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Profit 7 pages_Layout 1 11/17/2011 1:28 AM Page 1

Inflation outpaces income growth rate Page 8 Analysing Innovation Trends Page 2 Useless work Page 3

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Thursday, 17 November, 2011

PIA management decides to decrease flight frequency g

annulment of flights, elimination of international economy fare categories favour indus air g Decision to come into effect from 13 Dec KARACHI



aNaGEMENT of Pakistan international airlines (Pia) has decreased its flight frequency and annulled 23 domestic and international flights, while they have also reduced international economy fare categories from 7 to 4. Sources informed Profit that management of airlines has decided to reduce flight frequencies both on the domestic and international front. This decision would come into effect from 13th December, 2011. These decisions of annulling 23 flights and eliminating 3 international economy fare categories are made to favour the new airline, indus air – scheduled to be launched soon. This is reminiscent of last month’s decision by Pia management, which annulled economy discounted fare categories for domestic operations,

sources added. The eight domestic flights that are to be annulled include one flight from Sialkot to islamabad, one flight from Peshawar to islamabad, two flights from Lahore to Peshawar, and one flight each from Karachi to islamabad, islamabad to Quetta, Karachi to Sialkot and Karachi to Multan. Similarly, fifteen international flights to be annulled include three PK 27 flights from Karachi to Dubai, one flight from Sialkot to Sharjah, one flight from Karachi to Kuwait, one flight from Peshawar to abu Dhabi, one flight from islamabad to abu Dhabi, three flights from Karachi to Masqat, two flights from Karachi to Dhaka, and one flight each from Karachi to Katmandu, Peshawar to Doha and one islamabad to Barcelona. Sources further informed that in order to facilitate indus air, which is said to have support of the defense

minister, Pia management’s decisions connote that ultimate sufferer will be the passenger who is already suffering from abysmal service from the national airlines. Earlier, in the last month BoD, headed by the defense minister, decided to annul the discounted economy fare categories for domestic flights and implemented the decision even when Pia offices were closed on Saturdays and Sundays. Now, the passenger has to pay for single category Y in domestic economy class which has the highest fare, while earlier there were many categories in the economy class like K, T, M, N and O. it is to be noted that indus air was supposed to start its flying

Diversion of gas to fertiliser sector

325MW power outage on the cards shortage of urea and high prices force PM to rescind ecc decision g 200 mmcfd additional gas expected to be injected into transmission system g Power plants will have to rely on expensive alternative fuel for production g




cTiNG on Prime Minister’s orders to provide additional natural gas to fertiliser sector, Sui Northern Gas Pipeline Limited (SNGPL) diverted 60 mmcfd gas from power sector to fertiliser units that decreased power generation by 325 MW. an official source said SNGPL has cut gas supplies to three gas based power plants, which can now operate only on other alternate fuel diesel that would enhance their generated power by at least by rs10 per unit. he said the adjustment of the power price increase will be manageable during current year, but would be unmanageable next month when hydel power generation declines significantly due to closure of

canals for annual clean up. Government has been forced to divert additional gas supplies to fertiliser sector, as country is faced with a urea shortfall of 1.2 million tonnes during the current rabi season. Domestic prices of urea have already more than doubled from rs830 per bag to rs1,770 per bag during the last one year. Pakistan faced an unprecedented gas supply shortage even during summer season which resulted in low urea production. Government is importing 700,000 tonnes of urea to bridge the gas in demand and supply. according to Petroleum Ministry, natural gas shortfall against committed supplies would be around 529 mmcfd during November which will increase up to 911 mmcfd in December; peaking at 1.1 and 1.4 mmcfd in January and February, respectively, before easing down to 726 mmcfd in March. Economic coordination

operations in November this year with a minimum of three aircrafts both on mandatory primary routes Gwadar, Turbat, Sukkur etc.) and trunk routes (Karachi, Lahore, islamabad, Peshawar). When contacted some time back, abdul Wahab, chief Executive Officer and the owner of the indus air, said they have been in talks with airBus in this regard but due to shortage they had to wait for commencement of their operations. On the other hand, an aviation lawyer, Shah Murad, when asked, said that it is open for any airline to charge fares to cover its

committee of cabinet had earlier approved gas load management plan for November deciding supply of gas to cNG and industrial sectors for 3 days every week. it decided to provide 76 mmcfd gas to power sector and 90 mmcfd to the fertiliser sector on rotation basis. after PM’s directives, supply to fertiliser sector had been increased to 150 mmcfd as compared to their requirements of 236 mmcfd. Shortage of urea and its high prices forced PM to rescind the decision of Ecc, as insufficient urea was likely to affect yield of wheat crop. import of urea is expected to start from third week of November and the process will be completed by middle of December. Wheat sowing starts from early November and continues till December end, but the late sowing results in suppressing of yield. Petroleum Minister, Dr asim hussain had earlier said about 200 mmcfd additional gas is expected to be injected into transmission system, out of which 100 mmcfd is expected from Kunnar Pasaki Deep in December while 30 mmcfd each from Sui, Qadirpur and Kandanwari are expected in the first quarter next year. Pakistan has annual urea demand of 6.5 million tones, which could be easily full filled by local fertiliser industry having the capacity to produce 6.9 million tonnes per annum, provided they get feedstock gas supplies. annual production for current year is estimated to be 5 million tonnes, with an estimated urea shortage of 1.3 million. Government has already imported 500,000 tonnes of urea during the current year.

operating costs, and this element does not have to be regulated but it should be just and reasonable. as per international practices airlines are allowed to increase or decrease their fares according to their business plans; yet, no competitive advantage should be given to any airline in this regard, he added. it is pertinent to mention that Pia’s decision of levying fuel surcharge could not be justified as it is always linked with increase in international fuel prices. But this time this has not been the case and international oil prices are stable and low.

fuel shortage affecting Kesc KARACHI APP


arachi Electric Supply company (KESc) has maintained that duration of load shedding has been increased in some residential and commercial areas of the city due to `shortage of fuel supply to power generation plants, and `non-supply of power from KaNUPP and other independent power plants’. in a statement KESc appealed to Dr asim hussain, Federal Minister for Petroleum and Natural resources, to prevent an `impending power crisis in Karachi’. Underlining reasons causing drop in power generation, KESc claimed supply of natural gas to the utility’s production plants had suddenly been reduced by SSGc. This has caused Bin Qasim, SiTE and Korangi power plants to trip and hence power production had dropped. On the other hand, furnace oil was made non-available to independent power plants forcing them to halt supply power to KESc. Thirdly, the 80-MW KaNUPP has not been providing electricity to KESc for over a month due to technical faults. Under these circumstances, load shedding hours in certain residential and commercial areas had increased. The utility would be constrained to further expand circle of enhanced load shedding hours and include usually exempted industrial areas into load shedding schedule in case fuel shortage continued. The utility was in contact with SSGc and relevant quarters to get fuel supply restored. Load shedding duration would be brought back to normalcy once efforts to restore fuel supply succeeded, KESc said.

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Thursday, 17 November, 2011


Model businesses are emphasing more on innovating new services every organisation and business feel the need for innovators g innovation should be channeled as a means to an end, rather than an end within itself g



trends W


haT does innovation mean? it used to relate mainly to products, and that is still important. But over the last decade or so, businesses have been putting more and more emphasis on innovating new services and business models as well. in light of this, it is time companies take another look at how they manage innovation. Most of the information about managing innovation available today is addressing specific issues such as technology or finance. But as the boundaries of innovation expand, more managers will need practical knowledge and tools that transcend these functional silos. innovation is one of the least well-managed areas in most companies and identifies ways in which executives can approach innovation differently to achieve greater success.

