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BUSINESS Monday, 3 JUNE, 2013

Bonds tumble worldwide as stocks reach highs on growth speculation NEW YORK: Global bond markets posted their biggest monthly losses in nine years in May as the United States (US) dollar rallied and stocks reached record highs amid speculation that a strengthening US economy will allow the Federal Reserve to reduce its monetary stimulus. The over $40 trillion of bonds in the Bank of America Merrill Lynch Global Broad Market Index fell 1.5 percent on average, led by a 2 percent drop in Treasuries. The MSCI World Index lost 0.1 percent while the Standard & Poor’s (S&P) 500 reached a record high. The US Dollar Index soared 3.3 percent as the greenback gained versus all its major peers. The S&P GSCI Total Return Index of metals, fuels and agricultural products dropped 1.5 percent a month after falling the most since May 2012. Employment gains and increases in housing and consumer confidence suggested that the US economy, the world’s largest, is gaining momentum which is prompting traders to increase bets the Federal Reserve will scale back its $85 billion in monthly debt purchases later this year. The Organisation for Economic Cooperation and Development predicts faster global economic growth, led by the US and Japan. “Investors’ attempt to access what the Fed will do with its bond-buying program has been pretty central to the performance of all asset classes,” Neil Mackinnon, a global macro strategist at VTB Capital Plc in London, said May 30 in a telephone interview. “The markets are very sensitive to the idea that the Fed might ease back on their debt purchases.” AGENCIES

#Pakvotes and the Private sector SAfWAN A KhAN AND SAmAvIA BAtooL

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he elections euphoria this year appeared to be sketched with an urban tone. This could be witnessed easily in multiple media forums, from social media debates and ‘memes’ to discounts and offers at numerous franchises. It was interesting to observe private sector activity that was not hidden for purposes of rent-seeking! More importantly, it opened up a new dimension in corporate advertising that appeared to promote a democratic culture in the country. Numerous business organisations were observed campaigning on the importance of the vote. Social media was flooded with many such advertisements focusing on voter awareness, coming from a wide range of businesses in Pakistan. A number of discounts, especially on food items were introduced on the election Day to encourage voters to exercise their right. The historic turnout in these elections is attributable to shared awareness on the importance of the vote. Not only people but institutions also stood for spreading awareness in this regard. And that is where it was interesting to see how many business organisations caught on with the flare. Although this may be encouraging in terms of creating shared awareness, the private sector’s role in creating ‘shared value’ might still be debatable. Creating shared value implies a business model in which corporate success and social welfare are interdependent and complement each other, creating value for the firm and benefiting society at the same time. A common idea to achieve this goal is to promote a culture of corporate social responsibility (CSR) in the private sector. As a practice, CSR caught attention in Pakistan in the year 1996, when the local carpet industry collapsed and threats in working conditions for workers were found in the sports industry too. It was at that time that issues such as labour exploitation, inadequate employee benefits, child labour and unsuitable working environment were pinpointed by the international community. Besides adhering to international standards and creating shared awareness, such as that witnessed during elections, there is much more that the private sector can do in terms of actually creating shared value. Given that there are huge sums of money

that float around in philanthropic ventures across the country, creating such a model of shared value becomes all the more important and relevant. It is important to view businesses as part of the same communities in which they operate. In this regard, communities offer businesses opportunities that are beneficial for businesses and therefore, empowering these communities suits long-term interests of the business community. A sustainable business model, thus, is one in which business practices are more inclusive of communities; and that can be achieved in ways more than one. Given their economic advantage, the private sector can play an important role in influencing public policy decisions in favour of social welfare and communal benefits, instead of just financing election campaigns for political elites, for example. The advent of technologies can erode jobs, and one way of sustaining jobs in the market is to train the potential workforce through skill development programs on newer technologies. Such kinds of initiatives need to be incorporated within the business model. Again, this might require a shared vision, such as the one observed in an automobile factory in Karachi,

which established a schooling facility in its vicinity that had long been abandoned by the government. Apart from this, partnership of government and private sector can help improve social service delivery in many sectors. Such partnerships have a twofold benefit as it ensures efficient social service delivery and helps in generating goodwill for private firms. Corporations should also mainstream youth and women from underprivileged areas into their workforce and provide them with needed education and health care. It is also interesting to see how the private sector can help in conflict resolution. This was witnessed in Sri Lanka when a group of business organisations came together to establish a forum called ‘Sri Lanka First’. The forum continues to engage in promoting peace in conflictstruck areas. Again, this can be another way of creating shared value in which a sustained peace environment helps business operations. It also comes in stark contrast to what one witnesses in Karachi, where businesses are forced to partner with local gangs in order to continue operating in a particular area. Another aspect where businesses can

