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Swan promises rigorous audit of election policies

Updated February 22, 2013 09:08:51

The Parliamentary Budget Office will be required to release a post-election audit of all election commitments within a month of polling day under changes announced by Treasurer Wayne Swan today.

In a speech to an Australian Business Economists forum this morning, Mr Swan has also promised to release a preliminary budget outcome for the current financial year well before the September 14 election.

Amid an increasingly personal debate with the Coalition over economic credibility, Mr Swan has committed to a funding boost for the Parliamentary Budget Office (PBO) to ensure it has the resources needed to prepare rigorous policy costings in the lead-up to the election.

“Transparency would be further enhanced if the PBO were to prepare a post-election audit of all political parties, publishing full costings of their election commitments and their budget bottom line 30 days after an election,” he said.

“We will introduce legislation for consideration by the Parliament to enable this reform.

“This will remove the capacity of any political party to try to mislead the Australian people and punish those that do.

“It will avoid a situation we saw last election, where the Liberal Party thought they could con the Australian people.

“As a result of the reforms I am announcing, their $11 billion black hole in the budget bottom line would have been uncovered regardless of the election outcome.”

After the 2010 election, Treasury analysis revealed a multi-billion-dollar shortfall in the Coalition’s election costings, although the Opposition described the figures as a “difference of opinion”.

The analysis was only made public because of the post-election negotiations between the independent MPs and the major parties.

Shadow treasurer Joe Hockey has welcomed Mr Swan’s move, saying the Coalition strongly supports the PBO.

“I cannot believe my luck in Wayne Swan calling for sunshine on budget numbers,” he said.

“I mean, he is just the gift that keeps giving in this regard.

“Every single number from the mining tax and the carbon tax through to the budget surplus that he claimed he was going to deliver, every number he’s got wrong and transparency only helps the Coalition.

“It seems as though Wayne Swan is actually trying to get more prepared for opposition than he is actually running the country. I mean, he’s almost declared the innings closed on Labor by going down this path.”

The Coalition has said it would not be able to finalise its policy costings for the 2013 election until the Pre-election Fiscal Outlook (PEFO) is released, which will occur after the official campaign begins in August.

Mr Swan has today pledged to release a preliminary budget outcome for the 2012-13 financial year as soon as he is given a “reliable figure”.

“Treasury and Finance officials last week were clear that a reliable estimate of the underlying cash balance could be made well before the election and we commit to releasing them,” he said.

“This means that the 2012-13 outcome of the underlying cash balance – the most important budget aggregate – will be there for everyone to see.

“There will be no fiscal surprises after the election.”

Both the Coalition and Labor have indicated the economy will be a key focus of its election pitch to voters, although the Government is still dealing with the fallout of walking away from its promise to deliver a surplus this financial year.

It is also coming under pressure to explain how it will pay for signature policies such as the National Disability Insurance Scheme and the overhaul of school funding.

“Inevitably, these reforms will involve very difficult decisions, but they will always be guided by our Labor values,” Mr Swan said.

Topics: federal-government, government-and-politics, budget, business-economics-and-finance, australia

First posted February 22, 2013 06:18:50

Economic policies irk Japanese businesses

Shoraku restaurant Kunio Ueno’s small restaurant will feel the effects of three unpopular economic policies being debated in the run-up to Japanese elections Wanted: A leader who can fix the world’s third largest economy. Needs to be able to boost growth, end falling prices, reduce its mammoth debt and weaken the Japanese yen. All the while, keep the voters happy by not resorting to unpopular policies.


The name of a short-lived political party sums up what these unpopular moves are: “Tax Cuts Japan • Anti-TPP • Zero Nuclear”. The party only existed for five brief days before merging with another in late November but they are the three economic policies that are on voters’ mind ahead of general elections on Sunday.


Small Chinese restaurant Shoraku is one of many businesses in a residential area of Tokyo that is affected by all three. It is run by the Ueno family, originally by father Kunio and now by his son Koji.

First unpopular move

A hike in the consumption tax shoppers must pay on everything they buy. It is currently 5% but the Prime Minister, Yoshihiko Noda, along with the two main opposition parties, pushed through a bill to raise it to 8% by 2014 and 10% by 2015 in August.


It is a move which 73-year-old Kunio Ueno definitely doesn’t support.

Shoppers at a store Analysts say a tax hike is one of the few ways for Japan to fund a social security system

“Big businesses may be able to pass on the hike to consumers but we cannot raise prices because we’ll lose customers,” he says.


“We haven’t changed prices since the sales tax was 3% so we’ve already absorbed the hike of 2%.”