CHanGInG ConSumer perCeptIon 1. Chartering innovation within the organisation 2. Selecting, preparing and supporting the right team 3. Co-creating innovation with customers 4. Changing the organisation to deliver the innovation

5. building the market for the innovation The new realities of today’s business environment have shifted the boundaries of innovation, placing a renewed emphasis on creating new services and business models. in our interconnected world, now firms can keep pace by changing management practices in order to keep their innovation relevant and of value to their customers and shareholders. To survive in today’s global business marketplace, companies need to develop new products,

services and business models to achieve sustainable growth. amid the current economic downturn, the approach is highly relevant and demonstrates how companies can create opportunities to further enhance their innovation strategies by redefining value and launching new services. The approach should be to set a clear direction for innovation ‘hot spots’ within the organisation, how to position the right people into innovation teams and work with customers as partners in development. it has been acknowledged that innovation leads to value creation, intellectual or monetary. Management expert, Peter Drucker said that if an established organisation, which in this age necessitating innovation, is not able to innovate, it faces decline and extinction. Even though efficiency is essential for business success, in the long run, it can not sustain business growth. intensity of competition is the determinant of innovation and productivity. innovation, besides products and services, also includes new processes, new business systems and new methods of management, which have a significant impact on productivity and growth. Today, we need innovators more than any time before. Every organisation and business is feeling the impact of globalisation, technological and knowledge revolutions. innovation will bring added value and widen the employment base. innovation is imperative if the quality of life in these trying circumstances is to improve. innovation will make the world a better place for the younger generation. innovation is exploiting new ideas leading to the creation of a new product, process or service. in context of a corporation, ‘innovation’ means the process by which an idea or invention is translated into a good service for which people will pay. it is not merely the invention of a new idea that is essential, but the act of giving it shape or “bringing it to market”, and exploiting it in a manner that leads to better products, services or systems that add value. innovation entails employing out-of-the-box thinking in order to generate new value and to bring about significant changes in society. innovation may be classified as, ‘Product innovation’ that entails the introduction of a new product or a service that has considerably improved functionalities, ‘Process innovation’ comprising the implementation of a significantly enhanced production or delivery method, ‘Supply chain innovation’ in which innovations transform the delivery of output products to customers and ‘Marketing innovation’ which results in the evolution of new

methods of marketing with enhancements in product design or packaging, its promotion or pricing, among others. Following points explain the importance oF innovation in a company; throwing light on why a company has to innovate and what will happen iF the company does not innovate: n Evolving society needs advanced products. The customers demand the best possible thing for the day and the latest products are in demand. Thus, the factor ‘customer satisfaction’ is vital and it relates to innovation. n The products, processes and services of the company need to be one step ahead of competitors; else the company loses the game. n innovation leads to better corporate positioning, increased market value and faster growth in the company. n Good ideas are quickly copied and there is pressure to devise new and better products, processes and services for the customer. n if the company doesn’t innovate, the customers stop buying the products, drops, stock price drops, shareholder returns drops, and employees leave the company and finally the company collapses. iNSEaD, the leading international business school, recently announced the findings of its 2009-2010 Global innovation index (Gii), a study which the school has jointly published with the confederation of indian industry (cii) for the past three years. The Gii evaluates the progress of innovation readiness in countries, highlighting the obstacles that prevent governments, businesses, and individuals from fully capturing the benefits of innovation. “This year’s report underlines the importance of innovation in a country competitiveness and growth particularly at a time when the global economy is recovering from one of the worst financial crises it has ever seen,” said Soumitra Dutta, roland Berger Professor of Business and Technology at iNSEaD and primary author of the study. “The results confirm the crucial need for countries to focus on directed pro-innovation policies to jumpstart growth in the medium term and lead to development in the long term.” ‘The Global innovation index’, featured in the report, examines how countries benefit from innovation through the use of enablers that stimulate innovation and their ensuing outputs. There are five enabling parameters which include: ‘institutions’, ‘‘human capacity’, ‘General

and icT infrastructure’, ‘Market Sophistication’ and ‘Business Sophistication’. The two output parameters – ‘Scientific Outputs’ and ‘creative Outputs and Well-Being’ - provide evidence of the results of innovation within the economy. iceland topped this year’s Gii ranking despite the difficult economic situation it has faced over the last two years. Sweden and hong Kong follow in the second and third positions, respectively. Several of the most innovative countries from last year’s report, including the U.S. (eleven), U.K. (fourteen) and Germany (sixteen) have fallen in the ranks.

top ten Global InnovatIon Index rankInG 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Iceland Sweden Hong kong, China Switzerland denmark Finland Singapore netherlands new Zealand norway

Similar to the 2008-2009 report, European economies performed particularly well, including the Nordic ones – Sweden, Denmark, Finland and Norway - which all ranked in the top 10 with iceland. Some of the Eastern European countries such as Slovenia (26), czech republic (27) and Estonia (29) also performed well in this year’s rankings. israel and the United arab Emirates placed within the top 25 countries, followed closely by Kuwait (33) and Qatar (35). Now let’s see which is more innovative? The global conglomerate with revenue of $363 billion or the entrepreneur, whose groundbreaking Doubleclick software package revolutionised online selling and was ultimately sold to Google for more than $3 billion? The answer is that it is a tie. The global behemoth is General Electric, represented at a Leadership

Summit in asia by colin Low, regional Executive of GE Growth initiatives in Southeast asia and President of the company’s Singapore, Philippines and cambodia businesses. “innovation means changing the status quo, impacting customers and really creating full value for them at the end of the day,” says Low. This, in turn, involves the “products, services and technology that the company produces, or it can be business models and leadership (within the company),” he adds. “it’s the thing that makes a consumer say, ‘i’ll use Product a versus Product B’,” says ryan. “Providing a product or a way of doing business that hasn’t been done before; and sometimes it can be a dramatic shift and sometimes it can be quite a subtle shift.” Both GE and ryan have businesses with global clientele. GE has a physical footprint; while ryan has a cyber-reach. GE puts its plants where its businesses are: research centres aimed at serving the needs of the global cities of tomorrow (a future fixed at the year 2050), based in New York State, Munich in Germany, Bangalore in india and Shanghai in china. “The big mega-trend is towards sustainable cities,” says Low. “and those cities will be developed by the rural population migrating to large cities all over the world. Bangalore and Shanghai are the world’s fastest-growing emerging markets,” he points out. “What better place to have research centres?” GE has actually developed electrocardiogram (EcG) machines in Bangalore, where they are also used by village doctors to treat patients. “Even three years ago we would have had no ability to enter this kind of marketplace,” adds Low. “We can sell to other emerging markets now, so this is a good revenue boost for a company like GE.” ryan is concerned about sustainability, too, especially sustaining the interest of venture capitalists in his businesses in today’s “iffy” economic climate. “We generally fund our companies ourselves for the first six months, and then we go out and raise venture capital,” he explains. “i’ve raised in the last couple of years $100 to $150 million for five or six different firms in about 10 different rounds. as a Vc (venture capital) investor, you’re really counting on the fact that by 2012 or 2013 we’ll really start to be a sustainable company, and if we have a big market and a great team it’ll probably work.” ryan’s customers for Gilt Groupe luxury sales include the Japanese, the second largest market for luxury goods in the world, his foothold in asia, and one of the keys to achieving his objective of growing the companies he starts as much as possible. “i never think about an exit strategy when i start a company,” he says. “i think about building it and making it as big as possible. if you can do that, you have all kinds of options: lots of people would like to buy it (for example, Google and its $3 billion purchase of Doubleclick); you can get private equity and liquidity that way; you can take it public. You don’t have to worry about it at that point. But i don’t really look actively to sell unless i think at some point it’s a business where we need more scale and we can’t do it on our own.” it’s at just about this stage that small entrepreneurial companies show up on the radar screens of big conglomerates like GE, who whip out their cheque books and start spending money from the corporate research budget. it is often cheaper and less problematic in terms of liability for large corporations to reverse outsource their r&D and buy smaller companies with proven innovative products and services. “i think the model for how we work now is learning from the experiences of companies like Kevin’s and the venture capital world where we see small start-up companies that have access to leading-edge technology,” says Low. “For example, we’ve got a $300 million fund looking for Vc-type acquisitions so it allows a big company like GE to have the nimbleness of a venture capital company like Kevin’s.” a lesson we can draw from these observations is the importance of education and training in a world relying increasingly on skill and innovation and decreasingly on material resources. One reliable prediction we can make about the future that the pace of change will continue to accelerate. i feel that the revolution manifest in the age of intelligent machines is in its earliest stages. The impact of this new age will be greater than the radical technological and social changes that have come before it. it cannot be stopped. We need to understand it, live creatively with it, and harness it constructively.

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thursday, 17 november, 2011


Useless work

Trade politics


aKiSTaN and india seem to have finally come to appreciate the underpinning of 21st century advances in realpolitik – trade benefits and economic interests dictate political alliances. This is truer since the epic ’08 collapse that choked credit markets and bankrupted even the strongest economic structures in the west, reorienting trade priorities across the globe. Both islamabad and New Delhi have let political differences of a bygone era interfere with fundamental financial demands of the present for far too long. hence the unprecedented anticipation and attention accorded to the MFN debate. Perhaps in focusing on “core” political issues before binding both countries in longterm economic initiatives, both sides misread landmark evolution in international political economy. as it turns out, indulging traditional rivals in mutually beneficial economic programs, which neither would want to derail, actually stimulates ironing out of political differences. Therefore, the “normalisation roadmap”, with trade at its heart, might actually have what it takes to turn a new chapter in not just Pak-india history, but the entire asian region.

