Tag Archives: years

Nestle Nigeria to triple sales to $2.2bn in ten years: CFO

LAGOS: Nestle Nigeria plans to triple its revenues in Nigeria to 351 billion naira ($2.2 bln) over the next ten years, its chief financial officer told Reuters.

Martin Kruegel earlier said the food manufacturer would invest 100 billion naira over a ten year period to achieve its sales target.

“Our aim is to triple our Nigerian sales over the next ten years from 117 billion naira currently,” he said, adding that the additional investment would drive that target.

Banks face ‘decisive’ two years

says that 2013 and 2014 are going to be decisive years for financial sector reform

The incoming governor of the Bank of England has said the next two years will be “decisive” for bank reform.

Mark Carney, current governor of the Bank of Canada, said “shadow banking” and the issue of “too big to fail” would be tackled.

The 2008 crisis would be repeated if unregulated financial activities – blamed for amplifying the meltdown – went unchallenged, he said.

He also warned that central banks alone could not eliminate “tail risks”.

He said that, contrary to some reports, tail risks – essentially worst-case scenarios – in Europe and the United States remained.

Shadow banks are companies that operate like banks but fall outside current oversight.

“The next two years will be decisive on ending ‘too big to fail’ [for banks] and addressing shadow banking and over-the-counter derivatives, that absolutely amplified the last crisis – and will do so again if we don’t complete our agenda,” he told an audience at the World Economic Forum in Davos.

‘Monetary toolbox’ Continue reading the main story

The calm mood in sunny Davos is open to interpretation. It might be tempting to see it as a reflection of hope that the global economy is back on track and picking up pace.

But equally, it could be taken as a sign of exhaustion, bringing pause to an economic crisis that has been long and tiring.

Nobody here expects a sharp and sudden recovery, especially not in the US or the eurozone.

But these days, politicians and business leaders seem happy as long as they are not in the eye of a storm.

Over-the-counter derivatives – unregulated because they are privately negotiated between two parties – were blamed for exacerbating the financial crisis.

Mr Carney takes up his new position at the Bank of England in June.

His comments could hint at what is to come when he succeeds Sir Mervyn King at the Bank, which has seen its financial regulatory powers increase since the financial crisis.

Mr Carney also rebuffed criticism that countries had “maxed out” all monetary policy options by major economies.

“Part of the point is to ensure that as the economy gains traction, stimulus will continue to be provided appropriately.”

International Monetary Fund managing director Christine Lagarde, who was present on the panel alongside Mr Carney, also said that the European Central Bank had to keep its monetary toolbox open.

‘Risks of relapse’

“Those tools that are in the toolbox have to be operational. It doesn’t necessarily mean they have to be used… but they must be operational,” she added.

Unconventional monetary policies pursued by the ECB have brought some respite to markets recently.

Operations including its Outright Monetary Transactions (OMTs) and the Long-Term Refinancing Operations (LTROs) helped bring down yields on eurozone sovereign bonds, making it less expensive for governments to borrow on international markets and pay off their interest payments to creditors.

Meanwhile Ms Lagarde warned against the “risks of relapse”, urging countries to keep up with reforms, especially in the eurozone, to pursue banking and fiscal union while keeping pace with structural reforms.

She said 2013 was “not going be a walk in the park” for the euro area but would be far better than last year.

With regards to the US, she said the government should change its debt trajectory and “indicate promptly” how to cut debt.

Construction faces ‘years of woe’

 Greater London will provide the only major bright spot in the industry over the next five years The construction industry in the UK will not recover its pre-recession peak level of output until 2022, says a study by an industry lobby group.

The bleak outlook follows “one of the most difficult periods since World War II”, the Construction Skills Network report said.

The sector lost 60,000 jobs in 2012, while output fell 9%, in large part because of public spending cuts.

Construction employment is expected to continue to fall every year until 2016.

“Construction found itself at the heart of a perfect storm in 2012,” said Judy Lowe, deputy director of CITB-ConstructionSkills, the industry training body that put the report together.

The sector had been “hit hard by a combination of public sector spending cuts and a lack of investment in the private sector”, she added.

Public sector construction fell 20% last year, while infrastructure fell 15%, commercial construction 10% and private housing 5%.

The report claimed that Greater London would provide the only major bright spot over the coming five years, with most other parts of the country suffering continued contraction.

Activity in Wales would be boosted by the building of the Wylfra nuclear power plant, while the North East would enjoy a rebound from what has been a particularly nasty slump.

Employment in the sector is expected to pick up in the East of England and Greater London, but nowhere else.

Londoners mark 150 years of minding the gap

Updated January 10, 2013 15:57:47

A lithograph of Baker Street station Photo: A lithograph of Baker Street station on the Metropolitan line of the London Underground, by an unknown artist from 1863-69. (Supplied: TfL from the London Transport Museum collection) Pocket London Underground map from 1933 Photo: Pocket London Underground map from 1933. This was the first version of the iconic London Tube map, and it was innovative because it showed the layout of the underground rail network without being constrained by geographical accuracy. (Supplied: Tfl from the London Transport Museum) London Underground construction - 1866 Photo: Workers at Praed Street in Paddington, London, build part of the city’s fledgling underground railway network in 1866. (Supplied: TfL from the London Transport Museum collection) City and South London railway Photo: Drawing of workers on the City and South London railway, part of the early London Underground rail network, in the 19th century. (Supplied: TfL from the London Transport Museum collection) Londoners at the Victoria London Underground station Photo: Londoners read newspapers while they wait for trains at the Victoria station on the London Underground network on November 23, 1896. (Supplied: TfL from the London Transport Museum collection) The Lure of the Underground Photo: A 1927 poster by Alfred Leete, called The Lure of the Underground, celebrates the popularity of London’s underground rail system. (Supplied: TfL from the London Transport Museum collection) London Underground train carriage 1938 Photo: The interior of a London Underground train carriage in 1938. (Supplied: TfL from the London Transport Museum collection) People shelter from London air raids Photo: People shelter from London air raids in the Piccadilly Circus underground railway station during World War II. (Supplied: TfL from the London Transport Museum collection) World War II London Underground poster Photo: A World War II poster declares that the London Underground railway network will continue despite the war’s impact on the city. (Supplied: TfL from the London Transport Museum collection) Charing Cross Tube station Photo: People wait for a train on the crowded platform of Charing Cross station (now know as Embankment) on the London Underground in the 1950s. (Supplied: TfL from the London Transport Museum collection) Queen Elizabeth II Photo: Queen Elizabeth II sits on a train at the opening of the Victoria line on the London Underground on March 7, 1969. (Supplied: TfL from the London Transport Museum collection) Free travel to disco on London Underground Photo: A London Underground poster from 1986 advertises a deal for free travel to a disco with a weekly travelcard. (Supplied: TfL from the London Transport Museum collection) London Underground staff Photo: London Underground staff at Westminster station pose in their new uniforms in 2000. (Supplied: TfL from the London Transport Museum collection) Bombing damage on London Underground train Photo: A CCTV still shows the damage on a London Underground train after a suicide bomber targeted the Piccadilly line on July 7, 2005. (London Bombing Inquest) London transport bombings 2005 Photo: Police close Edgware Road tube station in London after bombings on London’s transport systems on July 7, 2005. (AFP) London Underground map from 2013 Photo: London Underground map from 2013. (Supplied: London Underground) Gallery: London Underground through history

A century and a half ago, the very first Tube train – steam of course – pulled out of London’s Paddington station for the five kilometre underground journey.

Civil engineer Ron Turner says that first tunnel – dug by hand by 2,000 labourers – was hailed as a modern marvel of engineering.

“These guys were going into the unknown. It was a step off the edge of a cliff. Basically guys setting about digging the tunnel by hand,” he said.

Fast forward 150 years, and these transport veins pump workers, shoppers and tourists at speed and hidden from view.

The world’s first underground may not be the best, but it remains the most used means of getting around London – even if it is not always appreciated.

Mike Ashworth is the underground’s design and heritage manager, who on a daily basis grapples with the challenges the network throws up.

“I think we always have to accept we are the world’s oldest, not the world’s newest metro system, and we are also one of the world’s biggest and busiest,” he said.

“The Victorians who built this station didn’t think about 1.1 billion passengers a year, so it’s a real challenge.

“And yes, we face that on a day-to-day basis.”

We were the first subterranean railway in the world. We started this fashion of if there was no room above, if the roads were filled with carriages and those sorts of things, build an underground railway.

And on that day in 1863 Lord Gladstone was there, then passengers got onboard and it was an amazing journey, no one had ever ridden underground in a steam train.

London Underground chief operating officer Howard Collins

There is unwritten train etiquette which has hardly changed – it’s not a place for raucous conversation. People studiously avoid each other’s gaze – important when your face is jammed in a stranger’s armpit.

But in a concession to modernity, smart phones and tablets are slowly replacing newspapers and books as the main method of blocking out the uncomfortable close world.

The Tube has played a vital role in British history beyond transport. It provided vital shelter against the German bombers during World War II and became the target of the 7/7 terrorist attacks in 2005.

As the myriad songs and movies focused on the Tube attest, its iconic power gives it a major cultural focus.

But perhaps the easiest way to measure the importance of the worm city below is to imagine London without it: total chaos.

Topics: rail-transport, history, england, united-kingdom

First posted January 10, 2013 10:28:12

Daimler to extend CEO’s contract by five years

Posted by Shoaib-ur-Rehman Siddiqui

FRANKFURT: Car and truck maker Daimler will extend Chief Executive Dieter Zetsche’s contract by five years, two years more than expected, a German magazine reported.

Daimler’s supervisory board is due to sign off on the extension to the end of 2018 at a meeting on February 6, weekly Der Spiegel said on Sunday, citing no sources.

A spokesman for Daimler said the company generally did not comment on matters concerning the supervisory board.

A source had told Reuters in September that Daimler was expected to extend Zetsche’s contract by three years to 2016.

The news came as analysts warned that investors were growing increasingly concerned about Daimler’s inability to close the performance gap with rivals Audi and BMW.

Copyright Reuters, 2013

Figures show mining approvals take two years

Posted December 11, 2012 10:19:07

The Department of Mines has released figures showing it takes an average of just over two years for a new mining project in Western Australia to reach final approval.

The average was reached after assessing about 1,100 mining proposals over the past four years.

The figure has been released to counter industry criticism that approval timelines have blown out to five years, making WA a less competitive place to develop projects.