really help, particularly in the context of developing economies, is in the promotion of the informal innovations segment. Informal social innovations, such as the highly-cited micro-financing model, have a far greater pro-poor impact. There are also cases where development organisations and NGOs are trying to come up with such innovations and implementing them. It is about time that Pakistan becomes less dependent on foreign aid and donors, especially when the private sector in the country is in place to contribute to development. One can argue that one-off measures and corporate philanthropy may lack longevity in terms of achieving meaningful shared value in society. It is for this reason that the private sector in Pakistan needs to step up its efforts in order to help create a peaceful environment in a country mired in conflicts. The idea of shared value through CSR is not only applicable but also needed, given the difficulties that the private sector continues to face in the country. The authors are researchers at the Sustainable Development Policy Institute, Pakistan.

INTENSIVE LOAD SHEDDING SPURS UPS’, GENERATORS’ SALE RAWALPINDI APP

The demand for UPS and generators by electricity consumers is increasing each passing day as authorities have failed miserably to come up with any solution to the power crisis that has plagued the nation. The demand of Uninterrupted Power Supply (UPS) units, batteries, power inverters and generators has increased manifold due to scheduled and unscheduled power outages in urban and rural areas all across Pakistan. A market survey revealed that at present, these products are being sold at exorbitant rates. Shortage of batteries has also increased the miseries of customers. This year, UPS prices range between Rs 7,000 and Rs 20,000, depending on capacity of the unit. Various varieties of UPS are available in the market. A dealer of imported and local-made UPS units said demand for locally made UPS units had almost doubled while the demand for Chinese manufactured units is going down since it is costly its repair charges are also higher. When asked about the demand of these items, he said it was increasing each passing day. Most consumers said they had to cut their expenses to save money to get new power back-up equipment since there seems to be no immediate solution to the energy crisis. Other

options are also being used by citizens and the demand of inverters and gasgenerators has also increased considerably. An inverter is available in the market at a minimum price of Rs 5,000 while gas-generators are being sold at Rs 30,000. Altaf, a school teacher said, the price of alternate energy products such as UPS units and generators has skyrocketed and their manufacturers are

fleecing customers by taking advantage of prolonged power outages. A generator dealer in Raja Bazaar said the past 15 days had brought a 50 percent increase in sales. "The demand for Chinese generators is increasing gradually, and has already grabbed 60 percent of the market share," he claimed. "The price of a small generator, used in houses and shops, was Rs 16,000 last year. It is now being sold between Rs

23,000 to Rs 26,000. The price of heavyduty generators, used for running air-conditioners etc, is between Rs 76,000 and Rs 102,000," he said. It was also observed that traders and dealers of famous brands of UPS are selling their products at different rates and earning a huge margin. The prices have now gone beyond the purchasing power of most people, and only those who are well off are able to purchase this essential com-

modity. A UPS dealer said UPS’ were preferred over generators as the latter made a lot of noise adding that a powerful UPS setup could simultaneously operate computers, fans and lights. It was also revealed during the survey that the local market was facing an "artificial shortage" of certain parts of locally manufactured UPS’ as a handful of dealers had formed a cartel to manipulate prices. Consumers complained that most UPS manufacturers were using silver wires in transformers instead of heavy-duty copper wires. A silver wire UPS has a short life span and cannot withstand long spells of power outages as it heats up and burns away quickly. Owing to persistent prolonged power outages, dealers of generators and UPS units see a golden opportunity to charge prices at their free will, as sales continue to soar. Unfortunately, there is no official mechanism for checking the prices and quality of such appliances. Generators are not as useful because they frequently develop faults and a majority of people used to buy UPS units; but they have also failed to keep up with prolonged electricity load shedding. In addition, prices of batteries have also gone up exorbitantly. Warrantees of different duration are offered for new batteries, but mechanics claim repaired batteries can also serve the purpose for a period of three months with a minimum expense of Rs 3,500.


