Profit 19th December, 2011 by Profit Epaper

PRO 19-12-2011_Layout 1 12/19/2011 12:26 AM Page 1

Govt alive to economic challenges: Badr Page 4 Save industry to save Pakistan Page 2 Let euro enter teenage! Page 3

Pages: 7

profit.com.pk

Monday, 19 December, 2011

Ticket sales of first private train start g

Department to earn Rs1.15 billion per year LAHORE STAFF REPORT

FAP demands immediate withdrawal of GST on tractors LAHORE

STAFF REPORT

armers association of Pakistan (FaP) President Tariq Bucha said the present government since assuming power in 2008 has failed to take any correct and positive steps for the improvement in Pakistan’s economy despite tall claims and false promises. The most vital sensitive and crucial component of Pakistan’s economy was and still is agriculture with 22 per cent share in GDP. Government policies so far have destroyed organisations like PIa, Pakistan steel, Pakistan railways and many others. The recent attempt to kill the farmers and agriculture sector began with following most destructive measures: a) stoppage of gas to fertiliser Industry b) Imposition of GsT an agri inputs

c) GsT on agriculture machinery i.e. tractors and implements. While government has totally ignored basic components of economic progress to invest and cater for profitable sectors like agriculture, it is a pity that it has also made agriculture meet the same fate as other sectors through the anti farmer policy. d) Pakistani farmers of which 86 per cent own below 12.5 acres can hardly make both ends meet because of imposition of GsT on inputs they would now have to avoid the application of required fertiliser and the use of tractors for cultivation because of its prices swelling beyond the reach of the farmers. In fact FaP members felt that Pakistan face a catastrophic impact on its agriculture share in GDP because of following facts: a) Very little or practically no

increase in output / crop price in relation to the overall average increase of around 33 per cent in cost of production during 2011 (since imposition of GsT) b) Productivity will suffer further because of non affordability of buying tractors whose prices e.g in July - December for a 50 HP tractors were rs499,000 increasing in march - June to rs630,000. c) When approached, one of the manufacturers of tractor revealed that because of phenomenal increase in price of tractors resulting from GsT the sales dropped firm around 33,000 units in July – December 2010 to only 12,187 units in July – Dec 11 which shows an overall downward trend of 61 per cent in sales. accordingly it was anticipated that if this trend continued and GsT was not withdrawn as against 70,000

tractors sold last year, only 25,000 units will be sold this year. This trend clearly indicates that farmers have decided against use of tractors because of prohibitive prices and would revert to centuries old stone age cultivation method. FaP members felt that this will result in phenomenal drop in crops production and overall agricultural productivity including that of wheat the most important staple food for Pakistan besides creating serious issue of food security. moreover, FaP president further said that government at this time feels secure and comfortable because of heavy carryover stocks of wheat but is totally oblivious to the facts pertaining to the productivity of crops like sugarcane cotton, etc. which are essential raw material for sugar and textile industry.

ale of tickets for Pakistan’s first ever train in private sector started on saturday, when Pakistan railways (Pr) Chairman muhammad arif azeem, booked a ticket to travel on maiden journey of the train from lahore to Karachi at lahore railway station. mian shafqat ali was also present on the occasion. speaking at the booking inauguration, Pr chairman said it would be a successful example of public-private partnership. railways would provide all possible support to make this project a success. The first business train will be operational from January 15, 2012. Pr management expects say the department will earn rs1.15 billion per year through this project. Four Brothers International Private limited, a private company, invested rs225.786 million to bring substantive changes to value adding in the passenger services. Besides a modern booking booth, the company has also built a special passenger lounge at the city’s main station, which was recently inaugurated by General manager (Operations) saeed akhtar. “International standard facilitates will be provided to the passengers in this train, which will be operated between lahore and Karachi,” said organisers of train service. according to the agreement, food and catering service for the passengers in the lounges and in business train would be provided by Four Brothers Pvt limited. Business trains would consist of nine businessclass air-conditioned coaches, with a journey time of 18 hours. It is expected that mostly business community would travel through the train. Pr is likely to start more such trains in sialkot and Faisalabad.

NATo supply disruption reduces tea smuggling KARACHI

GHULAM ABBAS

ea smuggling from afghanistan has started declining after disconnection of NaTO supply and improvement in border control system during last few months. With the slight decline in smuggling from the neighbouring country, the legal import of the highly consumed kitchen item has also started increasing, sources told Profit. Though improvement in legal imports of tea is temporary and lesser as compared to over 40 per cent smuggling afghanistan, the fresh move of controlling borders will benefit the country, they said. according to s ahmed Khwaja, Vice Chairman, Pakistan Tea association (PTa) the interruption in NaTO supply from Pakistani border has caused decline in smuggling in the couple of months. Tea, as one of the major import items of afghanistan under afghanistan Pakistan Transit

Trade agreement (aPTTa), was mostly being smuggled to Pakistan as it was not being consumed in the neighbouring country. major import commodities included yarn and synthetic staple fibers fabric; electrical appliance and equipment; yarn and fabric of synthetic filament; machinery and mechanical appliance; paper and paperboard; animal and vegetable oils; coffee and spices; rubber and article thereof; sugar and sugar confectionaries; auto parts and accessories, etc. as consumption of tea has been increased in the country owing to the change of season, the price of the highly consumed item was also likely to be increased with reduction in imports, sources claimed. Prices of different varieties of tea, which are consumed at higher rate in the winter season, were likely to increase by the end of this month in local wholesale and retail markets. Though this was the seasonal demand, but reduction in tea smuggling could cause increase in price even after the

change of season. as the demand would also register a jump by at least eight per cent during the next few months, the

jump in demand would affect prices in the market. according to statistics provided by PTa, import of black tea increased to 8.4 million kilograms in

November with the increase of 12 per cent as compared to 7.5 million kilograms in October. Import of green tea has also shown an increase of 133 per cent as the item in November was recorded at 350,000 kilograms compared to 150,000 kilograms registered in October. Black tea prices currently vary at wholesale prices from rs360 per kg to rs460 per kg and green tea from rs350 per kg to rs450 per kg. according to sources, Pakistani market consumes 225,000 tonnes a year currently with handsome annual growth in imports and sales. The import of black tea is heavily carried out from different countries for meeting the local demand. Pakistan meets its green tea requirement from five countries including Indonesia, Vietnam, Bangladesh, China and sri lanka. Vietnam has a major share of 64.38 per cent in this group. Indonesia, Bangladesh and China’s shares in Pakistan’s green tea market are 2.33 per cent, 3.58 per cent, and 29.76 per cent respectively.

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Monday, 19 December, 2011

debate

Save industry to save Pakistan

FARAKH SHAHzAd

aIsalaBaD, a city known as Pakistan’s Textile Valley due to its once flourishing textile industry has recently transformed into a city under siege of protestors demanding the restoration of gas supplies. The product range of manufacturing units has been reduced into strikes, rallies, protests, lock outs and termination of labour resulting in unemployment. Textile exporters, industrialists and labour rights campaigners have got together to urge the government to immediately stop discrimination in gas supply to upcountry industries, as four days a week suspension of gas supply has forced closure of industrial units, rendering thousands of workers unemployed.

most three times more than Kerry lugar aid of $7.5 billion to be given in five years. The only pre-condition was the government must guarantee the uninterrupted power supply to the industrial units of Faisalabad. The crisis emerged at a time when Faisalabad-based business community was hopeful of doubling the existing $10 billion annual export target. But instead of the proposed increase, it is feared that this year export will remain less than it was last year. When an able and efficient workforce is made redundant due to scarcity of work opportunities in a society, it is a warning to the movers and shakers of that community that a horrible time is coming ahead.

BReeDing gRounD foR cRimes

Over the recent months, the export of cotton yarn has declined 26 per cent while the export of cotton cloth is showing steep decline of 32 per cent. similarly knitwear export has come down by 26 per cent and of bed wears 28 per cent. export of towels is down by 12 per cent and of readymade garments by 14 per cent in the month of November alone. The business community has a strong resentment that instead of remedying the situation, textile industry is being pushed to the wall. Calculating the four days weekly gas load shedding, it is estimated that the industry would remain shut for 120 days out of 365 days of the year; manufacturing would be reduced and industrial output would be down by 33 per cent; millions of daily wagers would be out of job and the exports of the country would further decline, he apprehended. The alarming figures are reflecting the untold stories of an unprecedented industrial crisis leading to collapse of the business activity, widespread unemployment leading to crimes.