“I guess you could reduce the quantity in each dish but that feels like betraying our regulars,” he adds.


The consumption tax hike is often seen as political suicide because almost every administration that suggested or imposed the introduction or the hike of the tax failed to win the next general elections.


Mr Noda said the hike was necessary to rebuild Japan’s finances. But more than 50 lawmakers from the ruling Democratic Party of Japan opposed the bill, resulting in their departures and the formations of many small political parties.

Second unpopular move

A huge new free trade area around the Pacific ocean called the Trans-Pacific Partnership (TPP). The pact began six years ago and its current members are Australia, Brunei, Chile, Canada, Malaysia, New Zealand, Peru, Singapore, Vietnam, Mexico and the United States.

Continue reading the main story
Even if cheaper overseas rice became available, we would continue to buy from Japanese farmers that we always bought from”

End Quote Kunio Ueno Restaurant owner Participation has been discussed in Japan for many years but the Mr Noda expressed Japan’s desire to become a negotiating partner earlier this year.


To put it simply, big businesses and exporters support the move. Farmers and their strong unions strongly oppose it.


“Made in Japan” produce is known to be much more expensive than its overseas rivals and without tariffs on imports, many farmers would struggle to survive global competition.


It could mean cheaper vegetables and rice for the restaurant owner Mr Ueno, but he is against Japan joining the TPP.


“We value our long relationships with the suppliers so we don’t want to see them struggle,” he says.


“Even if cheaper overseas rice became available, we would continue to buy from Japanese farmers that we always bought from.”

Third unpopular move

Nuclear energy, whether Japan should abandon it altogether. Before the accident at the Fukushima nuclear power plant in March 2011, nuclear accounted for 29% of Japan’s electricity supply. But in the past 21 months, the anti-nuclear movement has been gaining momentum.

Anti-nuclear protest The anti-nuclear movement has been gaining momentum since the Fukushima nuclear disaster

All but two nuclear reactors remain shut. It means that Japan has been importing other sources of energy. Japan now buys a lot more products from overseas than it sells abroad and the gap between its exports and imports – called trade deficit – has been widening.


It has also resulted in a hike in electricity prices. Big businesses want Japan to continue using nuclear power to reduce the impact on the economy but a large number of protesters have been taking to the streets every week.


Small business owner Kunio Ueno is also against nuclear power plants even if it means he will have to pay even more for electricity.


“We have to look at a longer term goal and we don’t want to have any more accidents at nuclear power plants,” he says.


“We changed our light bulbs to save energy and to cut costs.”


“In the 35 years that I’ve been running this restaurant, this is the worst that I’ve ever seen.”

Continue reading the main story
Having free trade with the growing Asia is crucial and I believe joining the TPP is the first step”

End Quote Kiyoaki Fujiwara Japan Business Federation “I don’t mind who becomes the leader but I want someone who can make things better, or at least not make them worse,” Mr Ueno adds.


And this is the challenge that the parties face – tough economic issues on which tough decisions have to be made. But would taking these decisions make them unelectable?


So what are the stances of Japan’s main parties vying for 480 seats in the lower house of parliament on 16 December?


“Not so different,” says Yuuki Sakurai, of Fukoku Capital Management.


Let’s start with the ruling DPJ. It pushed through the sales tax hike and Mr Noda said Japan should join the TPP. As for nuclear energy, after changing its position a few times, it has promised to phase it out by the 2030s. And voters see Mr Noda as someone who has restarted the first nuclear reactors since the Fukushima accidents.


Its main opposition Liberal Democratic Party of Japan (LDP) supported the tax hike in August. Its leader Shintaro Abe has recently said in a television debate that the hike is not definite, but most analysts believe Mr Abe will raise the tax once he is in office. The LDP wants Japan to join the TPP if tariffs on imports are not removed and it says Japan would need some forms of nuclear energy.

Anti-TTP protest Farmers are against the TPP because cheaper produce from elsewhere would enter the market

Economic policy of the fringe parties that are expected to form part of a coalition remains vague, although the Japan Restoration Party – a tie-up between two populist figures – backs the sales tax rise to fund local governments.


“Those policies may be unpopular but they would eventually support the country’s economy,” says Kiyoaki Fujiwara, the director of the Economic Policy Bureau at the Japan Business Federation or Keidanren.


“We think it is inevitable to raise the consumption tax to fund the social security system as our population ages quicker than anywhere else in the world.”


“We also support Japan joining the TPP because we have little natural resources and our economy grew by selling goods and services to the rest of the world.”


“Having free trade with the growing Asia is crucial and I believe joining the TPP is the first step,” he adds.