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BUSINESS B Monday, 3 JUNE, 2013

OPEC to study US shale oil bonanza as export concern grows CouRteSy BLoomBeRg

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PeC signaled growing unease with the United States (US) oil boom by starting a study into shale at its meeting in Vienna, where the group kept supply targets unchanged as $100 crude dulls the need to address excess production. “It is a concern,” Nigerian Petroleum Minister Diezani Alison-Madueke said after the session of the Organisation of Petroleum exporting Countries (OPeC). The committee will consider the effect of shale oil on the global market for OPeC crude “in the nottoo-distant future,” she said. US mastery of hydraulic fracturing and horizontal drilling techniques has led to a slump in energy imports from some OPeC nations, most notably those in Africa, which typically produce lighter grades of oil similar to the

North American blends. US crude production jumped 20 percent in a year to 7.37 million barrels a day in the week ended May 3, the highest level since February 1992, reveals data from the US energy Department’s energy Information Administration (eIA). “By the end of the decade the US won’t need to import much crude at all,” Seth Kleinman, head of energy strategy at Citigroup Inc. in London, said in a Bloomberg Television interview. “The market is justifiably very skeptical that OPeC’s going to be able to achieve any real kind of supply restraint. They’re scrambling right now, hoping and praying that prices hold up and I think they are going to be disappointed.” AngOlAn ImpOrTs: US imports from Angola declined to 85,000 barrels a day in March, the lowest level since 1993, according to eIA data published May 30. Shipments from Nigeria slid to 194,000

barrels in February, at least a 19-year low. Growing competition from the US means Africa should begin to “look inwards as well to create alternate markets within the continent,” AlisonMadueke said. “Asia has always been an alternate market. Asia will still have growing energy needs for quite a while to come, but remember that China itself may

be discovering shale gas pretty soon.” Some Middle eastern and North African OPeC members, including Libya, Algeria and Iran, said they had no concerns that shale supply will sap demand for their crude, while Saudi Arabian Oil Minister Ali Al-Naimi said this is just the latest in a series of new sources that the market has absorbed, such as the North Sea,

Brazil and Russia. “Demand is pretty good right now, and though there are clearly some concerns, OPeC is not going to make any serious changes until there’s reason to do so,” Jamie Webster, a Singapore-based analyst at PFC energy, said in Vienna. US shale is a light crude and does not affect exporters of medium and heavy grades such as Venezuela, the Latin American nation’s oil minister, Rafael Ramirez, told reporters the other day. DIsplAcIng OpEc: “every North American barrel pushes out an OPeC barrel,” even though the US does not yet export much crude, said Roy Mason, founder of tanker tracker Oil Movements, in halifax, england. “It’s a problem for OPeC now, and it will get worse.” even so, drilling for tight oil is an expensive way of supplying oil, meaning shale producers will “have an interest in

ogra slashes ssgc, raises sngPl gas Prices moNItoRINg DeSK The Oil and Gas Regulatory Authority (OGRA) proposed a cut in the price of gas for consumers of Sui Southern Gas Company (SSGC) and an increase in prices for those consuming gas from Sui Northern Gas Pipeline Limited (SNGPL), effective from July 1. According to a senior OGRA official, the regulator forwarded its decision on gas prices to the federal government on Saturday asking it to notify the prices from the start of the new fiscal year. Under the OGRA ordinance, the federal government must forward any advice regarding the new prices to the regulator within 40 days. In case that does not happen within the stipulated time, OGRA has the authority to implement the decision. In a significant related development, OGRA also imposed a ban on the launch of new gas development schemes. The official said the decision was taken in light of the current gas crisis and to keep gas utility companies from passing the burden of new schemes

onto consumers. he said SNGPL and SSGC had originally requested OGRA to raise gas prices for consumers by Rs 53 per mmbtu and Rs 32 per

mmbtu, respectively, in order to recover Rs 14 billion in revenue that was lost owing to gas theft and would also cover the Rs 10 billion needed to launch different LPG projects. The regulator, however, rejected these requests, he added. After conducting public hearings and taking into account the concerns of consumers, it allowed SNGPL to raise gas prices by just Rs 8.72 per mmbtu and slashed SSGC’s current gas prices by Rs12.12 per mmbtu, the official stated. Several controversial LPG air-mix projects were initiated by the previous government that placed undue burden on natural gas consumers. even a single 50 mmcfd LPG air-mix project was estimated to raise the cost of gas for all consumers, except domestic, by 10%. Meanwhile, OGRA also took stern action against gas companies by reducing the ceiling of unaccounted for gas (UFG) to 4.5%. Under the previous OGRA chief, gas companies were allowed a 7% UFG ceiling.

