company operates with a fixed rate of return, the profit margin is not directly affected by an increase in the price of gas purchased, it said. However, the cost of gas is increasing at a significant rate, which affects the value of UFG disallowed and which adversely and significantly impacts the company’s bottom-line, the company said.

In order to reduce UFG on a countrywide basis, a number of efforts are being exercised including the creation of Strategic Business Units for greater responsibility and accountability, an aggressive plan to change meters, and the rectification of overhead and underground leakages.

In addition to these steps, the company has initiated a $200 million World Bank-financed Natural Gas Efficiency Project with the Government of Pakistan. The project aims to reduce UFG levels to around 6.7% by financial year 2017, it said.

SSGC’s gas losses are currently around 10-11%, which are affecting the profitability of the company, said Atif Zafar, analyst at JS Global Capital.

Like other government-owned companies, the SSGC is also heavily overstaffed, which directly reflects on the profitability of the company. The incumbent government has regularised thousands of employees at the SSGC over the last few years.

Askari Bank


is the growth in profits for the bank to Rs1.255 billion for 2012 against a profit of Rs1.628 billion in 2011, according to a notice sent to the KSE. Earlier, the Fauji Foundation sealed the acquisition of 100% stake of the bank from the Army Welfare Trust at Rs24.32 per share.



is the increase in profits of the company to Rs1.32 billion in 2012 compared to 2011’s profit of Rs1.14 billion. The company also announced a final cash dividend of Rs4 per share and bonus share issue of 10% with the results, according to a notice sent to the KSE.

Displaying resolve, Naya Nazimabad launches first apartment complex

Invest­ors believ­e they will recoup invest­ments soon as econom­y picks up.  The developers of Naya Nazimabad, a mega housing project located on the outskirts of Karachi, say that they have received an overwhelming response since their first launch. PHOTO: FILE


Displaying extraordinary confidence in the economy of the country, Arif Habib Group Chairman Arif Habib has said that his group is determined to continue investing in Pakistan because there are enough sectors in which there is little or no competition.

“The very fact that not many foreign investors are willing to come to Pakistan is an opportunity in itself for Pakistani businesspersons as it means there is little or no competition in various sectors,” Habib told The Express Tribune after the launch of a new apartments complex in the Naya Nazimabad housing society on Saturday.

“Low competition means more profits on investments,” he said. “This is why you see that business groups in Pakistan have continued to enjoy double-digit growth over the past few years.”

“When I started my career four decades ago, my salary was just Rs60. Look at me today, and see how I grew in Pakistan within the context of political and economic crises like in the 70s and the 80s, and then again in the 90s and in the last decade,” Habib proudly pointed out.

With the numerous challenges it has faced in its turbulent history, Pakistan has always managed to grow, said Habib. “These are difficult times, but I have no doubt that the future growth of Pakistan will be considerable,” he added.

The developers of Naya Nazimabad, a mega housing project located on the outskirts of Karachi, say that they have received an overwhelming response since their first launch more than a year ago.

After the successful sale of housing units and plots in Naya Nazimabad, Javedan Corporation has now offered Parkview Apartments – a project sponsored by Arif Habib, AKD and Ghani Osman Hum Group – Habib said, while unveiling the project at a ceremony organised at the site office.

Park View Apartments have a range of two, three and four bedroom apartments, and are located at a prime location within Naya Nazimabad. “We wanted to offer these flats at competitive prices with affordable payment terms,” said Habib, adding that people are expecting quality projects from his company, which is why he wanted to build the first flat project himself. He wants other builders in Naya Nazimabad to follow the same quality standards.

To further its commitment to fostering a progressive living environment in Naya Nazimabad, the management is working extensively on the design of a Health and Education City, he added.

The Naya Nazimabad School is managed by The Citizens Foundation, and has been operational since April 2012, imparting quality education to youth from the surrounding residential areas.

Naya Nazimabad already has a central mosque, an open air mall and a family entertainment complex, while upcoming facilities include a bank street and the Gymkhana Club. The Government of Sindh has extended its full support to widen the road network, especially Anwar Shameem, which will ensure a comfortable drive to the residential complex for residents, a speaker at the press conference said.

SECP issues show-cause notices to 26 firms

Compan­ies under scruti­ny failed to comply with laws, accoun­ting standa­rds.  The complaints were pertaining mainly to jeopardising shareholders’ right of receiving dividend warrants, right/bonus shares and non-transfer of right shares. PHOTO: FILE

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has issued show-cause notices to the directors and auditors of 26 companies for failing to comply with corporate laws and accounting standards, according to a press statement issued on Monday.

These notices were issued by the enforcement department of the SECP in January 2013. The enforcement department also initiated proceedings against 23 companies on complaints from shareholders. The complaints were pertaining mainly to jeopardising the shareholders’ right of receiving dividend warrants, right/bonus shares and non-transfer of right shares.

These enforcement actions were taken in view of the breaches of statutory requirements noticed during inspection of audited accounts of listed and non-listed companies.

In January, the enforcement department concluded 20 proceedings against directors and auditors of companies by imposing penalties and issuing warning letters. On account of recommendations made by the enforcement department, the SECP also initiated an investigation into the affairs of a listed company.

The SECP also granted extension for organising annual general meetings (AGM) to two companies and also allowed a company to change the place of its AGM, while four companies were directed to hold overdue AGM in due course of time.

Furthermore, three companies were allowed to place their quarterly accounts on their website while nine companies were allowed to change their websites’ addresses.

Weekly review: Index continues relentless drive towards new highs

Strong corpor­ate earnin­gs provid­e a sturdy platfo­rm for market’s growth.  Strong corporate earnings provide a sturdy platform for market’s growth.


Bullish investors held sway over the stock market throughout the week, pushing the stock market towards uncharted territory as the benchmark Karachi Stock Exchange (KSE)-100 index gained another 320 points (1.8%) to close at a new record high of 14,797 points during the week ended February 15.

Strong corporate earnings and the relative calm in the political arena led to greater investor participation in the market, as the index continued its impressive month-long rally. Having crossed the 17,000 point barrier just two weeks ago, the index now has its sights set on the historic 18,000 points benchmark.

Telecom was again the preferred sector for investors, as Pakistan Telecommunication Company Limited (PTCL) was to announce its quarterly results during the week. The buildup lived up to the hype, as PTCL announced a staggering 497% growth year-on-year in its quarterly income.

This was largely due to the implementation of the International Clearing House for incoming calls earlier on during the year. However, the move was trashed by the judiciary and the gains are likely to be a one-off thing. It has been reported by KASB Securities that international incoming calls have declined substantially after the implementation of the ICH, and this is likely to hurt telecom revenues in the long term.

Also in the spotlight was the automobile industry, as monthly car sales jumped 50%, with the Indus Motor Company leading the way with a 127% month-on-month increase in car sales, followed by Pak Suzuki Motors, which saw car sales increase 17% over the previous month. Indus Motors and Pak Suzuki stocks closed the week up 10 and 4.7% respectively.

The oil and gas sector was also in the limelight on expectations of an announcement of higher marketing margins for oil marketing companies, and also due to higher global oil prices. The Oil and Gas Development Company was the biggest beneficiary, and climbed 6.6% during the week.

Politics was relegated to the backburner as Swiss courts said that cases against President Asif Ali Zardari cannot be reopened. Furthermore, the Supreme Court also rejected a petition filed by Dr Tahir ul Qadri calling for the reconstitution of the Election Commission of Pakistan.

Another major development towards the closing of the final trading session of the week was that of the Abu Dhabi Group reportedly signing a deal with property tycoon Malik Riaz for an investment of $45 billion for projects in Karachi, Lahore and Islamabad. The news is likely to provide a solid boost to the market in the coming week.

Average daily volumes declined slightly by 7.4% to 270 million shares traded per day. This activity, however, was focused more towards blue-chip stocks. As a result, average daily values climbed 19.4% to Rs6.81 billion per day. The market capitalisation of the KSE increased 1.9% to Rs4.46 trillion by the end of the week.


National Foods

National Foods

National Foods is a diversified food manufacturer. The group’s products include recipe blends, dehydrated vegetables, pickles, salts, snack foods, desserts, and a number of of health foods.

Netsol Technologies

Netsol Technologies

Netsol Technologies provides information technology solutions. The services include custom software development, technology outsourcing, systems integration, application development, and business intelligence consulting.

Nishat (Chunian)

Nishat (Chunian)

Nishat (Chunian) manufactures and sells yarn and fabric. The company operates spinning, weaving, dyeing, and finishing units.




The Karachi Electric Supply Company is a privately-owned power producer, which transmits and distributes electricity.

Sui Southern Gas Company

Sui Southern Gas Company

Sui Southern Gas Company transmits and distributes natural gas and constructs high pressure transmission and low pressure distribution systems. The company’s transmission system extends from Sui in Balochistan, to Karachi in Sindh.

Bankislami Pakistan

Bankislami Pakistan

Bankislami Pakistan attracts deposits and offers Islamic banking services. The bank offers mortgage and automobile loans, lease financing, wealth management services, and letters of credit and guarantee.

Bond Pricing Agency Regulations draft approved

SECP seeks feedba­ck from stakeh­olders throug­h online forum.  The regulations are based on recommendations of a committee constituted by the SECP comprising representatives of the SECP, the State Bank of Pakistan and the two credit rating agencies. PHOTO: FILE

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has approved the Draft Bond Pricing Agency Regulations, 2013, for soliciting feedback. The regulations have been notified in the official gazette of Pakistan and are also available on the SECP’s official online discussion forum, where comments can be submitted by March 21.

The SECP says the pricing of fixed income securities is an issue faced not only in Pakistan but also the global debt market. “This is primarily due to low trading volumes of listed debt and the fact that these securities are predominantly traded over-the-counter. The technical expertise required for valuation of debt securities is costly both in terms of infrastructure and human capital, thus prohibiting investors to value such securities themselves,” says a press release issued by the Commission.

The Mutual Funds Association of Pakistan has so far been providing prices of only corporate debt to the market. “However, in order to ensure organised development of this crucial market segment, the SECP has envisaged that an independent entity, capable of providing prices based on international benchmark pricing models, needs to be established to provide fair value of all debt securities to the market on a daily basis and in a transparent manner.”

The regulations are based on recommendations of a committee constituted by the SECP comprising representatives of the SECP, the State Bank of Pakistan and the two credit rating agencies. They broadly cover the eligibility conditions for registration as a bond pricing agency, the procedure for its registration and renewal, continuing obligations of a bond pricing agency and disciplinary powers of the SECP. The promulgation of the regulations will enable relevant entities to register with the SECP as independent bond pricing agencies and provide pricing services to the market in a transparent and fair manner.

FBR seeks proposals for national budget 2013-14

Asks the busine­ss commun­ity to send in recomm­endati­ons next month.  Asks the business community to send in recommendations next month.


The Federal Board of Revenue (FBR) sought viable proposals from the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) and all its affiliated chambers across the country for the forthcoming national annual budget 2013-2014.

FBR Chairman Ali Arshad Hakeem told APP that the revenue board had asked the FPCCI and all its affiliated chambers to submit viable suggestions and proposals for consideration by the first week of the next month.

Chief spokesperson of FPCCI and the vice president of the South Asian Association for Regional Cooperation (Saarc) Chamber of Commerce and Industry, Pakistan chapter, Iftikhar Ali Malik told APP that the FPCCI will finalise its budget proposals for the next fiscal year in the light of suggestions of the affiliated chambers.

He said that federation chief and the vice presidents will hold a series of meetings at its regional offices with the presidents of affiliated chambers, registered trade bodies and associations to come up with viable proposals and future strategy to be taken up with federal mini-series and chairman of the FBR.

The affiliated chambers have also been directed to convene specific meetings to give a final shape to their respective proposals which must reach the federation soon. The purpose is to have a direct one-on-one interaction with business leaders to discuss budgetary proposals for the next fiscal year and to help resolve trade issues.

Malik said that the FBR chief had fully assured to solve all genuine grievances of traders and the business community on top priority. He said the FBR will attach great importance to viable proposals by the federation to accelerate the pace of development and provide impetus to the industrial sector.

Elections and after: Expectations and fears of investors

Invest­ors wait to see what course the econom­y will take after polls.  Investors wait to see what course the economy will take after polls.


With just few weeks left in the tenure of present assemblies, everybody is looking forward to the formation of a new government. Since politics and economy are interwoven, investors are also keenly following economic agendas of different political parties to assess what course the economy will take in the near future.

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While most political and business analysts are convinced that the country will have a coalition government this time too, there is still a lot of interest among investors who are waiting to see which political party leads the coalition.

Whichever government comes, business analysts say the investors will be more concerned with how it deals with the challenges of law and order, energy shortage and corruption. They say though nothing much will change in the first six months as far as economy is concerned, at least investors will get an idea of the government’s direction.

Which party enjoys more investor confidence?

“Investors have no concern which political party comes and which goes, what they want is a consistent economic policy,” said Faisal A Rajabali, Nominee Director of Ali Hussain Rajabali Limited, a brokerage firm at the Karachi Stock Exchange (KSE).

A significant increase in share prices on the KSE over the last one year shows that investors have accepted the fact that they have to live and deal with coalition governments. As Pakistan Peoples Party (PPP) or Pakistan Muslim League-Nawaz (PML-N) will most probably form the coalition government with their partners, people are now more focused on policies instead of any specific party name, he added.

“PPP and PML-N are big parties and we cannot compare them with Pakistan Tehreek-e-Insaaf (PTI), a smaller party that may or may not get a significant number of seats in the National Assembly,” commented an analyst of a brokerage house in Karachi, but did not want to be named.

Even though PTI’s economic team has presented its economic agenda forcefully, it will not be in a position to impact policymaking in Islamabad because of its small size, the analyst believed.

“I do not think anything significant will happen after the general election,” Atif Zafar, analyst at JS Global Capital Limited, another brokerage firm, said. “Whichever political party comes to power, it will have to take tough decisions on tackling energy crisis, law and order and corruption.”

It will also have to decide whether Pakistan should knock the doors of IMF again. This is an immediate issue, rest of the economic matters are secondary, he added.

What trade bodies and corporate sector are thinking

“We are not supporting any specific party. What we want from leading parties is to seriously look into our research work and talk in concrete terms,” said Kamran Y Mirza, Chief Executive of the Pakistan Business Council (PBC), a think tank of 42 leading national and international corporate giants.

PBC has been active in negotiations with top political parties in order to develop and implement a single economic agenda that is not disturbed with the change of government.

“We are in constant touch with all leading political parties and discussing their economic agenda,” Mirza said.

“We as a trade body do not directly interfere in politics. Many of our members have affiliations with political parties, but it does not mean that the leadership of FPCCI meddles in political affairs,” Haji Fazal Kadir Sherani, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) said while sharing the Federation’s views on the election.

Karachi Chamber of Commerce and Industry (KCCI) President Muhammad Haroon Agar made it clear that KCCI as a trade body does not want to play a direct role in election.

“We have invited all political parties to the chamber to review their economic agenda. Some of them like PTI and MQM did come, but most have not showed up. This is enough from our side and we do not want to go any further,” he added.

An exodus of suits: Pakistan’s Wall Street losing its lustre

Compan­ies shift to office blocks having ample parkin­g space.  The overall occupancy rate in State Life’s real estate properties was 83% in 2012, which has increased to 85% in 2013, says Siddiqi. ILLUSTRATION: JAMAL KHURSHID


A lack of proper parking spaces in the business district of Karachi has forced companies to pull out, leading to lower occupancy rates in prime real estate properties, real estate brokers working in the area say.

“Many companies have moved out of areas that have traditionally been the centre of business activity in Karachi,” said Naushad Ali, a Saddar-based real estate agent, while speaking to The Express Tribune. “Many big companies, which were once headquartered in Saddar, have shifted to buildings around MT Khan Road that have ample parking space,” he added.

According to State Life Insurance Corporation of Pakistan Chairman Shahid Aziz Siddiqi, whose company owns as much as 2.4 million square feet of rentable office space across the country, the occupancy rate of his company’s properties in downtown Karachi is lower than that in other major cities of Pakistan.

“One, there’s the issue of parking in downtown areas. Second, companies are also trying to cut costs by moving their offices out of commercial areas,” Siddiqi said. The overall occupancy rate in State Life’s real estate properties was 83% in 2012, which has increased to 85% in 2013, he added.

“Our occupancy rates are close to 100% in Multan, Faisalabad, Lahore and Islamabad,” he said, adding Karachi’s lower than nationwide average of occupancy rate was attributable to traffic congestion in the business district, where most of State Life’s buildings are located.

State Life owns 61 buildings and 39 plots all over Pakistan. It owns well over a dozen multi-storeyed buildings in Karachi at the priciest locations, such as II Chundrigar Road, Abdullah Haroon Road, Zaibunnissa Street, Shahrae Liaquat, MA Jinnah Road, Dr Ziauddin Road and Shahrae Faisal.

In 2011, the latest year for which State Life has made its audited data available, the life insurance company earned Rs314 million – or 1% of its total Rs31.1 billion investment income – from properties. Although State Life recorded its “investment properties” at book value of Rs2.9 billion in 2011, their market value is estimated to be in the vicinity of Rs30 billion.

Siddiqi said while State Life is already constructing new buildings in Rahimyar Khan, Sialkot and Sargodha, a proposal to establish a parking plaza in Karachi a few years down the line is also on the cards.

“We’re looking at the cost-benefit ratio of building parking plazas in Karachi. It’s not yet final, but I strongly believe that such an initiative will lead to a swift increase in our property prices in downtown Karachi,” he said, adding the public sector should help solve parking issues in Karachi’s business district.

Unpaid fees: 3G consultants at loggerheads with PTA

Auctio­ning proces­s may also be entire­ly put on hold till a settle­ment is reache­d on the paymen­t issue, says Offici­al.  Consultant were given individual cheques by the PTA for 10% of the agreed fee, but those could not be cashed as PTA had already cancelled them. DESIGN: CREATIVE COMMONS


The country’s never-ending journey towards acquiring 3G cellphone technology appears to have taken yet another step backwards with consultants hired by the Pakistan Telecommunications Authority (PTA) for auctioning 3G licences initiating legal action against the telecom regulator over the non-payment of their fees.