The Chamber of Minerals and Energy welcomes the progress that has been made.

The Wilderness Society’s Peter Robertson says approval times have been reduced by cutting corners.

“The recent furore over fracking for example demonstrates that the Department of Mines and the Minister for Mines are in a huge rush to approve all kinds of mining projects, both onshore and offshore, in all parts of WA without adequate safeguards, without adequate assessments,” he said.

He says more should be done to protect the environment.

“WA should uphold the strictest standards because our environment is already under enormous pressure,” he said.

“We shouldn’t be cutting corners and we shouldn’t be fast-tracking approvals because we’ve already done so much damage and we’ve learnt very little from it.”

Topics: mining-industry, broome-6725, karratha-6714, perth-6000, kalgoorlie-6430, geraldton-6530, albany-6330

US manufacturing contracts to weakest in 3 years

NEW YORK: US manufacturing unexpectedly contracted in November, falling to its lowest level in over three years in a sign the sector may be struggling to gain traction, according to an industry report released on Monday.

The Institute for Supply Management (ISM) said its index of national factory activity fell to 49.5 in November from 51.7 the month before. The reading was shy of expectations of 51.3, according to a Reuters poll of economists. The 50 level in the index is the line between expansion and contraction.

The figure was the softest since July 2009 when the US economy was struggling in the aftermath of the financial crisis, and may have been aggravated by the superstorm Sandy that hit the US east coast in late October.

The return to contraction was a surprise after the sector grew for two straight months and marks a reappearance of the economic weakness seen over the summer months that investors and economists had hoped was behind them.

“There are two ways of looking at this,” said Christopher Low, chief economist at FTN Financial in New York.

“We had two months of growth and now we are back to contraction, that is one way. The other, which is a little more realistic is that since May the index has been very close to 50 and I think what we are seeing is that manufacturing has stalled and has yet to recover.”

US stocks lost ground after gaining earlier on Chinese reports that showed manufacturing in the world’s second-largest economy picked up pace during the month.

The S&P 500 rose 0.25 percent and the Dow industrials briefly turned negative.

The new worries over the economy come as investors are on guard over negotiations in Washington aimed at averting the so-called “fiscal cliff”, a series of tax hikes and spending cuts that economists say could push the economy into a recession.

The ISM survey was at odds with a separate manufacturing survey also released on Monday. Financial information firm Markit said rising demand from domestic and foreign customers helped US manufacturing grow in November at its quickest pace in six months, though hiring remained sluggish.

ISM’s survey, which focuses more on large companies, also seemed to contradict a survey of smaller firms published on Monday, though this was conducted a month earlier.

The Thomson Reuters/PayNet Small Business Lending Index showed borrowing by small US businesses rose in October, as the central bank launched its latest round of monetary stimulus to encourage borrowing and spending.

US construction spending, also during October, was a bright spot however as the housing sector recovery appears to be gaining traction. Spending rose by the most in five months, with stronger spending on homes outpacing tepid gains in business and government projects.

Monday’s reports mark the start of a relatively busy week for economic data releases that comes to a head on Friday with the closely watched monthly payrolls report for November. Economists in a Reuters poll expect 93,000 jobs were created during the month, down from 171,000 the month before.

Copyright Reuters, 2012

Adnoc to store crude in S. Korean facility for 3 years

Seoul: The UAE’s state-run energy giant Abu Dhabi National Oil Co (Adnoc) will lease oil storage facilities in South Korea capable of storing six million barrels of crude for three years, state-run Korea National Oil Corp (KNOC) said on Thursday.

This is the first time Adnoc has leased storage in South Korea, a KNOC spokesman said. It becomes the twelfth international company to hold storage facilities located in the world’s fifth-largest crude importer, joining other producers, oil majors and investment banks.

For producers, storage in South Korea gives them flexibility to meet fluctuations in demand from Asian buyers. It also allows them to sell smaller cargoes than the two million barrels that typically sail on Very Large Crude Carriers from the Middle East to Asia.

For South Korea, leasing storage to producers contributes to its security of oil supply. It has first rights to crude in storage in case of emergency.

Article continues below

The storage contract was signed on Wednesday.

“All six million barrels of crude oil will be shipped to the storage facility within the first half of next year under the contract,” a KNOC spokesman told Reuters by phone. The oil would be held in storage near the port of Yeosu, about 500 kilometres south of Seoul, he said.

The Korean government holds a total of 146 million barrels of storage facilities for its strategic crude and fuel reserves.

Of the total, 40 million barrels of capacity is reserved for leases to oil producers, majors and investment banks, and as of end-October a combined 30 million barrels of crude and fuel was stored there, according to KNOC data.

The announcement was made while Korean President Lee Myung-bak, and other government and business officials were visiting the UAE to mark the start of construction there of the country’s first nuclear reactor.

ECC meeting: Govt cuts age-limit of imports to three years

Withdr­aws weekly oil pricin­g mechan­ism, undeci­ded on new formul­a.  “The decision will help the local assemblers which are facing adverse business conditions due to influx of imports,” says the finance ministry. ILLUSTRATION: JAMAL KHURSHID


In what appears to be a game of electioneering the government hasdecided to reduce the age-limit of second-hand imported cars to three years from the existing five years – a decision reportedly taken on behest of automobile lobby. It has also withdrawn the decision of fixing petroleum products’ prices on a weekly basis.

The decision to this effect was taken here on Thursday in a hurriedly called meeting of the Economic Coordination Committee (ECC) of the Cabinet, headed by Finance Minister Dr Abdul Hafeez Shaikh. The ECC meeting was scheduled for Monday, but the government moved it up, even though most of the ministers were not able to attend, according to the sources in the Cabinet division.

The decision on reduction in the age limit for imports will be effective from December 15, 2012 in order to facilitate the already in process orders of imports. “The decision will help the local assemblers which are facing adverse business conditions due to influx of imports,” said the finance ministry. Previously, the government had raised the age limit while arguing that local manufacturers were fleecing the buyers.

The Ministry of Industries pleaded that due to the previous decision on relaxation in age, brands like Suzuki Swift, Suzuki Mehran, Suzuki Cultus, Honda City, and Toyota Corollas were at risk of being wiped out of the market.

Most of these brands are not locally manufactured but assembled in Pakistan as the sector has failed to implement the deletion plan, protection given by the government to local industry, according to industry experts.

The industrial ministry said that surge in influx of imports had resulted in idle production capacity in the domestic industry, and may affect 200,000 jobs.


In line with National Assembly’s resolution to discontinue weekly price adjustment system of the petroleum products, the ECC decided to abandon the weekly pricing mechanism. However, a committee was formed to suggest a practicable mechanism for fixing the prices. An insider said that the ECC may allow fixing of prices on a fortnightly basis in the next meeting.

Moreover, the committee also allowed export of 64,166 tons of sugar, taking the total export quota to 400,000 tons. The decision was taken on assumption of a bumper crop of sugarcane this year. This is in addition to 335,834 tons, already approved in previous meetings.

On the other hand, the ECC also restored agricultural tube-wells subsidy in Balochistan. The number of beneficiary tube-wells’ owners was frozen to the level of 15,660. The decision will be effective from December 1, 2012.

The ECC also waived demurrage charges on the Afghanistan’s transit consignments that arrived during floods and between July 2010 and December 2010.

Wheat support price up 14.3%

In what appears to be a move to appease rural voters, the government increased the wheat support price to Rs1,200 per 40 kilogramme, an increase of 14.3% that according to experts will result in 4% rise in inflation.

It is the fifth increase in the tenure, which has caused a net increase of Rs825 per 40 kg or 182% since 2008. When the Pakistan Peoples Party-led coalition government came into power, the wheat support price was Rs425 per 40 kg.

“After using monetary policy as a political tool to appease industrialists and making budget a ballot budget, the decision to increase the wheat support price is a criminal act by the government,” said Dr Ashfaque Hasan Khan, Dean Business School of National University of Science and Technology. He quoted various studies, including his own, which establishes that a 10% increase in support price results in 3% rise in overall inflation.

While defending the move, the government said that international prices of wheat were much higher which resulted in smuggling of wheat to neighbouring countries. Moreover, prices of inputs have risen substantially during the past year.

Sixty years on, Colombo Plan students reunite

Updated November 22, 2012 13:33:16

A group of students from Asia who first studied in Australia in the 1950s has returned to New South Wales for the 60th anniversary of the Colombo Plan.

The Colombo Plan, a regional initiative focused on education and technical capability, supported around 20,000 students between 1952 and 1985.

The University of New South Wales was the first to welcome scholarships students from regional countries to study.

Tennyson Rodrigo, now 82, was among those who arrived from Ceylon (now Sri Lanka) to study Chemical Engineering in Australia.

“It was a strange set of circumstances, in the sense that I expected to come to a very highly developed university in the sense of physical structures and so forth,”

“But [the area] was still in the early stages of industrial New South Wales – so the first impression was that it wasn’t that inspiring – but I got adjusted to it pretty fast.

“I had basically no difficult in settling in Australia despite slight issues with the accent.”

Sixty years on, UNSW is hosting a reunion for students from countries including Indonesia, Vietnam, Singapore and Ceylon.

Mr Rodrigo says he and his colleagues who arrived under the plan felt a strong sense of responsibility.

“We felt that coming to Australia under the Colombo plan scholarship was a pioneering experience for us,” he said.

“And getting back after the completion of my degree course, I had a feeling that we were making a contribution to the development of the country.”

The anniversary comes as Australia discusses the ‘Australia in the Asian Century’ White Paper.

The paper focuses on deepening regional ties, and improving Asian literacy among Australians.

Mr Rodrigo says the Australia of today is very different to the one he first experienced in the 1950s

“I can’t think of the words to describe how Australia has changed over the last 60 years,” he said.

“Over the last 50 years the world has changed, more than over the last 200 years, and Australia is an example of that – it’s changed, not only in terms of its physical environment…but also its demography composition has changed so much.”

Topics: history, education, international-aid-and-trade, nsw, sri-lanka, vietnam, indonesia, singapore, asia

First posted November 22, 2012 13:16:18

Seven years for £1.4bn UBS trader

Emma Simpson examines how former UBS trader Kweku Adoboli lost £1.4bn of his bank’s money

A City trader who lost £1.4bn ($2.2bn) of Swiss bank UBS’s money has been jailed for seven years after being found guilty of two counts of fraud.