That such progress has been achieved in the three short years since 26/11 also shows the strong realiastion in both establishments of the need to move forward. relevant authorities must now be both quick and thorough in identifying core irritants, and ensure removal of unnecessary bottlenecks. arguably the biggest nuisance in the present setup is the brutal visa regime. So far, ever since the confidence-building-measures of the previous government, businesses have been deterred by hostile visa regulations enough to abandon otherwise feasible initiatives. Both sides apparently realise the enormity of this particular problem, and have promised visible progress, which is appreciated. it also needs to be noted that these latest developments, impressive as they are, are still vulnerable to numerous shocks. Elements in both establishments will vehemently resist opening up to the traditional enemy. and far too often militant activity originating from our borders, though without knowledge of authorities, has driven a spanner in the works with regard to Pak-india normalisation. So both sides will need understanding and patience to match the eagerness they betray for formal mutual advancement.

Berlusconi and Italian debt


it is said that the government is going to buy uncertified and substandard sugar, since none of the local sugar producers and millers who are members of Pakistan Sugar Mills association (PSMa) holds the license issued by Pakistan Standards and Quality control authority (PSQca). Just for the record, PSMa should remember the time when in order to stablise prices in December 2007, a few importers ventured into the indian market with the asking price of rs24 per kg as against the then PSMa ex mill price of rs30 per kg. at that time, the PSMa tried hard to impound the shipment at Wagha attari.



global downturn, when a large number of people are either unemployed or fear losing their job, is not the best time to talk about useless work. But since i’m a kind of specialist in useless-ness i think the case has to be made nevertheless. The only point of working nowadays, or so we’re lead to believe, is to make money. That’s what makes work ‘useful’ and to believe otherwise is to entertain the most delusional of pre-modern fantasies about work and fulfillment somehow meshing together. Everyone knows that work is a form of drudgery (even the word ‘labour’ is related to pain, suffering, and toil and is a kind of Biblical curse). apart from politicians and a few creative people most of us are wage-slaves. and if you ask an economist they’d confirm this since in their view you have to renege on your freedom to earn a wage. Your salary “compensates” you for not doing something more interesting like reading a book or spending time with the family. That’s also why economists have a very narrow view of ‘incentives’: if no-one can monitor what you’re doing, why should you put in the effort without adequate compensation. So, there are two arguments in favour of ‘useless work’. according to the first, it allows one to get away from the perspective of those who identify themselves too closely with their jobs and the incomes they derive from them. To say that all work is truly useless is to acknowledge that you have a life over and beyond material pursuits. You learn to laugh at ‘productivity targets’, time management, quantitative measures of performance, and the whole Protestant idea that a good work-ethic, discipline, and perfection are signs of good character. You clearly see all that currying for favour with the managers is laughable and petty and that the whole language surrounding work is meaningless drivel: ‘work shall set you free’, ‘work hard and play hard’, ‘think out of the box’, contribute to the ‘knowl-

perhaps we should try to imagine how work could serve purposes beyond the ‘useful’ one of subsistence?

Government to buy uncertified sugar from PSM

it is clear that Europe is in a mess. The financial crisis is spanning from the eastern front to the western front and is creating havoc over everything in between. Berlusconi stepping down is not really the answer to the italian problem and a united effort is needed on the italians part to ensure that things begin to improve. Yes, Berlusconi was at fault on many instances and his reform policy was absolutely pointless, but pinning the entire blame on one individual is inappropriate. Whoever replaces the former italian Prime Minister has a huge tasks on his hands and only time will tell whether things have a potential to improve in Europe.


khalid mir

edge economy’ and so on. Everyone who knows me will testify to what an absolute and shameless slacker i am. ‘Slack’ comes from an old word meaning loose, careless. Today it means indifferent, blasé, someone who avoids or evades work. i would love to say i’m a slacker because i'm such an anarchic, counter-culture, hip revolutionary, but the sad truth is that it's really plain old Kashmiri laziness! and no, not the kind of deep and quiet idleness that leads you to self-reflection and profound insights into what life's all about but, rather, the kind of idleness that means that for large parts of the day you're sleeping or thinking about sleeping. i've got a grudging respect for people who work hard, but mostly they make me slightly sick and dizzy. When i was unemployed i found it hugely comforting doing something like getting dressed and posting a letter at the local post office. Now i realise that universities are amongst the best places for useless people like me. They're like a retirement home for the middle-aged and badly dressed. a second way of thinking of useless work is more positive though. Perhaps we should try to imagine how work could serve purposes beyond the ‘useful’ one of subsistence? Work would then be ‘useless’ in the sense that it transcends our immediate concerns and embodies a sense of hope. hope in the possibility of our playing a part in producing a world in which we can derive worthwhile pleasures and satisfactions, including aesthetic ones. and the hope that we find the joy of creative and free work, that we can be engaged in activities that are themselves meaningful and that can lead to a sense of belonging, place, solidarity, and equality. if we look to teachers, doctors, nurses in the public sector who are often driven by the desire to help other people; or to soldiers, judges, and policeman who should act out of a professional sense of duty; or if we think of craftsmen or artists with their commitment to giving practical shape to their ideals, we’d recognise that we can have intelligent interests and not just material ones. if we start to think of work in terms of ends and purposes, what we’re working towards, in terms of its ability as a frame of reference to sustain a good life-for everyone – then we’d probably move away from the current system that is often associated with exploitation, inequalities, soul-numbing routines, and anxieties about our skills becoming redundant. We’d then be more concerned about creating jobs and lifestyles that lead to something more durable, beautiful, a type of work that engages more of our faculties and that connects us with other people, rather than leading to alienation. The writer is a professor of economics at LUMS


average Joe investor

All quiet on the KSE front


agha akbar

ParT from a minor dip or some rise here or there, the country’s leading benchmark, the KSE-100, this past week mainly remained consistent, trading in the vicinity of 12,000 points. The volumes, the real indicator of investor interest and enthusiasm, mostly remained in the placid zone. and this period of quiet is likely to extend itself for a while, with investors visiting their brokers probably more

often with renewed vigour and energy some time after mid-December with the intent to chase the scrips that close their books at the year-end. The average Joe among them must then be looking for lower-end shares that offer around 20 per cent or thereabouts in a couple of months. Essentially there is no harm in going for big-ticket buys, but the longterm uncertain both locally and globally, it is advisable to keep oneself in check, and limit risk by staying to the lowerend purchases. Last week one had mentioned Bank alfalah as a possibility. at under rs12 apiece, riding at the back of good financial reports spread over three quarters, this is likely to appreciate and go up anywhere between rs14-16 around the last week of February 2012. if it all remains constant, and it actually does, those taking a risk at this entity may get a smart return. The problem with Bank alfalah is that in the good old days it traded be-

tween the rs40-50 band and when it hit rock bottom mostly owing to poor management, it never came back enough to go beyond its base price. The management has since changed but perceptions persist. This year if it offers a decent return, through dividend or capital gain, it may well get to move upwards over the next few years. in other words, it could be good as a short or long term investment. Though one had a setback with this particular share in 2007, selling it way short a year later, one would want to take a wager on Bank alfalah. here i must mention that i had then taken a jump on this particular one against the advice of my stock consultant, Mian Nusrat-udDin, who had surmised that the only direction this particular stock can go is down. So there was only myself to blame for the consequences of not heeding the calculations of a past master. One has tried to insist on this before, and it merits repeating, that all invest-

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the average Joe must then be looking for lower-end shares that offer around 20 per cent or thereabouts in a couple of months

ments should be made on research based on profitability – and an average Joe must still verify the facts before committing his cash to it. MND still is not really hot on Bank alfalah. if you ask him, he has his eyes on three other banks, one slightly higher rated, in the above rs100 apiece zone, the next in the middle in rs60 range, and the last at half that at around rs30 – meaning thereby that you have plenty of varied choice that you could opt for in accordance with how deep your pocket is lined up. These three are, in descending order, habib Bank Limited, allied Bank Limited and Bank al-habib. all three are quoted way lower at this point in time than they were at their high last February 2011 (hBL then at rs142 compared to

rs119 now, aBL at rs74 then, now rs63, Bank al-habib rs39.49 then, rs30 now). another benchmark, earning per share after three quarters last year and now also reflect positively in case of all three. Which means that unless something crazy happens between now and February 2012, profit in the vicinity of 20 per cent is more or less assured. Next week one would take a look at other December-closing sectors, in particular the otherwise hot fertilizer sector that is threatened by the chronic shortage of gas that becomes acute to the point of crippling for the industries in the winter months. The writer is Sports and Magazines Editor, Pakistan Today