The auctioning process may also be entirely put on hold till a settlement is reached on the payment issue, while legal action in British courts is also on the cards, said an official.

The legal action means PTA is liable not only for the unpaid fees – which amounts to Rs50 million or $0.5 million – but also for the legal costs associated with the case, consultants told The Express Tribune in a press release.

The lawsuit is a fresh blow to the federal body that has failed to launch the much-awaited technology on three occasions last year, despite already wasting Rs20 million in public funds for hiring 3G consultants.

On November 23, 2012, PTA had hired Rob Nicholls from the Australian law firm Webb Henderson; Dennis Ward, the former spectrum auctioneer for the Canadian Spectrum Management Program; and Martin Sims from the spectrum specialists PolicyTracker to assist in auctioning 3G licences.

However, PTA Member Finance Nasrul Karim Ghaznavi and Technical Khawar Siddiq Khokhar had initially opposed the appointments of these consultants. Khokhar and Ghaznavi maintained that their former chief Farooq Awan had hired these consultants against the law, adding that their advice was not requested at any stage of the process.

This opposition led to an internal turmoil within PTA with Awan and Khokhar and Ghaznavi at loggerheads.

The issue then came on the radar of the National Accountability Bureau (NAB) when it raised questions on December 21 about the process being adopted for auctioning 3G licences in the country.

“The NAB finds hiring of consultants for 3G/4G Spectrum (modern cellular phone technology) licences’ auction not in line with the Pakistan Procurement Regulatory Authority rules,” NAB spokesman Zafar Iqbal had said.

PTA eventually terminated the concerned contracts later in December, 2012.

The 3G consultants didn’t react to this breach of contract initially as they wanted to complete the auction instead, The Express Tribune reported on January 13. In the meantime, they made several attempts to contact PTA but no one talked to them, according to a source familiar with the matter.

As a result they have now engaged three Pakistani lawyers Waqqas Mir, Aiyan Bhutta and Umar Khan to take legal action against PTA and recover the money. The lawyers have already served a legal notice to PTA, the source said, adding that they are looking at a range of options including taking legal action in the UK against the “cheque fraud”, which is a criminal offence.

They are also looking for a civil recovery option. The consultants’ lawyers may also consider putting on hold the 3G auction till the issue is settled, the source said. Before their contracts were cancelled, the consultants had completed more than half of the work at their own expense – including a lengthy stay, at least four weeks, in Pakistan – the PTA didn’t confirm this development until January 14, they said.

The consultants said they were not paid a penny for the work they had done. They were given individual cheques by the PTA for 10% of the agreed fee, but those could not be cashed as PTA had already cancelled them.

“This is cheque fraud, pure and simple, and punishable by a jail sentence under Pakistani law,” said consultant Martin Sims. Consultant Rob Nicholls said they would pursue every option available to them until they are paid.

“The contract cancellation letter sent by the PTA was ridiculous,” the press release said quoting Dennis Ward as saying. It claimed that the contract was void ab initio, a legal term meaning invalid at the outset, the statement said.

“That is something only a court can decide,” said Ward. “The PTA is legally obliged to honour contracts. It can’t appoint itself judge and jury and suddenly decide to pull out,” he said.

“PTA seems to be more influenced by politicians and lacks confidence as a body,” said an official who wished not to be quoted. The official, however, said the consultants are professionals and may still consider finishing the job, if PTA can negotiate with them.

“The PTA is being cavalier with public money,” said Rob Nicholls. “Instead of adopting this ‘head in the sand’ approach it should make an arrangement to settle its debts and bring us back after the election to complete the auction.”

Is there an effective economic argument for democracy?

Sadly, some of Pakist­an’s best growth years have been in times of martia­l law.  Sadly, some of Pakistan’s best growth years have been in times of martial law. PHOTO: EXPRESS/FILE


Democracy and economic growth don’t go hand in hand. At least not in Pakistan. Throughout the more than 60 years that Pakistan has been in existence, the best growth years that we have seen, have predominantly been in the times of military rule.

I am not saying this to advocate martial law; rather, I am saying this to urge our political leadership to pay heed to their short-comings and count their blessings that we are not yet a true democracy where the people’s vote really is a harbinger of change, like it is in developed countries around the world.

For example after the country slipped into its first era of military rule, GDB growth rate jumped from an average of 2.5% in the 1950s to 6.8% in the 1960s. This is widely acknowledged as an era of unprecedented growth for the Pakistani economy. You can make many arguments for the political repercussions of this era, but I am just talking numbers here.

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Back to civilian rule

And once the country re-entered the democratic fold in 1971, which was a painful transition with tragic side-effects, the growth rate slumped to 4.8%. But democracy has always been short-lived in Pakistan. It wasn’t long before this fragile system once again got steam-rolled and Pakistan entered its most tumultuous era of all. Economic growth however in the 1980s once again went through the roof averaging 6.5%.

I do believe that the 1970s and the 1980s have been the two defining decades in Pakistan’s history. The 1970s ushered in an era of economic decay and mismanagement and bureaucratic stagnation the effects of which we have been unable to remove to this day.

In the same way the 1980s have forever left the dark shadow of war looming over Pakistan. It is no wonder that today we are mired in the clutches of both militancy and economic mismanagement.

In the 1990s, with the country once again under civilian rule, growth rate started to slide and by the time Pakistan entered its third and so far last military stint in 1999, it had fallen to historic lows, from an average of 6.5% in the 1980s to 2% in 2001. It was in Musharraf’s time that Pakistan saw some of its best growth years, with a high of 9% in 2004-5.

And one year into the present democratic setup, in 2008-9 the growth rate had slumped to 1.7%, the lowest in Pakistan’s history.

Dismal report card

The present government has had a dismal five years. The power crisis has gone from bad to worse. The circular debt has not been controlled.

The Debt Limitation Act has been breached every year and the debt to GDP ratio has surpassed all historic levels.

The rupee has set a record low of over 100 to the US dollar and Foreign Direct Investment has been on the decline. Sadly, the last year and subsequently the last budget prepared by this government was even more populist than ever. Subsidies have continued to rise and debt servicing has been eating a bigger and bigger slice of revenue every year.

graph 04

Martial law is not the answer, but unless democratic governments give up their populist agendas, they won’t be able to give credence to the mantra, ‘Democracy is the best revenge’ either.

For incoming government, winning should be the least of worries

As the econom­y teeter­s on the brink of collap­se, those who win the electi­ons will face unprec­edente­d challe­nges.  Those who win the elections will face unprecedented challenges. EXPRESS/FILE


With widespread consensus that Pakistan will enter into another International Monetary Fund (IMF) programme, the timing for the upcoming elections could not have been worse. As the incumbent government is expected to be replaced by a caretaker setup by March, the period up to that point will likely be marked by suspended policies and reforms.

Based on a survey conducted by AKD Securities and data analysed by The Express Tribune, both macro- and microeconomic indicators for the country remain bleak. The incoming government will definitely have a lot on its plate.

Balance of Payments position

Foreign exchange reserves, according to the latest data available from the State Bank of Pakistan (SBP), currently stand at $13.4 billion, of which the SBP holds only $8.458 billion. This amount is sufficient for only approximately four months worth of imports. The AKD survey suggests that the import cover is destined to fall below three months’ worth by April this year.

Considering the obligatory IMF stand-by arrangement repayments, the external position still poses risks, even as the current account is $62 million in surplus (in the July-January period of fiscal 2013). Meanwhile, inflation figures appear not to be moving. Keeping in view this situation, there appears to be little doubt that Pakistan will be forced to retire its previous IMF loan with another one.

It seems as if that is only a matter of time. According to most fund managers, waiting until after the elections will be too late, resulting in a Balance of Payments (BOP) crisis if inflows, remittances and the Coalition Support Fund (CSF) do not materialise. Remittances have so far totalled $8.21 billion in the ongoing fiscal year, while Pakistan received $1.81 billion in CSF payments in the first seven months of the fiscal year.

Rupee depreciation

After Pakistan paid $145 million back to the IMF on February 11, the rupee touched Rs100 against the greenback. That bad news will come back to haunt the rupee, as its parity with the dollar is expected to further deteriorate to 103 by June, and to 105 by the end of this year – for a full-year depreciation of 8.1% – according to AKD Securities. The next IMF repayment of $398 million is due later this month on February 26.

Reviewing the data regarding the import cover back to the 1990s, the rupee on average depreciates 11% against the dollar every time the import cover falls below three months.

So far, the rupee has held up due to CSF inflows: but they are not expected to arrive for the rest of the year. Thus, any inadvertent delay in securing the IMF arrangement may cause Pakistan to scramble to secure finances – meaning an above-average fall in the rupee’s value against the dollar.

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Monetary policy

Average inflation clocked in at 8.29% for the first seven months of fiscal 2012-13, and the central bank’s governor, during the latest monetary policy announcement, has said that the full-year consumer price index – the primary measure of inflation used in Pakistan – will range between 8-9%. However, the number to watch is core inflation – the non-food and non-energy measure – which hit 9.9% in January, with the seven-month average also at 9.9%.

That means an end to the monetary easing regime, with monetary tightening taking precedent in the SBP’s strategy framework. Brokerage firms predict that interest rates will sustain at current levels in the first half of 2013, then inch back to the double digits in the latter half.

On the macroeconomic front, the economy will stay entrenched in below-par (less than 5%) GDP growth. Pakistan’s GDP grew only 3.7% in fiscal 2012, which will keep the SBP in a catch-22 situation where, despite sluggish growth, it will opt to keep interest rates level. In view of fiscal extravagance and a weak external position, medium-term macroeconomic discipline is likely to arise only under the IMF’s ambit.

Karachi Stock Exchange

As the election process is expected to run its course more or less smoothly, Pakistan’s largest bourse – the Karachi Stock Exchange (KSE) – will remain flattish until June, say money managers.

After a steep fall on January 15 on some political drama, the market has rebounded strongly as its fundamentals are still strong. It has closed positive on 20 out of the 23 sessions since the selling frenzy.  Analysts expect the market to hover around the 17,500-level till June, before embarking on another bull run to touch 18,500 by the end of 2013, implying a full-year return of 9%. The KSE posted a 49% gain in 2012 – the best return any market offered that year.

AKD Securities believes that the benchmark KSE-100 index has enough support from corporate earnings and undemanding valuations to reach 18,500 points over the next few months.

Moreover, continuing unconventional monetary policy response by balance sheet expansion from the US to Japan should see unrestricted funds flow into emerging and frontier market assets through most of 2013. In this regard, Pakistan has received positive highlights with its recent market performance, where a recent Reuters article covering Lipper of the World’s Equity Funds showed 14 funds from Pakistan ranked within 100 of the best in the worlds.

Nishat Power’s profit grows 58% in first half of fiscal 2013

Power compan­y announ­ces Re1 per share interi­m divide­nd with the earnin­gs.  Sales recorded a growth of 20% to Rs12.62 billion in the semi-annual period compared to Rs10.48 billion in the corresponding half. PHOTO: FILE


Nishat Power (NPL) – a subsidiary of Nishat Mills which holds a 51% stake in the power company – reported a profit of Rs1.337 billion for the first half of financial year 2012-13, up 58% from a profit of Rs0.849 billion in the corresponding half of the preceding year.

According to a copy of the results sent to the Karachi Stock Exchange (KSE), the power company announced an interim dividend of Re1 per share with the earnings.

“We believe better operational levels, increased demand from the government and favourable indexation movements led to the growth in profitability,” said Zoya Ahmed, analyst at BMA Capital.

Sales recorded a growth of 20% to Rs12.62 billion in the semi-annual period compared to Rs10.48 billion in the corresponding half, driven by higher utilisation of the power plant at 81%.

NPL’s savings from operation and maintenance and gains from fuel efficiency were two significant factors, which contributed to improved performance in an industry hurt by circular debt.

After witnessing a considerable decline in plant utilisation over the past one year owing to liquidity crunch, the load factor hit 81% on account of payments of overdue receivables by the National Transmission and Dispatch Company.

The regular payments from the NTDC also resulted in a 19% drop in finance cost. Furthermore, regular payments resulted in improvement in load factor leading to higher operation and maintenance savings.

Moreover, higher utilisation levels of NPL shows the government’s commitment to keep load-shedding at a minimum, which analysts do not believe can be sustained due to tariff difference standing at Rs3.17 per kilowatt hour and subsidy of Rs185 billion spent in the first six months of fiscal 2013, said Arif Shaikh, analyst at Global Securities.

According to Arif Habib research, NPL managed to save a hefty Rs0.136 billion due to its fuel efficiency level of 46.3%, a healthy support for the bottom-line.

Exporters against curtailment of customs collectorates’ powers

PTEA reject­s move; says will hurt growth in export­s.  “This major policy shift, substantially enhancing IOCO’s powers, has been made without consultation with stakeholders,” PTEA complained. PHOTO: FILE

FAISALABAD: The Pakistan Textile Exporters Association (PTEA) has rejected a move to curtail the powers of the Model Customs Collectorates (MCCs) and transferring them to the Input Output Coefficient Organization (IOCO) in Karachi.

“Any change in the customs policy regime without consultation with stakeholders will not be accepted,” the body’s chairman said while talking to the media here on Monday.

PTEA Chairman Asghar Ali and Vice Chairman Muhammad Asif said that the shifting of all key imports and exports-related powers of customs collectorates, like export authorisations, approvals, reduced duty rate notifications and the regulating and monitoring of all concessionary and duty remission export schemes to IOCO would hamper growth in exports.

“This major policy shift, substantially enhancing IOCO’s powers, has been made without consultation with stakeholders,” they complained. “Exporters across the country will be disadvantaged, as they will have to go to Karachi physically for all imports and exports-related approvals, and approvals for Duty and Tax Remission for Export (DTRE) schemes and other concessionary and duty remission export schemes.”

They also asked whether IOCO has a sufficient workforce and infrastructure to deal with all import and export-related schemes across the country. “This move has created a panic-like situation among exporters, as they were not expecting such an anti-export measure by the Federal Board of Revenue (FBR),” they claimed.

All parties have an energy plan, but none is seeking a mandate

Major partie­s lay out their strate­gy for tackli­ng the crisis, but do not confro­nt voters with hard truths.  Major parties lay out their strategy for tackling the crisis, but do not confront voters with hard truths. PHOTO: EXPRESS/FILE


Every major political party in Pakistan is claiming to have a plan to address the energy crisis, but none of them are using the 2013 election campaign to secure a mandate from the voters about the tough reforms that will be necessary to fix the biggest problem crippling the economy.

In the upcoming elections, the energy crisis is the foremost issues on the voters’ minds, and all three major political parties – the incumbent Pakistan Peoples Party, the Pakistan Muslim League Nawaz, and the Pakistan Tehreek-e-Insaf – have put out plans of what they think will fix the problem. But the parties seem reluctant to tell the voters just how hard it will be or how long it will take.

There are many similarities between the three plans, since by now the policy cognoscenti of every political party have to agree on the reality of what needs to be done: deregulation, privatisation of large parts of the energy chain, and depoliticised management of the few parts of the energy chain that remain within government control.

And at some level, each party also realises that without fixing energy, they have no hope in hell of accomplishing anything in their five years in office, since they will be too busy dealing with either the political or the financial consequences of not having done so.

Having said that, there are some significant differences.

The most detailed plan currently available is that of the PTI, which is the brainchild of the party’s policy wizard Asad Umar, the former CEO of Engro Corporation and a man who has been intimately familiar with the evolution of the Pakistani energy sector for the past decade. Umar favours privatisation and deregulation of many parts of the energy chain in principle. He even has a preference for exactly how it should start.

“Start by bringing in the private sector in the [state-owned] generation companies,” he said, in an interview with The Express Tribune. “The problems on the generation side are mostly technical and that is what the private sector can help with the most.”

The ruling PPP has the advantage of currently being in government, and thus having access to all of the data that has been compiled by the ministries of petroleum and power. It also has more detailed access to the studies produced by the Asian Development Bank and the World Bank on the subject. So it is no surprise that the PPP does – at least in theory – support deregulation, privatisation, and independent management.

The problem with the PPP, however, is that they have the least credibility on the matter. Having spent five years in office, their case as the party best equipped to make the changes appears weak at first glance. There is, however, the argument that in its first term, the PPP did not expect to last a full term in office. Now that it knows that is possible – and has the benefit of experience in government – is the party most prepared to hit the ground running on the day after the elections. Whether or not voters believe that to be a strong argument is up to the voters to decide.

The PML-N’s policy appears to rely mostly on privatisation, with the party favouring the privatisation of the state-owned power distribution companies. The plan does have merit, but does not adequately address questions of energy sector regulation. Would the government, for instance, still set prices for oil, gas and electricity? Or would that be done by private companies?

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The PML-N has a well-deserved reputation as being a pro-business party. But pro-business does not mean the same thing as pro-free markets. The two are often at odds, and the PML-N has yet to clarify which side it will fall on.

Gas supply to SSGC to be increased next year

Compan­y will get 100 mmcfd from new fields, LPG air-mix plant.  3.2 bcfd of gas is supplied to Sui gas companies out of total production of 4 bcfd. CREATIVE COMMONS

ISLAMABAD: Sui Southern Gas Company (SSGC) will receive an additional supply of about 100 million cubic feet per day (mmcfd) of gas by next year, which will ease some of the shortages the company is facing, particularly in winter.

An official told APP that 50 to 60 mmcfd was likely to be supplied from new gas fields by early next year and another 50 mmcfd is expected in the shape of LPG air-mix from an LPG plant being constructed at Port Qasim.

Apart from these, a significant quantity of 110 mmcfd can be saved by adopting conservation techniques and installing proper gadgets.

Quoting SSGC’s managing director, the official cautioned that with the improvement in gas supply, demand too would grow at the same pace and to cope with this grim scenario, all gas consumers would have to make sacrifices whether they are household consumers, industrial and commercial users or compressed natural gas (CNG) stations.

In an attempt to improve its financial position, SSGC has sought permission from the Oil and Gas Regulatory Authority (Ogra) – the oil and gas sector’s regulator – to allow the company to recover losses caused by gas theft by unregistered consumers.