Southwark Crown Court heard Kweku Adoboli was “a gamble or two away from destroying Switzerland’s largest bank”.

He lost the money in “unprotected, unhedged, incautious and reckless” trades, the jury was told.

Adoboli, 32, of Whitechapel, east London, was cleared of four charges of false accounting.

He had denied the charges, which related to the period between October 2008 and September 2011.

Adoboli, who was arrested on 15 September 2011, worked in UBS’s global synthetic equities division, buying and selling exchange traded funds (ETFs), which track stocks, bonds and commodities.

He had joined the bank in 2003 and became a trader in 2006.

The court was told that at one point he stood to lose the bank £7.5bn ($12bn).

Adoboli, the Ghana-born son of a diplomat, told the jury his senior managers were aware of his actions and encouraged him to take risks.

He claimed he lost control over his trades during a period of market turbulence last year.

In his sentencing remarks, the judge, Mr Justice Keith, told Adoboli: “Whatever the verdict of the jury you would forever have been known as the man responsible for the largest trading loss in British banking history.

“Your fall from grace as a result of these convictions is spectacular. The fact is you are profoundly unselfconscious of your own failings….

“There is a strong streak of the gambler in you. You were arrogant to think the bank’s rules for traders did not apply to you.”

‘Magic touch’

The first verdict returned by the jury saw Adoboli convicted of one count of fraud relating to unauthorised trading leading to the £1.4bn loss to UBS.

The judge then gave the jury a majority verdict direction, saying they could deliver a 9-1 verdict on the second fraud charge and the four false accounting charges.

The jury had been reduced to five men and five women after two jurors were discharged.

They found Adoboli guilty by a majority verdict of the second fraud but acquitted him of the other charges.

The prosecution said Adoboli had been a gambler who believed he had the “magic touch”.

But, giving evidence, Adoboli said everything he had done was aimed at benefiting the bank, where he viewed his colleagues as “family”.

Adoboli said he had “lost control in the maelstrom of the financial crisis”, and was doing well until he changed from a conservative “bearish” position to an aggressive “bullish” stance under pressure from senior managers.

He told the jury that staff were encouraged to take risks until they got “a slap on the back of the wrist”.

‘Wanted it all’

After the verdicts, Andrew Penhale, deputy head of fraud at the Crown Prosecution Service, said: “Behind all the technical financial jargon in this case, the question for the jury was whether Kweku Adoboli had acted dishonestly, in causing a loss to the bank….

Det Ch Insp Perry Stokes: Adoboli was “running completely out of control”

“He did so, by breaking the rules, covering up and lying. In any business context, his actions amounted to fraud, pure and simple.

“The amount of money involved was staggering, impacting hugely on the bank but also on their employees, shareholders and investors. This was not a victimless crime.”

He added: “At the heart of any complex fraud is a simple notion of dishonesty which is something that we can all understand.”

Det Ch Insp Perry Stokes, from the City of London Police, which investigated Adoboli, said: “This was the UK’s biggest fraud, committed by one of the most sophisticated fraudsters the City of London Police has ever come across.

“To all those around him, Kweku Adoboli appeared to be a man on the make whose career prospects and future earnings were taking off. He worked hard, looked the part and seemingly had an answer for everything.

“But behind this facade lay a trader who was running completely out of control and exposing UBS to huge financial risks on a daily basis.

“Rules put in place to protect the bank’s position and the integrity of the markets were being bypassed and broken by a young man who wanted it all and was not willing to wait.

“When Adoboli’s pyramid of fictitious trades, exceeded trading limits and non-existent hedging came crashing down, the repercussions were felt in financial centres around the world.”

In a statement, UBS said: “We are glad that the criminal proceedings have reached a conclusion and thank the police and the UK authorities for their professional handling of this case.”

Power sector sustains hit of Rs400 billion in four years

ISLAMABAD: The power sector has sustained a hit of Rs400 billion which is not being refunded by the FBR for the last four years, as the revenue collecting authority collects 16 percent GST on the electricity billed amount knowing that the recovery of billed amount from the electricity consumers hovers in the range of 84 to 87 percent annually, a senior official at the Ministry of Water and Power said.

The power distribution companies pay approximately Rs120 billion as 16 percent GST to FBR on its average total annual electricity billing of approximately Rs750 billion. However, the FBR refunded Rs20 billion of Rs120 billion every year for the last four years, holding back Rs400 billion on one pretext or the other. The FBR functionaries say that power distribution companies did not pay the GST on subsidies and losses which is why they were justified to hold back the amount collected in the head of GST.

Distribution companies also pay 16 percent GST on the excessive billing which sometimes gets settled at reduced volume of billing. However, the collected GST on excessive billing is not paid back. Now the Ministry of Water and Power has moved the summary to the ECC that is to meet here today with Finance Minister Dr Hafeez A Sheikh in the chair, seeking permission for distribution companies to pay the 16 percent GST on the collected amount on electricity billing. Under the existing practice, the FBR is charging 16 percent GST on the total billed amount, not on the recovered amount of electricity bills.

Four years back, distribution companies were used to paying GST on recovered amounts of electricity bills but top mandarins started charging GST on the total billed amount to show its performance in terms of collecting the revenue.

Both the FBR and the Ministry of Water and Power were in litigation of Rs64 billion which the FBR owes to distribution companies in the head of GST, said the official.

The ECC is also going to take up the summary seeking the restoration of the subsidy on the agriculture tube wells in Balochistan. The Finance division is the mover of the summary and Ministry of Water and Power did not oppose it.

Officials said that the ECC was not the proper forum to take up this subject after the 18th amendment. However, the Punjab government has opposed the move of the centre to restore the subsidy without taking it into confidence. In the case of Balochistan, the provincial government’s share in subsidy stands at 60 percent whereas the centre’s share is 40 percent. In other federating units, provincial governments pick up the whole subsidy. The subsidy to agriculture tube wells was earlier suspended a year back. In Balochistan, the central government will extend Rs14 to 15 billion subsidies to tube wells if it is restored.

In Punjab, the Central Power Purchase Agency (CPPA) provides electricity to tube wells at subsidised rates and the Punjab government is supposed to pick the subsidy of 25 percent as in the past. However, the Punjab government seems annoyed over the summary that the Finance Division is going to place today in the ECC meeting.

View the original article here

Two years after IPO, GM is piling up cash

Detroit: Two years after a wounded General Motors returned to the stock market, the symbol of American industrial might is thriving again.

Sunday marks the anniversary of GM’s initial public stock offering in November 2010. The company has made money for 11 straight quarters, piling up more than $16 billion (Dh58.7 billion) in profits. Its cars and trucks are selling for good prices. And sales are strong in China.

But there are signs of trouble. GM’s US sales, the prime driver of its profits, aren’t rising as quickly as the overall market. There’s been turmoil in the executive ranks, and the company is haemorrhaging cash in Europe.

Since the IPO, here are GM’s achievements, struggles and question marks.

Article continues below


Big profits: GM is making money — nearly $4 billion so far this year. Most of that came from the US, where GM cars and trucks are selling for almost 6 per cent more than they did in January of 2011. The average selling price is $32,662, says the TrueCar.com auto pricing site. GM also is making good money in China and the rest of Asia, and it has turned around its money-losing South American operations with a host of new products.

Better cars: Before its 2009 bankruptcy, GM relied on trucks and SUVs to make money. Cars were an afterthought, and GM got a reputation for poor quality. The business model worked fine until gas prices spiked over $3 per gallon around 2005 and buyers shifted toward cars. Since bankruptcy, the company has rolled out new compact, subcompact and mini cars that are selling well. Car-based crossovers, which are more efficient than traditional truck-based SUVs, also are selling. Trucks accounted for 32 per cent of GM sales in 2008, with cars and crossovers making up 68 per cent. Now, trucks are down to 27 per cent. Sales of the Chevrolet Cruze compact are closing in on 200,000 through October, far better than GM’s previous compact and a strong counterpunch to Toyota and Honda. Also, the Chevy Sonic, the only subcompact made in the US, has become the top car in its segment with more than 70,000 sales this year. That’s more than 10 times the number of subcompacts that GM sold in the first 10 months of 2011.

Cash pile: GM, which nearly ran out of cash at the end of 2008, ended the third quarter with $31.6 billion in cash and securities. Bankruptcy wiped out old GM’s debts and burdensome contracts, and the new company’s cars and trucks have sold well around the world. The cash allows GM to invest in products and restructuring. It even bought a US auto finance company, which helps it to offer low-interest loans and cheap leases. GM also is bidding for international assets of Ally Financial, GM’s former finance arm, to help make cheap loans in Europe and elsewhere. Early in November, GM took out $11 billion in new credit lines, giving it access to more than $42 billion. The giant figure leads many analysts to believe that GM is preparing to buy back at least part of the US government’s 26.5 per cent stake in the company.

New lineup: As it headed into bankruptcy, GM cut spending on research. So for much of the past two years, the company had few new models to offer. But now it’s flush with cash and spending millions to update or replace 70 per cent of its North American lineup by the end of next year. That includes much-anticipated full-size pickup trucks, which pull in big profits. Cadillac also is getting a makeover with the new full-size XTS and the ATS, a small luxury sport sedan designed to compete with the BMW 3-Series, a top-seller in the luxury market. Buick gets the Encore small SUV, while Chevy is getting an all-new Impala big car as well as a new Malibu midsize car.


Stock price: Shares of GM sold for $33 when the company re-entered the stock market on November 18, 2010. For a few months, everything looked good. The stock peaked in January of 2011 at almost $39. But then the bottom dropped out and the shares tumbled. In July of 2012, they hit a low of $18.72, weighed down by a slowing US economy and troubles in Europe. They’ve recovered some since, but are still almost 30 per cent below the IPO price. That means the US government can’t sell its 500 million shares in the company without losing billions. The government got its stake in exchange for a $49.5 billion bailout almost four years ago. But the taxpayers are still $27 billion in the hole on the investment, and GM shares would have to sell for $53 each for the government to break even.

US market share: GM’s share of the critical US market has dropped to 18 per cent from 22 per cent since the end of 2008. That means rivals like Toyota are taking away buyers who used to drive a Chevy, Buick, Cadillac or GMC. There are more troubling signs ahead. GM’s US sales are up only 3.6 per cent this year, far behind the 13.8 per cent growth of the overall market. GM blames the slow growth on having the oldest model lineup in the market. That will soon change to the newest lineup, the company says. By the end of next year, GM will roll out 21 new or refurbished models, including a key Chevy Silverado pickup. GM, which relies on US sales to turn big profits, could run into trouble if the new models don’t sell.