For comments, queries and contributions, write to: MuneeB eJaZ layout designer

email: Ph: 042-36298305-10 fax: 042-36298302 website:

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Thursday, 17 November, 2011

Government is working to increase domestic production of gas and meet the shortage from external sources



Dr asim hussain




StAff REPoRt

hE Power sector of Pakistan has been in the limelight for the past couple of years due to its inability to supply power and settle dues of the energy chain. This has triggered many adjustments in the country’s energy mix and proved costly to some and indirectly beneficial for others. consequently, it is believed that power sector woes have opened investment opportunities at the local bourse. For example, FFc and FFBL in the fertiliser sector have performed in the last couple of months due to urea price hike amid gas rationalisation by the government. Similarly, we see a window of opportunity in the power sector mainly in hub Power company (hUBc) and Kot addu Power company (KaPcO), said Naveed Tehsin at JS. Their Power Purchase agreement (PPa) with the government makes their

cPlc to get rs350m tracking equipment KARACHI ISMAIL dILAWAR


O provide protection to witnesses, Witness Protection Unit (WPU) is being established in Sindh, Provincial home Minister, Manzoor Wasan announced. addressing a luncheon meeting at Korangi association of Trade and industry (KaTi) the minister said WPU is being formed to strengthen witnesses of crimes and to encourage them to give evidence against criminals. WPU will provide witnesses with legal and financial aid, security and logistical support to move them from one place to another with complete security. he said work on this project will started tomorrow. The minister further announced allocation of funds worth rs350 million for the citizens Police Liaison committee (cPLc) to purchase mobile tracking equipments. This would ensure that criminals and kidnappers would be traced easily while calling businessmen and other citizens for kidnapping ransom. he announced launch of a massive operation against extortionists and land grabbers. “There will be action only and not mere talks. all land from encroachers would be recovered,” Wasan assured.

business model resilient to changes in consumer power tariffs, PKr/USD parity and the US cPi. Furthermore, the generation bonuses and guaranteed tariff structure also acts as an added advantage for investment in the sector. Moreover, the recent 150bps cut in Dr and the market expectations of further easing in the policy rate going forward also bodes well for the high dividend yielding stocks of the power sector.

operational by June 2013 and will provide more fuel to profitability. ‘Our liking for hUBc is also based on its attractive dividend yield of 16.1 per cent which offers a spread of 390bps and 420bps over the 10 year PiB and 1 year T-Bill respectively,’ he added.

KOT ADDU POWER COMPANY: RESILIENT EARNINGS compared to hUBc, KaPcO lacks up-tick in its tariff structure. however, the indexation factor that provides protection against the devaluation of rupee against dollar and US cPi imply a low risk profile for the company. although, the company has shelved its expansion plan for the time being, we do not rule out a reversal in decision after the resolution of circular debt issue, he added. KaPcO also seems attractive at current levels as it trades at a FY12E PE of 6.4x and offers a dividend yield of 14.5 per cent compared to JS Universe PE and dividend yield of 6.4x and 8.4 per cent, respectively.

HUB POWER COMPANY: RIDING ON POWER SHORTAGE he said hUBc is their top pick in the power sector due to its rising Project company Equity (PcE) component of capacity Purchase Price (cPP) and generation bonuses amid supply shortfall in the country. Moreover, addition of the Narowal power project will further improve the top line of the company. in addition, hUBc has invested in Laraib power project and currently holds 75 per cent of shareholding. it is expected to be

PC board to pre-qualify parties for NPCC bidding ISLAMABAD JALALUddIN RUMI


hE Privatization commission (Pc) Board will pre-qualify the parties interested in the acquisition of minimum 88 per cent shareholding of National Power construction corporation (NPcc), today. at least ten foreign and local interested parties have submitted Expressions of interest (EOi) for the transaction structure of NPcc out of which parties found financially and legally eligible will participate in the bidding process. The privatization board headed by minister for privatization, Ghous Bux Khan Mahar, on the advice of transaction committee will approve the eligible parties to take part in the bidding of NPcc. The cabinet committee on Privatization (ccOP) and Pc board have already approved the privatization of Transaction Structure of NPcc. The bidding process would be open to Pc Board and ccOP will approve the bidding results, lead to the issuance of letter of intent to success-

at least ten foreign and local interested parties have submitted expressions of interest (eoi) for the transaction structure of nPcc ful bidder. Pc expects to fetch $42 million by the sale of NPcc established in 1974 under the Ministry of Water and Power. The successful bidder will be required to continue to operate the company as a going concern. Up to 12 per cent shares were allocated for employees of NPcc through the Benazir Employee Stock Option Scheme (BESOS). The NPcc is incorporated in Pakistan and is engaged in the execution of power engineering projects such as extra high voltage transmission lines, power generation plants, industrial electrification and external lighting of housing complexes in Saudi arabia, Pakistan and other Middle Eastern countries. NPcc’s services include survey, design, material

procurement, installation/erection and commissioning of projects. NPcc’s operations in the KSa and Middle East are carried out by NPcc’s branch office. NPcc undertakes execution of large power construction projects including high and low voltage lines, distribution networks and electrification of large housing and commercial projects on turnkey basis in Saudi arabia. The Pc Board will also formulate recommendations for cabinet committee on Privatisation (ccOP) and review the status and progress of various ongoing and upcoming transactions including, the transaction structure of the Secondary Public Offering (SPO) of Pakistan Petroleum Limited (PPL), and privatization of heavy Electrical complex (hEc).

Bourse drops 24 points amidst lack of impetus Karachi Staff report


EarTh of conviction amidst lack of impetus and growing political bickering pulled the index further lower. investor participation at 51 million shares was concentrated in select blue chip stocks as FaTiMa led the board. The KSE 100 index closed at 11992.77 levels with the loss of 1.24 points, while KSE 30 index lost 24.16 points to close at 11333.91 levels. all Share index closed at 8291.30 levels after losing 2.14 points. Total 90 scrips advanced 134 declined and 116 remained unchanged out of total 340 scrips traded. advancements in bellwether oil and gas exploration stocks on account of attractive valuation kept the overall index afloat. Fertiliser stocks wit-

nessed selling pressure as the news flows regarding government mulling to divert gas supply toward urea manufacturers in a bid to lower per bag price kept investors wary. ‘We reiterate that in the absence of triggers and foreign flows, trend at local bourse may remain directionless,’ said Salman Vid-

hani, Senior analyst at hMFS. OGDc and PPL remained by far the best performers rising by 0.6 per cent and 1.3 per cent over news of discoveries. Engro too remained in the limelight on rumours of gas restoration from the SSGc network while FFc came under selling pressure by local funds and insti-

tutions on the back of rumors of reversal in urea prices. POL was dominant on the DOMaiL ii discovery stance that gave a boost of 0.8 per cent as heavy participation was witnessed. reasonable consolidation in the last trading hour was witnessed in ENGrO, PPL, OGDc and POL.

stock index futures contracts launched at Kse KARACHI ISMAIL dILAWAR


arachi Stock Exchange (KSE) has launched Stock index Futures contracts on Tradable Sector indices from January 1st next year in banking, oil and gas sectors. The exchange notified this to members through issuing a notice numbering KSE/N 6207. Four blue-chip scrips, OGDcL, POL, PSO and PPL would constitute tradable benchmark for oil and gas sector while seven stocks including McB Bank, NBP, UBL, hBL, BaFL, BahL and aBL would be the benchmark for banking sector contracts. Oil and gas sector’s free float per centage would be 89 per cent against the banking sector’s 82 per cent. KSE said sector index futures would offer opportunities to investors wishing to gain exposure in specific sectors without actually buying each share in that sector. “Such investors can use SiFc on sector indices to take positions in an entire sector which can be purchased and sold easily and inexpensively,” it said. Exchange said SiFc contracts on tradable benchmark indices are agreements to buy or sell a standardised value of tradable sector index. This allows investors to track performance of a basket of securities in a given benchmark index. Mark-to-market losses are collected and paid daily, with cash settlement at rs5 per index point movement and concluded on maturity (without delivery requirement). it said Basket Order Window was also being made available in KaTS to facilitate efficient hedging mechanism for small investors, high net worth individuals and financial institutions. “The Basket Order window shall allow investors to place multiple market orders in ready market with same time-priority through a single mouse click for all stocks within a tradable sector index. Once an order set is placed, basket window will show execution status for each line item in the basket. Now with reduced lot size of 1, it is more practicable than ever for small investors to gain exposure of leading oil and gas stocks stalling from a cumulative value of rs5O,OOO by paying 12.5 per cent margin (i.e. minimum rs6,500). Moreover, basket stocks may be bought in smallest denomination of 1 stock each which can be hedged by selling a similar index futures contract.