This is exactly what is happening in and around the city where the street crimes have surpassed all previous records. The city was once a host of thousands of the workers coming from the other districts of the Punjab to work in the textile sector, but the situation has reversed now. Thousands of workers have been fired as power loom factories have been closed down after suffering heavy losses. some of the flagship industrial units have been closed, thanks to the gas and electricity crisis, the world’s highest interest rates in the banking sector and the shortage of raw material in the local market. But these are not the only factors; the government’s indifference to the crisis is the key to the imminent collapse of the textile infrastructure. The gravity of the situation was graphically highlighted by the statement of Punjab Chief minister shahbaz sharif who called Faisalabad as the target of a discriminatory gas load shedding by the federal government. He defended his position by throwing the fallout on the federal government. some of the analysts say that the discriminatory gas load shedding had led to the flight of capital from Faisalabad to Karachi or elsewhere and it is a conspiracy against the province.

unifieD pRoTesT

shoRT fall

Workers and entrepreneurs usually represent two different camps and are mostly pitched against each other due to their obvious clash of interests. But now they have realised that the survival of one is linked to the prosperity of the other. a 45-yearold factory worker, Ghulam muhammad, a resident of a shanty town, was down with flu. He was advised a complete bed rest for three days. He ignored the doctor’s caution and came out along with his fellow workers to protest against the cruel fourday gas load shedding schedule for industry.

In the broader spectrum, the gap between supply and demand of natural gas has reached nearly one billion cubic feet per day mark (bcfd) resultantly the management is forced to cut gas supply for industrial sector of Punjab and CNG sector of sindh. However, the situation is likely to deteriorate in the coming months due to increase in the intensity of the cold. according to Petroleum ministry estimates, natural gas shortfall against committed supplies is around 911 million cubic feet per day (mmcfd) in December and will increase up to 1.1 mmCFD in January 2012 and 1.4mmcfd in February, before easing down to 726mmcfd in march. It is unfortunate to forecast that the problem is likely to worsen in the coming years. according to official estimates, gas shortfalls are estimated to reach 2.5 BCFD in 2014-15, 3 bcfd in 2015-16 and 3.5 bcfd in 2016-17. The gap is estimated to peak at 5 bcfd by 2020-21, unless major discoveries and field developments are made in the coming years. The consumption of gas has increased from the year 2000 onwards on a massive scale. Initially, domestic users were consuming 32 per cent of the total gas supply, general industries 24.9 per cent, the power sector 22 per cent, commercial users five per cent, and the CNG sector four per cent. However, the ratio has now changed with domestic consumers consuming 26.07 per cent, the power sector 15.9 per cent, the CNG sector 11.85 per cent, fertilisers 7.82 per cent, and the commercial sector 4.75 per cent.

seRious Decline

gRowing fRusTRaTion This is a back stage of ongoing large-scale protests held throughout the length and breadth of the manchester of Pakistan that is fast turning into somalia’s Capital mogadishu or any african city where starvation and crimes go hand in hand. Thousands of industrial workers have lost their jobs due to gas and electricity crisis. The city of more than 10 million people, famous for its flourishing textile industry, has been significantly declining in terms of export and business due to the energy crisis during last three years. When three years ago Pakistan accepted the most controversial Us aid package titled Kerry lugar Bill, the textile exporters of Faisalabad openly offered the government that they could generate a foreign exchange revenue of $20 billion per annum which is al-

wiDening gap according to petroleum ministry estimates, Pakistan’s domestic gas production is expected to fall from the current 4 billion cubic feet per day (cfd) to 2 billion cfd by 2020. Demand, on the other hand, is expected to soar to eight billion cfd by that time, creating a six billion cfd shortfall.

unexplaineD losses Pakistan is losing 300 mmcfd of gas due to theft and leakages, causing a rs20 billion loss to the gas companies in unearned revenues alone, admitted rashid lone, former managing director of sui Northern Gas Pipelines, the second of the two government-owned gas distribution companies. lone said sNGPl’s gas losses have reached 9.6 per cent, which was almost double than the world average. He said a one per cent loss amounted to rs1.5 billion in lost revenues and 18 mmcfd gas. ssGC’s gas losses have crossed seven per cent.

iRan-pakisTan pipeline pRojecT Pakistan is on track to complete all the work for ensuring gas flows from the Iran-Pakistan pipeline by its contractually obligated date of December 31, 2014, said Hilal a raza, managing director of Inter state Gas systems, the company created to manage the international pipeline project. a failure to erect the infrastructure will be costly, though. Pakistan is liable to pay Iran $8 million per day for every day the project is delayed after the deadline. The price is equivalent to the cost of the 750 mmcfd that is expected to slow through the pipeline. In other words, Pakistan pays Iran from January 1, 2015, regardless of whether or not the gas is flowing. Pakistan has had some trouble raising financing for the project after Us objections, though raza insisted that Us sanctions on Iran do not apply to the gas pipeline to Pakistan since those only apply to investment into Iran’s domestic production capacity. Pakistan is purchasing gas at its own border. Islamabad is expected to ask for China’s assistance in financing the project.

alTeRnaTives Under the Iran-Pakistan pipeline agreement, Pakistan will be able to import 750 million cfd from Iran’s gas field. The Turkmenistan-afghanistanPakistan (TaP) pipeline, which is subject to extreme political risk due to the war in afghanistan, is expected to yield another 1.3 billion cfd. Offshore lNG imports are expected to bring in another 2 billion cfd, still leaving a 2 billion cfd shortage in supply.

puBlic ouTcRy Citizens, business community and industrialists have condemned the government for its failure to manage ongoing gas crisis and further increase in the gas load shedding for industrial and compressed natural gas (CNG) sectors. Citizens said that Pakistan is naturally very rich with gas and other minerals and despite discovery of new reservoirs in the country, no proper attention is being paid to exploit this potential of the country. They criticised the federal government and sui Northern Gas Pipeline limited (sNGPl) for increasing gas load shedding. ali ahmed, a consumer said that they were already facing economic loss due to gas load shedding and now further increase simply means further loss for him. Khalid mehmood, a factory owner said that his

mill was closed due to unavailability of gas. I have to pay salaries to my employees despite the fact that our production has decreased considerably. The government must work on new exploration. meanwhile, all Pakistan Textile mills association (aPTma) has decided to protest against the sNGPl if gas supply is curtailed for four days in Punjab. “We will come on the roads if they close our gas for the fourth day,” said the regional office aPTma in their press release. aPTma Punjab Chairman ahsan Bashir has authorised the leadership to decide about strike in case the sNGPl curtails gas for more than three days a week, as promised by the government. Bashir said extra ordinary general meeting of aPTma Punjab has lamented over dishonouring the agreement of four days a week gas supply by the sNGPl. He termed it as unfair for the textile industry in Punjab. Therefore, he said, the aPTma members have decided to take every possible step if curtailment continues for more than three days. He said all the textile associations besides those from the Faisalabad are on the same page. “We will bring 10 million workers on the road,” he warned, adding, “Farmers would be directly affected by the crisis-like situation.” He said it is irony that the sNGPl has shown curtailment of three days on its website but 70 per cent of the industry has been out of gas on sunday. earlier in a statement, aPTma’s top leader ejaz said the industry has a strong feeling that it has failed to highlight the importance of the industry to the government, procuring 13.5 million bales, employing 15 million workers and contributing $14 billion to the exports of the country. He said some 6 million cotton bales are yet with the farmers with a total value of rs400 billion. He said a denial of gas supply to the Captive Power Plants of the industry has crippled the industry’s wheel altogether. “We’re fighting for gas instead of running mills,” he deplored the faulty decision making of the government. He said the system of gas rationing is not the solution in a situation when cheap price has become the real catch for stakeholders. It is high time for a revision, he said. Gohar further criticised the government for providing free gas to the fertiliser sector. He said addition of 600 mmCFD liquefied natural gas was the solution but no work on this front has so far been done.

confuseD pRioRiTies In the face of severe shortage of gas, there seems to be no way out except gas management and it is also a fact that the gas companies are not bound to provide gas to industries during three months of winter under the gas supply agreement. similarly, as almost all CNG stations get supply from domestic distribution lines, they almost completely choke gas for domestic consumers and as a result there is always hue and cry about low pressure or unavailability of gas. But it is loathsome that the change of stewardship of the ministry of Petroleum and Natural resources has not made any difference and instead the situation is becoming more complex. suspension of gas for four day the industry would play havoc with production and exports. What a contradiction that on the one hand we are seeking market access from the United states and eU and are also boasting about prospects of getting access to bigger Indian market after giving the neighbour the mFN status but on the other hand we are unable to ensure provision of required energy to industries and businesses.