The official, however, pointed out that recovery of bills from the industrial sector was excellent and said besides undertaking a gas conservation campaign, SSGC had launched an advisory service for the industries. “Any industrialist can take this service free of charge,” he said.

There are calls that the industry should be given priority among all gas consumers as it provides employment to millions of people.

Pakistan produces 4 billion cubic feet per day (bcfd) of natural gas, of which 3.2 bcfd is pumped into SSGC’s and Sui Northern Gas Pipelines’ systems and the rest is supplied to power and fertiliser companies.

According to the official, the gap between supply and demand is widening, with rising unaccounted-for-gas (UFG) levels, caused by leakages, measurement and billing errors and theft, making SSGC’s bottom-line vulnerable.

Competition Commission comes out swinging against auto lobby’s claims

Uses data to illust­rate how restri­ction in car import­s is hurtin­g consum­er intere­st.  The CCP recommends easing the import regime, saying it will have a disciplinary effect in this regard. PHOTO: FILE

KARACHI: Contrary to what the automakers’ lobby has been arguing for over the past year, the Competition Commission of Pakistan (CCP) – the country’s top antitrust watchdog – has recommended that the government should open domestic markets to the import of new cars at reasonable tariffs.

In a study released on Tuesday, it has made a case for allowing foreign competition in the sector, which it says will actually benefit consumers, bring in new technology, and offer more choices to buyers.

Focused solely on the automobile sector, the latest research report is part of the CCP’s ongoing sector-wise studies that seek to assess anti-competitive tendencies in various sectors. In the study, the watchdog has analysed market competition in the passenger cars segment in Pakistan’s automobile sector.

The study has found that Pakistan’s automobile industry is inward-looking and tries to protect itself through the use of regulatory instruments. The CCP recommends that Pakistan needs to develop the automobile industry – currently dominated by only three major players – instead of protecting it. It recommends easing the import regime, saying it will have a disciplinary effect in this regard.

At present, Pak Suzuki is the sole local manufacturer in the 800cc and 1,000cc market segment. In the 1,300-1,800cc cars segment, the state of competition is slightly better, as Honda, Suzuki and Toyota compete with each other to increase their market shares. However, parallel increases and decreases in prices by these manufacturers over the last three years signal a cause of concern from the perspective of competition, the CCP says.

In all three market-segments, manufacturers are sitting on excess installed capacities; and, by not utilising their excess capacities, the firms seem to signal their inward-looking approach towards the domestic industry, says the CCP.

The study also points out a significant cause of concern from the motor safety perspective. In the absence of regulations, domestic automobile manufacturers do not offer safety features such as anti-lock breaking system (ABS), airbags and lower carbon emissions. These are coupled with the absence of quality specifications such as alloy rims, power steering and windows in all their vehicles, the CCP said.

“Dealerships are merely agents of manufacturing companies and have no real incentive to compete in the market,” it said.

Based on its findings, the CCP has recommended various short- and long-term measures. It has suggested that the government remove barriers to entry and lower import tariffs and make them uniform across all automobile categories.

“This will make cars more affordable, push the local assemblers to competition, and incentivise the automobile industry to strive towards international standards and pricing,” it said.

The CCP said it opposes the recent reduction in allowed age limit for the import of used cars from five to three years. “The import of five-year old vehicles provides a better competitive environment in the local automobile industry,” it said. The import of used cars, currently allowed under the gift, personal and baggage schemes, should be reopened according to the watchdog.

The Competition Commission has also suggested that a recently-implemented measure that lowers the depreciation allowance for imported used cars needs to be reconsidered, as it ‘may’ reduce consumer welfare by increasing the price of imports.

Pipe dreams: Govt sets ambitious foreign investment target at $5.5b

Draft of the new invest­ment policy prepar­ed, to be sent to cabine­t for approv­al.  Under the new policy, there will be no upper ceiling on share of foreign equity, except in specific sectors like airlines, banking and media in the new policy. CREATIVE COMMONS


The government has set an ambitious foreign direct investment target at $5.5 billion per year in its new investment policy, which will be achieved gradually by adjusting economic priorities in the face of the changing global scenario due to an economic slowdown, coupled with domestic problems of power outages and continued pressure on economy because of the war on terror.

The Board of Investment (BOI) has finalised a draft of the investment policy for 2013, which will be tabled before the cabinet for approval.

According to the draft, the new policy will be instrumental in increasing foreign direct investment (FDI) to $2 billion in 2013, then with a growth of 25% to $2.5 billion in 2014, $2.7 billion in 2015, $3.25 billion in 2016 and $4 billion in 2017. FDI will be taken to at least $5.5 billion per year, it says.

Assuming an average annual economic growth of 5%, the FDI will account for 20% of gross domestic product (GDP) growth, which is close to the current global average.

The policy seeks to remove obstacles and impediments in the way of foreign and domestic investments, putting Pakistan’s investment environment in line with those of its international competitors.

The government will also remove the minimum equity requirement in different sectors. In the investment policy for 1997, which is in force at present, minimum foreign equity in services had been set at $0.15 million and in social and agricultural sectors at $0.3 million.

Under the new policy, there will be no upper ceiling on share of foreign equity, except in specific sectors like airlines, banking and media in the new policy.

Foreign investors will have the right to exchange local currency with any other freely-convertible foreign currency, subject to the foreign exchange regulations of the State Bank of Pakistan (SBP).

BOI has proposed that the government should place no restrictions on use of foreign private loans, which should be extended to any purpose and not restricted to financing the import of plant and machinery only.

According to the 1997 policy, the facility for contracting foreign private loans is allowed only for financing the cost of plant and machinery required for setting up a project.

In the upcoming policy, the BOI proposes that foreign investors in all sectors should be given access to domestic borrowing, subject to prevailing rules and regulations of the Securities and Exchange Commission of Pakistan (SECP), the SBP, and the observance of the debt-to-equity ratio.

In the 1997 policy, foreign-controlled manufacturing concerns are allowed domestic borrowing according to their working capital requirement without any limit, irrespective of their exports.

In the new policy, foreign investors will be entitled to lease land without any limit under the rules and regulations of the authority concerned.

In the policy for 1997, land for agriculture purpose could be acquired on lease for a long period initially up to 50 years, extendable for a further 20 years.

In the new policy, there will be no ceiling on transfer of land held by foreign investors unless contractually specified in an agreement between the landholder and the federal or provincial government.

Foreign investors will also be permitted to hold a 60% stake in agriculture projects. In corporate farming, the investors will be able to hold 100% equity.

An industrial unit introducing new technology in the country, which was not available before, will be declared an industry pioneer and will receive incentives similar to those enjoyed by units in special economic zones.

Market watch: Stocks close lower as investors book profits

Nation­wide protes­ts put a damper on bullis­h sentim­ent.  The Karachi Stock Exchange’s (KSE) benchmark 100-share index lost 47.90 points to end at the 17,817.71 points level.

KARACHI: Countrywide protests against sectarian killings took their toll on the stock market’s elongated bout of optimism, with the bourse closing a rare session trading in the red. Investors turned bullish as the stock market neared the 18,000 points psychological barrier, with profit-taking in key sectors pushing the index below its opening for the day.

The Karachi Stock Exchange’s (KSE) benchmark 100-share index lost 0.27% or 47.90 points to end at the 17,817.71 points level. Trade volumes dropped to 266 million shares, compared with Monday’s tally of 292 million shares. The value of shares traded during the day was Rs7.90 billion.

“Profit-taking was led by Pakistan Telecommunication Company, which closed 4% down amid unconfirmed news that telecom companies may face contempt of court charges after increasing international call rates. Other telecom stocks also fell due to this,” reported Topline Securities’ equity dealer Samar Iqbal.

“The majority of the profit-taking was witnessed in oil and banking stocks, with Pakistan Oilfields, the Oil and Gas Development Company, United Bank and National Bank of Pakistan closing down by 1.5%, 0.3%, 1.5% and 0.9% respectively,” added JS Global analyst Mujtaba Barakzai.

“Engro Corp gained 4.31% as the stock remains in the limelight on expectations of a resolution to gas supply issues [faced by its fertilisers business]; however, rumours suggest serious obstacles,” said Elixir Securities’ Nazim Abdul Muttalib. “Moreover, Sui Northern Gas Pipelines closed on a second consecutive lower price limit, as the company announced booking down retained earnings by a whopping Rs8.3 billion after losing its petition.”

Shares of 364 companies were traded on Tuesday. At the end of the day, 106 stocks closed higher, 212 declined, while 46 remained unchanged. Pakistan Telecommunication Company was the volume leader with 33.01 million shares, losing Rs0.88 to finish at Rs21.89. It was followed by Fauji Cement with 29.30 million shares, losing Rs0.21 to close at Rs7.84; and Jahangir Siddiqui & Company with 21.44 million shares gaining Rs0.30 to close at Rs18.31.

Foreign institutional investors were buyers of Rs601.32 million and sellers of Rs305.04 million, according to data maintained by the National Clearing Company of Pakistan Limited.

Trade prospects: Maldives’ envoy urges businesses to explore the island

Pakist­an and the Maldiv­es could collab­orate in constr­uction sector for mutual benefi­t, says envoy.  Pakistani businessmen a good opportunity to enhance exports by increasing contacts with their Maldivian counterparts, says Adam.


High Commissioner of the Maldives Aishath Shehenaz Adam has urged the Pakistani business community to explore untapped trade prospects by holding single country exhibitions in the Maldives.

She was talking to a delegation of the Islamabad Chamber of Commerce and Industry (ICCI), according to a press statement issued on Monday.

She said that the Maldives met most of its needs through imports, which offers Pakistani businessmen a good opportunity to enhance exports by increasing contacts with their Maldivian counterparts.

She said that the construction sector was another area in which Pakistan and the Maldives could collaborate for mutual benefit. She said that tourism was the main industry as about 100,000 tourists visit her country annually, adding that both countries could reap the benefits by increasing bilateral cooperation in this area.

Climate change cannot be avoided, say scientists

Say GM crops, mega water reserv­oirs can reduce its impact.  Chattha suggested that the country should redefine agro-ecological zones to cope with climate change. PHOTO: FILE/REUTERS

LAHORE: Climate change, which is posing a serious threat to the country’s agricultural productivity and water resources, cannot be avoided completely, but its effects can be lessened through developing high temperature-tolerant, climate-resilient genetically modified crops and constructing mega water reservoirs, scientists say.

This was the crux of presentations made by scientists from University of Agriculture Faisalabad (UAF) at a workshop organised by the Agricultural Journalists Association, UAF and Monsanto Pakistan here on Monday.

Professor Ashfaq Ahmad Chattha, in his presentation, pointed out that not only carbon dioxide (CO2) level, but also temperature was rising because of climate change, leading to increased water requirement for crops and loss of production in absence of water supply.

He was of the view that a one centigrade rise in temperature could result in loss of 1.2 million tons of wheat production.

Chattha suggested that the country should redefine agro-ecological zones to cope with climate change. “We have to develop an automated environmental network, use models for forecasting, make adjustments to planting time, densities and sowing method, change cropping pattern and cropping intensity and choose suitable varieties.”

He also underlined the need for developing crop varieties keeping in view the climate change perspective and introducing new crops using conventional as well as mutation breeding through biotechnology and genetic engineering.

Monsanto Pakistan Country Lead Aamir Mahmood Mirza, said Monsanto – a US-based agricultural biotechnology corporation – was working with the objective of ‘produce more conserve more” .

He said Monsanto invested $1.5 billion per annum in research and development activities to double the yield of cotton, corn and soya by 2030.

Corporate results: Fauji Cement’s fortunes witness a meteoric turnaround

Higher cement prices, softer coal prices allow the compan­y to post a profit of Rs923m.  The cement industry is expected to have another great year as the demand for cement in Pakistan will continue to grow at the current pace of 7.6%.


On Tuesday, Fauji Cement reported a profit of Rs0.923 billion for the first half of the current fiscal year, switching to black from a loss of Rs0.102 billion in the corresponding half of the preceding year. On a quarter-to-quarter basis, the cement producer’s profits accumulated to Rs0.562 billion in the second quarter of fiscal 2013 against Rs0.361 billion profit in the corresponding previous quarter, up an impressive 56%.

Though exceptional, the results were below market consensus pulling Fauji Cement’s share prices down Rs0.21 to Rs7.84. The stock, however, has outperformed the market by 11.83%, current year to date.

2012 has been really good year for the cement industry in general as higher cement prices and softer coal prices have propelled profits of the highly-leveraged sector. Despite stagnant exports, the industry has more than made up for the losses through higher local dispatches amid higher prices.

Revenues clocked in at Rs7.567 billion in the semi-annual 2012 period, up an astounding 77% compared to Rs4.257 billion in the corresponding half of last year. The astounding boost was solely driven by selling prices which surged 13% to Rs465 per bag in the south zone and 8% to Rs438 in the north.

On a sequential basis, the company posted revenues of Rs4.103 billion in the second quarter against Rs3.464 billion in first quarter of fiscal 2013, up an 18%.

Fauji’s total cement dispatches stood at 662,000 tons in the second quarter, where local dispatches increased 22% to 520,000 tons and exports relatively stable during the quarter, according to a Global Securities’ analyst note.

Gross margin is the number to look at as Fauji Cement managed to boost its margins to 35% during the quarter from 19% in the corresponding quarter of last year, primarily on the back of higher cement prices and falling international coal prices, which declined 27%, and aggressive use of the refuse derived fuel, a cheaper alternative top coal as kilning fuel. Gross margins for the semi-annual period of fiscal 2013 also were at an impressive 32.2%.

On the flipside, the company’s finance cost climbed 15% to Rs0.818 billion despite declining interest rates. Rupee’s depreciation against the dollar contributed to the considerable rise in financial charges as Fauji Cement had secured a foreign denominated loan, which constituted 55% of the company’s total debt. Since the rupee depreciated 2.6% from 94.9 per dollar to 97.4 in the October to November period, Fauji Cement incurred exchange losses of Rs0.168 billion, said Yousuf Rahman, analyst at Global Securities.


Going forward, the cement industry is expected to have another great year as the demand for cement in Pakistan will continue to grow at the current pace of 7.6% as government spending is expected to rise due to upcoming elections. Moreover, exports to Afghanistan and African markets will continue to rise in the future.

Furthermore, analysts believe that Fauji Cement’s stock will witness a further upside, despite forward price-earnings of 4.9 times, as the company has an influence on the pricing of the product in the market.

Diversifying business: Fashion brand maker to open restaurant chain overseas

Energy crisis forces Parago­n Fashio­n to enter into new ventur­e.  Energy crisis forces Paragon Fashion to enter into new venture. ILLUSTRATION: JAMAL KHURSHID


Paragon Fashion, the manufacturer of famous fashion brand Zara let down by the crippling energy crisis, has decided to diversify and open an offshore restaurant chain in an attempt to recoup losses caused by gas and power cuts.

“The management has decided to try its luck in the restaurant business in Saudi Arabia and South Africa instead of expanding its textile business in the country,” said the company’s Chief Executive Officer, Mian Mohammad Naeem, in an interview to The Express Tribune.

He admitted that it would not be easy to make forays into overseas markets, but the company would have to avert losses to save itself.

Paragon Fashion runs a garment factory in Faisalabad, manufactures famous world brands like Zara, Republic, Officer Club and Prime Mark and relies heavily on exports.

Naeem said the energy crisis had caused immense losses because of delay in shipments, stressing that it is necessary to ship consignments on time, but it was not possible any more.

About five years ago when the PPP government took over in March 2008, the company’s sales stood at around Rs500 million, which have now dropped sharply to Rs300 million.

“If the government overcomes the energy crisis, the company can increase its revenues to Rs1 billion,” Naeem claimed.

Businessmen have been hoping that the government will tackle the energy problem and bring an end to the outages. If power and gas are supplied without any interruption, Paragon Fashion will invest in enhancing production capacity as well.

However, Naeem said it would be useless to invest more in this business because the factory was already running at half the capacity.

He said rising prices of fuel were also pushing up the cost of production because running generators on furnace oil and diesel made exports uncompetitive in the international market.

Garment factories cannot survive at a rate of return that is below 15 to 20% as the cost of production had increased by more than 35% in the past few years, Naeem said. “If the factory runs at full capacity, then we can manage the cost of production by increasing the manufacturing capacity.”

Before selecting Saudi Arabia and South Africa for opening the restaurant chain, Naeem had visited various countries to scout for right places for making investment. After completing projects in the two countries, the company will expand business to other Gulf states.

Egypt in political clinch as economic cliff looms

The Egypti­an pound has lost 14 percen­t of its value since the 2011 revolt.  With little regard for the looming economic cliff, politicians in the most populous Arab nation are trading blows over an Islam-tilted constitution. PHOTO: FILE

CAIRO: Two years after a pro-democracy uprising, Egypt resembles a rickety bus rolling towards a cliff, its passengers too busy feuding over blame to wrench the steering wheel to safety.

Foreign exchange reserves are dwindling. Tourism is moribund. Investment is at a standstill. Subsidised diesel fuel and fertiliser are in short supply, while the cost of subsidies is swelling the budget deficit unsustainably.

The Egyptian pound has lost 14 percent of its value since the 2011 revolt. Dollars are scarce. An IMF loan that could unlock wider aid is on hold. Unemployment is rising. Public security has deteriorated, and arms smuggling is rife.

With little regard for the looming economic cliff, politicians in the most populous Arab nation are trading blows over an Islam-tilted constitution, political violence and an alleged power grab by the Muslim Brotherhood.

To President Mohamed Mursi and his supporters in the Freedom and Justice Party, the Brotherhood’s political arm, this is just a tough home stretch in Egypt’s delayed transition to democracy.

With the strongest national machine, they confidently expect to win parliamentary elections in April or May, completing their conquest of the new democratic institutions, then set about reforming the country along conservative Islamic lines.

“We are going through a bottleneck,” said Essam Haddad, the president’s national security adviser. “We’d like to get through this bottleneck as quickly as possible, and without cracking the bottle.”

Cash injections from Qatar, the Brotherhood’s main foreign backer, are holding the country’s head just above water, and Haddad says a big informal economy will keep Egypt going.