Profit 7 pages_Layout 1 11/17/2011 1:28 AM Page 5

Thursday, 17 November, 2011

Existing capacity is inadequate to meet the current demand and the government has to install new power plants


naveed Qamar


Govt’s new model of management



N 17 October 2011, Minister for Water and Power informed National assembly that the “line losses” of Sukkur Electric Supply company (SEPcO) and Peshawar Electric Supply company (PEScO) have reached 40.2 per cent and 35.25 per cent, respectively. Other distribution companies in the champion’s league of power pilferage are hyderabad at 34 per cent and Quetta at 21 per cent. Multan takes the lead among the distribution companies in Punjab with line losses of 18.3 per cent. When Federal Minister responsible for this sector admits to such a massive hemorrhage of billable power supply, one does not expect his statement to end there. if you are idealistic, you expect a resignation to follow this admission of failure. at the very least, you expect a plan of action with specific outcomes and time lines. Minister assures us that “The government is cognisant of the situation”. he also gives us glad tidings that the “culture of generation and distribution companies would change”. Meanwhile, political masters as well as NEPra, the regulator, continue to play this game of make believe. in financial year 2010-11, for example, NEPra prescribed a target of 16.5 per cent as cumulative line losses of all distribution companies. The actual losses were 19.6 per cent, with “healthy” growth of 7.2 per cent in PEScO, 5.8 per cent in hEScO and 3.35 in MEPcO. The story of shameful complicity and inefficiency does not end here. after having lost one fifth of this very valuable resource to theft, the remainder is billed. Believe it or not, distribution companies fail to collect 11.5 per cent of the billed amount, which comes to a massive rs67 billion in one year. The bottom line is that PEPcO and its distribution companies are incompetent as well as complicit in leakage of more than 30 per cent of their revenue. You have the right to ask, how government of Pakistan penalises the com-





12.0 per cent 10.5 per cent 10.8 per cent 9.5 per cent 15.0 per cent 28.0 per cent 18.0 per cent 28.0 per cent 16.5 PER CENT

13.2 per cent 12.1 per cent 11.2 per cent 9.8 per cent 18.3 per cent 33.8 per cent 20.8 per cent 35.2 per cent 19.6 PER CENT

-1.2 per cent -1.6 per cent -0.4 per cent -0.3 per cent -3.3 per cent -5.8 per cent -2.8 per cent -7.2 per cent -3.1 PER CENT

panies and consumers who are responsible for causing these losses? The answer is that it does not punish them. On the contrary, they are rewarded. What happens is that for the determination of tariff, the performance of most efficient distribution company is taken. currently, this means islamabad Electric Supply company, which has line losses of 9.8 per cent and a recovery to billing ratio of 93.4 per cent. Tariff is worked out for iEScO and this becomes the uniform tariff for all distribution companies; the good, the bad and the ugly. The deficit this creates is picked up by the government as power subsidy. Over the three years in which the present government has been in power, nearly one trillion rupees has been poured into this bottomless pit. Such mismanagement of generation, distribution and tariff determination; all embedded in a bedrock of corruption is more than scandalous. But unfortunately no one, not even Punjab’s chief Minister, seems to be moved by the grinding burden which this is imposing on the middle and lower income masses. The “Khadime-ala” gets galvanized into action over trivial issues, but he is unmoved by half the industrial output of the province being lost to power shortages and loadshedding of natural gas only in the Punjab province. This has been done on the dubious plea of a constitutional provision casually sanctified by the province’s con-

sent through the 18th amendment. in contrast, Sindh and Khyber Pakhtunkhwa used the pretext of this provision to secure stay orders against gas curtailment in their provinces from their high courts. is Ministry of Petroleum is making any efforts to get such parochial orders vacated? is chief Minister Punjab agitated over a measure which is stifling commerce and industry in this province? Strangely enough, he is not. During the Pak – US strategic dialogue on energy in Washington last month, the Pakistani team led by Mr Naveed Qamar, Minister for Water and Power, disclosed that Pakistan’s economy suffers a 3 to 4 per cent loss of GDP per annum due to electricity shortages and subsidies, besides the 10 per cent increase in unemployment. We only have to add this 4 per cent to our projected GDP growth of 4.2 per cent for the ongoing financial year to realise the magnitude of the opportunities which we are missing on account of our poor governance. Our experts added that they were going to introduce some vital changes in the new tariff determination formula according to which, the government will include 100 per cent line losses in electric power tariff determination. The callous injustice and insensitivity of this planned policy initiative is appalling. instead of deciding upon measures to curb theft and technical losses due to inefficient distribu-








138,501 56,110 74,289 84,637 67,015 420,552 52,428

135,872 55,458 74,111 82,922 62,581 410,943 43,105

98.1 98.8 99.8 98.0 93.4 97.7 82.2

117,297 48,137 63,537 72,150 60,433 361,554 38,016

109,344 46,085 61,657 67,968 57,955 343,008 32,478

93.2 95.7 97.0 94.2 95.9 94.9 85.4

4.9 3.1 2.7 3.8 -2.5 2.8 -3.2

53,302 31,250 136,980 16,638 574,170

31,501 12,810 87,416 11,036 509,395

59.1 41.0 63.8 66.3 88.7

45,945 24,044 108,005 18,463 488,022

27,481 18,174 78,133 10,799 431,940

59.8 75.6 72.3 58.5 88.5

-0.7 -34.6 -8.5 7.8 0.2

Pakistan’s overall demand for power is estimated to reach 35,000 Mw by 2015. every megawatt which has been added to the system over the previous three years was planned, approved and commenced during the tenure of the previous govt tion, the government is planning to make the consumers pay. a much more logical decision would be to make the distribution companies, such as FEScO and hEScO autonomous to sell power in bulk and to let them distribute and collect from consumers. The good ones will then get their efficiency dividend, while those throwing up huge losses on account of theft and inefficiency will have to pay for it. Pakistan’s overall demand for power is estimated to reach 35000 MW by 2015, which will be more than twice of our installed dependable capacity, today. Every megawatt which has been added to the system over the previous 3 years was

planned, approved and commenced during the tenure of the previous govt. Not a single new project (other than the notorious rental Power Projects) has been approved by the present government and this will threaten the every viability of the country in the years to come. The terrifying fact is that no one in power seems to care. There is no sense of urgency in the concerned ministries and political circles. No mechanism has been evolved to focus and propose solutions for the grave crisis that are confronting us today. Do i see any light at the end of the tunnel? as the cliche goes, all i can see is an on rushing express train.