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Monday, 19 December, 2011

EDITORIAL

Let euro enter teenage!

Washington’s paranoia and Pakistan

ODerN real politik dictates that economic/financial interests lay the foundations of political alliances, hence the rush to safeguard and nurture trade alliances even as the great recession assumes a distinctly political outlook. There are deep disagreements and suspicions within the european Union, yet these strains are actually strengthening official resolve in Paris, Berlin, rome, etc, to keep the euro from unraveling, realising well how betraying political differences at this point will impact the single currency’s life expectancy. China and america have long been at loggerheads over the former’s currency manipulation bloating the latter’s trade deficit, yet Beijing and Washington wisely remain shy of flirting with outright political pullback. In this light, it is unfair for Washington to pressure Islamabad to abandon the pipeline project with Iran, crucial for Pakistan’s future energy needs. Information revealed to Profit, that Washington’s paranoia is demanding undue concessions from Pakistan, confirms fears that the pipeline deal is set to face many more pitfalls, that is, if there is resolve in Is-

lamabad to pursue till completion. The government should make its position clear. already we lag behind the Iranians, who have constructed a large portion of the pipeline, and will begin charging for the gas after 2014 even if our infrastructure does not allow use of the commodity. The TaPI (Turkmenistan-afghanistan-Pakistan-India) alternative, suggested by Washington, is a non-starter. The very idea exposes serious lack of understanding of our geo-political compulsions, and should be objected to as an affront to our energy-compromised position. also, for economic as well as political concerns, Pakistan must refrain from hopping onto the anti-Iran bandwagon. Tehran must not be considered guilty till proved innocent, and it is well within its rights to generate nuclear energy. Furthermore, any increase in tensions that can lead to Iran blocking the straits of Hormuz will have serious oil-implications for our economy. We must weigh all factors carefully. Caving in to Washington on this point, foregoing pressing concerns and wasting billions of dollars, is not in our national interest.

Anglo-French bond

Branchless Microfinance Initiative

This is with regards to the article ‘France, Britain in the battle of downgradation’ published yesterday. In my humble opinion, France’s clamour might sound ‘more hollow than concrete’ but if one looks at the mess that Cameron has created following the eU summit, one does understand where the French claims are coming from. UK has much bigger deficits and yes it resembles Greece in terms of the potential shambles that their economy could find itself in. One does find irony in the noise that French leaders are generating but they do have substance in their claims. Britain is on an economic slump and if France deserves downgradation of rating then so does Britain in my humble opinion.

This is with regards to the report ‘Branchless microfinance Initiative: a groundbreaking programme’ published yesterday. The idea of controlling your bank balance via a mobile set is indeed interesting. add this to the fact that the initiative targets the destitute and is working on their improvement is worth commending. asasah are doing a wonderful job by taking this initiative that could in the long run help our economy, which indeed is need of a lot of help. Going through some of the achievements of the programme I realised that in so little time, the programme has already earned world round acknowledgement. and they deserve it.

SAnIyA WASIm

TALAL HASSAn

Kumail Rizvi

lBeIT knowing the fact that global financial markets are prone to financial bubbles, the recent european sovereign debt crisis has been, due to its distinct features, not only successful in making a fool out of the financial gurus but it has also shattered the very foundations of financial markets and traditional finance’s concepts at such a drastic level which was surely beyond the imagination of even those having an extremely sceptical vision. sovereign debts, particularly those issued by the industrial giants of northern hemisphere, have long been considered as infallible by the financial community due to their strong economic and financial systems supported by the massive capital intensive infrastructure. That is exactly why despite observing the increasing vulnerability of eurozone due to the inability of Greece, Ireland and Portugal to refinance their debt in 2009-2010, majority of financial market players seemed unaware of what was about to come! and the first thrust of tornado was felt severely by the financial world when the 70 year old mighty Us treasury debt, which had always been considered the most suitable proxy of risk free rate (at least in the text books), was downgraded by standard and Poor’s for the first time since its birth. sadly that was just the “beginning of a new beginning” and Us treasury debt downgrade has been proven the first domino after whose fall there was left nothing but a count. From Italy, spain and Belgium to the mistakenly downgraded France, the major dominoes have continuously

What would come out is very diﬃcult to predict particularly because of the unique eco-political nature of this crisis

been falling and the world especially europe seems unable to even preserve the very existence of eurozone, let alone to achieve recovery. Tonnes of reasons can be provided on ex post basis to explain the fundamentals that exacerbate this crisis, however, in addition to putting blame on fancy words of “sovereign debt” or “debt to GDP”, the echoes of some not so easily forgotten words associated with the sub-prime mortgage crisis like real estate bubble, derivative securities and the role of rating agencies are also being heard during this emerging fiasco of european sovereign mozart. If we look at the importance of euro by analysing the data of COFer provided by ImF, we find it just behind the UsD having 14.4 per cent share in the world reserves following 32.5 per cent share of UsD. From July 2011 to December 2011 almost 10 per cent of euro’s worth has been vaporized against UsD on a continuously compounded basis; against PKr this loss is approximately seven per cent. This is indeed a huge loss; however, it is no more than equivalent to peanuts if we compare it to the value which is at risk. after all we are talking about the world’s second largest reserve currency! What would come out is very difficult to predict at least at this stage of time, particularly because of the unique eco-Political nature of this crisis. meetings by decision makers are being held on regular basis and the second week of December is considered as the critical week to save euro by enforcing stricter rules of fiscal discipline on the member countries. eCB is also expected to intervene by initiating massive buying of Italian bonds in an attempt to lower their yields. By the end of Friday’s meeting market participants will be able to know what the fate of marKOZY plan is. Will all these actions be sufficient to recover from the crisis? There is a big question mark ahead of it. Otherwise to imagine the worst case scenarios, one should look at the suggestions, that have already been floated from the different corners of intellectual community, ranging from the voluntarily exit of nasty actors to save the remaining fraternity to the complete elimination of euro zone. The writer is Chartered Financial Analyst and Financial Risk Manager. He holds a PhD in Finance from Paris Sorbonne and currently heading the Department of Finance at University of Central Punjab, Lahore

LAHORE

Rewriting economic theory

Amjad Riaz

raVellING up on the small mountain train to take a good view of Hong Kong from the Victoria Park is indeed a very thrilling experience. milton Friedman aptly remarked that if you wanted to observe capitalism at work then go to Hong Kong. There were no restrictions of the financial flows in or out of the territory. The international financial centers were abuzz with calls for exploring the eastern markets. The nineties were good times when the experts around the world would give advice to the

Wall street and other international investors to head for the asian markets. But in the ensuing years the entire gains made through decades of international negotiations would start crumbling and begin a vicious circle of turmoil in the international economy. The market principle of business flowing to better lucrative environment is a time tested rudiment of economic realities. The thriving market economies of the region are a testament to that truth. But then the economic tumult of recent years in the world ought not to have happened. The economic theory has always managed to catch up with the shifts in archetypical models in the known history of the economic eras during different times. It is indeed surprising that suddenly all the answers that should be coming from the quarters engaged in the process are somewhat quieter or not forthcoming with an eagerness that should be a part of the exercise. an entrepreneur would take his savings to a bank to raise a loan and then launch his business venture. It is after this initial prepa-

ration involving some significant steps of putting to make use of your business acumen that the final approach to raise further finances in the securities markets was made. somewhere along the line the whole process got convoluted in a way that its essentials were lost to the urgency to not only shorten the distance from the first to the second but eliminate totally the formal distance that was always maintained between the two very important steps. It was when the investment function of the financial market got amalgamated with the side of the financial market that had traditionally been involved in taking care of the deposits by the customers the economic realities of the market economy began to slip through the fingers. Development of the economic theory between the two sides of the atlantic did take care of going along the economic problems or issues that arose from time to time. at the time of the oil crisis of the seventies many significant developments had taken place in the international economy. The gold standards

shahaB jafRy Business Editor

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BaBuR saghiR Creative Head

ali RiZvi News Editor

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The events of the last two decades have narrowed down the space that is required for the interplay of a vast number of variables

had been earlier given up by the international community and the economic activity at the western side of the Pacific rim had begun to send ripples in to the world markets. This was when the specific economic realities of the asian markets should have been taken on board to revise and rewrite economic theory. There has been a misjudgment about the specific nature of make-up of varied markets in the asian region. The recent experience in the eurozone has amply exemplified the fact that all indigenous markets function and act in their own specific environments. any attempt to push them under one umbrella or label is likely to hinder a better understanding of individual economies. Gathering a few general statistics about an economy does not give out a complete picture of its performance. When the world economy was divided into two broad re-

gions of economic systems through the major part of the last century the economic thinking around the world continued to hover to find better solutions to the economic woes. The events of the last two decades have narrowed down the space that is required for the interplay of a vast number of variables that are important to be taken seriously. The economies in the asian region are taking a dimension where their influence on the international economy would continue to grow in the days to come. They need to be watched closely at the macro and micro level of performance. The writer has served as a consultant to the United Nations and other developing economies on the issues of trade and development and can be reached at amjadriazzz.com