 IMF loan unsure

Others are less sure. U.S. ambassador Anne Patterson warned this month that the dearth of foreign currency could cause food and fuel shortages and put social stability at risk in a country where two-fifths of the population lives on less than $2 a day.

Contacts with the International Monetary Fund continue by telephone and email, but there is no sign of an IMF mission returning to Egypt to conclude a $4.8 billion loan agreement vital to stabilise the economy.

The IMF demanded in December that Egypt amend its economic adjustment programme to qualify for the loan. Diplomats say an IMF deal could unlock up to $12 billion in funding from a range of sources including the World Bank, the European Union, the United States and Gulf Arab countries.

Haddad made clear the government would not risk implementing before polling day the unpopular subsidy cuts and austerity measures required by the global lender.

“It is very well known by the IMF that nobody would do such an action just before the elections,” he said. “However, our message is very clear. These reforms are essential for the economic recovery. There is no other choice.”

Some liberal opposition leaders, who have failed to pressure Mursi into amending disputed articles in the constitution or replacing a weak cabinet led by pale Prime Minister Hisham Kandil with a national unity government, are now offering a pact on a platform of economic priorities.

Hassan Malek, the Muslim Brotherhood’s top business leader, played down that idea, saying opposition politicians Mohamed ElBaradei, a former U.N. nuclear agency chief, and Amr Moussa, a former head of the Arab League, were only speaking for themselves and could not deliver their National Salvation Front.

The leftist Popular Current party of Nasserite firebrand Hamdeed Sabahi, a key member of the NSF, and hardline Islamist Salafi parties have distanced themselves from the IMF programme.

Malek said in an interview the economy was going through a sticky patch because the transition to democracy launched by the 2011 revolt that toppled former President Hosni Mubarak was not yet complete and institutions were not working fully.

“The Egyptian economy is not going to collapse,” he said. Malek is trying to lure home Egyptian billionaires and Mubarak-era economic reformers, some of whom had their assets seized or were convicted in absentia after the uprising.

“Brotherhoodisation” Denied

The opposition intelligentsia in Cairo and young street activists who spearheaded the anti-Mubarak uprising and feel their revolution has been confiscated, denounce what they call a growing “Brotherhoodisation” – a drive to infiltrate and control all institutions.

In one example, veteran al-Ahram journalist Hani Shukrallah, a respected commentator, blamed Brotherhood pressure on the government-owned media group for his enforced retirement. The paper’s new management denied political motives.

Yet there is little sign of any monopolisation of state power or civil society so far. It looks more like the kind of rotation of elites that occurred in Turkey when the AK party won election a decade ago.

The armed forces and to some extent the Interior Ministry and security services remain autonomous power centres that appear to have reached a modus vivendi with Mursi based on mutual non-interference rather than being under his thumb.

A vibrant independent media forced the president’s son this week to forgo a job with a state-affiliated company by raising accusations of nepotism. Shrill late-night television talk-shows offer a wide range of trenchant opinion.

The judiciary is still full of Mubarak-era holdovers who show little inclination to do the Brotherhood’s bidding. Neither the government nor opposition parties control the young street.

And a clumsy effort to gain more sway over the religious authorities failed last week when senior Muslim scholars picked an apolitical Islamic lawyer as Egypt’s top cleric in preference to the Brotherhood’s preferred candidate.

Haddad said any talk of Brotherhoodisation was “black propaganda trying to exclude a whole sector of society”. He noted that Brotherhood members had been excluded from many state institutions and the armed forces under Mubarak.

Ziad Bahaa el-Din, a former investment authority chief who is now vice-president of the opposition Social Democratic party, says the Brotherhood, like past Egyptian rulers, is trying to secure its grip on power before tackling the country’s problems.

“This has happened ever since (Ottoman pasha) Muhammad Ali slaughtered the Mamluks in the early 19th century,” he said in an interview. “(Gamal Abdel) Nasser locked up the Muslim Brothers and the Communists in 1954. (Anwar) Sadat locked up his opponents in 1971.

“The difference now is that people’s acceptance is no longer there. You cannot control public opinion, and the kind of economic problems we are facing cannot be postponed for a couple of years,” he added.

Dan Kurzer, a former U.S. ambassador to Cairo now teaching at Princeton University, said Egypt was only in “round three of a 15-round heavyweight contest”.

Among the players in the ring, he sees the Brotherhood, the military, the internal security forces, the revolutionary street, and what he called “the fourth heavyweight – old regime loyalists who may be off balance, in jail or in exile but who will be energised if the economy collapses”.

Khyber-Pakhtunkhwa: New governor urges investors to come forward

Engine­er Shauka­tullah Khan assure­s invest­ors of his full suppor­t.  Industrialists and traders of the federal capital urged to invest in Khyber-Pakhtunkhwa.


Newly appointed Khyber-Pakhtunkhwa (K-P) Governor Engineer Shaukatullah Khan has asked industrialists and traders of the federal capital to invest in Khyber-Pakhtunkhwa, assuring them of his full support.

He was speaking during a meeting with a delegation of the Islamabad Chamber of Commerce and Industry (ICCI), led by its President Zafar Bakhtawari.

The governor praised the ICCI for acting as a catalyst for rapid economic development and prosperity of the business community not only in Islamabad but the whole region.

Speaking on the occasion, Zafar Bakhtawari expressed the hope that the new governor would improve law and order in the province.

He announced that industrialists and traders of Islamabad would definitely invest in K-P for the development of the province.

Bureaucracy blocks EOBI’s investment in energy projects

It wanted to invest billio­ns of rupees in Diamer Bhasha Dam, LNG import.  “In the past, EOBI made proposals for investment in various projects of electricity generation to the government, but unfortunately these could not get through,” says Gondal. PHOTO: ARIF SOOMRO/EXPRESS/FILE

FAISALABAD: The Employees Old Age Benefit Institution (EOBI) could not succeed in its efforts to invest in energy projects as bureaucratic hurdles stood in its way, instead the organisation is now pouring money into construction of three-star hotels in different cities of the country.

“In the past, EOBI made proposals for investment in various projects of electricity generation to the government, but unfortunately these could not get through,” said EOBI Chairman Zafar Iqbal Gondal while speaking to members of the Faisalabad Chamber of Commerce and Industry (FCCI) on Friday.

EOBI had offered to invest Rs15 billion in the Diamer Bhasha Dam and another project, but Wapda did not approve it. Similar was the fate of investment interest in the import of liquefied natural gas (LNG) from Qatar.

He asked regional EOBI offices to hold regular meetings of advisory and dispute resolution committees in order to avoid misconception and resolve problems faced by the business community. “FCCI will be given representation on the EOBI board of trustees,” he announced. Gondal pointed out that an agreement had been signed with NADRA and the Easy Paisa facility would be offered for quick delivery of pensions to the people.

He praised the employers for their positive role in encouraging worker pension contributions, which has led to a massive increase in EOBI funds from Rs149 billion to Rs250 billion in a short span of three years, when he took charge.

Earlier, FCCI President Mian Zahid Aslam highlighted the tough business conditions in which industrial units were operating in Faisalabad. The top most concern was prolonged electricity outages and suspension of gas supply for continuous 68 days in the winter. Gas supply has now been resumed for two days a week, curtailing industrial production to 50% of capacity.

He said prices of industrial inputs and utility charges along with minimum wage, EOBI and social security contributions and other government levies had increased the cost of production.

He called on the EOBI to invest in electricity generation projects as the industry was in dire need of energy to keep its wheel running. EOBI could also get lucrative returns from such projects compared to investment in buildings, plazas, roads, hotels and real estate.

Aslam asked the EOBI chairman to stop harassment on the plea of record checking and accept whatever pension contributions made by industries under prevailing circumstances, freeze arrears of industrial units and waive the unpaid contributions and penalties on closed units.

He suggested that EOBI should find new contributors instead of burdening the existing ones, hold regular meetings of advisory and dispute resolution committees and fix the 30th of month as last date for the receipt of contribution.

German diplomat says no shortcut to GSP+ scheme

Says German­y will lobby for approv­al, but reiter­ates that ball is in Pakist­an’s court.  Exports to Germany constituted 5.2% of the total exports of Pakistan in 2012, with a majority of exported goods falling in the textile category. DESIGN: MOHSIN ALAM

KARACHI: Granting the Generalised Scheme of Preferences-Plus (GSP+) status to Pakistan will be primarily a “political decision” aimed at boosting Pakistan’s economy, German Ambassador to Pakistan Dr Cyril Jean Nunn said while speaking at an interactive session on German-Pakistan relations here on Thursday night.

The GSP+ is a trade arrangement that allows exporters from developing countries to pay lower or no duties on their exports to the European Union (EU).

“It is up to the government of Pakistan to negotiate the GSP+ package with the trade division of the European Commission. There’s no short cut,” the ambassador told a textile industry representative who had a complaint regarding the short window of time in which a country can apply for the GPS+ status, which becomes effective on January 1, 2014.

The granting of the GSP+ status depends on whether the benefitting countries effectively implement as many as 27 international conventions on environment issues, good governance and human and labour rights. While the standard GSP – which will stay in force until the end of 2013 – allows 176 developing countries and territories to enjoy easy access to the EU through various duty reductions for certain product lines, the upcoming GSP+ will be limited to 89 low and lower middle-income countries. Experts believe that with the exit of many competitors from the scheme, Pakistan will be in a position to exploit more opportunities to export to the EU.

Nunn, however, warned that there were some countries within the EU that wanted to protect their markets from Pakistani textile imports as they are not “naturally favourable” to their economies. Explaining that Germany is not a negotiator in the matter of the GSP+ scheme, Nunn nonetheless said his country would use its influence to negotiate a package that suits the two parties.

“However, once you have the package on the table, please remember that it has to go through 27 national parliaments and the European parliament. That’s a tricky business, because any parliament can ask for renegotiations at any time,” he said. “But the good news is that you have friends in the EU who are on your side.”

Regarding the composition of trade between Pakistan and Germany in 2012, for which official data is still not available on the website of the World Trade Organisation (WTO), Nunn said it increased 10%, which is far more than the global growth rate. However, he noted that the trade in textiles between the two countries witnessed a decline in 2012. “It didn’t happen because the German consumer would not buy textiles from this country. It was because textiles from this country were not available (in Germany) for reasons that I don’t have to comment on,” he said; apparently alluding to the energy crisis plaguing the industry in Pakistan.

According to the most recent WTO data available, Pakistan’s exports to Germany increased to $1.3 billion after rising at an annual rate of 14% between 2007 and 2011. Exports to Germany constituted 5.2% of the total exports of Pakistan in 2012, with a majority of exported goods falling in the textile category.

Real estate: Abu Dhabi Group to invest $45 billion in Pakistan

Malik Riaz of Bahria Group signs contra­ct to bring record foreig­n invest­ment into the countr­y.  Sheikh Nahyan bin Mubarak al Nahyan and Malik Riaz sign the investment agreement in Abu Dhabi. PHOTO: PRESS RELEASE


Former chairman and present consultant of Bahria Town, Malik Riaz Hussain has signed an agreement with His Highness Sheikh Nahyan bin Mubarak al Nahyan, Chairman Abu Dhabi Group, Union National Bank and United Bank Limited under which $45 billion will be invested in Pakistan.

The investment will be made in various construction projects, and is the biggest-ever foreign investment in Pakistan.

Out of the total investment value, $10 billion will be invested in Islamabad and Lahore whereas $35 billion will be invested in Sindh.

These projects also include the construction of the tallest building of the world (Taller than Burj Khalifa, Dubai) in Karachi.

Moreover, the project encompasses sports city, educational and medical city, international city and media city. The project also includes the construction of miniatures of the Seven Wonders of the World. These projects will employ more than 2.5 million people and will boost more than 55 industries like cement, bricks, iron, steel and glass. Moreover these projects are expected to represent all the social classes of society and middle-class and lower-middle class will have equal representation. The agreement will have a revolutionary impact on not only Pakistan’s economy but also the tourism of the country and will be a milestone in reviving the lights of Karachi.

Speaking on the occasion, His Highness Sheikh Nahyan bin Mubarak al Nahyan said that Bahria Town not only represents modern Pakistan but is also a credible, respected and authentic name in the real estate sector the world-over. “I am genuinely happy that in this historic project of Pakistan we are working with the visionary Malik Riaz Hussain, this guarantees that not only the project will be delivered beyond our expectations but also before time. We will Inshallah be welcoming first residents in next 3-4 years.”

Malik Riaz expressed his pleasure at the signing and said that it was a matter of great pride to be part of this project as such a huge amount of foreign investment has never been made before.

A distinguished feature of this project is the utilisation of seawater to produce electricity. The projects will have their own grid station. Moreover, a separate modern water treatment plant will be established to convert seawater into drinking water. These features make this a landmark project in Pakistan, which addresses the current water and electricity issues of the country.

The Abu Dhabi Group has previously made huge and successful investments in Pakistan by the establishment of Bank Alfalah, Warid Telecom and Wateen Telecom.

Pleasing foreigners: Ban on import of CNG kits may be partially lifted

Econom­ic Coordi­nation Commit­tee to consid­er the propos­al in its upcomi­ng meetin­g.  The move is expected to help certain influential individuals clear 59 consignments of cylinders which were awaiting clearance due to the ban imposed in September last year.


The government appears to be moving to reverse its decision to ban the import of CNG kits and cylinders in order to facilitate an Italian manufacturing firm and its sizeable investment in the country and to clear 59 consignments of cylinders imported by certain influential lobbies despite the embargo.

The Economic Coordination Committee (ECC), in its upcoming meeting, will consider the proposal.

Sources in the Ministry of Industries, and documents available with The Express Tribune, revealed that it has been proposed to the ECC that the import of cylinders and kits may be allowed for those shipments for which a letter of credit was opened, or bank guarantee or contract as per State Bank Regulations had already been concluded, before December 31, 2011. The move is expected to help certain influential individuals clear 59 consignments of cylinders which were awaiting clearance due to the ban imposed in September last year.

According to documents available, the Federal Board of Revenue (FBR) has stated that out of the 59 pending consignments of cylinders, importers have furnished particulars of the bills of landing and purchase orders of 26 consignments. However, the concerned bank has verified the bills of landing, but no verification report has been provided regarding purchase orders. Accordingly, the dates for the letter of credits, bank contracts or bank agreements for the pending consignments are not available with the FBR.

According to a list of consignments available with The Express Tribune, a few firms have not had their consignments cleared. These include Mehr Brothers Limited, Zam Zam Gas, Cres Resource, Gas Inn, Madni CNG, Seven Star CNG Station and Satellite Gas 2. These firms will be the main beneficiaries if the ban is lifted.

Landi Renzo Pakistan, an Italian firm, is engaged in the manufacturing and assembly of CNG kits. The firm imports CNG cylinders and parts and components of cylinders and kits. The firm has raised serious concerns regarding their future projects and investments in Pakistan in view of the import ban, and has urged the government to review its decision. It has proposed that CNG kits manufacturers that import parts and components may be granted the status given to Original Equipment Manufacturers, a status otherwise enjoyed by local automobile assemblers.

The ECC has been asked to allow the import of only those parts and components of CNG kits that are not locally manufactured, in order to encourage the export of fully assembled CNG kits.

The Ministry of Finance has said that the Italian firm has been working in Pakistan for the past five to seven years, having invested a considerable amount. Under the current investment regime, a reversal of the decision on the import of CNG cylinders and kits will likely have a positive effect as far as encouraging investments is concerned. It said that the opinion of the Board of Investment should be sought in this regard.

Published in The Express Tribune, February 16th, 2013.

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Market watch: Index-heavyweights, earnings boost bullish momentum

Benchm­ark KSE-100 index gains 69 points.  Trade volumes climbed to 313 million shares compared with Wednesday’s tally of 262 million shares.

KARACHI: Institutional buying in index-heavyweights pushes the market to continue riding the bullish momentum on reasonable activity as corporate earnings season keeps the mood upbeat. The telecom sector stayed on investors’ radar as the market expect better results for the sector after the Pakistan Telecommunication Company realises international call revenue.

The Karachi Stock Exchange’s (KSE) benchmark 100-share index gained 0.39% or 69.37 points to end at 17,765.82 points. Trade volumes climbed to 313 million shares compared with Wednesday’s tally of 262 million shares. The value of shares traded during the day was Rs6.41 billion.

“The index-heavyweights MCB Bank and the Oil and Gas Development Company (OGDC) drove the market to new highs,” reported Ovais Ahsan, analyst at JS Global Capital. OGDC closed up 1% at Rs204.04 while MCB Bank closed up 1.7% at Rs217.48.

“PTCL results, announced on Wednesday, generated investors’ interest in all telecom stocks as they expect that higher rates under the international clearing house arrangement will impact positively on the whole sector,” said Samar Iqbal, equity dealer at Topline Securities.

The oil marketing giant, Pakistan State Oil (PSO), climbed 1.5% on expectations that the government will soon release funds after multiple SOS calls by the company bearing the brunt of the circular debt situation.

Textile cum power play Nishat Chunian attracted buying as the company’s listed power subsidiary Nishat Chunian Power announced cash payout of Rs2 per share accompanying its results, driving it to hit at its upper circuit.

Consumer plays Unilever and National Foods were also in the limelight in anticipation of strong earnings growth in the sector.

Telecard was the volume leader with 40.5 million shares gaining Rs0.95 to finish at Rs5.6. It was followed by Pakistan Telecommunication Company with 32.52 million shares gaining Re1 to close at Rs21.1 and Sui Northern Gas Pipelines with 22.37 million shares shedding Rs0.16 to close at Rs25.3.

Foreign institutional investors were net buyers of Rs400.35 million.

Canada encourages exporters with tariff cut

Asks Pakist­an’s busine­ssmen to capita­lise on the opport­unity.  According to Sheikh, main sectors of interest for Canadian businesses could be power and energy, agri-food, food processing equipment and technology and telecoms. PHOTO: FILE

LAHORE: Canada has asked Pakistan exporters to capitalise on the tariff cut made by it, terming the duty reduction a big opportunity for traders as Canada is interested in enhancing trade and investment ties with Islamabad.