CORPORATE CORNER Japanese ambassador awards special commandments to otsuka clinic

holding a three day training course for fish farmers on “Prosperity through fish farming” from November 21 to 23. The training is aimed to provide modern scientific techniques about fish farming. For detailed information, farmers may contact the Fisheries research and Training institute’s director at Wahga road, Lahore, or at contact numbers 042-36522895 and 04236522896. Provincial Fisheries Department will provide free of charge hostel facility to the participants. PRESS RELEASE

valuable customers,” said Mr irshaid on the occasion. PRESS RELEASE

Mobilink foundation supports Disabled welfare association

Ptcl receives saMena award 2011 Karachi: ambassador of Japan, Mr hiroshi OE, awarded special commandments to Otsuka welfare clinic on its outstanding work in Peshawar by making contribution to promote friendship and good will between the people of Japan and Pakistan. cEO Otsuka Pakistan Limited, Mr abid hussain, received the award was by on behalf of Otsuka Welfare clinic (a group company of Otsuka pharmaceutical Japan). ambassador, Mr hiroshi OE extended heartfelt congratulations to the doctors, nursing staff and all the concerned people on receiving the award. PRESS RELEASE

fisheries training to start from nov 21 lahore: Punjab fisheries department's, Fisheries research and Training institute is

doha: cEO and President, Pakistan Telecommunication company Ltd (PTcL), Mr Walid irshaid, accepted the prestigious SaMENa award 2011 for PTcL as “Best Telecom Operator in South asia”, conferred at the annual SaMENa ‘convergence to Doha’ summit held in Doha on November 1-2. “it is a result of the brilliance and hard work of all PTcL employees who are busy bringing the best of innovation and service to our

lahore: The Mobilink foundation has extended support to the Disabled Welfare association, Karachi (DWa), with the donation of tricycles, wheel chairs and ration bags. Employee volunteers, known as the Mobilink Torchbearers, helped deliver the items to the DWa. Director Public relations and cSr, Mobilink, Omar Manzur, added, “at Mobilink, it is our firm belief that such disabilities do not impose any limitations on potential and capability. People with disabilities are an essential part of our society, and as before, Mobilink remains at the forefront of supporting their needs through the Mobilink Foundation.” PRESS RELEASE

acca to organise accountants for Business global forum Pakistan 2011 lahore: acca Pakistan is organising

“accountants for Business Global Forum Pakistan 2011” at royal Palm country and Golf club. The forum is aimed to initiate discussion about business accountability and assurance provision challenges presented to the accountancy profession by the new business environment. acca Pakistan in a press statement indicated that the event will be attended by a large number of senior hr, finance and accounting professionals from private and public sector. The forum will discuss risk and rewards – shared perspectives, maximising people power – effective talent management in finance and the E-professional – embracing learning technologies. PRESS RELEASE

ISLAMAbAd: (L-R) fawzia Siddiqui (founder Member, Pakistan US Alumni Network), Muhammad Azfar Ahsan (founder Member, Pakistan US Alumni Network), dr Marilyn Wyatt (US Ambassador's Wife and Representative of USAId) and dr Cameron Munter (US Ambassador and Patron of Pakistan US Alumni Network) at a ceremony of Pakistan US Alumni Network. PRESS RELEASE

Profit 7 pages_Layout 1 11/17/2011 1:29 AM Page 6

Thursday, 17 November, 2011

06 Markets

top 10 sectors

24% 09% 35% 10% 08%


01% 07% 02% 03% 01%

General Industrial

Construction & materials electricity banks

Fixed line telecommunication

oil & Gas

Financial Services

personal Goods

equity Investment Instruments

STOCK MARKET HIGHLIGHTS Index 11992.77 3154.31 2679.68

kSe-100 lSe-25 ISe-10

Change -1.24 -16.26 +21.13

volume 41,798,751 1,908,953 47,495

market value 3,085,797,435 49,901,141 2,032,238

Major Gainers Company bhanero tex.xd unilever pak ltd. exide (pak) pak oilfields ltd. pak petroleum ltd

open 217.70 5581.94 172.10 358.37 179.81

High 228.58 5648.99 177.00 362.50 184.60

low 228.58 5560.00 170.25 358.50 179.49

Close 228.58 5592.00 1 175.82 361.10 182.17

Change 10.88 0.06 3.72 2.73 2.36

turnover 110 7 3,194 751,070 1,477,547

780.01 3048.99 99.21 146.00 188.40

780.01 3006.00 99.21 140.00 181.81

780.01 3033.78 99.21 140.55 183.63

-9.99 -9.30 -5.22 -4.72 -4.09

44 44 1 3,499 3,335,808

Major Losers bata (pak) ltd. nestle pakistanxd Hinopak motor Sanofi-aventis Fauji FertilizerSpot

top 5 perForMers sector wise syMBol



low current



404.69 120.40 6.98 93.80 334.90

396.00 116.10 6.75 89.30 308.94

396.87 117.57 6.77 92.03 310.82

-6.98 -1.21 -0.12 1.02 -14.37

61,485 833,559 399,510 91,674 314,938

15.00 31.05 71.99 143.49 40.80

14.00 29.29 65.17 137.50 37.06

15.00 29.30 70.64 139.79 37.39

0.00 -1.53 2.05 -0.90 -1.57

1,500 2,485,646 855 4,017 244,529

Oil and Gas attock petroleumxd attock ref.xd byco petroleum mari Gas Co.xb national ref.xd

403.85 118.78 6.89 91.01 325.19

agritech ltd. arif Habib Coxdxb Sd biafo Industriesxd Clariant pakistan dawood Hercules

15.00 30.83 68.59 140.69 38.96

Volume Leaders Fatima Fert.Co. d.G.k.Cement engro Corporation Fauji FertilizerSpot Jah.Sidd. Co.

24.35 21.00 134.50 187.72 5.61

24.60 21.45 137.25 188.40 5.90

23.82 20.97 132.21 181.81 5.57

23.86 21.18 133.11 183.63 5.60

-0.49 0.18 -1.39 -4.09 -0.01

6,538,046 3,776,433 3,558,166 3,335,808 2,407,266

Bullion Market Gold 24k Gold 22k Silver (tezabi) Silver (thobi)

per tola (pkr) 57,514.00 51,608.00 1,113.00 1025.00

per 10 Gm (pkr) 49,361.00 44,245.00 956.00 880.00

per ounce uS$ 1,775.00 – 35.05 –

Interbank Rates uS dollar uk pound Japanese Yen euro

23.25 1.41 8.60 34.00 11.00

23.59 1.45 9.00 34.50 11.00

-0.31 0.00 0.07 -0.48 -0.56

al-abbas Cement attock Cementxd berger paints bestway Cement Cherat Cement

2.00 51.11 11.79 8.11 7.66

29.62 2.49 41.17 7.72 22.00

buy 86.50 16.04 135.97 1.1172 83.65 10.97 23.53 23.04 86.77

Sell 87.20 117.19 137.20 1.1243 85.76 11.21 23.67 23.16 89.19

Brent Crude Oil


6.93 184.30 28.50 7.00 108.00

2.00 51.99 12.00 9.11 8.19

1.90 50.81 11.60 8.11 7.50

1.92 51.02 11.91 8.11 8.01

-0.08 -0.09 0.12 0.00 0.35

26,799 108,952 4,762 100 197,042

58.00 169.52 117.00 2.63 168.53

30.40 3.25 42.00 7.95 22.00

28.14 2.21 39.12 7.01 20.95

28.14 3.08 39.60 7.65 22.00

-1.48 0.59 -1.57 -0.07 0.00

14,022 614,084 16,802 993 70

abdullah Shah Colony Sugar mills engro Foods ltd. Habib Sugar mills Habib-adm ltd.xd

8.00 1.75 23.52 28.10 11.58

8.00 1.75 23.90 28.50 11.70

7.90 184.30 28.50 6.90 108.00

6.93 184.30 28.25 6.25 102.60

58.00 170.00 118.00 2.79 169.99

0.00 0.00 -0.24 -0.30 0.00

10 90 5,055 5,004 2

58.00 168.94 117.94 2.51 168.53

0.00 -0.58 0.94 -0.12 0.00

2,000 240 302 39,802 31

109.00 111.18 145.05 145.58

0.69 -4.44

1,170 203

58.00 168.50 117.00 2.43 168.53

110.49 111.43 150.02 150.00

(Colony) thal al-Qadir textile amtex limited annoor textile artistic denim xd

1.70 11.25 1.67 13.00 18.50

1.11 11.25 1.70 14.00 18.50

aHCl-nov aHCl-oCt anl-oCt atrl-nov atrl-oCt

31.00 30.82 4.01 120.42 119.16

31.00 30.82 4.25 121.50 120.30

abbott laboratories Ferozsons (lab) ltd. GlaxoSmithkline pak. Highnoon (lab) Ibl HealthCare xd

102.49 80.00 68.92 28.09 10.92

103.00 80.00 68.26 28.09 11.92

6.93 184.30 28.26 6.70 108.00

p.t.C.l.a pak datacom ltdxd telecard limited Wateen telecom ltd WorldCall telecom