Europe: GM has lost $16 billion in Europe in the past 12 years, but it’s trying to resuscitate the business with cost cuts and new products. CEO Dan Akerson said this week that European operations are making progress toward profitability and he expects them to break even before taxes by the middle of this decade. Reaching that goal will be tough, though. The company expects to lose $1.5 billion to $1.8 billion in Europe before taxes this year, and analysts say it has 20- to 30-per cent more factory capacity in the region than it needs. Closing more plants will require drawn-out negotiations and expensive buyouts of union workers.

Tas house prices ‘worst in years’

Posted November 01, 2012 14:53:44

The head of the Housing Industry Association in Tasmania says house prices in the state are the worst he has seen in years.

Hobart continues to be the weakest performing capital city.

Over the past three months, Hobart has experienced a 5.7 per cent drop in dwelling values.

In the past year there has been a 4.6 per cent decline in property prices, compared with a national decline of 1.1 per cent.

The association’s Stuart Clues says over the past 12 months about $15,000 has been wiped off the value of an average $300,000 home.

He says the result is a symptom of Tasmania’s weak economy.

“Today’s house prices are probably the worst that we’ve seen in many years and I don’t say that lightly,” he said.

“It’s not my job to talk the industry down but when the figures are what they are, it’s often an opportune time to just shake people up and get them out of the doldrums and recognise that if things don’t change we’re going to continue down this slippery slope.”

But Mr Clues says it is also a good time to invest.

“At the moment you’ve got interest rates at 22-year lows, property prices are falling, so it’s an opportunity to buy cheap land or buy a home and renovate it.”

“The reality is that you’ve got the building trade ready to actively compete for the work in terms of renovating or building a new home.”

Topics: housing-industry, tas, hobart-7000, launceston-7250

Kuwait telco Viva still not listed on bourse 4 years after IPO

Dubai: Loss-making Viva Kuwait has yet to join its local bourse more than four years after its initial public offering and the telecommunications operator’s listing could be further delayed as it may first need to issue new shares to shore up its balance sheet.

Convincing minority shareholders to pump in more cash to the Saudi Telecom Co (STC) affiliate when their original investment has been off-limits for so long may be a tough sell.

Viva, which competes with Zain and Qatar Telecom subsidiary Wataniya, raised 25 million Kuwaiti dinars (Dh325 million or $88.57 million) from selling half its shares to Kuwaiti nationals in an IPO in September 2008, launching services later that year.

The company refused to explain the delay or state when it would list on Kuwait’s ailing stock exchange when asked by Reuters, only saying it made an application to the regulator, Capital Market Authority (CMA), in February 2012. Saudi Telecom and the CMA declined to comment.

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The dismal performance of the bourse is a likely factor. The main share index hit an eight-year low this month, but the firm’s finances are a bigger consideration.

At the end of 2011, Viva had accumulated losses of 68.5 million dinars and 49.9 million dinars of capital, according to its annual report, which also said Viva would hold a special shareholders meeting in 2012 after losses topped 75 per cent of capital to comply with local law.

That meeting has yet to happen, but its probable remit will be to approve a capital cut to alleviate the accumulated losses, a common practice in the Gulf.

“It will be difficult to get a listing with negative equity,” said Shakeel Sarwar, head of asset management at Securities & Investment Co (SICO) in Bahrain. “The only option available is to go for a rights issue to recapitalise the company.”

The company would likely issue new shares, offering these to shareholders on a pro rata basis, meaning they could either pay more money into the company or have their holdings diluted.

STC would probably meet any shortfall, meaning its stake would increase from 26 per cent at present. Zain did something similar earlier this year with loss-making affiliate Zain Saudi .

In 2008, Viva’s IPO was 3.4 times oversubscribed with 916,000 investors each receiving 274 shares at 0.105 dinars per share, which may explain why shareholders have not been more vociferous in complaining about the listing delay.

“The individual investment is peanuts. They’ve almost forgotten about it,” said Nasser Al Nafisi, general manager for Al Joman Centre for Economic Consultancy in Kuwait, adding Viva would likely restructure its capital in the first half of 2013.

Prior to the IPO, STC — the Gulf’s No 1 telecommunications operator — paid 3.42 billion riyals ($911.93 million) for its Viva stake, including the Kuwaiti firm’s licence.

“The shares look undervalued in terms of the IPO price,” said Sarwar. “Ideally, the amount of capital raised during the IPO should have been higher. If and when the company increases the share capital the valuation metrics will look different.”

Viva may have been undervalued, but a worsening sector outlook could make investors pause.

“This year has been difficult for Kuwait operators. It’s generally one of the more lucrative markets in the region with a rapid take-up of data, but a variety of factors have combined to make it a tougher market recently,” said Nadine Gobrial, EFG-Hermes telecoms analyst.

“Changes to government fee structures has impacted margins, the sector still lacks an independent regulator and competition intensity has increased.”

Sindh suffers over Rs500bn agricultural losses in 3 years

KARACHI: Sindh has suffered losses of more than Rs500 billion during the last three years, as floods and rains have devastated the crops and properties in the province, said an official on Tuesday.

Syed Mehmood Nawaz Shah, general secretary of Sindh Abadgar Board, said that the agriculture sector had suffered from two angles, one was natural disaster and the other was low prices.

Official estimates say that the province suffered loss to crops, animals and other properties of Rs240 billion in 2010 floods. Rains of 2011 damaged crops and properties of around Rs200 billion, while the current year’s loss is around Rs80 billion, he said. Besides natural disasters, prices of cotton and paddy this year were low, which also affected the growers’ income, said Shah.

Trade with India is also hampering Sindh agriculture as the country imported onions, tomatoes, bananas and mango from India, while it did not export any agricultural commodity. “Punjab markets are full with the Indian bananas,” he said.

Haji Shahjahan, president of Falahi Anjuman Wholesale Vegetable Market, said that the government is importing tomatoes and green chillies from India, which were abundant in Sindh. “The government’s action shows that it is suppressing growers here,” he said. Earlier, onions were also imported.

Shahjahan suggested that all such agricultural products that were available in the country should not be imported from India, as it hurts the growers. “A no objection certificate (NOC) on tomatoes and green chillies import should be cancelled,” he said.

Besides vegetables, major Kharif crops, cotton and paddy, have also suffered huge damages in Sindh and Balochistan, he said. Sindh’s paddy faces damage of around 15 percent in monsoon rains, while several growers faced losses of more than 90 percent in the affected areas, said Arif Hussain Mahesar, a grower and president of the Sindh Balochistan Rice Millers Association.

Low lying areas of paddy growing belt, where water can be stored for more than five days, faced heavy damages, while the majority areas were still safe, as paddy was mature by the time of the rain, he said.

Dera Murad Jamali and Osta Muhammad faced heavy damages, while the affected districts in Sindh included Jacobabad, Shikarpur and Kashmore-Kandhkot. “Individual growers have suffered huge losses, while overall crop production in Sindh will be covered from lower Sindh areas, where paddy benefited from the rain,” said Mahesar.

Upper Sindh’s five districts of Jacobabad, Larkana, Shikarpur, Kashmore-Kandhkot and Kambar-Shahdadkot produce around 70 percent paddy in Sindh over an area of two million acres. Along with the rain, arrival of water from Balochistan after damages to the Right Bank Outfall Drain (RBOD) increased the damages. Cotton on the left bank was already affected, he said.

According to official figures, recent monsoon rains have affected around 5.250 million people in 20 districts of the province, while crop standing on around 250,000 hectares were perished, besides agriculture land of around 1.5 million hectares was also affected.

Cotton affected in the left bank districts of River Indus in upper Sindh included mainly Ghotki, Khairpur and Naushero Feroze, which received heavy rains. “Trees and mango will benefit from the rains,” said Abdul Majeed Nizamani, president of Sindh Abadgar Board.

Dr. Younis Soomro, a grower from Shikarpur, said that the rains affected the paddy crop at a large scale, while estimates are underway.

Cotton benefited in parts of lower Sindh water was not stored in fields, as rain would remove white fly and other insects, which infected the crop, said Mehmood Nawaz Shah.

“Cotton Leaf Curl Virus (CLCV) is mostly transferred by white fly, which will be removed. However, Sindh is not infected by the CLCV at a large scale,” he said.

Naseem Usman, chairman of the Karachi Cotton Brokers Association, said that the rains have affected the cotton crop in Upper Sindh, while it benefited cotton in those areas, where there were light to moderate showers.

Zafar Shah, a grower from Badin, said that heavy rains fell in Badin, which damaged tomato and other vegetables, while paddy was also affected in low lying areas of the district.

Toyota to invest $1.3bn in Indonesia over five years

TOKYO: Japan’s Toyota group said Saturday it will invest about 13 trillion rupiah ($1.3 billion) over the next five years in expanding its vehicle production in Indonesia.

Toyota Motor and its five affiliated firms are making the move “considering the remarkable growth of the (Indonesian) market in recent years”, a statement from the group said.

The investment will create 9,000 new jobs, raising the group’s total workforce in Indonesia to around 41,000, according to Japanese media.

Toyota Motor’s Indonesian unit, Toyota Motor Manufacturing Indonesia (TMMIN), will buy 150 hectares (370 acres) of land near its two plants in Karawang outside Jakarta to build a new engine plant, the statement said.

TMMIN will increase annual production at one of the Karawang plants from 110,000 vehicles to 130,000 by September 2013 to reinforce supply of pickup trucks, minivans and sports utility vehicles.

The five Toyota group firms are Daihatsu Motor, Toyota Auto Body, Aisin Seiki, Denso and Toyota Tsusho. In the expansion project, Toyota Auto Body will begin vehicle production in December, the statement said.

Daihatsu Motor will also begin construction of its second test track and design centre outside Japan — at one of its Karawang plants — by the end of this year. The six group firms have already invested about 27 trillion rupiah over four decades with Toyota Motor accounting for 9.5 trillion rupiah, the statement said.

Young cheats: Almost 50% of tax dodgers below 35 years of age

FBR, NADRA catego­rise over 2.4m dodger­s accord­ing to age groups, sex and profes­sion.  The statistics shows that almost two-thirds of the identified people use advanced business models.