Speaking at the Lahore Chamber of Commerce and Industry (LCCI) on Friday, Canadian High Commissioner to Pakistan Greg Giokas pointed to the sectors that hold huge potential for cooperation. Of these, livestock and agriculture are the two areas in which cooperation can lead to a win-win situation for the two countries.

“Education and economic development are key components for Pakistan’s competitiveness in a globalised economy,” he stressed.

The high commissioner said Canada pursued a broad range of interests in relations with Pakistan including trade and investment, development cooperation, people-to-people links, regional security and defence, governance and human rights.

He welcomed the improvement in economic and political relations between Pakistan and India, terming it critical to regional security and the economic future of Pakistan.

Speaking on the occasion, LCCI Senior Vice President Irfan Iqbal Sheikh was of the view that bilateral trade statistics were not satisfactory and there was room for enhancing the trade volume to new levels. A little effort focusing on selected sectors could take trade to around $2 billion in the next few years, he said.

The target can be achieved through exchange of businessmen delegations, organising single country exhibitions, participation in fairs and exhibitions, seminars, workshops, etc and involvement of diplomatic missions.

According to Sheikh, main sectors of interest for Canadian businesses could be power and energy, agri-food, food processing equipment and technology and telecoms.

Corporate results: Fertilizers decimates otherwise strong year for Engro

Foods now the larges­t subsid­iary of the conglo­merate by any measur­e.  During the course of 2012, the company spent Rs13.6 billion in servicing its debt, including about Rs4.9 billion in principal payments.


Engro Corporation may be well on its way to becoming a well-diversified conglomerate, but during earnings season, one truth hits home: its core business is still fertiliser manufacturing, and that core is dragging down an otherwise outstanding company.

After the announcements of the earnings of Engro Foods and Engro Fertilizers, the market largely knew what to expect, but it was still grim reading: revenue increased a paltry 8.7% (below inflation) to Rs125 billion and profits plummeted 83% to Rs1.3 billion. The overwhelming bulk of that decline can be attributed to the fertiliser manufacturing business, which went from a Rs4.6 billion profit in 2011 to a Rs2.9 billion loss.

Excluding the losses from Fertilizers, the conglomerate saw its revenues increase by 13.5% and its profits by a much healthier 22.9% during the year ending December 31, 2012. So anaemic is the fertiliser business that it is no longer the largest business: 2012 also has the distinction of being the year that Foods became, in every respect, the largest subsidiary of Engro Corporation. The North American subsidiary of Engro Foods – Al-Safa Halal – also registered a substantial revenue number for the first time, of around $11 million.

At the press conference announcing its results, however, Engro CEO Aliuddin Ansari spent the bulk of his time talking about the problems in the fertiliser business, specifically how the company was able to get only 9% of the gas that the government is obligated – by sovereign guarantee – to provide the $1.1 billion plant in Dharki. Most worryingly for shareholders, the CEO did not present any backup plan for how the company might deal with the failure of the government to supply it with natural gas.

The new plant for Engro was financed largely through debt, which has been a particularly troublesome burden for the company in light of the amount of time the plant spends idle, and thus unable to generate revenues. During the course of 2012, the company spent Rs13.6 billion in servicing its debt, including about Rs4.9 billion in principal payments.

Ansari claimed that the government was being highly discriminatory in its attitude towards Engro, adding that other fertiliser manufacturers – especially Fatima Fertilizer – were getting natural gas, even though both Engro and Fatima have identical agreements with the government.

Fertilizers may soon have at least some relief from the chronic gas shortages, however. The state-owned Oil and Gas Development Company, the largest oil exploration and development company in the country, signed agreements with several fertiliser manufacturers, including Engro, to sell them natural gas directly through its low-BTU wells, bypassing the state-owned gas distribution companies, which also have to cater to several other constituencies.

Engro’s other businesses have begun to do well and have a significant impact on the company’s bottom line. Engro Vopak, its chemical storage business, had an net income of Rs1.5 billion. Engro Polymer & Chemicals finally swung to a narrow profit of Rs77 million after years of losses, and Engro Energy contributed Rs2 billion to the conglomerate’s bottom line.

Forex spread: SBP open for complaints against exchanges

Compla­ints must be accomp­anied by a copy of NIC of the compla­inant, purpos­e of transa­ction and other relate­d detail­s.  The general public may also lodge a complaint with SBP, if an exchange company refuses to sell foreign exchange on the pretext of shortages or non-availability of currency notes. PHOTO: FILE


The State Bank of Pakistan (SBP) advised the public that they may lodge their complaints with the central bank, if the difference between buying and selling rates, charged by an exchange company exceeds the prescribed limit of Rs0.25 and/or exchange rates of different currencies are not displayed in the premises prominently.

“The general public may also lodge a complaint with SBP, if an exchange company refuses to sell foreign exchange on the pretext of shortages or non-availability of currency notes for otherwise bona fide permissible transactions or transacts at other than displayed rates,” a statement of the SBP issued on Friday said.

Complaints must be accompanied by a copy of the computerised national identity card of the complainant, purpose of transaction and other related details.

Federal Board of Revenue moves to curb corporate tax evasion

Approv­es risk parame­ters for audit of suspec­ted tax dodger­s.  The FBR will conduct fresh balloting on the basis of approved parameters on Monday to select cases for audit. DESIGN: FAIZAN DAWOOD

ISLAMABAD: The Federal Board of Revenue (FBR) has approved risk parameters for the selection of cases for audit of suspected tax evaders aimed at removing a legal lacuna that barred the revenue body from audit of 10,000 firms selected through computer balloting last year.

Headed by FBR Chairman Ali Arshad Hakeem, the Board-in-Council – the highest decision-making body of the FBR – gave the go-ahead to separate risk parameters for income tax, sales tax and federal excise duty.

In November last year, the FBR had picked 9,740 cases for audit through computer balloting on suspicion of massive tax evasion. However, the Lahore High Court stopped the move on the ground that risk parameters for selecting audit cases had not been approved by the Board-in-Council.

Talking to The Express Tribune, Ali Arshad Hakeem said the FBR will conduct fresh balloting on the basis of approved parameters on Monday to select cases for audit.

Following the directives of the high court, he said, the FBR has set separate parameters for three types of taxes. The Board-in-Council has also delegated powers to the members of FBR for performing the audit.

The November 2012 effort was the second such attempt to conduct the audit in three years. Earlier, in 2009 the FBR had selected roughly 900 firms for audit, but these companies approached the court, arguing that under the FBR Self-assessment Scheme, the body had no powers to perform audit.

To overcome that hurdle, the FBR inserted Clause 214-C in the income tax law of 2001. In 2009, the selected companies exploited another loophole.

Now, the Board-in-Council has plugged this loophole with 14 risk parameters for the audit of corporate sector. These include firms that show a 5% difference between the value of imports in income tax returns and the value of declared imports. Other firms that will come under FBR’s radar include those that show a 10% decline in sales over previous year, claim refund of Rs10 million, show persistent decrease of more than 5% in net profit over the last three years and show addition to plant and machinery exceeding Rs200 million.

Companies that show addition to plant and machinery in tax year 2009 without a corresponding increase in turnover for tax year 2011 will also be subject to audit. Another important parameter is that if a company puts financial cost at more than 5% of turnover.

For non-corporate sector, the first parameter is that if a company’s opening stock does not match with the closing stock of previous year. Companies that put cost of sales at 80% of total sales (other than distributors/suppliers), continuously declare losses for the last three years, continuously post decreased income for the last three years, show a 10% decline in total sales over previous year and their net tax paid is less than 10% in comparison with the previous year, will face audit. Hotels and restaurants showing cost of sales at over 70% of turnover will also be picked for audit.

In sales tax, a company will face scrutiny if it shows a difference of 5% between declared imports and sales tax returns.

In federal excise duty, a corporation will be selected for audit if it shows more than half of the purchases from unregistered persons and more than 50% of sales to unregistered persons. Fifty per cent of supply to blacklisted and suspended persons and 50% of purchases from blacklisted and suspended persons will also lead to the audit.

Published in The Express Tribune, February 16th, 2013.

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‘Cracks’ appear in ties between Pakistan and ADB

Financ­e minist­er avoids meetin­g with the bank’s direct­or genera­l.  One of the reasons behind the friction is said to be the preferential treatment the finance minister gives to Washington-based World Bank.

ISLAMABAD: As the country needs foreign loans to bolster its dwindling reserves, cracks are apparently appearing in relations between Pakistan and the Asian Development Bank – once considered a friendly lender which has come to the country’s rescue in difficult times.

ADB, the largest lender to Pakistan, does not seem to have the sort of cordial relations that it enjoyed before 2010, according to sources in diplomatic circles and the finance ministry.

On the one hand, Finance Minister Dr Abdul Hafeez Shaikh is reportedly giving less importance to the ADB’s top management, and on the other the lending agency has changed course on issues like Diamer Bhasha Dam.

In the latest episode, Shaikh apparently attempted to avoid a meeting with the visiting Director General of ADB for Central and West Asia Department, Klaus Gerhaeusser. According to finance ministry officials, Shaikh did not confirm his meeting with Gerhaeusser even after the latter had left for Islamabad.

On Wednesday, Shaikh’s personal staff told relevant officials that the minister was not well and would not be able to confirm the scheduled meeting for Thursday noon. They said he had not come to the office for the last two days because of ill health. Later, the meeting was postponed.

Afterwards, on the repeated insistence of the ADB’s Islamabad office, the meeting was arranged at the minister’s residence in the evening.

Shaikh was not available for comments.

However, according to the Press Information Department, Shaikh met with Prime Minister Raja Pervez Ashraf on Thursday.

ADB lifeline

In 2008, when Pakistan was in deep financial crisis and was on the verge of default, almost all western bilateral and multilateral lenders blocked assistance in a bid to put pressure on Islamabad to sign a bailout agreement with the International Monetary Fund.

Even at that time, the ADB came forward and signed a $2.2 billion Accelerating Economic Transformation Programme in September 2008. It immediately released the first tranche of $500 million, helping Pakistan avoid possible default, said a former federal secretary, who spoke on condition of anonymity.

“ADB has remained a better development partner than the World Bank and has offered loans at preferential terms,” said an official of the Economic Affairs Division.

Until the end of 2011, the bank had disbursed $16.8 billion to Pakistan, making it the single largest creditor. Despite that, Pakistan has tilted towards the World Bank because of its pro-US foreign policy.

Four and a half years gone, the country’s economy is again passing through tough times and this time all international lenders, including the ADB, have stopped offering budgetary support. This will put further pressure on the rupee which, in the face of depleting foreign currency reserves, has already crossed the 100 mark against the dollar.

One of the reasons behind the friction is said to be the preferential treatment the finance minister gives to Washington-based World Bank. Shaikh is a former employee of the bank.

As the country’s finance minister Shaikh is a member of the ADB’s Board of Governors. However, out of three meetings held since he became the minister, he attended only one meeting in 2011 in Vietnam. ADB’s spokesperson in Pakistan Ismail Khan confirmed that Shaikh took part in one meeting.

The finance minister has also had limited engagement with ADB President Haruhiko Kuroda, but has held a number of meetings with the WB chief.

Owing to the same reasons, the ADB president did not participate in a meeting of the Friends of Democratic Pakistan, held in Washington, according to people privy to the matter.

Corporate results: ABL hit hard by State Bank policy rate cuts

Manage­s to post 16% higher profit­s on lower provis­ions, higher non-core income.  ABL’s profit declined 23% in the last quarter of 2012.


Allied Bank (ABL) has announced its result for calendar year 2012 (CY12) on Thursday. On a consolidated basis, ABL has posted a net profit of Rs11.88 billion for CY12, up 16% year-on-year (YoY). It has also announced a final cash dividend of Rs2 per share alongside the result, bringing the full-year payout to Rs6.5 per share. It has also announced a 10% bonus shares issue.

The bank has been hit particularly hard by the State Bank’s repeated cuts in the benchmark interest rates, with its net interest income declining by a sharp 27% YoY (interest expenses grew a whopping 168%). However, a 78% YoY decline in provisioning expenses saved its skin, along with a near 100% increase in non-interest income accruing from higher dividends and capital gains. The latter factor also resulted in a significantly lower effective tax rate. The bank also witnessed a 12% YoY rise in non-interest expenses, with core administrative expenses spiking towards the year end. As characteristic of banking activity, the bank realised lower gains from dealing in foreign currencies as compared to the previous year.

On a quarterly basis, ABL’s profit declined 23% in the last quarter of 2012 over the preceding quarter, primarily due to lower interest and dividend incomes and the aforementioned spike in administrative expenses.

Bank Al Habib’s profits grow 20% in 2012

Bank Al Habib announced its earnings results on Thursday, declaring a net profit growth of 20% in CY12 over the previous year to reach Rs5.45 billion. It has also announced a final cash dividend of Rs3 per share.

The bank’s net interest income increased 22.3% during the year, despite the State Bank’s repeated policy rate cuts, to reach Rs14.90 billion. Meanwhile, its provisioning expenses declined by 74% to Rs466 million on better payback capacity of borrowers in a low rate environment.

A result preview released by Elixir Securities says the bank’s strong preference for government securities and its active participation in the central bank’s open market operations have expanded Bank Al Habib’s average earning assets and offset the contraction in the net interest margin. It also mentions that the bank’s deposits have increased in the ballpark of 15% YoY. “Advances growth would likely be robust [...] based on working capital loans disbursed during the year,” the note adds.

Under its non-interest income head, its revenues from fees commission and brokerage income increased by 15% to reach Rs1.50 billion, while dividend income rose 41% to reach Rs328.21 million. Similarly, it earned Rs77 million from the sale of securities this year, as compared to a loss of Rs1.26 million under this head a year ago. However, its income from dealing in foreign currencies declined 22% to Rs577.89 million.

Market watch: Oil sector drives the bourse to a new record

Benchm­ark KSE-100 index gains 31 points.  Trade volumes fell sharply to 263 million shares compared with Thursday’s tally of 313 million shares.

KARACHI: The local bourse closed in the black ahead of the weekend with the oil sector leading the gains amid subdued activity. Moreover, investor interest in the Pakistan Telecommunication Company supported the climb.

The Karachi Stock Exchange’s (KSE) benchmark 100-share index gained 0.18% or 31.4 points to end at 17,797.22 point level. Trade volumes fell sharply to 263 million shares compared with Thursday’s tally of 313 million shares.

In the morning session, the stock traded higher, however, lower than expected Engro Corporation’s results announcement ruined the mood.

“In the late session, while investors snoozed and were getting ready to call it a day, news flash of an investment commitment by the Abu Dhabi Group in Pakistan’s real estate and other sectors got telecoms and cements back on the charge,” reported Faisal Bilwani, analyst at Elixir Securities.

Shares of 386 companies were traded on Friday. At the end of the day 137 stocks closed higher, 184 declined while 65 remained unchanged. The value of shares traded during the day was Rs7.06 billion.

Disappointed investors booked profits in business conglomerate Engro Corporation after it announced good results but no pay out, said equity dealer Samar Iqbal at Topline Securities. However, the stock clawed back as investors see a resolution of the gas supply issues and possibly a great year ahead.

The PTCL closed at its upper limit as it continues rallying after its result announcement of Rs8.61 billion for the December quarter on the back of higher international call rates under the international clearing house arrangement. Stocks in Pakistan can only move up or down 5% per day in order to control volatility in the market.

The index-heavyweight Oil and Gas Development Company contributed 56 points alone to the index with volumes of 392,000 shares as production from the Sinjhoro gas field of 1,100 barrels per day of oil and 12 million cubic feet of gas per day commences, where OGDC has a 60% stake.

Pakistan Telecommunication Company was the volume leader with 28.76 million shares gaining Rs0.85 to finish at Rs21.95. It was followed by Telecard with 19.62 million shares losing Rs0.11 to close at Rs5.49 and Wateen Telecom with 15.06 million shares falling Rs0.14 to close at Rs3.84. Four of the five stocks on the volume leader board belonged to the telecom sector.

Foreign institutional investors were net buyers of Rs180.65 million, according to data maintained by the National Clearing Company of Pakistan Limited.

Published in The Express Tribune, February 16th, 2013.

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CAA’s head of standards appointment marred with obscurity

Offici­als say appoin­tment illega­l as per rules; PIA denies allega­tions.  “Majeed is retiring in March. The rules clearly say that an official needs to have a service of at least three years left for such a deputation,” says an official. PHOTO: FILE

KARACHI: A former office bearer of the Pakistan Airline Pilots’ Association (Palpa) has been appointed as the head of aviation industry’s watchdog for cabin crew, raising concerns about impartiality of his office, officials told The Express Tribune.

Captain Arif Majeed, a pilot of the Pakistan International Airlines (PIA), took over as director of flight standards of the Civil Aviation Authority (CAA) on January 22, just weeks before he retires from the national carrier, they said.

His appointment comes at a time when PIA is facing problems in maintaining the quality of its fleet, which has been hit hard by technical problems in recent months.

From 2006 to 2010, Majeed remained Palpa’s general secretary, which basically works as a representative body for the PIA pilots. He has gone to CAA on deputation.

As head of the flight standards department, he will be responsible to review the performance of pilots and flight attendants besides ensuring that the interior of the aircrafts meet relevant safety and security regulations.

Officials say the entire process of his appointment is marred with irregularities. “Majeed is retiring in March. The rules clearly say that an official needs to have a service of at least three years left for such a deputation,” said an official who is close to the development.

He was appointed on recommendation of the CAA without any selection procedure. “How can just one man be fit for the job? The right way should have been that a panel be formed that shortlists the director from a number of candidates,” said the official.

A senior pilot said that the aviation regulator should have advertised the post and hired someone who had not been part of the pilots’ union.

CAA spokesperson Pervez George said there was no conflict of interest in Majeed’s appointment. “Our concern is with the safety of the aircraft. Now that he is with CAA, his past affiliations do not matter.”

He said that the Flight Standards’ Director is directly appointed by the CAA and no interviews are conducted. He could not say, however, on whose recommendation was Majeed appointed.

PIA spokesperson said Majeed will be retiring sometime this year. He said the rule of having at least three years of service left does not apply to such deputation.

Published in The Express Tribune, February 15th, 2013.