For comments, queries and contributions, write to: muneeB ejaZ Layout Designer

email: profit@pakistantoday.com.pk ph: 042-36298305-10 fax: 042-36298302 website: www.pakistantoday.com.pk

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Monday, 19 December, 2011

The challenge of this decade is to invoke investor confidence in acquiring technology without fear of business loss as this is only the requirement of less than 40 per cent urban population

news

chairman pTa, Dr mohammed yaseen

Govt alive to economic challenges: Jehangir Badr g g

consultation with private sector, a prerequisite institute of vision and leadership, a timely step to generate awareness LAHORE

STAFF REPORT

eCreTarY General Pakistan People’s Party senator Jehangir Badr has said that the present government is quite alive to economic challenges and trying to promote regional trade through Free Trade agreements (FTas) and Preferential Trade agreements (PTas). The senator was addressing moU signing ceremony between the lahore Chamber of Commerce and Industry and the Institute of Vision and leadership here at the lCCI on saturday. lCCI President presented Irfan Qaiser sheikh the address of Welcome while former lCCI Presidents Iftikhar ali malik, sheikh mohammad asif and former senior Vice President sohail lashari also spoke on the occasion. senator Jehangir Badr said that in today’s globalised world, survival of the fittest is the thumb rule therefore both government and the private sector would have to focus on better handling of socio-economic matters. He said neither politicians alone nor the private sector could perform any miracle as far as far as economic turnaround is concerned and there is a dire need to establish institutions

to prepare the next generations to cope with economic challenges. He said that the Institute of Vision and leadership would facilitate and pave way for achieving much needed results. senator said government is convinced that for the implementation of economic policies in letter and spirit, the consultation with the private sector is a prerequisite as they are the main stakeholders therefore all the government department including the Federal Board of revenue (FBr) had been directed to strengthen its liaison with the business community. speaking on the occasion, lCCI President Irfan Qaiser sheikh said the leadership gap in all spheres of life has pushed the country to the wall and the nation as whole has failed to taste the fruit of marvelous potentials that the country owns. He said the economic situation today would have been quite encouraging if a little attention had been given towards bridging this leadership gap. He said that though the present government was making all out efforts but challenges were multiplying with every passing day. He said the country is standing at a unique crossroads today. We have atypical standing in international community. Our economy has its own strengths and weaknesses. Our geo-strategic positioning is marred by a unique set of

challenges and opportunities. This situation calls for measures to improve our understanding of

LNG IMPORTS IN DOLDRUMS

Global Energy wants soverign guarantee ISLAmABAd AMER SIAL

He Turkish firm Global energy has demanded a sovereign guarantee from the government that the state owned gas utility companies would be bound to buy imported 500 million cubic feet per day (mcfd) of liquefied natural gas (lNG) in case it failed to find local buyers. an official source said the demand has perplexed the government, as the capacity allocations to the firm was made with the condition that it would have to find local buyers itself for their imported lNG. “If the government wanted a share in imported lNG it could have easily done it through its own companies”, he added. The company has raised the demand recently with the Petroleum ministry but no reply was given due to the absence of the Petroleum minister Dr asim Hussain, who was accompanying the ailing President in Dubai. The official reply would be given in the next few days, the source said. The Oil and Gas regulatory authority (OGra) had made capacity allocations, in October this year to three companies, Global energy, engro and Pakistan Gasport to import 1.4 bcfd of lNG. The companies were to find themselves

ogRa had issued construction licences to three companies to set up lng terminals buyers from the local market for the imported lNG. These stakeholders were asked to provide performance bank guarantees of $10 million each to meet their lNG delivery deadlines. Global energy was expected to start lNG imports by June 2012, followed by engro by December next year and Pakistan Gasport by early 2013. The Turkish firm has informed the Petroleum ministry that there were slim chances of finding local buyers for lNG and the best option was that the government should provide a sovereign guarantee that in the case of no local buyers the two state owned gas utility companies would be buying imported lNG, the source said adding that there were already concerns in the official circles about the professionalism of the Turkish firm and their new demand was seen as an attempt to abandon the business.

The government is hard pressed to meet the rising gas demand, as natural gas shortages are estimated to rise to 1.6 bcfd. The only available option is lNG imports to bridge the gap. The concerned ministry plans to utilise imported lNG for power generation, as the country is faced with a power deficit of 5,000 mW. Official estimates project production of 2500 mW from 500 mcfd of lNG. OGra had asked the companies to submit their timelines for lNG imports so that the two state owned gas utilities could make arrangements to construct infrastructure to receive imported lNG. an estimated investment of $1.2 billion is required for laying a dedicated pipeline to transmit the rlNG from the port to power plants in Punjab. OGra had issued construction licences to the three companies to set up lNG terminals on a fasttrack basis in order to offset severe gas shortfall. The Port Qasim authority is already working with investors to develop a jetty and terminal facilities for handling lNG. Under the third party access rules finalised by OGra, lNG importers would use pipelines of gas utilities for transportation of the fuel across the country.

domestic and world issues. Therefore, as individuals, as Pakistanis and as representatives of the business community we need to promote a systematic debate on all issues that we come across, lCCI President said. Irfan Qaiser sheikh said Institute of Vision and leadership is a timely step to generate awareness and possible solutions to all the challenges being faced by the country. He hoped that Institute of Vision and leadership will contribute a great deal in closing the leadership gap through training to potential leaders in areas relating to economic, political, constitutional, legal, geo-strategic and international affairs.

commodities to be registered under geographical indications LAHORE: Intellectual Property rights Organisation (IPO) Director General sajjad Bhutta has said that important agricultural commodities, animals and localcultural products would be registered under Geographical Indications (GI) so as no other country or organisation could market these things with the registered names. He was speaking at a seminar arranged by the department of industries, commerce and investment Punjab to create awareness amongst the stakeholders about ‘geographical indicators’ here on saturday. sajjad Bhutta disclosed that draft of law regarding registration of geographical indicators has been prepared and will be sent to the parliament for approval after consultation with the stakeholders. He also disclosed that comments from World Intellectual Organisation (WIO) have also been received for preparation of proposed law. He also disclosed that separate registration office for approval of trade marks of local products would be set up in lahore by next year, after which, separate registration offices in Khyber Pakhtunkhawa and Balochistan would also be set up. speaking on this occasion provincial secretary industries Dr shujaat ali said registration of local commodities and animals under geographical indicators would financially help local artisans and growers. It would also increase foreign reserves due to increased exports to the international markets of Pakistani products, he added. He said various quality agricultural commodities, cultural products and precious animals were getting international recognition but not the appropriate price due to nonregistration under geographical indicators. He said Basmati rice of Punjab, mangoes of multan, Kinnow of sargodha, sahiwal Buffalow, Chinioti wood furniture and other such things were appreciated and recognised world over. If these products are registered under Geographical indicators (GI) system then no other country or organisation would market these things in the international market except the companies having registration. STAFF REPORT

sugar miller opens fire on poor farmers; one dead, two injured

industrialists make ‘model security system’ to counter crime KARACHI STAFF REPORT

NDer increasing street crimes in Karachi, the country’s financial hub, industrialists here introduced a ‘model private security system’ for landhi industrial area. a centralised security system based on inter-company security methods, intelligence sharing, surveys, patrolling by private security staff and closed cooperation with law enforcement agencies has successfully addressed all security concerns in one of the industrial zones of Karachi. This was said by Ziad Bashir, Chairman, landhi association of Trade and Industry (laTI) in a statement here on saturday. He said model security mechanism could be applied in other industrial areas of the city which were facing the security issues despite heavy deployment of rangers and police. Through self financed new security system, laTI has interlinked all factories and industrial units in the zone while making a centralised office which would be in direct contacts with the security chiefs of all companies for 24 hours. The central office would be informing law enforcement agencies including rangers and police about any criminal activities immediately thus ensuring a timely action against the criminal, he said.