For Japanese voters, coming to grips with difficult economic choices may be what is needed to jolt their nation out of ongoing stagnation. But it is something not many want to hear.

SBP issues instructions for IBIs profit, loss distribution policies

KARACHI: The State Bank of Pakistan (SBP) on Monday issued detailed instructions for profit and loss distribution and pool management in Islamic banking institutions (IBIs) in order to improve transparency and disclosures, standardising their profit and loss distribution policies and practices. The instructions are applicable with immediate effect.

According to the circular issued by the banking regulator to the heads of all Islamic banks and all conventional banks which have Islamic banking branches, the provisions of a circular regarding the minimum rate of return on savings deposits as amended from time-to-time will no more be applicable on to Islamic banking institutions. And failure to comply with the SBP’s instructions will draw penal action under the provisions of the Banking Companies Ordinance, 1962.

As per SBP instructions, each pool of deposit established by IBIs will act as a virtual enterprise having explicitly demarcated sources of funds, ownership of specific assets and income and expenses. The profit earned on financing and investments made through such pool of deposits will be shared between IBIs and the depositors as per the pre-agreed profit sharing ratio. In case of loss, the same will be borne by the depositors in proportion to their investments unless caused by the negligence and misconduct by the IBIs in managing the depositors’ funds. According to the instructions, the IBIs would have a well-defined profit and loss distribution and pool management framework for creation of one or more pools of assets to be financed by different types of mudaraba-based (individual, corporate or financial institutions) deposits.

The framework will specify the objectives, investment strategy, and risk characteristics of each pool. It would also explicitly define the basis for allocating different types of deposits to different pools and assigning weightage to each deposit category of a particular pool, it said.

The framework would be approved by the shariah adviser and the board of directors of the IBI and a duly approved copy of the same would be submitted to the Islamic Banking Department, SBP within three months of issuance of these instructions.

The Mudaraba-based deposits would be invested in earning assets such as financing, investment, etc. Such deposits would not be invested in non-trading fixed and other assets such as land, building, furniture fixtures, computers and IT systems, etc. The IBI as Mudarib is responsible to finance all such costs / assets from its own sources / equity, it said.

The cash reserve requirement (CRR) as prescribed by the SBP from time-to-time would be part of the pool financed through deposits attracting CRR, it added.

The IBIs may comingle its own equity (available in liquid / cash form) with the depositor’s funds in a pool. As the IBI assumes all the risks of current deposits (mobilised on qarz basis), it can use such deposits as its equity for the purpose of profit and loss computation and distribution, said circular.

“In case of comingling of IBI’s equity with the depositors fund in a pool, the net income / loss of pool shall be allocated between IBI’s equity and the depositors fund in proportion to their respective share in pool. The profit and loss on the Mudaraba-based deposits shall be computed and distributed on the basis of average balance in the depositor’s account during the profit computation period,” it said.

The profit sharing ratio (PSR) between depositors (Rabbulmal) and IBIs (Mudarib) would be decided and announced at least three working days before the beginning of the period.

Furthermore, no downward revision in the PSR agreed with the depositors (particularly the term depositors) at the time of acceptance of deposit would be made during the deposit tenor. In case such a revision is necessary, the depositors would be allowed to withdraw their investments without any deduction / forfeiture of profits / penalties, etc, it said.

The SBP said that the distribution of profit and loss to the depositors on the basis of these instructions would be subject to verification / audit jointly by the shariah adviser and external auditor.

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Govts inappropriate policies result in gas, power crises: Jang Forum


KARACHI: Speakers at the Jang Forum have unanimously attributed inappropriate policies of the present and past governments as the prime reason behind the gas and energy shortages in the country.


Haroon Rashid, vice president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), said that the industry, which is the main employment generator, is the worst hit by gas shortage, particularly the fertiliser industry.


He categorically said that transport must be the least priority for gas allocation, as they have alternative fuels available.


Rashid said that the regulators have been pursuing corrupt practices, resulting in mushroom growth of compressed natural gas (CNG) filling stations and now there is no gas for them.


Zahid Hussain, former managing director of Oil and Gas Development Company Limited (OGDCL), said that the cumulative unaccounted for gas (UFG) of Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) accounted for 20 percent as against the international standard of four percent.


“The UFG is out of control and always increasing. If it is contained to eight percent of both networks, the requirement of the CNG sector could be met easily,” he said.


Hussain said that the CNG sector has invested a huge amount of money and they should not be targeted, adding that the government should look for alternative gas supply resources, including imports.


Samir Gulzar, chairman of All Pakistan CNG Association (APCNGA) Sindh, said that it is no more feasible for them to carry on their business after the decision of the Supreme Court reducing CNG prices by Rs30 per kilogram.