Nearly five out of every 10 identified tax dodgers are between 18 and 35 years of age, while one out of every 10 of the evaders is a woman, according to official statistics.

Karachi hosts the maximum number of tax evaders, while traders make up the biggest group of those who earn millions, own multiple houses and expensive vehicles, maintain many accounts and spend significant time abroad while avoiding paying a rupee to the exchequer.

The statistics also show that almost two-thirds of the identified people use advanced business models.

The Federal Board of Revenue (FBR) and the National Database and Registration Authority (NADRA) have for the first time identified and grouped over 2.4 million tax dodgers, according to their age groups, sex, geographical background and professions.

Almost 60% of the 2.4 million have a two-member family, while 317,429 have more than five-member families. According to census and data, wealthy people like to have small families.

Also featuring in the list of evaders are 735,212 people who have remained taxpayers but have exited the system through corrupt FBR officials. However, this figure has not been used in working out the percentages in various categories of evaders.  Salaried individuals and withholding agents have not been added to the list either.

According to official figures, as many as 2.2 million or almost 90% of the 2.4 million men and 240,292 (10.2%) women willfully evade taxes.

The government will provide the tax dodgers one last opportunity to avail the tax amnesty scheme before resorting to coercive measures.

Age groups

Ten percent or 242,640 indentified people are between 18 to 25 years of age; 465,549 or 20% are between 26 to 30 years of age and 393,850 people or 17% are between 31 and 35 years of age. This shows that 47% of the total evaders fall between the ages of 18 and 35, indicating the trend of transferring assets to offspring, a common practice among politicians and the industrialists in the country.

As many as 897,242 individuals or 38% are between the age group of 36 and 50 years. Fifteen per cent or 355,744 people fall in the age group of 36 to 40, while 285,409 or 12% are of 41 to 45 years of age. Eleven percent or 256,089 individuals are aged between 46 and 50 years.

In the elderly group of 51 to 60 years, as many as 360,546 people or 15% have been identified.

Top 10 cities

Karachi hosts 326,144 or 13.8% of the identified people followed by Lahore with 238,050 people (10%), Rawalpindi with 117,639 people (5%), Faisalabad with 101,422 people (4.3%) and Sialkot with 97,391 people or 4.2%.

The rest are residents of Gujranwala, Gujrat, Multan, Peshawar and Islamabad.

Top 10 professions

The maximum numbers of evaders, 62,779, are traders by profession, followed by contractors (36,270), importers-exporters (17,853), general-store wholesalers (13,531), jewellers (10,728), small industry owners (10,105), construction industry owners (9,569), doctors (9,330), travel agents (5,426) and owners of filling stations (3,766.)

Published in The Express Tribune, November 13th, 2012.

Cost of buying a home in the UK is at its lowest in 15 years, making a case for a buyer’s market

 Image Credit: REUTERSA construction worker walks past a colourful hoarding in the city of London. A composite of this week’s data releases suggested the UK economy grew only marginally in the third quarter with construction sector activity still contracting and the dominant services sector growing at a much slower pace than anticipated.

London: The cost of buying a home in the UK has fallen to its lowest level in 15 years, according to the Halifax banking chain, as separate data showed further downward pressure on house prices. A typical mortgage on a new property now costs the average buyer 26 per cent of their take-home pay, said Halifax, compared with 48 per cent at their peak in late 2007 before the credit crunch struck.

Price falls and lower interest rates have pushed affordability in parts of the country to their best levels in a generation. In several towns in Scotland, buyers now have to part with 15 per cent of their disposable income to afford a new home, although the improvement in affordability has been greatest in Northern Ireland, where house prices have tumbled most in the UK. In London and south-east England, the average new homebuyer has to part with 32 to 35 per cent of their income to finance a mortgage, compared with 56 per cent in 2007.

Overall, mortgage payments have nearly halved as a proportion of income over the past five years, said Halifax. The research, based on an analysis of local incomes and prices in 383 local authority districts, may give hope to struggling first-time buyers, but the mortgage famine continues. Last week the British Bankers’ Association revealed that net mortgage lending in July was 17 per cent lower than a year ago, while just a few days later Santander increased its standard variable rate from 4.24 per cent to 4.74.

Ashley Brown, director of mortgage broker Moneysprite, said: “Whatever chinks of light the property market may be showing, the outlook for the mortgage sector is unremittingly dark. Most lenders are simply not interested in borrowers with anything less than a substantial deposit.” House prices fell by 0.1 per cent in August, according to figures published by Hometrack, which said the property market remained”fragile”.

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In London, which has defied falls elsewhere in the country, prices were unchanged, the first time this year that prices have not increased in the capital.

Thin volumes and a sluggish market will help push house prices down for the rest of the year, said Hometrack. “As the supply/demand balance weakens, we expect to see slow downward pressure on prices over the remainder of 2012,” it said.

On average, homes lie on the market for about 9.5 weeks before finding a buyer said Hometrack, although across the north the figure was three months, a return to the highs of March 2011.

But Martin Ellis, housing economist at Halifax, said: “The relatively low level of mortgage payments in relation to income is providing support for house prices. The prospect of interest rates remaining at low levels for sometime yet is expected to continue to be a key factor supporting the demand for homes, helping to keep house prices around their current level during the remainder of 2012.”

The Halifax research named east Ayrshire in Scotland, which includes Kilmarnock and Cumnock, as the cheapest area in the country for buying a home, where the typical mortgage will cost 15 per cent of local income. At the other end of the scale, Kensington Chelsea remains the least affordable, where buying the average property will cost 77 per cent of the typical local take-home pay. Outside of London, Oxford and Guildford were the next least affordable locations.

Can China lead global growth in the next five to 10 years?

When prophecies of impending doom are overdone, there is a danger that such “forecasts” may turn self-fulfilling. The pressure created by China’s “slowdown” chant and the fear that the worst is yet to come seems almost like a “death wish” now.

So even though the Chinese economy has outperformed its US counterpart, the stock market story is on an altogether different tangent. No one wants to buy Chinese stocks which have been going cheap for much of this year, with a price-to-earnings ratio of 9.8, against US stocks whose general PE ratio is 15. With this buzz of negativity, investors prefer to wait for the slowdown to bottom out rather than be proactive.

A section of experts strongly feel that the China narrative should change. The focus ought to shift from traditional market markers and instead measure the quality of growth which China is adopting. The question should not be about third or fourth quarter growth, but whether China can lead in global growth in the next five to 10 years.

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Despite a timid and lacklustre stock market, China continues to enjoy remarkable industrial activity, along with the services sector. The IMF forecasts a GDP growth of 7.7 per cent this year; the job market remains strong and inflation levels are dropping, which means a better quality of life for Chinese consumers overall.

Western industry houses are keenly watching the manner in which China is treading on a slower and superior quality of development. A more domestically centred model which is based on internal consumption and environmental sustainability is likely to generate demand for upgraded goods and more imports. Whether China can make this transformation is the biggest question the world faces now.

A plethora of laws and regulations are being put in place across every sector to compel industries to upgrade from low-end processing to value-added manufacturing. Old manufacturing machinery is slowly being edged out of most sectors, to be replaced by greater automation. For three decades, China has been a major engine for global economic growth but manufacturers are gradually losing advantages due to rising labour costs. Greater automation and transformation now means specialising in niche exports, developing as much technology as possible, or adopting foreign technology for the Chinese market, with heavy emphasis on local innovation. This trend is particularly visible in the polymer sector where the market for advanced chemicals and polymers is suddenly on the rise.

So what does the changing operational environment and economic transition mean for Chinese banks? For many years, China’s economy has revolved around government leadership, exports and investment as core elements. Segregated operations and strict regulatory oversight have helped to form the current bank-led, non-competitive financial system. Growth of non-banking financial operations such as securities, insurance products, trusts and funds over the past 20 years, has been slow as banks remained the dominant players.

By end-2011, the banking industry’s total assets amounted to 113.3 trillion yuan (Dh66.5 trillion), while those in the insurance, trust, securities and fund industries was only 14.4 trillion yuan in aggregate. The proportion of non-bank financial institutions are far smaller here than those in developed countries such as the US and Japan. But will this division be viable any longer?

In the past decade, massive inflow of foreign capital stemming from trade surplus and continuous yuan appreciation caused banks’ balance sheets to expand rapidly. Meanwhile, the government provided support for loan growth in order to meet financing needs of infrastructure projects. The times, however, are changing. Forex has continued to flow out since late 2011. Now with transformation of the growth model inevitable, structural adjustments to the current financial system has become imperative. Will China oblige by displaying the same boldness in its financial reforms as it does with its industry? The world is still waiting.

Newsweek ends print run after 80 years

Updated October 19, 2012 10:59:51

Newsweek, one of the most internationally recognised magazine brands, will cease publishing a print edition after nearly 80 years on newsstands.

The decision to go all-digital, disclosed in a blog post on its companion website The Daily Beast, is indicative of the shift to media consumption on digital devices such as tablets and mobile phones, and underscores the problems faced by newsweeklies in an increasingly commoditised, 24-hour news cycle.

The final print edition of the weekly US current affairs magazine will hit American newsstands on December 31.

“We are transitioning Newsweek, not saying goodbye to it,” Tina Brown, editor-in-chief of Newsweek Daily Beast Co, and Baba Shetty, chief executive, wrote in a post on The Daily Beast website.

The move was not unexpected given both the macro changes affecting the magazine industry and, more specifically, the comments made in July by Newsweek’s owner, Barry Diller, head of IAC/Interactive Corp, about transitioning it to a digital-only format.

Plans call for the magazine to become a subscription-based, digital publication rebranded as Newsweek Global.

Its current 1.5 million subscriber base – a decrease of 50 per cent from its one-time peak of 3 million – will be given access to the digital edition.

Some of Newsweek’s content will be available free on the Daily Beast, which itself is entirely free and advertising-supported.

The transition to all-digital will entail job cuts, Ms Brown and Mr Shetty wrote, without providing further specifics.

Newsweek’s road from print to pixels has been a bumpy one, culminating in its sale in August 2010.

The late stereo magnate Sidney Harman bought the struggling newsweekly from The Washington Post for just $US1 plus the assumption of its more than $US50 million in liabilities.

Mr Harman viewed owning Newsweek – which had gone from earning $30 million in 2007 to losing the same amount just two years later – as more of a philanthropic effort than an actual business endeavour.