LAHORE: Kissan Board Pakistan (KBP) and farmer associations have took strong notice of the alleged brutality of Hunza sugar mills in which one farmer could not sustain bullet injuries and lost his life. KBP has asked government to register a case against culprits under terrorism act, otherwise farmers would be compelled to agitate against this gross injustice. In a press statement, KBP President sardar Zafar Hussain Khan alleged that management of Hunza sugar mills, Jhumra, opened straight fire on unarmed farmers in which one farmer died and two others were seriously injured. He pointed out that hundreds of farmers, members of grieved families and KBP leadership stage a sit in front of allied Hospital and burnt tyres. He underscored that millers’ highhandedness had been touching heights. On the one hand, millers were reluctant to make timely sugarcane payments, while on the other hand incidents of torturing poor farmers were on the rise. Khan demanded government to take notice of the issue and give stern punishment to culprits. STAFF REPORT

wheat sowing target missed LAHORE: Pakistan has missed the wheat crop sowing target by 1.8 million acres. In Punjab alone, around one million acre cannot be brought under wheat crop owing to delayed decision making and poor government strategy. agri Forum Pakistan Chairman muhammad Ibrahim mughal pointed out that unnecessary delay in sowing, low acreage and high fertiliser prices would badly hurt the wheat production. He estimated that wheat production could drop up to two million tonnes. He said the country had some 5.5million tonnes of wheat stocks, of which three million tonnes would be consumed when the new crop would hit markets, while the remaining carryover stocks would support next year’s requirements. mughal underscored that the country could easily earn rs75 to rs100 billion, if the government made timely decisions and the country could produce three million tonnes of extra wheat. He asked government to arrest artificial urea shortage and ensure farmers would use fertilisers and pesticides in required quantities. STAFF REPORT

PRO 19-12-2011_Layout 1 12/19/2011 12:27 AM Page 5

Monday, 19 December, 2011

The tightening of the monetary policy through introduction of additional tough fiscal measures is further going to challenge the recovery eﬀorts across the financial services sector

news

ceo js investments, Rashid mansur

Europe’s crisis may hold seeds of dealmaking

s and asian companies seeking acquisitions in europe may accelerate dealmaking next year after a slowdown in the second half, beckoned by a slumping euro and share prices depressed by the sovereign debt crisis. led by Johnson & Johnson’s $21.3 billion bid for switzerland’s synthes Inc. (sYsT), announced takeovers in europe by overseas companies rose by about 58 per cent to $252 billion this year, data compiled by Bloomberg show. While acquisitions have declined since July, companies including General electric Co. (Ge), China’s HNa Group Co., and Japan’s Fast retailing Co. (9983) have signaled an appetite for further takeovers in the region. “There are well-positioned acquirers globally looking for bargains,” even if economic pressure has slowed recent european deal making, said Gregg lemkau, head of mergers and acquisitions for europe, the middle east, africa and asia-Pacific at Goldman sachs Group Inc. (Gs)“One of the drivers in europe has been historically low valuations and a relatively soft currency.” europe may offer the best bargains in more than 15 years. The msCI europe Index, a measure of 450 stocks, trades (mXeU) for 10.4 times reported earnings, showing equities in the region are cheaper than they’ve been 98 per cent of the time since 1995, according to Bloomberg data. The euro, meanwhile, has fallen by about 13 per cent against the dollar since the sovereign debt crisis began two years ago, making conditions even more favorable for Us buyers. Potential Japanese acquirers have the advantage of a yen that has gained about 10 per cent in the past six months against

a benchmark basket of currencies including the euro.

ACQUIRING TECHNOLOGY While few companies are clamoring for access to the european market itself, “in many cases, what overseas buyers are really acquiring in europe is technology, or access to emerging markets,” said Giuseppe monarchi, head of european m&a at Credit suisse Group aG. J&J’s planned purchase of synthes will give the Us health-care products maker devices used to treat bone fractures and trauma, while Hewlett-Packard Co. (HPQ)’s $10.3 billion takeover of the UK’s autonomy Corp. in November handed it data-sifting enterprise search technology helpful to cloud computing. In buying luxembourgbased skype Technologies sa for $8.5 billion in October, microsoft Corp. (msFT) absorbed the world’s biggest provider of Internet telephone service.

EMERGING MARKETS european companies have also tended to be more aggressive than their Us counterparts in expanding in markets like africa and the middle east, spending about $90 billion on deals in those regions since 2000, Bloomberg data show. That compares with about $50 billion of such takeovers by Us companies. so far, access to those markets and technologies mean many european targets are still worth having. However, a protracted slowdown and a failure by european policy makers to resolve their fiscal challenges may damp the outlook for deal-making. a degree of reluctance to do deals will “likely persist until there’s some resolution to the debt crisis,” said Goldman sachs’s lemkau. “The interest is still there, but the volatility and uncertainty in the markets

makes the likelihood of most acquirers taking action low.” moody’s Investors service said Dec 12 it will review the ratings of all european Union countries after a summit last week in Brussels failed to produce “decisive policy measures” to end the region’s debt crisis. standard & Poor’s placed the ratings of 15 euro nations on review for possible downgrade on Dec 5.

SLOWING PACE Dealmaking in europe declined in the second half to the slowest pace since 2008, with foreign buyers announcing $86 billion of acquisitions, 48 per cent less than in the first half, Bloomberg data show. still, many companies have recently expressed an interest in europe. General electric, based in Fairfield, Connecticut, said in November it’s targeting european deals as it seeks to compete with German rival siemens aG. (sIe) Fast retailing, owner of the Uniqlo fashion brand, is seeking european targets to offset stagnant sales at home, Chief executive Officer Tadashi Yanai said last month. HNa, meanwhile, has said it has a $6 billion war chest for acquisitions in europe and the Us There were more than $8 billion in takeovers announced globally today, including New York-based apollo Global management llC’s agreement to acquire Belgian chemical producer Taminco Group Holdings from CVC Capital Partners ltd. for about 1.1 billion euros ($1.4 billion), the data show.

CASH STASHES “The Us went into recession earlier than europe and came out of it faster,” said David silver, head of european investment banking at milwaukee-based robert W. Baird, which typically focuses on deals valued at as much as $1 billion. “amer-

ican companies are armed with stronger balance sheets and want to deploy capital.” a study of 258 Us corporations by JP morgan Chase & Co. (JPm), published in september, found they held $368 billion abroad, roughly half of their total cash, cash equivalents or investments. microsoft and Hewlett-Packard both cited a need to find a healthy return on their cash held overseas when announcing their takeovers of skype and autonomy, respectively, earlier this year.

CAmBRIdGE

sIa’s return to the center of world affairs is the great power shift of the twentyfirst century. In 1750, asia had roughly three-fifths of the world’s population and accounted for three-fifths of global output. By 1900, after the Industrial revolution in europe and america, asia’s share of global output had shrunk to one-fifth. By 2050, asia will be well on its way back to where it was 300 years earlier. But, rather than keeping an eye on that ball, the United states wasted the first decade of this century mired in wars in Iraq and afghanistan. Now, as Us secretary of state Hillary Clinton put it in a recent speech, american foreign policy will “pivot” toward east asia.