He said that in addition to the announced gas outages, the gas utility did not provide enough pressure due to which the processing time of their compressors has increased and they are unable to serve more vehicles.


Gulzar said that they have suggested the authorities and the regulator to process the “flare gas”, ie, high sulfur and moist gas and provide it to the CNG sector. He said that 75mmcfd of flare gas is being burnt every day.


They have also suggested to process and transport in containers gas from dormant wells but their suggestions were rejected, he said.


Gulzar was highly critical of Karachi Electric Supply Company (KESC), which, according to him, is killing gas in its inefficient plants.


Haji Mohammad Tawab of Transport Ittehad said that they are left with no other option but to close their business.

Pakistan could be ranked ‘most lucrative’ to sell life policies

Countr­y’s share is lowest in the region, pointi­ng toward­s untapp­ed potent­ial.  Private companies in the life insurance sector have shown remarkable growth in the last five years.

KARACHI: 

If all countries of the world were ‘profiled’ from the perspective of an insurance agent looking to sell life policies, Pakistan should rank among the most lucrative markets.


According to Swiss Re Group – a global wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer – life insurance in Pakistan was significantly small even when compared to its peers in the region.


Life insurance penetration – defined as the collective share of gross premiums collected by all life insurance companies in the gross domestic product (GDP) of the country – was only 0.3% in Pakistan during 2010. However, for India, Sri Lanka and Bangladesh, life insurance penetration remained 4.4%, 0.6% and 0.7%, respectively, in the same year.


Out of the seven life insurers operating in Pakistan, six belong to the private sector with a collective market share of 36% in 2011. The two largest private life insurers – EFU Life Assurance and Jubilee Life Insurance – had a combined market share of 26%, which left the remaining four private companies with a collective share of only 10%.


Although the market share of the state-owned State Life Insurance Corporation of Pakistan (SLICP) had remained stable in the last five years, private companies in the life insurance sector have shown remarkable growth. For example, while total assets of the SLICP grew at an annualised rate of 14.5% during the last five years, the aggregate growth in the assets of private-sector companies for the same period had been a staggering 30.8% per annum.


Speaking to The Express Tribune, EFU Life Assurance Chief Strategy Officer Mohammed Ali Ahmed said three factors differentiated private-sector life insurance companies from the state-owned insurance giant that controlled 64% market share.


“I believe the differentiating factors are the product value and flexibility pre- and post-sales client experience with the company, and the comfort that the insurance company is financially sound and will pay the insurance claim when it is needed the most by the beneficiary,” Ali said.


EFU Life Assurance was the largest private-sector company in the country’s life insurance sector in terms of total assets. With assets of over Rs28 billion, its share in the combined assets of all private-sector life insurance companies was over 53% at the end of 2011.


Its individual clients increased from approximately 100,000 in 2006 to close to 250,000 in 2011, which translated into an annualised growth rate of 20.1%. On the contrary, the number of individual life insurance policies of the SLICP increased at an average rate of 11.5% per annum during the same fiver-year period.


Statistics show that life insurance companies in the private sector had also been more profitable than the SLICP. While profits of the state-owned company increased by 13% on average in the last five years, the bottom line of EFU Life Assurance grew at an annualised average of 19.6% during the same period. Moreover, the aggregate growth in the profits of all private-sector life insurance companies during the same period also remained 24%, nearly twice that of the SLICP.


“Such a low penetration rate for a population of over 170 million individuals simply points us in the direction of the huge opportunity which is waiting to be tapped,” Ali said. “There is nowhere to go but up.”


Despite repeated attempts, nobody from Jubilee Life Insurance was available for comment.


Published in The Express Tribune, October 22nd,  2012.

Prudent policies helped produce surplus agriculture yield: Sheikh


ISLAMABAD: Dr Abdul Hafeez Sheikh, federal minister for finance, said that owing to prudent policies of the government, the performance of the agriculture sector has enhanced as surplus crop yield has been recorded this year, according to a statement on Monday.


“This year we have surplus wheat, sugar and cotton crop because of democratic government’s good policies,” said the finance minister, while meeting Haruhiko Kuroda, president of the Asian Development Bank , in Tokyo. Sheikh said that despite a series of natural calamities, Pakistan has been able to raise its agriculture produce because of good agricultural policies, according to the statement. This has also contributed in the well-being of the people in rural areas, said the finance minister.


Highlighting the economic situation in Pakistan, the minister said that measures are being taken to bring macroeconomic stability in the country.The government tried to remain fiscally austere, which can help it bring stability in the economy, he said. Despite various constraints, the government is trying to mobilise the resources, said Sheikh, adding that in the last two years the government has doubled the tax collection.