For his part, Mr Diller launched The Daily Beast as an online news and culture site and tapped high-profile editor Tina Brown, who made her name editing The New Yorker, Vanity Fair and Talk.

Mr Diller and Mr Harman decided to merge their titles in November 2010 – the rationale was to leverage the combined audiences to cross-sell advertising at both publications and subscriptions for Newsweek.

Six months later, in April 2011, Mr Harman died. In July, his family’s estate decided to stop investing, leaving Mr Diller’s IAC with full ownership.

George Janson, managing partner and director of print for GroupM, the media buying arm for the worlds largest ad agency WPP Plc, said when his firm considers placing ads they do so based on the title, not on a so-called “category” such as newsweeklies.

“There are a lot of vital (weeklies) that have done a remarkable job expanding their brand,” he said, citing the New Yorker, the Economist, the Week and Time.

“I think the situation with Newsweek is that they lost their way editorially.

“I think advertisers began to loose faith.”

Indeed, Newsweek under Ms Brown has gained more recognition for its controversial covers than its content.

It recently published a widely panned cover on the Muslim uprising in the Middle East, for instance.

Other, negative, attention-grabbing covers featured a photo-shopped picture of the late Princess Diana and president Barack Obama under a halo with the tagline The First Gay President.


Topics: print-media, information-and-communication, media, business-economics-and-finance, united-states

First posted October 19, 2012 07:25:14

Railways likely to get additional Rs16bn in 39 years

LAHORE: Pakistan Railways will get an additional amount of Rs15 to Rs16 billion from the Railways Golf Club during the next 39 years, if the revised agreement was implemented, according to official documents on Monday.

The National Accountability Bureau (NAB) in its report revealed that Mainland Husnain Pakistan Limited (MHPL), currently running the Railways Golf Club with the title of Royal Palm Golf and Country Club (RPGCC), voluntarily came forward for enhancement of the rates, it revealed.

The Supreme Court has directed the NAB through an order dated November 12, 2011, to investigate irregularities in Pakistan Railways. As part of the overall investigation, the NAB chairman conducted an inquiry into the Railways Golf Club.

According to the National Accountability Bureau report, during the inquiry the sponsors of the project Mainland Husnain Pakistan Limited, voluntarily came forward for enhancement of the rates and after a number of meetings made revised offers to the Railways for this project.

In accordance with the revised deal, Mainland Husnain Pakistan Limited has agreed to pay immediately Rs12.857 million, which is the balance amount of the commitment fee payable to Pakistan Railways.

The company also agreed to a substantial increase in the current land usage charges, it said.

The company has also shown willingness to pay Rs180 million in 10 years as additional land usage charges as arrear from the date of contract awarded.

Similarly, the company has agreed to increase the minimum guaranteed share in gross revenue to Rs25 million, or 10 percent, of the gross revenue, whichever is higher (from the date of amendment) from earlier contract of Rs1.70 million, or 10 percent, of the gross revenue (excluding food and beverages), whichever is higher, it said.

The company is also ready to construct a hotel within three years from the date of approval of the Phase-II and receipt of all required consents by Pakistan Railways, the document revealed, adding that the provision of construction of hotel existed in the Phase-II of the previous contract but it never materialised.

The proposed revised rate / revisit of agreement by both the parties, Mainland Husnain Pakistan Limited and Pakistan Railways will approximately result in generation of additional estimated revenue of Rs15 billion to Rs16 billion over the period of the remaining lease period of 39 years, according to the report.

The report also revealed that the revised offer was sent to Pakistan Railways, the Standing Committee of the National Assembly on Railways and Public Accounts Committee who discussed the same in their meetings.

The executive committee of Railways Board agreed with the revised offer and the parliamentary committee and the PAC praised the efforts of the National Accountability Bureau, it revealed.

Royal Palm Golf and Country Club was developed by Mainland Husnain Pakistan Limited (MHPL) as a result of public-private partnership between MHPL and the government of Pakistan through Pakistan Railways and the ministry of communication and railways.

Royal Palm has been built with an investment of Rs1.5 billion by Mainland Husnain Pakistan Limited and is considered to be the largest-ever private investment in sports and leisure sector in Pakistan.

Royal Palm has been in operation for the last eight years and is currently rated as the highest revenue generating commercial project of Pakistan Railways and has paid it over Rs450 million so far.

The club has over 2,400 members, 550 employees and Mainland Husnain Pakistan Limited has contributed Rs100 million annually to the national exchequer during the last five years.

Wapda to add 6,000MW hydropower in five years: chairman

LAHORE: The Water and Power Development Authority (Wapda) will add 6,000MW hydropower within next five years and another 15,000MW by 2020 subject to regular availability of funds, said Syed Raghib Abbas Shah, chairman of Wapda.

Around 420MW of cheap hydroelectric power would be added by March 2013, while 1,000MW Neelum-Jehlum would be commission in 2016 and, at the same time, 1,450MW power generation through fourth tunnel of Tarbela would be available in the system, he said.

The World Bank has approved a loan of $850 million for Tarbela extension, he said, adding that prequalification bids have been called and tenders would be awarded by March 2013.

Shah said the Tunnel 5 is also available at Tarbela, which could produce another 1,000MW. A feasibility study is being carried out, he said, adding that the project is technically more complicated but hopefully the work on both the tunnels would continue side by side.

The power generation capacity of Tarbela would increase to 5,850MW from the current 3,400MW in the next five years.

The Wapda chairman said that the new secretary water and power has assured the authority that its payments against hydroelectric power supplied would be streamlined. None of the Wapda officials revealed the exact amount of the dues against power supplied by it at Rs1.15 per unit to Pakistan Electricity Power Company (Pepco).

Sources in the ministry of water and power had said last week that the Wapda receivables against Pepco have crossed Rs100 billion.

Shah admitted that the main hurdle in speedy completion of Neelum-Jehlum was paucity of funds. However, the work has not yet stopped, he said.

He praised the contractor and consultants of the project for their competence and efficiency. The tunnel boring machines imported by the authority to speed up the work required more funding, he said, adding that Wapda is sparing money from other projects to keep this project going.

Pakistan and India are in race to complete similar hydroelectric projects on River Jhelum. If India commissions the project first, it will get the right to use the river water for power generation.

The Wapda chairman said that Pakistan could complete the project much earlier than India if the required funding are regularly provided.

Talking about his development strategy, Shah said the authority is concentrating on completing four major projects before December and is diverting most of the available resources for these projects.

These include 121MW Alai Khwar project, Jinnah hydroelectric project, Gomal Zam and Satpara dams.

Since these projects are at the finishing stages their completion would first increase the Wapda income through power generation and irrigation. Secondly, he said, the huge recurring expenses on these projects would be eliminated leaving Wapda to bear only the maintenance and operation costs.

After December, all the resources being spent on these projects would be available for other Wapda schemes, he said, adding that priority would be given to those projects that could be completed earlier and generate income for the authority.

Wapda has guarded its creditability at all forums, said Shah. It is fulfilling all the power sector commitments it made to the creditors when water and power wing were under its control. “It is paying Azad Jammu and Kashmir government the hydroelectric royalty though it is not subject it to release the payment by Pepco for the power supplied.

The government released the required funding in the first quarter of this fiscal year, according to the allocations promised in the budget and has promised that the entire promised funding for the next quarter would also be provided, said Shah.

Wapda projects would face problems if the funding is curtailed or stopped, he said, adding that the authority is determined to add 2,000MW from Dassu hydroelectric project within the next five years, if the pledged funding is provided. The remaining 2,500MW from this project would be available in the system by 2020. He said 7,000MW Bunji, 4,500MW from Diamer-Bhasha and 1,500MW from Satpara would be available if the funding lines are not choked.

Central Qld coal mine closes after 33 years

Posted October 10, 2012 09:42:38

After more than three decades in operation, workers will today down tools at the latest Bowen Basin mine to close in central Queensland.

Production ends today at BHP Billiton-Mitsubishi Alliance’s (BMA) Gregory open-cut coal mine near Emerald, west of Rockhampton.

It is the third Bowen Basin mine to close within the year.

BMA closed its Norwich Park mine in May.

After 33 years in operation, BMA says the Gregory mine is no longer profitable.

It employed 55 workers and the company says it has redeployed all staff seeking retention but there is no such guarantees for about 240 contractors.

Central Highland Mayor Peter Maguire says it is of historic significance.

“It was one of the first coal mines in this region,” he said.

“It’s been part of our region since the 1970s.”

Construction, Forestry, Mining and Energy Union spokesman Steve Smyth says it is a sad day for workers.

“A lot of people would have spent most of their working life there,” he said.

However, he says he welcomes the redeployment offers.

“Especially at a time like this when things appear to be slowing down,” he said.

Emerald Chamber of Commerce spokesman Victor Cominos says it will hurt local business.

“People in Emerald having to go to other mines – that doesn’t do us any good,” he said.

He says spending will leave the region.

“Naturally we want the dollars spent in Emerald,” he said.

Topics: company-news, mining-industry, mining-rural, community-development, regional, regional-development, emerald-4720, rockhampton-4700, mackay-4740

IMF wants to give Greece two more years on deficit

Tokyo: The International Monetary Fund is happy for debt-battered Greece to have an extra two years to bring its runaway deficit in line with the demands of global creditors, the Fund’s chief said Thursday.

Christine Lagarde told a news conference in Tokyo it would take time before Athens is able to tame its budget overrun to agreed levels, in comments that add weight to the move to push back a deadline to 2016.

“Instead of frontloading heavily it is sometimes better — given the circumstances and the fact that many countries at the same time go through that same set of policies with the view of reducing their deficits — it is sometimes better to have a bit more time,” she said.

“This is what we’ve advocated for Portugal, this is what we’ve advocated for Spain and this is what we are advocating for Greece.

Article continues below

“I have said repeatedly that an additional two years was necessary for the country to actually face the fiscal consolidation programme.”

Greece is going through a painful round of austerity and spending cuts imposed on the country in return for promised loans and debt relief worth a total of about €347 billion (Dh1.6 trillion or $448 billion) since 2010.

The belt-tightening has forced Greece into its fifth year of recession, with its economy forecast to contract by 3.8 per cent in 2013.

New figures on Thursday revealed one in four people is unemployed and many of those that do have jobs have seen their pay slashed.

The IMF says Greece’s public debt is expected to stand at 170.7 per cent of GDP, one of the worst fiscal pictures in the world and a figure expected to rise to nearly 182 per cent in 2013.