President Barack Obama’s decision to rotate 2,500 Us marines through a base in northern australia is an early sign of that pivot. In addition, the November asia-Pacific economic Cooperation meeting, held in Obama’s home state of Hawaii, promoted a new set of trade talks called the Trans-Pacific Partnership. Both events reinforce Obama’s message to the asia-Pacific region that the Us intends to remain an engaged power. The pivot toward asia does not mean that other parts of the world are no longer important; on the contrary, europe, for example, has a much larger and richer economy than China’s. But, as Obama’s national security adviser, Tom Donilon, recently explained, Us foreign policy over the past few years has been buffeted by the wars in

Iraq and afghanistan, concerns about terrorism, nuclear-proliferation threats in Iran and North Korea, and the recent arab uprisings. Obama’s November trip to asia was an effort to align Us foreign-policy priorities with the region’s long-term importance. In Donilon’s words, “by elevating this dynamic region to one of our top strategic priorities, Obama is showing his determination not to let our ship of state be pushed off course by prevailing crises.” The Obama administration also announced that, whatever the outcome of the defensebudget debates, “we are going to make sure that we protect the capabilities that we need to maintain our presence in the asia-Pacific” region. Obama’s November trip was also a message to China. after the 2008 financial cri-

CORPORATE CORNER new collection arrives at ahan flagship outlet LAHORE: ‘Handmade by aHaN’, the flagship store of aik Hunar aik Nagar - aHaN located in Xinhua mall, lahore, is a one stop shop for trendy handicrafts, funky clothes and contemporary designs of traditional pottery. a new range of trendy cushions inspired by renowned traditional ‘Truck art’ of Pakistan is in store now. PRESS RELEASE

Roche pakistan to participate in pap conference

`GETTING SERIOUS' Us companies may face competition from asian acquirers, who have announced about $72 billion of takeovers in europe so far this year, up 42 per cent from the same period a year ago, according to Bloomberg data. Japanese acquirers led deal-making, more than doubling their purchases to $34 billion. “Japanese companies are getting serious about acquisitions abroad,” said Hernan Cristerna, head of m&a for europe, the middle east and africa at JPmorgan in london. Takeda Pharmaceutical Co. (4502)’s $13.7 billion takeover of Nycomed asa, a Norwegian supplier of pharmaceuticals, was the biggest acquisition by an asian buyer in europe. more recently, suntory Holdings ltd. entered talks to buy bottled-water assets from France’s Danone sa (BN), people familiar with the matter said in October. On the whole, a bleak economic outlook hasn’t changed the fundamental attractiveness of at least some european companies, dealmakers say. “International companies are stepping up their focus on europe,” said Jean-Baptiste Charlet, head of global industries for europe, the middle east and africa at morgan stanley. (ms) “The euro crisis still scares them, but there’s a lot of technology to be gleaned and the companies here are very well-developed internationally.” BLOOMBERG

Barack Obama’s Pacific pivot JOSEPH S NyE

sis, many Chinese expressed the mistaken belief that the Us was in terminal decline, and that China should be more assertive – particularly in pursuing its maritime claims in the south China sea – at the expense of america’s allies and friends. During Obama’s first year in office, his administration placed a high priority on cooperation with China, but Chinese leaders seemed to misread Us policy as a sign of weakness. China’s anxiety about a supposed Us containment policy is on the rise again, now that Clinton is insisting that the country’s maritime disputes with its neighbors be placed on the agenda at next year’s east asia summit in manila, which will be attended by Obama, Hu Jintao, and other regional leaders. But american policy toward China is different from Cold War containment of the soviet bloc. Whereas the Us

and the soviet Union had limited trade and social contact, the Us is China’s largest overseas market, welcomed and facilitated China’s entry into the World Trade Organization, and opens its universities’ gates to 125,000 Chinese students each year. If current Us policy towards China is supposed to be Cold War-style containment, it seems unusually warm. american military forces do not aspire to “contain” China in Cold War fashion, but they can help to shape the environment in which future Chinese leaders make their choices. I stand by my testimony before the Us Congress of 1995 in response to those who, even then, wanted a policy of containment rather than engagement: “Only China can contain China.” A version of this article was first published in Project Syndicate

KARACHI: roche Pakistan is proudly participating in PaP conference. This event will be held at College of surgeons and Physicians. The objective of the conference is to introduce new trends and solutions in the diagnostic industry. roche is already pioneering in diagnostic and management of hepatitis and in the event, it will highlight the importance of lab tests for general public and also blood screening procedures. PRESS RELEASE

Tcs chairman delivers lecture on Tcs KARACHI: Co-founder and Chairman, TCs Group, Khalid awan delivered a lecture on ‘TCs – a Case study of entrepreneurship in Pakistan’ at the royal aeronautical society, Pakistan division. The lecture was held at the PIa training centre auditorium. mr awan said that TCs has achieved many milestones by operating on a business concept that continues to gain strength as it has all along understood primary customer needs. The result is that TCs today leads Pakistan’s courier sector and continually sets benchmarks to improve the overall quality and standards of the industry. He also said that the key ingredient of a successful entrepreneurship venture is honest people and there is no extra effort needed to select such people. What is more important is the system that they work in because this is what absorbs and moulds people and makes them honest. PRESS RELEASE

Biztek convocation ceremony to be held KARACHI: The 5th Convocation Ceremony of Institute of Business and Technology (Biztek) is to be held on 24th December 2011 at the main campus (Korangi), Karachi. Chartered by the government, duly recognised by Higher education Commission (HeC) and highly rated in academia, Biztek is a premier educational institution of Pakistan in the private sector. PRESS RELEASE

ISLAMABAD: Ambassador of UAE to Pakistan Essa Abdullah Al-Basha Al-Noaimi, giving souvenir to Maj Gen Zahir Shah General Officer Commanding Engineers Division, after the singing ceremony at the embassy. PRESS RELEASE

LAHORE: Nina Akbar, CEO Sukh Chan Wellness Club, during the opening of a new restaurant ‘Patio’ in Sukhchan. PRESS RELEASE

PRO 19-12-2011_Layout 1 12/19/2011 12:27 AM Page 6

Monday, 19 December, 2011

The domestic economy of Pakistan is $180 billion, which eﬀectively means that we do $180 billion of business as a country – that’s the kind of money that’s changing hands

Markets

ceo Buksh group, asim Buksh weekly review

Disastrous week for investors as KSE benchmark return depletes

fertiliser sector mutes optimism, kse ends flat 107 advance, 114 decline, 88 remain unchanged out of total 309 scrips traded ffc, loTpTa perch on top of leader board

g g

Bear hug drains kse of 199 points 62 advance, 175 decline, 75 remain unchanged of total 312 scrips traded ppl, pol witness flattish closing

Bourse flat despite us reassurances 106 advance, 102 decline, 97 remain unchanged of total 305 scrips traded kse-30 index gains 47.19 points g

Bears grip kse as euro crisis hits regional stocks 39 advance, 188 decline, 89 remain unchanged of total 316 scrips traded kse-30 index also loses 217.25 points

KARACHI

STAFF REPORT

He current week turned out to be a disastrous one for the investors as the benchmark return depleted in a fast and furious manner. Before the onset of December, the year to date index return was -4.07 per cent which was nearly double in the current month at 8.3per cent. The twin sword cut the investors confidence hence the investment arena firstly the domestic political warfare after the recent memogate issues pushed the investors towards the wall. adding to the domestic induced drama, was Uncle sam’s decision to free $700 million in aid unless measures were implemented to curb the cross border transport of ammonium nitrate used to manufacture IeDs. The unfolding of

gloomy economic outlook kept the prudent investors worried. Without the buoyant cotton prices which supported us well in the preceding year, we believe the current fiscal year seems extremely tough for economic managers of the country, said Bilal asif at HmFs. The political warfare continued to hinder capital formation and foreign direct investment in the country. Furthermore local investors are looking at the situation and preferred to stay away from any such adventurism. He believes that inflation is no more our major concern but rather the weak macro economic fundamentals especially the external account position and export growth, ImF payment of $23 billion in CY12, budget deficit and sustainability of remittances at current level are the major hurdles. The preceding month exports posted a decline of 18.1 per cent mom and 10

per cent YoY magnified the investors concerns. The current account deficit to date (Oct-2011) has already surpassed the $1.5 billion mark and the FY12 target level of 0.6 per cent of GDP. We believe the current account deficit may easily breach the 1.5 per cent mark while budget deficit can easily surpass 6.2per cent (Base case on standalone basis), he added. The above mentioned economic numbers impacted the Pakistani rupee parity; hence the rupee posted a depreciation of 4.2 per cent to rs89.61. It is believed that rupee may continue to depreciate further in the upcoming month and may reach the PKr94 level. looking at the index weighted stocks, 76 per cent of the benevolent stocks traded in the negative territory while 10per cent remain unchanged. engro finally after a long time breached the rs100 mark with investors shouting

engro can’t grow. Furthermore FFBl and Fatima also witnessed the same kind of value erosion. In the light of negative sentiments very few stocks with limited free float posted positive return during the week. The twin sword of economic challenges and worthless political battle or government incompetence continued to dent the investor’s sentiment. election campaign for CY13 has already in full swing and we believe the blame game will continue to play. The memogate issue may have long term repercussions on the current political setup in the upcoming few weeks. We believe during the interim period investor sentiment may remain weak. T-bILL AUCTION: all the bids were rejected in last week’s T-bill auction by ministry of finance owing to higher bid rates than the previous auction along

Bears throng kse as index ships by 111 points 54 scrips advance, 159 decline, 104 remain unchanged out of total 317 scrips traded kse-30 index closes at 10154.14

with low investor participation. The government had set the target of rs100 billion against the maturities of rs99 billion while it received the bid amounting to rs45 billion. lower investor participation can be attributed to the Year end effect as commercial bank offered competitive rates to attract higher deposits. Government’s borrowing from sBP, which climbed up by rs84 billion for week ending Dec ‘2, could further escalate at the cost of short term liquidity in the banking channel. excluding circular debt adjustment amount, government borrowing from commercial bank has also jumped by astounding rs300 billion during 5mFY12. Pressure on external accounts and dwindling reserves have created further perils for the local currency which has depreciated by staggering 4.26 per cent on FYTD basis.