10.89 35.03 0.95 .68 1.13

10.98 34.01 1.00 1.70 1.19

p.t.C.l.a pak datacom ltd. telecard limited Wateen telecom ltd WorldCall telecom

11.47 31.65 1.09 1.51 1.32

8.00 1.74 22.54 27.88 11.50

0.00 -0.01 -0.98 -0.22 -0.08

53 23,501 91,748 70,820 2,995

1.11 11.25 1.45 14.00 18.25

1.11 11.25 1.60 14.00 18.49

-0.59 0.00 -0.07 1.00 -0.01

1,000 500 132,822 1,000 1,049

29.45 29.28 3.90 117.90 116.50

29.51 29.32 3.95 119.21 117.71

-1.49 -1.50 -0.06 -1.21 -1.45

376,500 516,500 24,500 201,000 200,000

101.00 78.10 67.01 27.65 10.99

102.10 80.00 68.06 28.09 11.92

-0.39 0.00 -0.86 0.00 1.00

1,283 45 1,557 100 25,154

10.71 34.01 0.90 1.65 1.06

-0.18 -1.02 -0.05 -0.03 -0.07

470,873 500 68,502 152,954 235,458

10.65 34.01 0.90 1.52 1.00

11.77 32.66 1.09 1.68 1.35

11.42 31.65 1.01 1.47 1.15

11.64 32.66 1.03 1.50 1.28

0.17 1.01 -0.06 -0.01 -0.04

4,752,418 1,430 194,249 449,333 649,632

0.50 36.38 0.75 1.70 41.36

0.50 36.50 0.77 1.70 41.80

0.36 36.10 0.70 1.56 41.25

0.50 36.10 0.71 1.60 41.53

0.00 -0.28 -0.04 -0.10 0.17

1 1,022,035 38,682 752,756 220,355

63.16 11.15 5.94 11.15 29.95

64.00 11.29 6.08 11.35 30.20

62.50 10.75 5.79 10.70 29.55

62.69 10.89 5.83 10.89 29.91

-0.47 -0.26 -0.11 -0.26 -0.04

32,694 944,906 319,287 1,929,563 175,090

Electricity Genertech Hub power Co.xd Japan power k.e.S.C. xr kot addu powerxd

Banks allied bank ltd askari bank b.o.punjab bank al-Falah bank al-Habib




low current



Non Life Insurance 7.00 1.70 22.50 27.50 11.50

Fixed Line Telecommunication

Beverages murree brewery Co. Shezan Int’l


Pharma and Bio Tech

Automobile and Parts agriautos Indus.xd atlas battery ltd. atlas Honda ltd. dewan motors exide (pak)


Future Contracts

General Industrials Cherat packagingxd eCopaCk ltd Ghani Glass ltdxd maCpaC Films merit pack

low current

Personal Goods 40,885 8,285 3,035 25,300 63,850

Construction and Materials

ados pakistan al-Ghazi tractors bolan Castingxd Ghandhara Ind. Hinopak motor

International Oil Price WTI Crude Oil


24.70 1.50 9.00 35.00 11.52

Industrial Engineering

86.9094 137.2561 1.1303 117.4929

uS dollar euro Great britain pound Japanese Yen Canadian dollar Hong kong dollar uae dirham Saudi riyal australian dollar

23.90 1.45 8.93 34.98 11.56


Household Goods

Industrial metals and Mining Crescent Steel dost Steels ltd. Huffaz Seamless pipe Int. Inter.Steel ltd.


Food Producers


790.00 3043.08 104.43 145.27 187.72


adamjee Ins xd ask.Gen.Insurance atlas Insurance Central Ins Co. Century Insurance

49.64 8.50 34.49 48.67 7.16

49.50 8.50 35.00 50.00 7.50

48.60 8.10 33.86 48.00 7.06

49.40 8.47 33.99 49.79 7.50

-0.24 -0.03 -0.50 1.12 0.34

6,785 1,651 1,110 3,909 1,500

13.50 1.40 65.53

14.50 1.40 65.53

0.00 0.00 0.00

2 1 157

0.30 14.89 17.71 0.86 7.25

-0.02 -1.00 -0.25 -0.02 -0.01

9,463 13,487 19,659 9,495 2,100

Life Insurance american life east West life assur eFu life assur

14.50 1.40 65.53

14.50 2.34 68.80

Financial Services amZ ventures a arif Habib Invesxd arif Habib ltd. dawood equities Invest & Fin.Sec.

0.32 15.89 17.96 0.88 7.26

0.35 15.50 18.34 1.09 7.26

0.22 14.89 17.20 0.86 7.25

Equity Investment Instruments 1st.Fid.leasing mod 1.70 al-noor modarxd 3.98 allied rentalmodxdxb 19.90 atlas Fund of Fund 6.00 b.F.modarabaxd 5.56

1.50 4.00 19.90 6.10 5.56

1.50 3.60 19.88 5.90 5.00

1.50 4.00 19.90 5.90 5.56

-0.20 0.02 0.00 -0.10 0.00

15,000 25,100 3,700 414,000 7

13.40 31.79 34.00 31.00 15.80 69.99 1.59 70.80 113.14 6.99 4.00 8.55 25.00 62.32 135.00 28.05 15.25 7.48 1.90 17.55 20.00 17.75 1.70 67.01 27.10 1.67 10.94

13.50 31.79 34.00 31.00 15.80 70.00 1.63 70.80 115.96 7.72 4.57 8.72 25.00 62.39 140.00 28.10 15.93 7.96 2.01 17.64 20.05 17.75 1.70 68.79 27.10 1.69 10.99

-0.06 0.00 -1.28 0.00 -0.22 0.00 -0.02 0.00 0.00 -0.12 -0.03 0.47 0.00 -3.21 0.00 -0.44 0.53 -0.52 0.09 -0.16 -0.25 -1.00 0.64 -1.07 0.09 -0.01 -0.04

126,503 453 2,400 263 12,200 2,302 512,771 13 190 200 2,615 10,002 200 204,001 2 506 12,944 1,099 47,263 49,080 27,230 599 1,000 2,646 1 198,697 101,938

Miscellaneous Century paper pak paper prod. Security paper pakistan Cables p.n.S.C.xd pak.Int.Con. Sd trG pakistan ltd. murree breweryxdxb Shezan Inter.xd Hala enterprise pak elektron ltd. tariq Glassxd Grays of Cambridge pak tobacco Co. philip morris pak. Shifa Int.Hospitals Hum network xd media times ltdxr p.I.a.C.(a) Sui north Gasxdxb Sui South Gasxdxb american life east West life assur eFu life assur akd Capital ltd.xd pace (pak) ltd. netsol technologies

13.56 31.79 35.28 31.00 16.02 70.00 1.65 70.80 115.96 7.84 4.60 8.25 25.00 65.60 140.00 28.54 15.40 8.48 1.92 17.80 20.30 18.75 1.06 69.86 27.01 1.70 11.03

13.65 32.65 36.49 32.55 16.00 71.00 1.74 72.24 118.50 7.72 4.84 8.80 25.00 62.39 140.00 29.88 16.00 9.48 2.14 17.99 20.70 17.75 1.70 69.20 27.95 1.82 11.10

Mutual Funds fund alfalah GHp Cash Fund askari Islamic asset allocation Fund askari Islamic Income Fund askari Sovereign Cash Fund atlas Income Fund atlas Islamic Income Fund atlas money market Fund atlas Stock market Fund Crosby dragon Fund

offer 501.2900 114.7196 103.6501 100.6900 519.3500 519.0900 516.9700 453.1500 82.9800

repurchase 501.2900 111.8516 102.6136 100.6900 514.2100 513.9500 516.9700 444.2600 81.3500

nav 501.2900 111.8516 102.6136 100.6900 514.2100 513.9500 516.9700 444.2600 81.3500

fund Hbl money market Fund Hbl multi asset Fund Hbl Stock Fund IGI Income Fund IGI Stock Fund JS principal Secure Fund I JS principal Secure Fund II kaSb Cash Fund lakson equity Fund

offer 100.2768 87.0103 97.6745 101.8987 112.3545 121.5000 104.1200 0.0000 106.3763

repurchase 100.2768 85.3042 95.2922 100.8898 109.6141 111.5200 96.5000 0.0000 103.2779

nav 100.2768 85.3042 95.2922 100.8898 109.6141 117.3900 101.5800 100.1087 103.2779

Profit 7 pages_Layout 1 11/17/2011 1:29 AM Page 7

Thursday, 17 November, 2011

they (banks) should keep it (nPls) below five percent preferably between three to four per cent of their net loan



Dr ishrat hussain

1st Quarter fiscal year 2012

NPL’s of banks, DFIs skyrocket to Rs629.55b KARACHI



hE bad debts of banks and development financial institutions (DFis) have increased to an alarming level of 6.53 per cent of their total advances.

exorBitant increase according to data released by the State Bank, during first quarter of the current fiscal year, July-September FY12, the Non-Performing Loans (NPLs) of banks and DFis skyrocketed to rs629.555 billion. The central bank had calculated these bad debts at rs591.226 billion during the last quarter ending on June 30, 2011. The economists believe that such an exorbitant growth in the banks’ NPLs might not be a good omen for the country’s businesses.

alarM Bells Dr ishrat hussain, former Governor State Bank of Pakistan (SBP), says the net NPLs to the banks’ total liabilities should not swell beyond 5 percent. “This is not good. They (banks) should keep it (NPLs) below five percent preferably between three to four per cent of their net loans,” the economist told Profit. The State Bank figures reveal that during the said quarter the banks’ net NPLs to their net credits swelled to 6.53 per cent against 5.48 per cent of the last quarter.

cash recovery on Decline During the review period, the DFis saw their NPLs increasing to rs16.336 billion against rs15.378 billion of last quarter, the bad debts of banks surged by rs37.37 billion. The banks’ NPLs, exhibiting an upsurge of 6.4 per cent, climbed to rs613.219 billion compared to last quarter’s rs575.848 billion. The cash recovery against the NPLs also shows a negative trend and dipped by 20 per cent or rs3.458 billion as the banks and DFis’ could recover only rs13.779 billion against rs17.237 billion of the previous quarter.