This year the growth rate is expected to be around four percent and the government has been successful in bringing inflation to a single-digit, said the minister.

Japan asks Pakistan to ensure consistent economic policies


ISLAMABAD: Japan on Tuesday asked Pakistan to ensure consistent economic policies for promoting investment, as change in the policies such as giving relaxation on the import of used cars from three to five years, would affect Islamabad’s endeavours to attract investment, said sources.


Japan will also encourage bilateral investment treaty between the two countries, and in this regard, they have so far signed the avoidance of double taxation, they said.


“There is a need to protect existing automobile manufacturers of Pakistan as change in the policy will not only have a negative impact on the manufacturers but also on vendors,” said Daisuke Hiratsuka, visiting vice president of Japan External Trade Organization (Jetro), while briefing reporters at the Japanese Embassy.


Earlier, President Zardari holds meeting with over 50 businessmen from Japan who are currently visiting Pakistan to explore opportunities for boosting economic relations between the two countries.


Pakistan would have to improve security environment and infrastructure in terms of smooth supply of energy and building roads and ensure consistent policies for boosting investment in the country, said Hiratsuka.


When asked about inconsistent policies regarding the automobile sector, he said, the quality and decline in prices could be achieved by enhancing production of cars from 200,000 units to 300,000 units per annum.


With the existing level of investment worth $3.2 million from Japan during the last financial year, Jetro’s vice president said, the Japanese firms considered Pakistan as a high risk country.


“We have brought the delegation of private sector companies to show that it was a wrong perception,” he added.


Pakistan, he said, could become the next destination of Japanese investors as this region, including India and Bangladesh, witnessed phenomenal increase in investment in the last few years.


When asked about the existing potential of boosting economic ties, he said, Pakistan would become a major market by 2030.


As the bilateral trade between Pakistan and Japan hovered around $1.7 billion in the first 10 months (July-April) of the last financial year, the trade balance remained largely in favour of Japan as Pakistan’s exports to Japan stood at $171 million, while it imported goods worth $1.551 billion.

Policies held back by lack of implementation

Lacunas in government policies and their misuse are even common in a country like the United States. PHOTO: FILE

LAHORE: A deadlock over building capacity of the workforce of government departments has blocked smooth sailing of investment and trade policies in Pakistan, said The Indus Entrepreneurs (TiE) Lahore President Salim Ghauri.

Talking to the media here on Monday, he said this dismal situation had given birth to a negative impression that incentives for the growth of investment and trade were a sheer wastage of public money.

He referred to press reports which suggested that the Ministry of Finance and Planning Commission had challenged the Strategic Trade Policy Framework (STPF) 2012-15 of the Ministry of Commerce, arguing that the offer of Rs30 billion in subsidies for promotion of trade was sheer wastage of public funds.

Ghauri said the issue of implementation of policies, and not the policies itself, should be addressed.

Lacunas in government policies and their misuse are even common in a country like the United States.

The fall of energy company Enron and the collapsing automobile and banking sectors in the US were recent examples of these, but an efficient government mechanism got hold of the faulty areas by some timely actions and moves, he said.

In Pakistan, on the other hand, visits of labour inspectors were suspended as a policy decision on the excuse that they were involved in extortion rather than examining safety measures in factories and other workplaces. As a result, he said, the country saw Pakistan’s worst industrial disaster which left more than 250 workers dead.

The Indus Entrepreneurs was founded in 1992 in Silicon Valley by a group of entrepreneurs, corporate executives and senior professionals with roots in the Indus region.

Published in The Express Tribune, October 2nd, 2012.

Consultation: Businessmen want say in policies

“Busine­ss commun­ity was the larges­t stakeh­older in the econom­y,” says Zahid Aslam. “It is dire need that government speed up the process of consultation with private sector while framing economic policies,” says FCCI President.

FAISALABAD: 

The Faisalabad Chamber of Commerce and Industry (FCCI) has asked the government to take into confidence all stakeholders while finalising policies on national economic issues.

“It is the dire need that the government speed up the process of consultation with the private sector while framing economic policies,” said FCCI President Zahid Aslam in a statement on Monday.

He said the business community was the largest stakeholder in the economy in terms of revenue generation, foreign exchange earnings and employment provider.

He said almost all macroeconomic indicators were deteriorating and the business community was uncertain about their businesses. “Energy crisis, high cost of doing business and uncontrollable law and order situation are discouraging further investment – the only catalyst for economic growth.”

Published in The Express Tribune, October 2nd, 2012.