FPCCI reposes confidence in PM-designate Nawaz Sharif LAhoRe APP

The Federation of Pakistan Chamber of Commerce and Industry, the apex body of chambers in the country, and all its affiliated chambers on Sunday unanimously reposed full confidence in the sagacious and dynamic leadership of prime minister-designate Nawaz Sharif to steer the country out of economic, gas and power crises that are crippling the national economy. FPCCI President Zubair Ahmad Malik and SARRC CCI Pakistan chapter Vice President Iftikhar Ali Malik said FPCCI along with all its affiliated chambers, trade bodies and associations across the country have unanimously reposed confidence in the Pakistan Muslim League-Nawaz (PML-N) government led by Nawaz Sharif. Zubair said PML-N’s high profile and competent teams of tech-

nocrats and elected veteran parliamentarians enjoy the highest degree of integrity under the sagacious leadership of Nawaz Sharif and will push the country out of looming crises, putting it on the track to progress, prosperity and development. he said traders are also Pakistanis, adding that all their demands just and genuine which must be addressed on a top priority to provide solace and cushion of relief to the grief stricken business community. he demanded a fair and equitable

system of taxation for all classes of the society and sectors of economy besides immediate levy of tax on agriculture income. he also said construction of water reservoirs be initiated immediately to meet the ever increasing energy needs of the country. Zubair said a workable mechanism be devised amongst regions and stakeholders to revisit, review and reach a political consensus for construction of new water reservoirs and dams on a war-footing to boost economic activities and agriculture production in the country. Regarding law and order,

Iftikhar Ali Malik said sustained political stability coupled with better law and order is a pre-requisite for strengthening the national economy. he suggested the government must evolve a long term economic policy with complete legislative cover for bringing an economic revolution in the country and fully exploiting indigenous natural resources. he said all stakeholders must also be taken on board prior to formulation of all national economic policies. Iftikhar hoped the PML-N government will take all stakeholders into confidence prior to giving a final shape to its economic policies to make them viable. he said members from FPCCI and other chambers’ office bearers should be included in all important policy-making processes on the pattern of other developed countries.

high prices,” Mason said. Five months ago, after OPeC’s mid-December meeting, Secretary-General Abdalla el-Badri fended off questions about US shale, saying: “We’re not really concerned. I don’t see that big a quantity.” Now, he’s taking a more measured approach. “We are studying it very carefully, how much this will affect OPeC supply,” el-Badri said the other day. “Maybe the Americans will increase by 1 million and somebody else will decrease by 1 million, so we have to know at the end of the day the non-OPeC supply; it’s not only the American supply. We get different numbers about shale oil and we are trying to get more accurate information.” The 12 members of OPeC are Algeria, Angola, ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab emirates and Venezuela.

CORPORATE CORNER

Firm Fiscal management can revive economy: Qayyum ISLAMABAD: The new government would have to maintain strict financial discipline for putting the economy back on track by overcoming major problems such as growth rate, inflation and unemployment, said speakers at a round table discussion on “Budget 2013-14: Challenges & Opportunities for Economic Justice & Development” organised by the Muslim Institute. Dr Abdul Qayyum from Pakistan Institute of Development Economics (PIDE) was the keynote speaker. He said in recent years, consumption rate in Pakistan was about 85% and savings just 15% whereas in China it was about 50%. For a growth rate of 6%, we need 20-25% investment rate. Only 40% of our imports are financed by export earnings and we do not have access to dynamic markets, he stated. The energy crisis is affecting economic growth decreasing it by 2.5 to 3%, he added. Our tax collection system is also very week and needs overhauling. External debt and liabilities (EDL) rose from $ 46 billion in June 2008 to $ 61 billion by March 2013, he said. “Financial management is also a challenge because we have power capacity more than our demand but are unable to manage it. By increasing the interest rate, deficit rate increases and interest is controlled by IMF. In the budget, interest payment is our biggest problem,” he added. He was of the view that corruption is a serious issue from an economic point of view also. If we manage circular debt and corruption, we can easily solve our energy crisis and improve the economy, he concluded. ONlINE

KARACHI: Tariq Rafi, Dr Ishrat Hussain, Arif Habib and the German consul general cut a cake to mark the opening of The Ocean Mall. PR

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