Greece has agreed with its creditors — the so-called Troika of the European Union, the European Central Bank and the IMF — that it will reduce its public deficit to 2.1 per cent of GDP by 2014.

It presently stands at more than three times that figure.

Athens is trying to persuade the Troika it is doing all it can to slash costs by €13.5 billion ($17.4 billion) over the next two years, with a €31.5-billion instalment from its bailout packages riding on that.

Once the austerity package is finalised later this month, Athens hopes to secure an extra two years to apply the relevant cuts, betting that its economy will have picked up steam by then.

The IMF has previously said there are some “good arguments” for pushing back the deadline, but Thursday’s comments in Tokyo marked the first time Lagarde had been so explicit.

Leather exports stagnant at $1 billion for five years

Tanner­s say Pakist­an traili­ng all region­al countr­ies.  Pakistan is leading in leather products, compared to the world, both in terms of technology and quality. PHOTO: FILE


Contrary to the huge potential of leather products, exports of the leather industry have remained stagnant at $1 billion for the last five years, says a top industry man, insisting that just a bit of support from the Ministry of Commerce can push exports to $3 billion in three years and make the industry the second biggest after textile.

“Leather quality of Pakistan is second only to Italy, but its exports of leather products are static, in fact they have declined in the financial year 2011-12,” said Pakistan Tanners Association Chairman Agha Saiddain while talking to The Express Tribune.

Citing growth of other countries, he said, exports of India’s leather industry grew to $4.86 billion in 2011–12 from around $1.96 billion per annum in the 1990s. Bangladesh’s exports of leather products have increased by 17% and Ethiopia’s exports have doubled in the last three years.

“All countries including China have recorded growth in exports of leather and its products and the only country lagging behind is Pakistan,” he remarked.

Globally, the imports of leather and its products rose from $80.2 billion in 2001 to $137.96 billion in 2010. According to Saiddain, though South Asia accounts for 26% of the global population of cattle, buffalo, sheep and goat, it has only a 3.57% share in global exports. On the other hand, Vietnam alone enjoyed 6.22% of global leather exports with bare minimum animal population compared to India, Pakistan and Bangladesh, he said.

With limited animal population, Italy also enjoys a 13% share in the global market. However, most prominent among them is China, which has a huge 37.5% global market share in leather trade.

“One reason for this excellent performance of China is value addition of 29% in the industry compared to 18% in South Asia,” Saiddain said.

He insisted that after Italy, Pakistan was still leading in leather products both in terms of technology and quality and all the industry needed was government’s support and incentives.

India, Bangladesh and China offered duty drawback and other incentives to their leather industries, which were much better than Pakistan, he said.

“All other governments, except ours, understand that leather is one of the most important sectors, which provides wider benefits because of its role in job creation, linkage to agriculture and rural economy, poverty alleviation and foreign exchange earnings.”

Saiddain asked the commerce ministry to study the incentives given by India, Bangladesh and China and provide a level playing field for Pakistani leather products.

“There is a dire need to change our policies and tune these to the policies of our competitors,” he stressed and asked the government to sit with industry stakeholders, particularly the exporters, to draw up a viable plan for giving a boost to exports.

Published in The Express Tribune, October 7th, 2012.

Thai AIS to invest $1.62bn on new 3G network over 3 years

Thursday, 20 September 2012 10:10 Posted by Shoaib-ur-Rehman Siddiqui

thai-flag-unBANGKOK: Thailand’s top mobile operator, Advanced Info Service Pcl, said it will maintain its 3G investment budget of 50 billion Thai baht ($1.62 billion) over the next three years after it receives licences for third-generation mobile services.

AIS, partly owned by Singapore Telecommunications Ltd , has already prepared money to join the 3G auction, Chief Executive Wichain Mektrakarn told Reuters on Thursday.

The telecoms regulator plans to hold the long-awaited 3G auction on Oct 16, a crucial step in reforming the nearly $7 billion sector and allowing operators to tap new revenue from fast-growing data services.

A slew of problems: Why has our export performance remained dismal over the years?

Neighb­ouring countr­ies, with simila­r socio-econom­ic proble­ms, have succee­ded where we have not. We need to prioritise enhancing exports in the country’s policy dialogue. On a fair share basis, our exports based on our GDP size should be in the range of $180-200 billion. PHOTO: FILE


In a recently-concluded American Business Council economic summit, titled “Beyond Borders: Trade Treaties and their Implication”, a thorough debate on the challenges and opportunities of trade in Pakistan highlighted many attention-grabbing facts. An example presented quoted our exports statistics. 

If anyone inquires about the export performance of Pakistan over the last two decades, the immediate response is that it has quadrupled: from $6 billion in 1990, to $10 billion in 2000, and now an impressive $24 billion in 2010. This translates to a 7% per annum increase over a 20 year period.  What they fail to highlight is that as ‘a percentage of GDP’ – a key economic indicator, as it puts the overall economic growth of a country in perspective – our exports have dropped from 16% of the GDP in 1990, to 14% of GDP in 2010: a net drop of 2% of GDP or roughly $4 billion.

To realise the true impact of this statistic, it is important to compare it with other countries in the region; such as our neighbours, India and Bangladesh. Over the same period, both our neighbours have faced similar socio-economic challenges, while significantly increasing their export businesses. India increased exports 17 folds, Bangladesh 10 folds, while Pakistan managed only a 4 folds increase. On a ‘percentage of GDP’ basis, the data is even more striking; India’s exports have grown by a whopping 16% of GDP, and Bangladesh’s by 12% of GDP, while our exports have dropped by 2% of GDP during the same period.

Reasons for dismal performance

Among the many factors responsible for our dismal exports, decades of protectionist policies have rendered local industry uncompetitive and inefficient. A protectionist policy works if it protects an infant industry; but protecting mature industries simply does not make sense and is not sustainable.  Even with infant industries, there should be solid plans to develop them during the period of protection, invest in their infrastructure, assist them by driving innovation and upstream research, build a supplier base, and improve their productivity.

After a period, protections should be taken away so that these industries can stand on their feet and compete with global corporations. India has used protection polices very effectively and now exports nearly $384 billion worth of goods and services. Their exports were just $23 billion two decades ago, and have grown 15% per annum on average. This is clearly disproportional, if you compare that their GDP is nine times ours, but they export 16 times as much as we do.

In addition, we have very few Free Trade Agreements (FTAs) with trading partners, which could provide the private sector greater access to other countries and regions. For the last two decades, nearly 20 FTAs are signed globally on average every year. To date, the Pakistani private sector has access to only four. For the FTAs we have signed, utilisation has remained extremely poor. For example, for the South Asian Free Trade Area (SAFTA) agreement we signed in 1994, we have only a 10% share of total trade, while 90% is split equally between India and Bangladesh.

Furthermore we have a poor in-country logistics network, which hurts the growth of both imports and exports. The railways structure is dilapidated, the road network lacks reach and is in poor condition, and there is no online tracking system for goods in transit to smaller cities. Our port and airport charges are the highest in the South Asian region: Port Qasim and Karachi Port charges are estimated to be three times Sri Lanka’s, and seven times Singapore’s.

Finally, we also urgently need to streamline and improve the efficiency of our Customs operation. It is a proven fact that the faster the clearance times of imports and exports, the larger the volume of overall trade. There is empirical evidence that indicates that that overall trade gets close to, or in many cases exceeds, 100% of GDP if goods’ clearance time falls below 3.5 days.

We need to prioritise enhancing exports in the country’s policy dialogue. On a fair share basis, our exports based on our GDP size should be in the range of $180-200 billion. We need a single-minded focus on fixing infrastructure, inland logistics, Customs operations, as well as overall governance and security in the country. I have no doubt that we can enhance exports significantly and solve many of our current account challenges if we are to work on these measures.


Published in The Express Tribune, September 17th, 2012.

US industrial output drops most in 3 years

Friday, 14 September 2012 18:24 Posted by Muhammad Iqbal

13423WASHINGTON: US industrial output fell in August by the most in over three years as production slowed in factories and a hurricane temporarily shut down oil and natural gas rigs in the Gulf of Mexico.

Industrial production fell 1.2 percent, the Federal Reserve said on Friday. That was the steepest decline since March 2009. Analysts polled by Reuters had expected industrial output to be flat last month.

In March 2009, when the US economy was still languishing in recession, industrial output declined by 1.7 percent.

The decline was driven by a 0.7 percent drop in factory output, a sign that the cooling global economy appears to be holding back growth in America’s manufacturing sector.

The Fed estimated that Hurricane Isaac, which hit the Gulf Coast last month, contributed about 0.3 percentage point to the overall fall in output.

The storm dragged on mining output, which declined by 1.8 percent in August.

Industrial production encompasses output from factories, utilities and mining operations, including oil and natural gas production.

Utilities output declined 3.6 percent in August. Capacity utilization, a measure of how fully firms are using their resources, was at 78.2 percent in August, below forecasts and declining from 79.2 percent in July.

PRACS incurs loss for first time in 35 years

Holds PR’s liquid­ity issues respon­sible for first annual loss of Rs10m.  Pracs, which manages PR’s financial activities through commercial and consultancy projects, has been affected to a great extent due to trains being inactive.

LAHORE: After sustaining profitability for three and a half decades, Pakistan Railways Advisory and Consultancy Services (Pracs) registered an annual loss of Rs11 million primarily due to the insolvent condition of its parent – Pakistan Railways (PR).

Pracs, which manages PR’s financial activities through commercial and consultancy projects, has been affected to a great extent due to trains being inactive. The main source of income of the ancillary is the commercial management of PR’s passenger trains. Currently, Pracs is active in the commercial management of only the Hazara Express, from which it is earning Rs10 million annually. The other service, Rohi Express is currently suspended on the orders of the railways administration due to lack of locomotives.

The number of booking centres has also been reduced to 20 from 27 all over Pakistan due to the PR’s bad health. Pracs received Rs1.6 million monthly merely from the reservation office in Lahore city railways station when 340 trains were operational, presently the figure has dipped below Rs0.4 million as most of the coach services are suspended.

This is the first time that Pracs is in loss, which created panic among the employees, said Pracs Assistant Director Commercialisation Khalid Bashir, while talking to The Express Tribune. “This is mainly due to the lower number of projects that we are executing currently,” he added.