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Gas pipeline: Pakistan, Iran to sign construction contract today

Pipeli­ne will cost Rs190m per km, markup on loan is 3%.  According to Hussain, the Iranian company will complete the process of constructing the pipeline in 15 months. ILLUSTRATION: JAMAL KHURSHID


The critical Iran-Pakistan gas pipeline project is entering the implementation phase as Pakistan’s state-owned firm Inter-State Gas Systems and Tadbir Energy Costar Iranian Co will sign a construction contract for laying the pipeline in Pakistan today (Friday).

Adviser to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain told this to the National Assembly Standing Committee on Petroleum and Natural Resources in a meeting here on Thursday. Engineer Tariq Khattak chaired the meeting.

Pakistan and Iran are forging ahead with the project despite opposition from the US, which has imposed sanctions on Tehran for its alleged nuclear programme.

According to Hussain, the Iranian company will complete the process of constructing the pipeline in 15 months.

Frontier Works Organisation (FWO), Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) will also take part in the construction work.

Sources said Pakistan and Iran had finalised per kilometre cost of laying the pipeline, which will be of 42 inches and spread over 781 km, as well as markup on loan being provided by Tehran.

The per kilometre cost will be Rs190 million and markup on $500 million loan will be 3% per annum. “Iran had demanded 4% interest on loan,” a source said.

The financing will be for 20 years with a five-year grace period.

SNGPL on verge of default

Briefing the parliamentary panel, Hussain said the prime minister had directed the implementation of parliamentarians’ gas development schemes, but the gas companies were not capable of completing the work.

He disclosed that Sui Northern Gas Pipelines Limited (SNGPL) was on the verge of financial default and had no money to pay salaries to its employees. “We have asked the prime minister to pay subsidy to the company, which will help it to continue operation,” he said.

Hussain held the Oil and Gas Regulatory Authority (Ogra) – the oil and gas sector’s regulator – for the sorry state of affairs at SNGPL, which he feared would not be able to function after June. “Gas theft is going on, but Ogra is not playing any role in restricting the practice,” he added.

The regulator was working according to rules and was performing its functions, retorted Ogra Chairman Saeed Khan. Rather, he blamed the gas companies for doing nothing to stop the gas theft.

He pointed out that Ogra had set a benchmark, allowing gas companies to recover some of the losses on account of gas theft from registered consumers. But at the same time, he said, gas companies could not reduce the distribution losses and gas theft.

“If the petroleum adviser wants to shut down Ogra, do it,” he remarked, but reminded the panel that foreign countries were taking steps to strengthen the regulators, but no such case at home.

During the meeting, the parliamentarians asked the Ogra chairman to allow 69 compressed natural gas (CNG) stations, which had applied for relocation, to operate as they had invested a huge amount in their business.

In response, the Ogra chief told them the CNG stations had been barred after the National Accountability Bureau (NAB) took action over their relocation.

Panel member Rana Afzal presented report of a subcommittee about loss of billions of rupees because of procurement of defective portable drills. The panel recommended strict action against the culprits involved.

Published in The Express Tribune, February 15th, 2013.

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FBR extends withholding tax to all registered companies

Previo­usly, the tax was applic­able only to firms regist­ered in large taxpay­er units.  During the first seven months of fiscal 2013, government collected only Rs1.03 trillion, 43% of the annual target of Rs2.38 trillion. DESIGN: FAIZAN DAWOOD

ISLAMABAD: The government enhanced the scope of sales tax withholding regime to all registered companies and exporters to deduct 20% of the payable sales tax on all purchases – in a first desperate move to increase declining revenues.

The decision was taken on Thursday and is expected to compensate part of revenue shortfalls on account of declining imports that had severely affected tax collection, according to a member of the Federal Board of Revenue (FBR).

Through a statutory regulatory order, the FBR extended the scope of sale tax withholding regime from those companies which are registered in the three large taxpayer units (LTU) of the country to all the registered companies across Pakistan besides exporters. This will effectively increase the number of companies liable to be taxed under the regime from a few hundred to over 75,000.

The decision will take effect from February 14.

The FBR had not disclosed the amount it intends to raise through what it insists an administrative measure instead of a revenue measure. Previously, corporations registered in LTUs were required to withhold 1% sales tax of the value of taxable supplies from persons registered outside the LTU.

During the first seven months of fiscal 2013, government collected only Rs1.03 trillion, 43% of the annual target of Rs2.38 trillion. The FBR officials said a decline in imports has significantly affected revenue collection.

The FBR’s showed a revenue growth of around 6%, far below the nominal GDP growth (8% inflation and 4% expected GDP), suggesting massive pilferages in the tax machinery. Additionally, the FBR had given roughly Rs30 billion tax breaks under political compulsions in the current fiscal year so far.

Due to massive revenue shortfalls and the International Monetary Fund’s insistence to enhance revenues as a precondition for a fresh bailout programme, the FBR is in process of taking such measures.

It proposed a mini-budget of Rs60 billion, which the analysts believe is the cost of inefficiency and political appointments in the tax machinery and may have to borne by the existing taxpayers.

Published in The Express Tribune, February 15th, 2013.

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Market watch: Oil sector fuels bourse to breach 17,500-level

Benchm­ark KSE-100 index climbs 71 points as earnin­gs season guides direct­ion.  “The stock market maintained its upward trend as on Monday the index was led by the Oil and Gas Development Company (OGDC),” says an equity dealer.

KARACHI: The index-heavyweight oil and gas sector fuelled the Karachi bourse to breach the psychological level of 17,500 points. Earnings season sensation drove the rally despite the State Bank of Pakistan raising concerns over the country’s macroeconomic health in its monetary policy announcement last Friday in which it maintained the interest rates at 9.5%.

Although around 600 companies are listed on the exchange, less than 10% of them see regular trading. Top companies include state-run oil and gas companies, banking companies and a few textile companies.

Both the oil and gas companies and the textile industry are benefiting from the rupee’s depreciation against the dollar. The energy companies post their profits in dollars, and textile exporters find the rupee’s slide makes their wares more competitively priced internationally.

The Karachi Stock Exchange’s (KSE) benchmark 100-share index rose 0.4% or 70.6 points to end at 17,548.54 point level. Trade volumes improved to 278 million shares compared with Friday’s tally of 269 million shares.

“The stock market maintained its upward trend as on Monday the index was led by the Oil and Gas Development Company (OGDC),” reported Samar Iqbal, equity dealer at Topline Securities.

“With oil prices up nearly 4% in the last two weeks, the oil sector recorded decent volumes as investors expect OGDC to announce healthy earnings for the previous quarter,” said Jawwad Aboobakar, analyst at Elixir Securities. The OGDC stock rose Rs3.26 to close at Rs198.75 during yesterday’s trade.

Nishat Chunian closed at its upper limit and Nishat Mills attracted buying over exceptional growth in revenues due to weakening rupee.

The value of shares traded during the day was Rs6.55 billion.

Jahangir Siddiqui and Company (JSCL) was the volume leader with 25.5 million shares losing Rs0.26 to finish at Rs17.78. It was followed by Maple Leaf Cement with 24.49 million shares gaining Rs0.75 to close at Rs18.05 and Pakistan Telecommunication Company with 17.28 million shares losing Rs0.13 to close at Rs19.87 as investors opted to book profits at current levels of above the price Rs20 per share.

JSCL and Maple Leaf Cement jumped onto the volume charts indicating persistent retail participation in the stocks. Whereas, lower than expected results of DG Khan Cement caused its share price to drop drastically.

Foreign institutional investors were net buyers of Rs257.57 million ($2.63 million), according to data maintained by the National Clearing Company of Pakistan Limited.

PSO cuts by half furnace oil supply to power plants

Cash crunch puts pressu­re on oil market­ing giant as stocks fall.  PSO had been supplying on credit 22,000 tons of furnace oil per day to power plants, but the cash crunch forced it to curtail the quantity to 15,000 tons. PHOTO: FILE

ISLAMABAD: Pakistan State Oil – the state-owned oil marketing giant bitten by financial crunch – has announced that it will further scale down fuel supplies to power plants by 50% as stocks are falling rapidly, setting off fears of a power crisis.

Earlier, PSO had been supplying on credit 22,000 tons of furnace oil per day to power plants, but the cash crunch forced it to curtail the quantity to 15,000 tons. On Monday, PSO announced a further reduction to 8,000 tons per day.

The oil marketing firm took the decision following release of a meagre Rs5 billion on Monday against demand for Rs50 billion for clearing part of its receivables. Now, it has sought immediate release of Rs45 billion to stave off imminent default on payments to local and international fuel suppliers.

In a letter sent to the finance, water and power ministers and adviser to the prime minister on petroleum and natural resources, PSO said “keeping in view the current stocks and the uncertain chain position, PSO is compelled to reduce the current credit rate from 15,000 to 8,000 tons per day.”

According to company officials, it will be constrained to slash supplies to credit customers from Tuesday – 2,500 tons to Hub Power Company, 2,500 tons to Thermal Power Station Muzaffargarh, 1,000 tons to TPS Jamshoro and 2,000 tons to Kot Addu Power Company (Kapco).

“In the absence of an urgent financial relief from the government and Pepco, PSO is unable to open new letters of credit (LCs) for planned HSFO (high sulphur fuel oil) and LSFO (low sulphur fuel oil) imports, which will disrupt fuel supply chain of the country,” the letter said.

This could deal a blow to the government’s efforts to end power outages to send a positive signal to the voters before upcoming elections.

At present, power shortfall stands at 4,000 megawatts at peak hours, leading to outages across the country. According to an official of the Ministry of Water and Power, electricity generation was 9,500MW compared to demand for 13,500MW at peak hours.

Sources revealed that high-ups of the petroleum ministry and PSO, in a meeting with the prime minister and finance minister on Friday, took up the issue of possible default by PSO on payments to fuel suppliers due to failure of power firms to clear their unpaid bills. However, the finance minister promised release of only Rs5 billion.

“We received Rs5 billion on Monday and got no further commitment,” a PSO official said.

An official of the petroleum ministry said PSO’s receivables had piled up to Rs158 billion, which had to be paid by various entities including power companies, adding PSO had itself to pay Rs50 billion to furnace oil suppliers in 10 days. It also has to clear an outstanding amount of Rs32 billion accumulated over the past three months.

“Any disruption in furnace oil supply will lead to massive load-shedding across the country and in case PSO defaults, the resumption of fuel supply will take up to 45 days,” the official said.

As PSO faces difficulties in opening new LCs for import of furnace oil, the demand is rising because of gas shortage. “PSO needs payment of Rs82 billion from the defaulting entities to cope with the situation,” he added.

Corporate results: Stronger operational efficiency boosts profit growth at KESC

Compan­y’s manage­ment says it cut down on transm­ission and distri­bution losses.  KESC’s profit for the six months ending December 31, 2012 were just over Rs3.2 billion, compared to a loss of over Rs2.8 billion in the same period in the previous year. PHOTO: FILE


The turnaround at the Karachi Electric Supply Company (KESC) appears to be continuing well into its second year, with the country’s only integrated utility announcing robust profit growth, largely as a result of increased operational efficiencies.

KESC’s profit for the six months ending December 31, 2012 were just over Rs3.2 billion, compared to a loss of over Rs2.8 billion in the same period in the previous year. Revenues for the first six months of the company’s financial year – that ends June 30, 2013 – were Rs94.3 billion, up a staggering 29% from the same period in the previous year.

The utility’s management attributes the rise to two major factors: an ability to cut down transmission and distribution (T&D) losses, and a substantial improvement in the operational efficiency of its power generation units.

“Our T&D losses are down to 28.5% compared to 29.4% last year,” said KESC spokesperson Aminur Rahman. “And the feed efficiency of our power generation units was greatly improved when our state-of-the-art 560 megawatt generation unit came online in May 2012.”

KESC has been a favourite among retail investors ever since it first hit profitability during financial year 2012. Yet many analysts had expresses scepticism over the stock’s rise, pointing out that it seemed overvalued. The stock was often trading at as much as 60 times its 2012 earnings during the past four months.

Yet Tuesday’s results appear to vindicate the optimism of the retail investors: taken on a trailing four quarters’ basis, the stock is trading at only slightly higher than 18 times calendar year 2012 earnings, a much more justifiable figure, considering the utility’s growth potential.

Some sceptics from outside the financial world have argued that the company appears to be benefiting from higher tariffs announced by the National Electric Power Regulatory Authority (Nepra). KESC’s management reject those claims. “A tariff increase does nothing to increase our margins. Nepra only allows us a tariff increase based on our cost,” said Rahman.

Given the significant increase in KESC’s gross profit margin – which rose to 13.6% during the first six months of financial 2013 compared to just 5.1% during the same period last year – suggests that increased efficiency is indeed the biggest driving factor in higher profits.

Having announced stellar earnings, KESC announced that its CEO Tabish Gauhar would be resigning and taking up the position of chairman of the board of directors. Nayyar Hussain, the chief distribution officer and an executive director, will be taking over as CEO.

The market reacted badly to the announcement, with the stock dropping 4.6% to close at Rs5.99 per share in trading on the Karachi Stock Exchange on Tuesday. It is customary for a company’s stock to drop when it announces a management change.

Corporate results: Despite lower dispatches, DGKC reports more than double earnings

Compan­y’s net profit grew nearly 127% on the back of higher margin­s.  DGKC’s higher local sales also meant a higher tax rate, which averaged 15.6% for 1HFY13.


The DG Khan Cement Company (DGKC) released its half-yearly results on Monday, announcing that earnings grew nearly 127% in the first six months of fiscal 2013 (July-December) (1HFY13) over the same period of the preceding year. On a quarter-to-quarter (QoQ) sequential basis, however, DGKC’s net profits grew by a modest 2.5% in the October-December 2012 (2QFY13) period over the July-September 2012 (1QFY13) period; but were higher by 54% in 2QFY13 as compared to the same period of the previous year.

The company’s operating profitability improved by nearly 59% YoY in the period under review.

Notwithstanding the spectacular rise in earnings, DGKC’s stock closed lower on Monday by Rs0.52 (0.93%) to close at Rs55.49. Analysts say that the market was disappointed in the ‘lower-than-expected earnings’.

According to the result statement, the company’s dispatches actually decreased 1% in 1HFY13 over the preceding year, due to a 15% year-on-year (YoY) fall in exports. On the bright side, the company posted healthy 6% YoY rise in local sales driven by healthy demand growth in the north of the country amid aggressive utilisation of development funds, says a note issued by brokerage house BMA Capital.

The growth in local sales, coupled with an average 8% hike in cement prices in the north to Rs440 per bag, took net sales for DGKC up 11% YoY to Rs11.8 billion in 1HFY13, BMA Capital’s note added. The healthy growth in net sales was further magnified in profitability thanks to a 35% drop in finance costs to Rs577 million as the company has entered debt retirement phase, said BMA Capital. Significantly lower coal costs (cheaper 27% YoY) and higher retention levels also helped improve gross margins by 6.5 percentage points to a staggering 39%.

On the flipside, DGKC’s higher local sales also meant a higher tax rate, which averaged 15.6% for 1HFY13.

On a QoQ basis, DGKC’s revenues improved by a nominal 1% over 1QFY13 on account of higher retention prices in the local market, says an analyst report issued by Global Securities’ Research department. DGKC’s cost of goods sold clocked in 3.4% lower in than the previous quarter due to falling coal prices, with total selling and distribution expenses coming down to Rs313 million in 2QFY13 due to a higher proportion of local sales as compared to the previous quarter.

Meanwhile, DGKC’s other income increased 17% to Rs416 million in 2QFY13, primarily due to dividends received from Nishat Mills, Nishat Chunian, and MCB Bank during the period, said analysts.

Elixir Securities estimates that DGKC’s share in the domestic market increased by a percentage point to 12% by the end of 2QFY13, as local sales accounted for 77% of the total in 2QFY13, as compared to 65% in 1QFY13.

Urban development: Multan Industrial Estate Phase-II inaugurated

Chief minist­er says 12 more indust­rial estate­s in pipeli­ne.  The project is spread over 670 acres and has been completed at the cost of Rs1.5 billion. PHOTO: CREATIVE COMMONS


Chief Minister Shahbaz Sharif on Monday inaugurated the Multan Industrial Estate Phase-II. The project is spread over 670 acres and has been completed at the cost of Rs1.5 billion.

Addressing the inauguration, the chief minister revealed that feasibility report of 12 more industrial estates in the Punjab had been completed and will be inaugurated soon. He said these projects would generate employment opportunities across the province for more than two million families in five years.

Blaming the federal government for the energy crisis in Pakistan, Sharif said that President Asif Ali Zardari had abandoned the people to suffer from unemployment and poverty for five year. Only now was he talking about the Iran-Pakistan gas pipe-line, he added.

Sharif said that the federal government could have chosen sugarcane, coal or some other cheap fuel for producing electricity, but they depended instead on buying fuel from abroad because they got kickbacks in the bargain. He said sugarcane could be used to produce 6,000 megawatts of electricity.

He said the biggest problem in the presence of President Zardari was that the assets of Pakistan were in a single hand. “In such circumstances, a country cannot be expected to move in the direction of economic growth,” he added.

The chief minister said that the PML-N leadership would not award ticket to anybody who was accused of corruption and nepotism. He said family or work connections, too, would not be considered while deciding party tickets. This, he said, will be purely on merit.

“Yesterday when he was inaugurating the Bilawal House in Lahore, the PML-N was inaugurating the historical Metro Bus Service in the city.”

He said those who did not live in the hearts of the people could not find peace in their bunkers.

Sharif said that the federal government claimed to have spent Rs50 billion on development projects only in Multan. From the condition of the city, he said, it seemed that only Rs50 million had been spent.

“Seeing the deplorable condition of Multan, I had gifted the city a hard working and honest DCO in Naseem Sadiq, who is known for his bold decisions and checks against corruption and mal-administration.”

The chief minister later visited Muzaffargarh to condole the death of former PML-N member Sardar Amjad Khan Dasti and met the deceased’s daughter Begum Tehmina Dasti.