PRECIoUS — Gold up but still on track for big weekly fall g

funding stress weighs on gold prices g gold on course for 7 per cent weekly loss g fears of industrial decline may hit platinum, palladium

SILvIA AnTOnIOLI

OlD rallied on Fridayafter a sharp pullback in the four previous sessions, gaining support from a weaker dollar, but the metal remained headed for its biggest weekly fall in almost three months. spot gold rallied as much as 1.96 per cent to $1,600.49 per ounce and then traded at $1,585.99 by 1432 GmT, off a 2-1/2-month low of 1,560.36 hit in the previous session. U.s. gold rose about 1 percent to $1,588.40 per ounce. a slightly weaker dollar against a basket of currency was helped precious metals. a softer U.s. currency makes dollar-priced commodities, such as gold, more affordable for holders of other

currencies. Bullion was still on track, however, for a 7 per cent loss this week, the biggest fall since the end of september, and it remained vulnerable to a deepening euro zone debt crisis and rising funding stress. “Gold took a beating this week and today bounced a bit as investors see this as a good moment to buy, but it is still vulnerable,” Credit agricole analyst robin Bhar said. “I expect gold will stay under pressure as the funding stress is increasing the need for liquidity, and gold is seen as one of the assets to liquidate.” The need for cash has overwhelmed gold’s traditional status as a safe haven in past few months, putting the metal on course for its first quarterly fall since end-september 2008 when the

global credit crunch was at its worst. Gold has, therefore, benefited recently from developments that have reduced risk aversion and the flight to cash. The metal was supported by better-than-expected U.s. job data on Thursday, which suggested a weak economy is gradually improving and supported financial markets. It got also got a boost, along with financial markets, after spain attracted solid demand for its bonds on Thursday, helping to ease concerns the country could be among the next to fall in the euro zone’s debt crisis. “at the moment a lot people are resting their hopes on the fact that physical demand will pull gold back up again, but because of the amount of speculative investment that has gone into this

market over the last years, it is obviously exposed on that basis,” said Ole Hansen, a senior manager at saxo Bank. “Gold has received a lot of new followers over the last few years because of its long-term trend, and if we should see a failure to recover, investors might say, ‘look I lost a lot of money and I don’t dare to try once again’, so it very much depends on what prices will do over the next couple of weeks.” FUNDING STRESS: Gold benefits when central banks print money or cut interest rates or when money mangers diversify assets. “With access to liquidity being constrained, market participants have increasing problems to refinance,” Credit suisse said in a research note. “as a result they have to sell their assets – including precious metals - to

raise the much needed cash. This is the main reason why gold prices fall on days of increasing funding stress.” In other precious metals, spot silver gained as much as 2.68 per cent to trade at $29.90 an ounce, before easing to $29.44. spot platinum rose as 1.76 percent to $1,428.80, before trading at $1,418.50. Palladium climbed more than 2 percent to a session high of $627.5 an ounce and then eased to $622. “as well as tracking gold, for platinum and palladium there are fears over weak industrial growth, and they may be hit harder as people look to liquidate risk,” Bhar said. “some support however comes from costs. These metals are already trading very close to their costs.” This article was first published in Reuters

PRO 19-12-2011_Layout 1 12/19/2011 12:27 AM Page 7

Monday, 19 December, 2011

Unfortunately, Pakistan’s literacy rate is very low. However, we believe that data adoption and broadband adoption will grow as broadband penetration is still very low among the literate population

analysis

ceo wi-Tribe, mustafa peracha

Wealth-Insurance-Strategy-Economically g

silver to vanish by 2020 g nothing has the potential to multiply your net worth like silver SHAn SAEEd

IlVer is in backwardation phase i.e. when spot price is higher than future price. It’s rare in commodities, but it’s happening here. During my last visit to Chicago/New York in aug-2011 and I was taking to some senior analysts at UBs, JP morgan and Goldman sachs who were bullish on silver and its reaching its record pace going forward. While production has been sharply declining for many years and demand is rising sharply especially from China. The chart below illustrates exactly what’s happening: SOURCES: ImF, GFms, Commodity market, Conversation with Jim rogers. bREAKING NEwS: If you analyse the chart, the world will run out of silver by 2020. scary and dangerous situation ahead. But I am happy, since my clients have already taken position in silver and this is the best investment of the decade. and I am not the only one who believes in this. Jim rogers—the most well respect commodity guru, the person who taught me the strategic insight about commodity market is also bullish on silver. such opportunities are incredibly rare and fleeting. It’s not every day that the existing supply of a major investment asset goes extinct. In a recent Forbes interview, Dr stephen leeb called this situation “scary” and “frightening,” but said “an investment in silver could be an absolute huge, huge winner. already, silver is becoming more difficult to come by.” Physical silver seems to have simply evaporated from the Indian markets, with delivery going from immediate, to three days to a week now, and that too without a guarantee of delivery. earlier this year, BullionVault.com reportedly posted a page on their website stating, they weren’t accepting orders for silver in london. and one of the largest online dealers of silver bullion – the american Precious metals exchange – is now offering to buy back silver coins for a generous premium. Due to Us debt crisis, silver is already an incredible investment. Over the past 10 years, it has gained as much as 750 per cent more than oil, real estate and even gold. With the combination of the debt crisis [Us/eU], plus the silver shortage, I believe, it could be the best or looking at one of the most valuable moneymaking opportunities in the world over the next few years. I wouldn’t be surprised to see gains of 1,000 per cent or more in this decade. and I haven’t even mentioned the X factor that could

cause silver to soar to heights never seen before – the Chinese. CHINESE IMPACT ON THE SILVER MARKET: Chinese used to export 100 million ounces of silver every single year – but there’s such a shortage they now have to import 112 million ounces every year. China accounted for 22 per cent of the world’s silver usage last year. The bottom line is that if investors have never invested in silver before, I would urge them to reconsider their option and investment strategy. Nothing in the world has the potential to multiply your net worth like silver. It’s a fundamental law of economics that when there’s a shortage of something of great value, its price will increase tremendously. according to a reuter’s article, “silver demand in China is set to rise by 40 per cent in 2012.” REVISITING COMMODITY MARKET HISTORY: If investors can remember the rhodium shortage of 2008, there could be a repeat in silver market. The price of rhodium – which was an essential component of diesel engines jumped in just a few years from $444 an ounce to $10,010 an ounce — a gain of 2,154 per cent — due in part to european auto demand. Or how about the Palladium shortage of 2000? The price of the precious metal shot up from $114 to over $1,000 in 5 years – a gain of over 854 per cent – when russian stockpiles fell short. But, sometimes — on extremely rare occasions – metals are actually threatened with the possibility complete and total consumption... or extinction. This has only happened a handful of times in modern history because at the end of the day, nothing has the potential to multiply your net worth like silver. GLObAL SUPPLY SHORTAGES AND INCREASED DEMAND— PURE ECONOMICS: Unlike gold, which is used primarily as a store of value, more than 95 per cent of the demand for silver comes from industry. simply put, silver is used in everything: smart phones, prescription glasses, plastics, solar panels, surgical equipment, military weapons, fabrics, swimming pools, DVDs, CDs, energy efficient windows, etc. The list is virtually endless. more patents are filed on silver than any other precious metal in the world - It has over 10,000 uses. But here’s the thing. When silver is used for industrial and technological purposes, it is used up forever. It cannot be recycled. JUST CONSIDER THESE FACTS: americans throw away 130 million cell phones every single year. Together, these phones contain over 46 tonnes of silver. 1