“We are directly linked with the condition of PR. Despite the downfall of the national rail, Pracs managed to remain in profit throughout its history; however the bad situation of railways has now started to haunt us,” Bashir said. He, however, added that Pracs has already started to implement precautionary measures like curtailing its expenses and working to obtain new projects such as the commercial contracts of Rail Cars and Karachi Express.

PR was earning Rs88.1 million annually, a handsome profit, only from the commercialisation of 3 trains ration against the contracts given to Pracs despite the 60% profit which Pracs achieved as per agreement. The amount which railways were getting at present from Pracs stood at Rs200 million, as only a single service is operational.

Previously, Pracs was also offering catering services in eight express trains and earning Rs27 million annually of which 95% was transferred to PR’s account as per agreement, that contract was not in service due to the railways condition.

Pracs is also bearing the expenses of 20 retired railway officials hired specifically for the project of rehabilitating 96 locomotives, however till date no work in this regard has been initiated and the officers are just enjoying luxury pays and perks. The management considered these officers a big burden on the organisation and considers them as one of the reasons for the loss for the financial year 2011-2012.

The consultant has assets of Rs400 million deposited in different banks as strategic reserves. “We have managed to overcome our losses via utilising our reserves,” Bashir said. Pracs has 800 employees, and if situation persists then it will be hard to handle the financial affairs of the organisation as the only revenue drivers for Pracs is the execution of projects which are at a record low, he added.

Published in The Express Tribune, September 1st, 2012.

Corporate results: KESC switches to profit after six years of losses

Profit marks first billio­n made by UAE-based Abraaj Capita­l post acquis­ition.  The profit also marks the first billion made by Dubai-based Abraaj Capital since it acquired management controls of the city’s sole power distributor in November 2005.


Karachi Electric Supply Company (KESC) has switched to a profit regime in fiscal 2012 after a gap of six years.

The electric supplier posted net profit of Rs2.62 billion, more than the total amount the company made in the last ten financial years, in fiscal 2012 compared with loss of Rs9.4 billion in the same period a year ago, says a notice sent to the Karachi Stock Exchange.

The profit also marks the first billion made by Dubai-based Abraaj Capital since it acquired management controls of the city’s sole power distributor in November 2005. The management posted a profit of Rs321 million in the year it took over and since then has been incurring a loss. The utility witnessed a profit only twice in the last twelve years.

The core increase in profitability stems from tariff adjustment, one of the three ways the electricity distributor generates revenue, data shows. Revenue from tariff differential electrified 56% to Rs70 billion in the outgoing financial year compared with the preceding year’s Rs45 billion.

Overall revenues grew 24% to Rs163 billion compared with the preceding year’s Rs131 billion.

The company also managed to trim expenses incurred in transmission, generation and distribution by 8% to Rs13.3 billion in fiscal 2012 from Rs14.5 billion.

Transmission and distribution losses have come down to 32.2% of the total from 34.43% in fiscal 2005, the year it switched from being a state-owned enterprise to a private company. The line losses are still higher than the national average of around 22% and more than double the global average of around 15%.

The company’s shares rose 22% or Rs0.81 to Rs4.49, the highest since May 3 during trade at the Karachi Stock Exchange.

The result will help us position KESC favourably in the investors’ community and help us generate funds for our future mega projects, added Gauhar. A profitable KESC will help us attract the required financial resources from local and international financiers,” said KESC CEO Tabish Gauhar in a press statement.

Raising capital

The new management has had to raise large amounts of capital in order to switch the entity into a profit regime.

During the last few years, KESC has been successful in arranging substantial funds for its development project from Asian Development Bank, International Finance Corporation and OEKB along with many local financial institutions.

In July 2011, the company decided to issue 7.25% right shares, hence 29 new shares for every 400 ordinary shares held by stakeholders.

The management launched term finance certificate worth Rs2 billion to the general public in May 2012, to finance KESC’s permanent working capital requirements.

In the latest move, KESC will list secured term finance certificates of Rs1.2 billion to raise capital. Privately placed term finance certificates are offered to banks, other financial institutions and not the general public. KSE notified on Wednesday that trading in the second such term finance certificate of KESC will start on the Exchange from August 13, 2012.

“We are grateful to our international shareholders who have been very patient and our international and local lenders who entrusted us with their money,” said Gauhar.

Published in The Express Tribune, August 9th, 2012.

Mutual funds witness highest growth in three years

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


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

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

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

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


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

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

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

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

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

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

McLeod Road mammoth: State Bank profits down 10% over two years

The centra­l bank is still the single most profit­able entity in the countr­y. The central bank is still the single most profitable entity in the country. DESIGN: JAMAL KHURSHID


Despite rising government borrowing and high interest rates, profits at the State Bank of Pakistan have been declining for the last two years, largely due to a decline in non-interest income, declining by 10% over two years.

In an audit report of the central bank’s financial statements up to fiscal year 2011, auditors observed that the SBP’s net income declined, even though interest income kept rising. “Net profits in 2011 declined by 3.1% even though interest income [the biggest source of revenue] went up 16.4%,” observed report issued by the Auditor General of Pakistan’s office.

Despite the drop, the State Bank of Pakistan remains the single most profitable entity in the country – public or private – with a net income totalling Rs181 billion in 2011, down 3.1% from the Rs187 billion it earned in 2010 and 10% from the Rs202 billion it earned in 2009.

The main source of the central bank’s revenues is the monetisation of the national debt: the government asks the SBP to simply print money and then buy up treasury bills issued by the finance ministry to cover the federal government’s fiscal deficit. The government then pays interest on those bills that the State Bank bought simply by printing money, virtually out of thin air, a process that economists agree is highly inflationary.

In other words, higher profitability at the State Bank is a bad thing and lower profitability is a good thing. Higher profitability means that the government is financing too much of its deficit by printing money and causing inflation, which means higher interest rates, and thus higher income for the SBP. Yet in a twisted financial loop, the government also uses the State Bank’s profits to lower its fiscal deficit, by as much as 1% of the total size of the economy every year.

The auditors, however, appear to have drawn attention to the fact that it is not interest income that is declining, but rather non-interest income, on things such as foreign currency dealings, where the State Bank’s income is down almost 84% to just Rs1.9 billion, compared to Rs11.7 billion two years ago. The State Bank’s interest payments on its own debts also rose 38% over that same period to Rs13.3 billion, also contributing to the decline in net income.

“These are not healthy signs for the profitability of the Bank and required corrective measures,” observed the audit department.

In 2011, the SBP’s gross income rose by Rs30.4 billion, or 16.4% to Rs216 billion. However, the bank’s operating income – the profits its gains from such heads as the Banking Services Corporation and other activities – went from a profit of Rs10.5 billion in 2010 to a loss of Rs11.6 billion in 2011.

The report may well become fodder for other government organisations such as the finance ministry to begin criticising the central bank – which has always had a structure independent of the rest of the government – for what are perceived to be higher benefits for its employees. Insiders at the SBP, however, argue that the central bank needs to lure talent away from the lucrative financial services sector that it regulates, and hence needs higher salaries and benefit packages.

The central bank’s leverage ratio – the ratio of company’s debt to its equity – is also worsening. The leverage ratio has deteriorated by 1.6%, according to the audit report. The audit also warned the central bank to make efforts for minimizing its credit risk over non-interest bearing financial instruments.

Published in The Express Tribune, June 26th, 2012.

Govt likely to expand next year’s budget

Extra resour­ces from Coalit­ion Suppor­t Fund and 3G auctio­ns to provid­e ‘relief’. Extra resources from Coalition Support Fund and 3G auctions to provide ‘relief’.


The federal government is likely to increase the size of next fiscal’s budget to Rs2.9 trillion, higher than what the cabinet approved in its budget strategy paper, a populist move aimed at creating space to give more subsidies and ‘relief’ in the all-important election year. 

The additional space is created by increasing the projections for non-tax revenues from earlier estimates of Rs562 billion to Rs737 billion, higher by Rs175 billion, said sources in the finance ministry. The government has decided to roll over Rs75 billion of profits made by Pakistan Telecommunication Authority (PTA) on account of 3G spectrum auctions.

An addition of Rs99.5 billion from the Coalition Support Fund (CSF) in the budgetary projections for 2012-13 has also been made, they added.

However, a senior finance ministry official said that non-tax projection was raised in spite of the fact that neither the auctions nor the CSF materialised well, due to PTA’s mishandling of auctions and strains in relations with the US, respectively.

In April, the cabinet had approved the budget strategy paper, indicating the size of next year’s budget would be Rs2.738 trillion, which was 6.6% or Rs170 billion higher than the revised budget outlay of the outgoing fiscal year.

However, in the same cabinet meeting, several ministers called for increasing power sector subsidies to provide relief in a bid to lure voters during the upcoming general elections. The ministers also recommended providing relief to the agriculture sector by reducing taxes on inputs like fertilisers.

In the budget strategy paper, the finance ministry recommended Rs120 billion for subsidies, which were Rs70 billion less than the budgeted subsidies for this fiscal year.

Sources said the new size has yet not been formally revised but there is a strong possibility that it will be over Rs2.9 trillion. The proposed budget will be at least Rs300 to Rs345 billion higher than this year’s revised budget estimates, which is in line with official inflation rates.

The sources added that subsidies could be increased from the earlier proposed Rs120 billion to Rs160 billion. Another finance ministry official said that though the exact size has not been worked out yet, it will range somewhere between Rs150 billion and Rs200 billion.  The finance ministry is now of the view that whatever gap exists between determined and notified electricity prices should be reflected in the budget.

In the coming days, the official added, the water and power as well as the finance ministry will hold a meeting to make a decision over the required increase in electricity tariffs, subsidies, and whether to pick up fuel adjustment surcharges in the next fiscal year.

With a revision in the proposed non-tax revenue for 2012-13, the gross projected revenue receipts will increase to close to Rs3.2 trillion as against earlier estimates of Rs3.01 trillion.

Against estimated expenditures of Rs2.9 trillion, the net total revenue, excluding provinces shares in federal taxes, has now been estimated at Rs1.78 trillion, with a budget deficit close to 5% of the Gross Domestic Product.

Sources said the government was also considering increasing the medical allowance of civil servants after it turned down a proposal to give health insurance as long as employees were provided allowance.

Terming a huge increase in salaries ‘mere speculation’, an official of the finance ministry said that maximum increase would be in the range of 20% to 25%, costing an additional Rs28 to Rs34 billion to the exchequer. The increase may be offered as ad-hoc relief and will not be treated as an increase in basic salaries.

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