Sukuk issue: Karachi airport offered as security

Govt borrow­s Rs182 billio­n to bridge last year’s record budget gap.  Earlier, the government had offered the motorway land with all constructions and improvements on M-2 (Islamabad-Lahore) as a guarantee against Sukuk to generate funds for budget financing. PHOTO: PPI/ FILE


As the budget deficit soared to a record high at Rs1.77 trillion in the last fiscal year, the government raised Rs182 billion through an Islamic bond, called Sukuk, against the security of Jinnah International Airport Karachi – another asset mortgaged after Pakistan Motorways (M2).

However, analysts question the use of Islamic bonds for budget financing and linking the return with treasury bills, saying it is forbidden and against Shariah laws.

The government borrowed the money during fiscal year 2011-12 ended June 30 last year, according to documents of the finance ministry.

Sukuk is a bond structured on Islamic principles as an alternative to traditional bonds. It gives creditors partial ownership in the debt asset until the borrower pays back all the obligations.

Sukuk operations were launched through the Pakistan Domestic Sukuk Company Limited incorporated in 2007.

Earlier, the government had offered the motorway land with all constructions and improvements on M-2 (Islamabad-Lahore) as a guarantee against Sukuk to generate funds for budget financing. In the last fiscal year, it borrowed a total Rs412 billion through Sukuk, enabling it to meet 23.2% of financing needs.

Compared to the original target of Rs826 billion or 4% of gross domestic product, the budget deficit in 2011-12 stood at Rs1.77 trillion or 8.6% of GDP – the highest in the country’s history. The government’s failure to implement much-needed fiscal and energy reforms led to this situation, according to the analysts.

According to the documents, “the (borrowed) amount was utilised to finance the budget deficit… and a major portion of the amount was raised on a par with the treasury bill rate for three years.”

There are differences of opinion over the use of money raised through Sukuk and linking the return with the treasury bills.

“Linking Sukuk with the fixed rate of return on any loan and security paper becomes Riba, which is forbidden under Islamic laws,” said Ahmad Mukhtar Naqshbandi, an expert in Islamic economics.

In the Sukuk model, he said, the money borrowed against the asset has to be used for the purpose described and profit on investment has also to be paid out of the return on the mortgaged asset.

Finance ministry spokesman Rana Assad Amin told The Express Tribune there was no restriction on the use of money raised through Sukuk and the government was using the Karachi airport’s income to pay profit on the investment in Sukuk.

According to another official of the ministry, the Shariah Board, which has approved the mechanism for floating Sukuk, has not objected to the nature of using the borrowed money.

According to the documents, the share of permanent debt in total domestic debt rose from 18.7% in 2010-11 to 22.2% at end-June 2012, mainly contributed by the Ijara Sukuk bond and Pakistan Investment Bonds.

The finance ministry said the government mopped up Rs159 billion through successful auctions of Ijara Sukuk and Rs356 billion through Pakistan Investment Bonds during 2011-12.

However, according to the Debt Policy Statement of 2012-13, in the last fiscal year, the government added roughly Rs2 trillion to the overall debt burden.

The economic slowdown also compelled the government to seek rollover of a significant chunk of foreign loans. Last year, roughly $1.2 billion in matured loans were rolled over. Furthermore, it got $500 million from friendly countries, which have been parked in the State Bank to shore up foreign currency reserves.

Last year, the government also obtained $256 million from International Islamic Trade Corporation under Murabaha Finance. This amount is expected to be utilised in the current fiscal year for import of crude oil and petroleum projects of Pak Arab Refinery Company (Parco).

Remittances record a slight drop in January

Averag­e monthl­y inflow still 10.36% higher than last year.  Analysts have observed that the strong inflow of remittances into the country has been supporting the Pakistani rupee against the US dollar in the currency market.

KARACHI: Overseas Pakistanis in January 2013 remitted $1.09 billion, down $21 million or 2% if compared to the $1.111 billion remitted in the corresponding period of fiscal 2012 (FY12), the State Bank of Pakistan said on Monday.

However, the country received overall remittances of $8,206.39 million in the first seven months (July-January) of the current fiscal year (FY13), depicting a growth of 10.36% or $770.41 million when compared with the $7,435.98 million received during the first seven months of the preceding fiscal year.

Since the country has been continuously receiving more remittances in the current fiscal year, as compared to the previous year, average monthly remittances from July to January 2013 stood at $1,172.3 million as compared to $1,062.2 million in the previous year.

Emerging Economics Research Managing Director Muzammil Aslam says that the rise in remittances would continue in the coming months owing to a significant outflow of skilled and unskilled labour from Pakistan in the last few years.

Analysts have observed that the strong inflow of remittances into the country has been supporting the Pakistani rupee against the US dollar in the currency market.

Apart from professionals like doctors and bankers, many businesspersons have also opted to shift some or entire businesses out of Pakistan, Aslam said; adding that this would further add to the increase in remittances.

On the current depreciation of the rupee against the dollar, Aslam said that speculators are active in the open market and they want to further increase the difference between the open market and interbank dollar rates.

The official inter-bank rate for the dollar is Rs98, while the dollar is being traded around Rs100 to a dollar. “The difference of Rs2 rupees is too much – it should not be more than 50 paisas,” he added.

On Monday, Pakistan repaid $146 million in the 9th instalment of an International Monetary Fund (IMF) loan, the central bank spokesperson said.

Analysts count this as another reason why the rupee is under constant pressure against the dollar in the open market. The country has to repay an amount worth 258.425 Special Drawing Rights (worth around $390-395 million) on February 26, 2013, to the IMF.

Published in The Express Tribune, February 12th, 2013.

Nandipur power project: Pakistan to finance plant through local banks

Govern­ment will raise Rs23 billio­n as Chines­e back out.  The ECC has also waived demurrage and detention charges totalling Rs856.5 million on the machinery, imported for the project and stuck at the Karachi Port. DESIGN: FAIZAN DAWOOD


The government has decided to borrow Rs23 billion from domestic banks to finance the construction of the 425-megawatt Nandipur power project – a step taken after a consortium of foreign banks led by the Chinese backed out of its financing commitment.

According to a senior government official, the government will take Rs23 billion in loans from banks against sovereign guarantees compared to the total financing requirement of Rs57 billion.

In March 2009, the consortium, comprising BNP Paribas and Export-Import Bank of China, had signed a Buyer Credit Facility Agreement worth $150.151 million with Northern Power Generation Company Limited for the combined cycle power project at Nandipur, near Gujranwala.

“The Ministry of Water and Power will seek the approval of the Economic Coordination Committee (ECC) in its upcoming meeting for issuing government guarantees to the banks,” the official said.

Arrangements have also been finalised with the Chinese contractor to push ahead with the project. The main engineering, procurement and construction (EPC) contractor is a leading Chinese company, Dongfang Electric Corporation, with a sub-contractor GE France.

The ECC, in a meeting held in the first week of July 2012, had already approved an increase in sovereign guarantees from Rs5.3 billion to Rs19.1 billion in favour of local banks as a stopgap arrangement until foreign loans came.

The ECC has also waived demurrage and detention charges totalling Rs856.5 million on the machinery, imported for the project and stuck at the Karachi Port.

Earlier, the Chinese contractor had served a notice on the government, asking it to scrap the contract for the project because of delay in work. During negotiations, the Chinese company sought compensation for the losses it suffered during the two years when the machinery remained stuck at the port.

The machinery worth $85 million has been awaiting clearance for quite a long time. “Now, the issue with the Chinese contractor has been settled and it has agreed to carry out physical work if funds are released,” an official said.

The Supreme Court had also taken notice of the delay in executing the Nandipur project. A judicial commission, constituted by the Supreme Court, held the law ministry responsible for deferring work for long.

The Ministry of Water and Power had sought legal opinion on foreign guarantees from the Ministry of Law in the contract with the Chinese firm, but the summary remained pending with the law ministry for two years from March 2010 to March 2012. According to the original plan, the project had to be completed in April 2011.

Historic: Rupee weakens to 100 against dollar

Pakist­an repays $145.79m to the IMF; schedu­led to repay anothe­r $375m.  “The rupee lost 39 per cent of its value against the US currency since March 2008. PHOTO: FILE

KARACHI: The Pakistani rupee on Monday sank to an all-time low against the US dollar over forex reserve fears as the country repayed $146 million to the International Monetary Fund.

The rupee fell to 100.1 to the greenback in trading in Karachi, down from 99.30 on the open market Friday, and has now lost 39 per cent of its value against the US currency since March 2008.

“We have traded the dollar at Rs100.1, although there is a slight difference on the open market,” said currency dealer Mohammad Arshad.

The official inter-bank rate for the dollar is Rs98, but Mohammad Sohail, who heads brokerage firm Topline Securities, confirmed it had crossed 100 on the open market.

Pakistan had a $10.7 billion IMF loan until September, but had drawn only about a third of it. The government has indicated it would not seek a new loan.

Pakistan repaid $145.79 million to the IMF on Monday and is scheduled to repay another $375 million on February 26, according to Syed Wasimuddin, spokesman for the country’s central State Bank.

So far Pakistan has repaid $2.57 billion, $1.5 million this fiscal year, ending June 30, according to the central bank.

“The rupee is likely to remain under pressure because of IMF repayments,” said Sohail.

“The foreign exchange reserves have declined to $8.7 billion as of January 31 from $10.8 billion at end-June 2012,” said the central bank last week.

The IMF last November urged Pakistan to reduce its large budget deficit to bolster the struggling economy’s resiliency, noting that foreign exchange reserves under $10 billion were below adequate levels.

Published in The Express Tribune, February 12th, 2013.

With hands tied: Central bank’s board functioning at 30% capacity

As govt delays appoin­tments, three member­s do the job of 10.  Owing to the lack of required diversification and sufficient expertise, analysts have recently questioned the quality of decisions taken by the current board. CREATIVE COMMONS


The federal government seems to be obstructing the independent working of the State Bank of Pakistan (SBP), having put off the appointment of seven members to the SBP’s central board of directors, besides also delaying the appointment of a deputy governor for the bank.

Owing to the lack of required diversification and sufficient expertise, analysts have recently questioned the quality of decisions taken by the current board. Their fears have some substance: at the moment, the provinces are not adequately represented in the highest corridors of decision-making in the country’s central bank.

It seems that the government is dragging its feet at a time when growth is sinking and inflation is slowly ticking up. The SBP has to monitor both these macroeconomic factors – it has to ensure sustainable growth while controlling inflation beyond desired levels.

According to the law, the SBP board provides general supervision and direction in monetary affairs for the smooth functioning of the economy. It formulates and monitors monetary and credit policy and determines the expansion of liquidity while taking into account the federal government’s targets for growth and inflation.

The SBP Act empowers the board to determine and enforce the limit of credit to be extended by the SBP to the federal and provincial governments – powers that bring it head-to-head with the existing policies of the federal government.

For effective decision making, the Act requires that there should be ten members on the central board of the bank. According to the Act, the authority to appoint these members rests with the federal government. The eight members of the board, other than the chairperson, should include at least one representative from each province. They should be eminent professionals from the fields of economics, finance, banking and accountancy.

On the contrary, only three members are currently in service; two of them ex officio. Yaseen Anwar is the chairman of the board because he is the governor. Finance Secretary Abdul Wajid Rana and Mirza Qamar Beg take up the two other seats.

Bearing in mind the expansionary fiscal policy employed by the incumbent government, our sources point out that an incomplete board seems to serve the interests of the government: it often dictates its decisions through the office of the finance secretary. Our sources claim that the finance ministry wishes to appoint people of its own choosing to the board, in a bid to bend the SBP to its own will.

They say the SBP has sent various names to the finance ministry for approval, but it is sitting on these names like it did in the case of appointment of SBP Deputy Governor Kazi Abdul Muktadir. Muktadir was appointed in July last year after months of tussles between the finance ministry and the SBP management.

On the other hand, spokesman for the finance ministry Rana Assad Amin says a summary for the appointment of the remaining seven members is still pending the prime minister’s attention. He also added that there is no minimum quorum requirement for the functioning of the board, and that it is working normally despite its reduced strength.

Former State Bank governor Dr Ishrat Hussain believes that a fully-occupied board is necessary for good management of the economy and governance. “In the absence of the required pool of expertise, the quality of decision making will [undoubtedly] be poor,” remarked Hussain.

Meanwhile, unwarranted delays in the appointment of board members has given substance to rumours that the State Bank’s recent monetary policy decision to keep the discount rate unchanged at 9.5% despite an uptick in inflationary pressure had a political reason behind it.

The federal government, in the meantime, hides behind a convenient legal loophole: Clause 51 of the SBP Act states that no act or proceeding of the bank’s central board shall be questioned merely on the grounds of an existence of any vacancy in, or any defect in, the constitution of such board.

Appraisal team: World Bank to send mission for Dasu Dam in March

Recomm­endati­ons of the World Bank will be analys­ed and the dam’s design will be finali­sed by March.  Representatives of the World Bank expressed interest in financing the Dasu hydropower project. PHOTO: FILE.


In a visit to the Water and Power Development Authority (Wapda) house, representatives of the World Bank expressed interest in financing the Dasu hydropower project and the bank will send an appraisal mission to inspect the progress on the project in March 2013.

The international panel of experts held a meeting with the Wapda Chairman Syed Raghib Shah to discuss their recommendations about the progress on the dam so far.

Shah thanked the World Bank team for showing interest in financing the Dasu hydropower project, adding that the bank had been a reliable partner for construction of various Wapda projects.

Recommendations of the World Bank will be analysed and the dam’s design will be finalised by March.

Published in The Express Tribune, February 12th, 2013.

The latest monetary policy: where do our priorities lie?

The centra­l bank seems restri­cted in its ambiti­ons for the econom­y.  Despite growing demand for a decrease in the interest rate, the SBP has maintained the benchmark rate at 9.5% in the latest monetary policy. PHOTO: FILE

KARACHI: Unlike many other countries, our monetary policy seems to reach beyond its underlying fundamentals. In its latest monetary policy announcement, the State Bank of Pakistan (SBP) has focused more on inflation than other factors. This approach restricts monetary authorities from forming a comprehensive policy which covers other issues like debt management and exchange rate etc.

It can be observed that inflation, which is a fiscal-driven phenomenon, cannot be controlled through monetary measures. A tight monetary policy does not assure the curbing of inflation, even when it is the prime goal of the monetary policy. When inflation prevailed at 22%, our corresponding discount rate was 15% – nearly the highest in the region. But when it was slashed to 14%, on the demand of the business community, inflation also declined – which shows a positive relation between the two, instead of the traditional inverse association.

Despite growing demand for a decrease in the interest rate, the SBP has maintained the benchmark rate at 9.5% in the latest monetary policy. Inflation is currently in the single digits, but other macroeconomic indicators do not bode well, according to the SBP. A major source of concern is that the availability of loans has grown only 4%, while domestic debt has increased.

The SBP has mentioned the actual problem, but failed to take corrective measures in this regard. Similarly, the fiscal deficit, which leads to unlimited monetary expansion if more currency is printed to overcome it, has been the major cause of inflation in the recent decade. Monetary policy in this regard has seemingly failed in its entirety.

Meanwhile, it seems that our monetary policy has little regard for investment. Economic obstacles like the energy crisis, the prevailing law and order situation and political instability are already creating an unfavourable climate for investment. In this scenario, a reduction in the discount rate would surely have come as a relief for investors.

There is a need to formulate a comprehensive policy which has multiple objectives; including curbing inflation, achieving stability in the exchange rate, enhancing investment in line with effective management of government borrowing and limiting monetary expansion. These ultimate objectives will be achievable only in the case of coordination between monetary and fiscal authorities. The autonomy of the central bank should be ensured; otherwise, monetary policy will be reduced to nothing more than a useless exercise conducted every two months.


Shale gas: the dos and don’ts of future policy

Althou­gh shale gas promis­es a lot of potent­ial, care needs to be taken.  Preliminary studies have shown that at least 33 trillion cubic feet (out of 204 trillion cubic feet) of unconventional gas reserves trapped in rocks is recoverable with available technology.DESIGN: MUHAMMAD SUHAIB


The present demand for natural gas stands at 8 billion cubic feet (bcf) during the winters, whereas national production from conventional sources stands at 4.2 bcf. It is no secret that the supply for natural gas has been unable to meet demand for many years now. New fields, brought online over the last 3 years, have been barely able to maintain the current levels of production.

The reason for the stagnation in output is reduced production from the main natural gas fields: ie, Sui (which has seen a fall of 4.4% year-on-year), Qadirpur (which has seen a fall of 2.0% year-on-year), Zamzama (which has seen a fall of 23.1% year-on-year), Sawan (which has seen a fall of 1.1% year-on-year), Kandhkhot (which has seen a fall of 5.5% year-on-year) and Miano (which has seen a fall of 4.8% year-on-year). These fields together contribute nearly half of the total natural gas production of Pakistan.

These major gas fields (especially Sui) have been responsible for the supply of cheap natural gas for the last 40 years. However, they are past their peak production capacity, as is the case for any finite natural resource. The trend we see in our natural gas production over the last five years is that it has plateaued-out and is expected to decline rapidly from here on in. This has forced policy-makers to look for alternative sources of domestic natural gas; ie tight gas, shale gas and coal-gasification (converting coal to gas).

In this article I intend to address the question whether shale gas can help resolve our energy crisis and what it means for our environment.

To answer the first question we must first look at the role natural gas plays in our economy. Natural gas as a source of energy to the economy constituted (48%) of the total. In terms of consumption, the breakdown is as follows: power sector (35.5%), general industrial use (25%), domestic use (15.20%), fertiliser (both feedstock and fuel) (15.90%), transport (CNG) (4.60%). These sectors are dependent on the cheap and abundant supply of natural gas. The said supply has allowed our industries (in particular textile, but also other industries including plastic) to remain internationally competitive. Note that natural gas is used both as fuel and as a feedstock for the manufacturing of a number of chemicals and products – ammonia fertiliser is one such example. Therefore, the provision of natural gas is essential for the smooth running of our economy. So, where will we get our natural gas if we are running out of conventional sources? The most promising source is shale gas.

Geological studies show that gas could can be found in deeper, denser, “unconventional” shale formations (called plays). These plays act as both a source of gas (because shale is where natural gas is actually formed) and as its reservoir.  Natural gas is stored in shale in three forms: free gas in rock pores, free gas in natural fractures, and adsorbed gas on organic matter and mineral surfaces.