out of every 7 prescription glasses sold in the Us contains silver to protect the eyes from damage caused by sunlight – over 30 million pairs of glasses are sold each year. The plastics industry uses over 22 million ounces of silver in the making of polyester fabrics. 500 ounces of silver are reportedly used in each Tomahawk missile. as you may have read, the Us recently launched 112 of these missiles into libya. see what I mean when I say “gone forever”? silver is more rare than gold? Few people noticed it, but in the year 2000, the Us government eliminated the silver defense stockpile. On June 28, 2002, Congress passed s.2594, the “support of american eagle silver Bullion Program act.” The bill authorises the secretary of the Treasury to purchase silver on the open market when the silver stockpile is depleted. That’s important because just 50 years earlier the Us government held over 3 billion ounces of silver, the largest in the world. Now, the government is forced to buy silver on the open market because, by law, they must make silver coins available for purchase to citizens that want them. and just last year, the Us mint had to cease production of certain coins because of “unprecedented demand” for silver and with the precious metals consultancy GFms estimating worldwide annual silver production at 735 million ounces and worldwide consumption at 878 million ounces. DO YOU SEE wHAT A 40 PER CENT INCREASE IN DEMAND COULD DO TO THE PRICE OF SILVER IN 2012? No wonder, billionaire precious metals investor eric sprott calls sil-

a market of ironies

SHAHAB JAFRy

are I disagree with John Taylor, founder of the world’s largest currency hedge fund, as he calls for an aggressive euro short all the way to parity? That too especially when markets met my 1.30 eurodollar call a good two months ahead of projection? Truth be told, if my crystal ball had the slightest idea eU leaders would meet so often, I would have chopped the

extra two months off the call a long time ago. every time europe’s top guys meet to safeguard the single currency, they engineer brief windows of risk appetite at best, followed by a big squeeze. This time, risk was not stimulated at all. either they have not noticed the trend, or it is deliberate. else they’d just stop meeting so regularly. I’m not surprised the euro recorded its worst weekly fall in three months. Or that it closed the lowest since January. rating agencies’ going for big banks’ jugular on

ver “the investment of the decade.” as crazy as it sounds he may be right. Jim rogers is taking huge position in silver and is advocating to others of buying real assets. CAN’T wE JUST MINE MORE SILVER? Not really. as you can witness, about 80 per cent of mined silver is a by-product of other metals – zinc, copper, and gold. In other words, most of the silver supply comes from operations where other metals are the primary revenue generators. most mining companies just don’t target silver as their primary revenue generator. The geology doesn’t make it a high-probability play and the money isn’t as lucrative as the more popular precious metal. even worse, the amount of silver found in the (copper, gold, zinc) ore is so small, that most mine owners won’t even care when the price skyrockets. as resource investor rick rule says, “The interesting thing about silver is that it doesn’t respond to fundamentals very well in the sense that most silver that’s produced, is produced as an adjunct to mining other metals.” It’s for this very reason that I shared with Indonesian investors “silver is the biggest opportunity I have ever seen.” GLObAL bEST SILVER OPPORTUNITY: But for the past 7years, I’ve spent a large portion of my time studying about the silver industry. I’ve flown to various places around the world analysing about silver’s sentiment among investors in Chicago, Jakarta, singapore, Kuala lumpur, New York london, madrid and shanghai. The bottom line is, thanks to my

both sides of the atlantic, France’s longterm outlook reduced to negative, and 15 of 17 sovereigns of the union likely to be downgraded early next year all mean the market is finally pricing in eventual disintegration of the euro. The summit proved a make-orbreak event after all. as soon as stakeholders realised merkozy had just stitched up a framework to diffuse future crises while doing nothing about the present one, they simply lost faith in the euro. Take hint from bloomberg’s finding that net euro shorts increased to 116,457 on Dec 13 from 95,814 a week earlier. stay short, stay happy. Cable (GBP-UsD) presents the currency markets new dilemma. While mervin King’s liking for currency weakening in

analysis and connections, I’ve found what I believe is the best way to potentially make 500 per cent gains up to 1,900 per cent gains from the coming silver shortage. SILVER SHORTAGE INVESTMENT #1: Put simply, I believe every global investor needs to own real “hold in your hand silver.” I’ve found what I believe is the best form of silver in the world – a rare coin that’s both affordable for the average investor and has tremendous upside potential. It was minted from 1878 to 1904. However, in 1918 the Us government melted over 300 million of these coins because of excess supply. In fact, it’s estimated that only 17 per cent of the coins ever produced are still in existence. But here’s why investors really want to own this coin: It has been extremely leveraged to the price of silver. For example, during the silver bull market of 1976-1980 this type of coin shot up more than 990per cent, while the price of silver shot up just 277 per cent. Today, you can buy this investment for around $200 but I believe it will be worth at least 5-times that amount in the next few years. But here’s the thing. Yes, you should invest in these coins and potentially make hundreds of percent. However, if you’re really looking to make a fortune from the silver shortage and want to see gains that will make you gasp. Here’s what you need to do. THE SECRET SILVER PRODUCER YOU’VE NEVER HEARD OF IN THE GLObAL PRESS OR MEDIA: If investors want to prosper from the silver shortage, I mean really have the opportunity to make a lot of money; investors need to buy equity shares of the companies that will see their value skyrocket the most. But which silver stocks do investors buy? after all, there are more than 1,000 silver companies listed on the global stock market. Well, for starters, the best silver companies aren’t silver explorers. sure, some of them get lucky. They stumble upon world–class silver deposits... Pump out millions of ounces of silver from the ground. and make shareholders

favour of increased exports makes sense during recessions, sterling’s position must be evaluated in light of corresponding weakening of currencies of its most traded partners – China, eU and Us. The yuan equation is not the most crucial. But europe’s own weakness and subsequent euro devaluation is a formidable deterrent. and the Us cross is volatile, both economies running printing presses overtime and engaging in quantitative easing. eventually, the one that unleashes the greater monetary tsunami will weaken more (simple). Of course they will have to weigh other crucial variables (not so simple). For now cable remains trapped, unable to decide whether to bend towards safe-haven rise from eu-

rich in the process. But typically, this is not what happens. Fact is, most silver discoveries simply don’t pan out. either there isn’t enough silver in the ground. Or the company isn’t able to attract any financing. more often than not, shareholders end up losing money. I believe the best silver stocks to own during a silver bull market are the ones that actually mine and produce silver – these companies are known as the “producers.” But not just any silver producer will do. You see, only the companies with the most silver in the ground – verified by an independent, certified mining auditor – who produce silver at the cheapest possible price, are the absolute best stocks to own. If investors want to make a fortune, there’s a company much smaller than Pan american, which most investors have never heard about. [Pan american is a $3.2 billion company; this one is less than $1 billion]. Here’s the best part... This small company gets silver out of the ground for just $5.77 an ounce. That’s $2.76 cheaper than Pan american. That may not seem like much, but when you multiply that by millions of ounces a year, it adds up fast. Plus, this company has two world class mines and four more in the works. Zero debt and 842 per cent production growth since it was founded in 2004. as a result, this company’s performance has more than quadrupled the silver price over the past 3 years. When the price of silver takes off, this company’s shares could soar thousands of per cent, which is why I urge you to buy this stock today. Happy investment in silver and silver company for investors Wealth Insurance strategy economically [WIse] going forward. Shan Saeed is a financial economist and commodity expert based in Singapore/Malaysia. He has got 12 years of financial market experience. He has graduated from University of Chicago, Booth School of Business, USA and IBA, Karachi. He blogs at www.economistshan.blogspot.co m and can be reached at saeedshan@gmail.com

rope’s problems or weaken because of the domestic monetary overdose. For the time being, best ride the good news from america while it lasts, and its positive impact in asia. India’s rupee, south Korea’s won and Indonesia’s rupiah are on the rise, and should feel more confident about export earnings. Yet it’s important not to read too much into these numbers. america has a habit of recording cyclical, circumstantial consumer sentiment, retail and employment strength in the holiday season. Ironic, like much else in the forex market ever since the fateful collapse of lehman Brothers in ’08 unleashed the mother of all recessions.