Inflation outpaces income growth rate

‘not gooD’


The banks recovered rs13.657 billion against rs17.007 billion, the commercial banks rs12.736 billion against rs14.471 billion, the public sector banks rs2.134 billion against rs2.463 billion, the local private banks rs10.476 billion against rs11.841 billion, the foreign banks rs126 million against rs167 million and the specialised banks could recover only rs921 million against rs2.536 billion during the quarter in review. Former SBP Governor Dr ishrat hussain views that the five plus per cent growth in the bad debts was “not good”. The ex-central banker said the banks should maintain the ratio of their bad debts between three to four per cent of their net lending.

rescheDuling loans “The banks should do more provisioning,” said Dr ishrat, who is currently the dean and director of the institute of Business administration. The analysts also cite a higher cost of interest rate and double-digit inflation that, they opine, have taken a toll on the borrowers’ ability to pay. The analysts said owing to their inability to repay many of the businessmen were asking the central bank to reschedule their loans for at least one to five years against the regulator’s two-year extension.




Er capita income over the last ten years has increased, but it is far less than rate of inflation. Therefore, it has resulted in low access to food for people of the country. Data available with Profit reveals that rate of income growth remained considerably lower than inflation rate. This in turn has created huge problems for masses and is also creating problems for food access. Economic access to food is largely determined by purchasing power of people, which is decreasing day by day. With inflation outpacing growth in income, access to food has become further difficult for people. according to World Bank report, there is no doubt that per capita income i.e. purchasing power parity (PPP) has increased in Pakistan since

Prevailing trend to have disastrous impact in near future

2000 from $1,690 to $2,680 in 2009 but at the same time inflation grew rapidly. it is pertinent to mention that in inflation trend, inflation of food items remained high as compared to general inflation, which is also an alarming sign for policymakers. in majority of years, rise in income was outpaced by inflation, thus causing decrease in real purchasing power. Simultaneously,

Breather in terMs of liQuiDity analysts said in a country like Pakistan all businesses are “highly leveraged” requiring more liquidity to clear the previous business loans through selling the bought goods. “This phenomenon was building up over the time. The first indication towards this collapse had come in april 2005, but no one heeded that,” said an analyst. he said an “effective” legal system, providing for the extension of fresh liquidity to the businesses to provide it with a commercial breather, would help the country rid the ever-increasing NPLs.

unemployment rate has increased gradually over the years and in 2008 it touched 5.7 per cent. inflation rates remained below double digits till 2007 but later on there was a sharp increase and crossed even the 20 per cent mark in 2008. Disaggregating inflation into food and non-food categories reflects that food inflation remained far more than non-food inflation thus highlighting concern for food access in recent years. recent increase in inflation was due to certain reasons including poor governance, which increased smuggling, hoarding and profiteering resulting in artificial shortage and increase in prices. Lack of marketing and shortage of storage facilities have also contributed to demand push inflation. Economists believe that if current trend prevailed then it would be very dangerous in coming years and would cause poverty and low access to food for masses.

economic reforms necessary to eliminate grip of market forces: us g

Kse board calls eogM to extend the board’s tenure to two years g Market participants, aKD and arif habib groups are controlling affairs of stock exchange KARACHI



NiTED States has stated Pakistan must legislate on tax collection to increase its revenues in addition to quickly withdrawing power subsidies that were draining the cash-strapped government’s budget. Pakistan’s non-NaTO ally in the global war against terror warns that market forces would dictate matters unless government of Pakistan necessitates economic reforms in the crises-hit country. Further, US said the Obama administration was “quite aware” of the “frustration” being caused to islamabad by issue of market access to Pakistani products in america and was committed to development of reconstruction Opportunity Zones (rOZs) in the terrorism-hit country. Washington is appreciative of the ongoing Pak-india dialogue on increased economic connectivity that, US consul General in Karachi William J. Martin said, would benefit entire South asian region. “Pakistan must work quickly to fix the energy sector by eliminating govern-

ment subsidies that drain the government budget,” american consul general stated during his meeting with young Pakistani entrepreneurs at Federation of Pakistan chambers of commerce and industries (FPcci). “We know that Pakistan’s industrial sector has been hard hit by crippling electricity and gas shortages,” said Martin who was earlier welcomed by FPcci vice president Khalid Tawab at Federation house. counsel General said the present predicament, nevertheless, provided opportunities through which governments in Washington and islamabad and private sector could work together. “We are funding studies on power generation and distribution. Our technical experts are working closely with Pakistani officials on practical steps forward, figuring out how to solve tough problems such as technical inefficiencies, unsustainable tariff structures and power theft. all of these contribute to the energy shortfall,” the consul general said. increasing domestic revenues was another key area consul general dubbed as a “must” for islamabad to address. “You know well that the government

spends more than it collects. as businessmen you know that this is unsustainable,” Martin said. The american official agreed that raising taxes in any country, including his own, was a political challenge. But, the alternative was even less attractive, he viewed. he further added that adding tax collection legislation was critical to provide future governments services that would help private sector grow and create jobs. “inevitably, market forces will necessitate economic reforms,” consul general warned. about Pakistan’s longstanding demand for market access, Martin said his government was quite aware that improving market access for Pakistani products could have “a much bigger impact” on economic development in Pakistan than any assistance programme from US government. “i know that market access remains an area of frustration,” he conceded, saying President Obama was committed to rOZs in Pakistan, creation of which would allow goods produced in those zones to be exported duty-free to the US. he said the US was Pakistan’s largest source of Foreign Direct investment. Pakistan enjoys a significant trade

surplus with US. The US official, however, hinted at diversification of mutual Pak-US trade that was by and large restricted to textile sector. “We believe that for trade to grow, it must be as broad based as possible and not limited to any one sector,” the consul general said. he complained that though his government was actively promoting american investment in Pakistan, particularly in the energy sector, islamabad was delaying the approval of proposals jointly floated by the US-Pak companies. “american and Pakistani partner companies have proposals pending with the Government of Pakistan to build plants to import Liquefied Natural Gas (LNG),” he said. about the ongoing Pak-india trade talks, Martin said Washington was committed to promoting concept of a “New Silk road” to forge stronger regional ties between Pakistan and its neighbours. “Lasting stability and security go hand in hand with economic opportunity,” he quoted US Secretary of State hillary clinton as saying. “We are very encouraged by the ongoing dialogue between Pakistan and

india on trade issues.” “New Silk road” vision, consul general said, meant upgrading facilities at borders crossings, removing bureaucratic barriers to free flow of goods and people, and casting aside outdated trade policies. “The entire region will benefit from increased economic connectivity,” he said. Earlier, FPcci VP Khalid Tawwab and other entrepreneurs asked consul general for a level playing field for the war-torn country’s export produces in american and international markets. “Give us market access, give us trade like you are giving to Mexico and other countries,” said an entrepreneur. Khalid urged need for Pak-US economic cooperation to bail out crisis struck railways sector in Pakistan. counsel General was positive when a young entrepreneur proposed setting up of a US-funded Business Support Fund for the local businessmen. responding to a query, the consul general said building power plants was futile when the government was lacking the will to charge consumers for electricity. “if you don’t charge for your products it does not matter how modern you are,” he concluded.

Profit 17th November, 2011