In the early 2000s, a combination of two existing techniques led to a breakthrough, allowing American companies to produce shale gas. One of them horizontal drilling – drillers penetrate the shale laterally and vertically, which exposes greater surface area of the rocks for extraction and enables multiple wells to be created from each drill pad. The other is hydraulic fracturing (or fracking), a process involving water, sand and a chemical mixture pushed down a well at thousands of pounds of pressure which cracks the shale and releases the hydrocarbons.

Preliminary studies have shown that at least 33 trillion cubic feet (out of 204 trillion cubic feet) of unconventional gas reserves trapped in rocks is recoverable with available technology. The Balochistan Basin, the Suleiman Foredeep Basin and the Lower Indus Basin offer significant potential in this regard. As technology improves, so will the recoverability and the cost of production.

Provided enough incentive and facilities, the project of shale gas is technically and financially feasible. That being said, the production of natural gas from shale is not without its hazards. In addition to being technologically demanding and expensive to produce, the process can be very dangerous for the environment. The liquid used in fracking contains chemicals that are harmful to humans and our habitat. Ingredients include water and sand (98-99.5%). The remaining chemicals can be hydrochloric acid (initiates cracks), methanol (inhibits corrosion), glutaraldehyde (kills bacteria), and ethylene glycol (winterises product). In terms of weight, even 0.5% can amount to many tons of toxic material per drill pad. Chemicals used in the United States by local companies are known to be carcinogenic, mutagenic, cause chemical pneumonia, and toxic to aquatic organisms.

The biggest risk from these chemicals is in the form of water contamination. These shale gas plays are supposed to be many layers of impenetrable rocks under the water table, but when the fracking fluid goes down the well it can leak. Well walls are normally made of two layers of steel casing and two layers of heavy-duty cement: nonetheless, the risk exists. In the US, there have been many reports of ground water contamination as well as high levels of methane in water wells. Therefore any production must be tightly regulated and supervised.

The second possible source of contamination is the large amount of produced (waste) water that comes back out of the well. This chemical-laced water requires treatment before disposal or reuse. Its treatment and disposal is an important and challenging aspect of production.

Due to these and other environmental hazards, the production of shale gas should not be allowed to take place near populated areas or where our sources of water are present. It is clear that the exploration of natural gas is necessary if our economy is to survive, let alone grow. However, and as stated above, the exploration has to be supervised to prevent any environmental risks.

The writer is a barrister-at-law and an advocate at the Lahore High Court

Ex-Top Pc Maker: ‘Buyout plan grossly undervalues Dell’

Dell unveil­ed its plan to go privat­e on Tuesda­y in a $24.4 billio­n deal.  Southeastern Asset Management, which claims to hold 8.5% of Dell shares.


An investment firm claiming to be the largest outside shareholder in Dell said Friday the proposal to take the firm private for $24.4 billion “grossly undervalues” the computer maker.

Southeastern Asset Management, which claims to hold 8.5% of Dell shares on behalf of clients, said it will fight the proposal and noted its objections to the deal in a letter to the board of directors, also filed with US securities regulators.

Dell unveiled its plan to go private on Tuesday in a $24.4 billion deal, giving founder Michael Dell a chance to reshape the former number one PC maker away from the spotlight of Wall Street. The company said it had signed “a definitive” agreement to give shareholders $13.65 per share in cash, at a 25% premium over share price on January 11.

Diplomatic Mission: New envoy vows to promote trade ties with France

Ambass­ador design­ate Ghalib Iqbal sugges­ts ICCI send a delega­tion to Pakist­an’s second larges­t tradin­g partne­r.  Ambassador-designate to France Ghalib Iqbal has assured the business community that he will share information with them about trade opportunities.


Pakistan’s Ambassador-designate to France Ghalib Iqbal has assured the business community that he will share information with them about trade opportunities available in France, which will lead to better bilateral trade ties.

He was speaking during a visit to the Islamabad Chamber of Commerce and Industry (ICCI), where he discussed relations between the two countries before his departure to France.

He declared that he would do his best to promote business and asked the ICCI to keep giving him feedback about its business interest.

He suggested that an ICCI delegation should be sent to France, the fifth largest economy of the world and Pakistan’s second biggest trade partner in the EU, and assured them that he will make the trip productive and beneficial in Pakistan’s best interest.

Expressing satisfaction with the bilateral trade volume of $1.5 billion, he said this indicated that both sides had multifaceted and strong relations.

The importance of education: Economics of the English language in Pakistan

Countr­y has failed to invest suffic­iently in teachi­ng the langua­ge.  Among those in Pakistan who claim to be proficient in English, only one in 10 is actually good in written and spoken English, remaining 90% cannot speak more than a sentence or two of correct English. CREATIVE COMMONS


It might come as a complete surprise to many that Pakistan is one of the least accomplished countries amongst those who proclaim to be ‘English-speaking’ countries.

Among those in Pakistan who claim to be proficient in English, only one in 10 is actually good in written and spoken English, the remaining 90% cannot speak more than a sentence or two of correct English. When it comes to writing English, they are slightly better but writing more than one page would be considered a challenge.

The lack of English language proficiency is costing the country dearly. Most of our politicians who claim to be proficient in English (but actually are not) fail to present the country effectively on the international stage. Similarly, our bureaucrats arrogantly claim to be proficient in English, but in fact lack, in most cases, the vocabulary and expression one would consider adequate and appropriate for diplomatic discussions.

As a result, they fail to negotiate favourable terms for us when representing the country vis-à-vis other countries.

When it comes to sports, our stars fail to utter more than a couple of sentences in correct English. Consequently, while they may bring medals and pride to the country through their achievements, they miserably fail to develop an erudite image of the country.

Quite the contrary. After winning a tournament or championship, we still end up leaving the impression to the wider world of being a crude and unsophisticated nation.

Why does the country remain poor in English despite its people taking pride in the English language, culture and heritage? There is a simple explanation. The country has failed to invest in teaching the English language sufficiently.

English tutelage starts at schools. While public schools have almost no qualified English language teachers, a vast majority of private schools have an inadequate and largely unqualified teaching staff for English. Admittedly in large cities, English language proficiency is better, but one must emphasise that it is only marginally better.

Edbiz Consulting, an international advisory firm with offices in London and Islamabad, estimates that there are approximately 50,000 families in Pakistan that are sufficiently consummate in English: only a fraction of the total number of households (estimated to be about 30 million) in the country. Interestingly, less than 1% of families considered to be linguistically proficient are involved in teaching English.

Yet there is an overwhelming desire to learn English as it provides a significant commercial opportunity in the field of teaching English. The global market of English language training is worth billions of dollars, although there are no reliable estimates for the size of the market.

In Pakistan, the government spearheaded the National Institute of Modern Languages in 1970, which was upgraded to a university and renamed as the National University of Modern Languages in 2000. While this was a worthwhile initiative, the government has not been able to develop similar projects since.

Given the enervated state of public sector institutions, it will never be possible to provide high-quality instruction of the English language on a national level. This allows the private sector to develop a viable business model to grab this huge opportunity. There are already a number of non-governmental organisations (NGOs) that are undertaking commendable work, most notably the recently concluded English Access Microscholarship Programme, jointly developed by the US Embassy and the Society for International Education.

This kind of work has existed in Pakistan through different organisations and is expected to continue as part of the development agenda of various governments and NGOs, but there is a lacuna that the private sector has a real opportunity in filling.

English language instruction must be offered as part of a commercial enterprise focusing on development of soft skills (eg effective communication, people management, team work, writing personal curriculum vitae, etc). Although one may find all kinds of advertisements of English language schools and academies in big cities like Karachi and Lahore, these are predominately small places set up by an individual or a group of friends (in some cases as a transitory job). In Islamabad, the House of Knowledge has been the only private English language institution with some limited value and repute since 1980.

No private sector institution has taken a systematic and commercial approach to teaching English in the country, thereby missing a multi-billion opportunity. This needs to change sooner rather than later.


Promoting financial inclusivity for greater commercial participation

Women should be encour­aged to become primar­y decisi­on-makers.  Only 2% of the women in Sindh know how to withdraw money from an ATM, compared to 27% in Punjab, 23% in Khyber-Pakhtunkhwa and 20% in Balochistan. PHOTO: FILE

KARACHI: The ability to generate revenues within existing markets and to identify new markets and avenues to reach the right customers is necessary to business growth and profitability. The ‘right’ consumer profile usually has two vital elements: income and education. 

Having a measure of disposable income is necessary for the buyer, whether he or she is educated or not. Without income, a person is essentially useless to a business as he or she cannot contribute to revenues.

On the other hand, buyers with some form of financial literacy and/or product knowledge are easier to woo, as they can be influenced in their decision-making through advertisement of products that suit their needs. Coupled with a healthy amount of disposable income, such buyers become a lucrative market for businesses – making competitors vie with each other for their attention.

Most brands nowadays go for a collective marketing strategy; ie, they target an entire class of consumers through an advertisement. The challenge, however, is gender-orientation: more specifically, how to induce more women and children to become primary buyers themselves, separate from the usually male-dominant activity of purchasing goods and services.

With 52% of Pakistan’s population comprised of women, this remains a large untapped market. As more and more of them enter the workforce and gain basic knowledge of how the financial system works, they increasingly make up the ranks of the biggest upcoming market for businesses. What businesses need to do, of course, is enable them to become primary decision-makers and buyers. There is no dearth of products that cater exclusively to women; why not gear the market so as to separate this segment from the traditional ones altogether?

Cultural and structural issues hamper real economic progress in the Pakistani context, as income disparities and financial exclusion prevent large chunks of the female population from taking part in commercial activity. The trend is changing slowly, as banking and technology catches up to local demands to provide products and services that extend financial services to all.

However, according to a survey conducted in 2012, a significant number of women still do not know exactly how to operate an automated teller machine (ATM) – hence a lack of confidence in controlling their own financials. Only 2% of the women in Sindh know how to withdraw money from an ATM, compared to 27% in Punjab, 23% in Khyber-Pakhtunkhwa and 20% in Balochistan. A complete lack of educational programmes in this regard significantly inhibits their ability to do so.

Banks have generally played a phenomenal role in consumer financing by educating end users – the entire family nowadays is encouraged nowadays to avail personal financial services, even children. With nearly all debit cards accessible through 1-Link servers, one only needs to locate an ATM and avail 24-hour banking services throughout the country.

In this regard, financial literacy is a vital tool in furthering market development. It educates new segments to step up the curve, understand the market, participate in buying decisions and ultimately become end buyers. Most of the bank cards issued today are usable at any retail outlet that wants to make money by maximising customer transactions. It also enhances the sellers’ chances to enhance sales, as a customer purchases nearly three times more using a debit card than with cash alone.

The future will revolve around technology, microfinance and automated banking, with debit cards taking over to become the medium for monetary exchanges for the average consumer. Considering these factors, banks have a major role to play in enhancing real economic growth within the country. If the average size of the market can be increased just by encouraging and educating more people – in our case women – to participate in commercial activity, the banks may hold the key to a future of financial inclusivity and personalised economics.

The writer comments on international relations and public policy and is also a banker and broadcaster for FM 91

Choosing office space in times of deteriorating law and order

Busine­sses that want to contin­ue operat­ing in Karach­i have limite­d option­s.  The prevailing security situation in the city has forced entrepreneurs to change the selection criteria for office space. PHOTO: RASHID AJMERI/FILE

KARACHI: Due to the pervasive practice of extortion in the commercial hub of Pakistan, quite a few businesses have relocated to countries like South Africa and the UAE in order to evade the unjustified demands of the ‘bhatta mafia’. Nonetheless, a large number of them still want to continue business in Karachi, despite the rampant lawlessness that rules the city.

Such businesses look for office space in safe and secure surroundings. Due to this, offices currently available in high-rise commercial complexes within the city remain mostly unoccupied, because they are not considered secure enough.

Since II Chundrigar Road – also known as the Wall Street of Pakistan – has reached a saturation point and has no space to offer up-and-coming entrepreneurs, builders have turned to Shahrae Faisal, keeping in view its strategic position, and Clifton, with the latter being an upscale locality.

In a span of ten years, a number of commercial plazas have sprung up on both sides of the Shahrae Faisal avenue. These buildings offer 2.7 million square feet of ‘office grade’ space, while the rest can be graded as ‘B’ and ‘C’ category real estate. Clifton, on the other hand, offers 2.2 million square feet of ‘office space’ grade estate. Unfortunately, out of total available office space, only 8% can be classified as ‘A’ grade space. This is usually taken up by company-operated tailor-made head offices such as the MCB Tower, PSO House, Faysal House and Harbour Front, which faces the Arabian Sea.

The prevailing security situation in the city has forced entrepreneurs to change the selection criteria for office space. The priorities of low-price and proficient-sizing have now been changed to ‘good secure location with ample space for parking’. Other vital attributes which affect decisions are on-site car parking, easy accessibility, cutting edge IT and communication facilities, availability of utility services, high-speed elevators, and, above all, an uninterrupted supply of electricity. Any complex which ensures all these facilities and services will not face any problem in getting occupants.

At present, Karachi’s gems and jewellery market is concentrated primarily around key retail areas, which, according to a rough estimate, comprise of 5,000 units employing 500,000 persons. The Sarrafa Bazaar is the largest, followed by Tariq Road, Saddar, Clifton, Nazimabad and Liaquatabad. Workshops are usually situated in the back street of retail outlets. These workshops are typical one-unit rooms of very small sizes, ranging between 70-120 square feet. Each workshop, regardless of its size, accommodates around 3 to 7 workers. These units have no facilities, except an enclosed room with a window.

According to the Pakistan Gems and Jewellery Development Company (PGJDC), the sector has tremendous growth potential, keeping in view the natural reserves of gems found in Pakistan and the global demand for end products. However, despite a phenomenal increase of over 100% in exports, this sector has failed to bring about any change in the environment and working conditions of its labour force.

Those involved in the business do wish for an improvement in the overall scenario, but are reluctant to shift their businesses in the absence of a state-of-the-art business complex which ensures a safe and secure surrounding.

Similarly, the IT sector has emerged as an important participant in the country’s economic growth. According to the State Bank’s annual report, Pakistan’s IT sector posted rapid growth on the back of growing domestic demand for automation, along with an increasing demand for business outsourcing in developing countries that provided a boost to our IT exports. Currently, around 1,306 small and medium sized IT companies are operating in the country. The total size of the IT sector is estimated to be worth $2.8 billion. The sector holds great potential to grow, but continuous power failures and unavailability of proper ISP connections greatly hampers business operations. Hence, this sector is also in search of a complex which is ideally suited for them.

Fortunately, the National Industrial Parks Development & Management Company (NIP) now offers suitable plots for both sectors. It also offers corporate offices at their flagship project – Korangi Creek Industrial Parks (KCIP). All interested businesses can construct dedicated state-of-the-art high rise buildings which ensure 48 megawatts captive power generation for uninterrupted electricity, round-the-clock security, gated entrance with a perimeter wall, an underground utility corridor, metalled roads, and a host of other facilities. The processing of all these facilities will be done by NIP under its one-window operation system.

The debt trap: Used wisely, debt can be a catalyst for growth

Loans are not the proble­m; our failur­e to use them proper­ly is the issue.  Japan usually has a debt-to-GDP ratio that has hovered close to the 100% mark, but no one has ever questioned Japan’s ability to pay back these loans. It is all about the health of the economy. CREATIVE COMMONS


Debt is not really as bad a thing as it is made out to be. Pakistan has run a budget deficit since its inception, and loans were taken as early as the 1950s and 1960s. Loans taken for the right purpose, used properly and then paid back on time are, in a way, critical for the development of an economy.

This was certainly the case in the 1950s as well as the 1960s, when the majority of loans that were acquired were used to promote industrial growth.

While many may have issues with Ayub Khan’s politics, very few question his economics. The country saw arguably some of its best growth years under the military dictator. In fact, Pakistan has seen some of its best growth in the times of two military dictators – Musharraf and Ayub. But I digress.

Coming back to the topic, as I said, a loan is not a bad thing. Most entrepreneurs would not be the success stories that they are if they did not have access to start-up capital. They were successful because of three things: one, they had the right economic model or idea, for which the loan was acquired; two, they used the loan for the purpose it was intended for; and three, they made it a priority to pay off the loan. In fact, it would be impossible for a developing economy like Pakistan to move forward if it did not have access to project financing.

But a loan acquired just to pay off previous loans makes much less financial sense and is also very risky. Again, this can and has worked if the economy is growing at a healthy rate – which is not the case with Pakistan. And it can work if the loans are being used equitably and the return on the investment is viable; which, again, is not the case with Pakistan.

It is therefore important to gauge an economy’s ability to pay back debt. For example, Japan usually has a debt-to-GDP ratio that has hovered close to the 100% mark, but no one has ever questioned Japan’s ability to pay back these loans. It is all about the health of the economy. The risk increases if the economy’s ability to pay back loans is also in doubt. If that is the case, then the economy has, or is, at risk of slipping into a debt trap.

In Pakistan’s case, the rationale of seeking more and more debt just to pay off previous debt is a recipe for disaster. There is an urgent need to increase the tax base, to stop giving tax waivers, to do away with subsidies and to limit non-development expenditures. This sounds like a broken record, but it is the only way.

The answer to this lies in stimulating real growth in the economy while ensuring stability, security and investor-friendly policies. There should be strict checks and balances in place before the approval of any further debts. In fact, while it may seem like a financial impossibility, Pakistan is courting disaster unless it plans a strategy based on acquiring no more debt from this point on.

But the real answer lies in austerity – in cost-cutting. Not by the average Pakistani, but by the government. The size of the government and the bureaucracy has to be reduced; the cost of that excessive manpower has to be slashed.

After the 18th Amendment, provinces can raise their own debt. This has the downside of public debt accumulation at the sub-national level. It is most likely that the provinces will follow the federal government route of resorting to bank borrowing… and that is a scary thought. It has to be discouraged. And I think the State Bank has tried and failed. Nonetheless, given the current scenario, it is still worth a shot.