Sunday, 11 November, 2012
Afghanistan beckonsIndia’s businessleaders to invest Afghanistan is “ripe and ready” forIndian investments in mining and othersectors, President Hamid Karzai toldbusiness leaders in Mumbai on Saturdayat the start of a trip to woo investors forhis war-ravaged country
MUMBAI
AGENCIES
“We’d like to welcome you with a red carpet,but you need to arrive at the red carpet,” hetold delegates at an Indian industry event inthe financial capital. “What I’d like toemphasize in particular is that Indianbusinesses need not be shy when thinkingabout Afghanistan. The Chinese businesseswere there long before you came, five or sixyears before.” India has invested billions ofdollars in Afghanistan since the Talibanregime’s ouster in 2001 and has urged privatefirms to invest there, though many havemisgivings about the security climate after2014, when most foreign troops will leave.China is also looking to tap intoAfghanistan’s mineral reserves. A consortiumled by state-firm Steel Authority of India lastyear won the rights to develop a huge iron oredeposit in central Afghanistan and a nearby 6million metric ton steel plant at a cost ofaround $11 billion. China won a huge copperconcession not far from Kabul, as well as oilblocks in the north. However, both Asiangiants have been held back in Afghanistan bysecurity concerns as well as poorinfrastructure in the landlocked,mountainous country. India also has to treadcarefully in Afghanistan because of thesuspicions of arch-rival Pakistan, which seesNew Delhi’s expanding role in its neighbor asa move to encircle it. Indian Commerce andIndustry Minister Anand Sharma told themeeting with Karzai that New Delhi wouldlook at engaging with Kabul to developinfrastructure such as highways, powerprojects, Chahbahar port and energy security.
ISLAMABAD
APP
FEDERAL Minister for Fi-nance, Dr Abdul HafeezShaikh said on Fridaynotwithstanding eight biginherited challenges, the
government’s prudent polices broughtabout macroeconomic stability, re-duced inflation to single digit, main-tained fiscal discipline, created jobs,doubled revenues and bolstered thevulnerable segment of the society.
The government focused on soundmonetary policy to bring down infla-tion rate and ensured fiscal disciplineby taking austerity measures, he saidwhile talking in a talk show on Pak-istan Television.
The inflation rate has been re-duced from the peak 25 per-cent in 2008 to 9 percentnow, which he de-scribed as a greatachievement of thegovernment.
On the otherhand, the govern-ment implementedfiscal disciplinewhich is evidentfrom the fact thatas compared to 10-11 percent increasein inflation rate, thefederal governmentexpenditures have
gone up by just 6 percent while that ofprovinces increased by 21 percent.
These expenditures included de-fence, payback loans and civil govern-ment expenditures, which he saidremained stagnant at Rs 200 billion.
Giving details about the perform-ance of revenue collection system, thefederal minister said that the tax col-lection has been more than doubledfrom Rs 1000 billion to Rs 2300 billionduring the past four and a half years.
The Federal Minister for Finance,Dr Hafeez Shaikh said the tax collec-tion ratio has increased by 21 percentas Rs 350 billion additional revenueswas collected in the financial year 2011-12. The government is following thestrategy of self-dependence and in thisregard more and more new tax payers
are being brought undertax net.
He said therewere some sec-
tors whichwere enjoy-
ing zerorating facil-ity but havenow beenb r o u g h t
under tax. D r
H a f e e zShaikh said
the people whoare not paying
their due taxes
and non-filers will be brought undertax net, whereas the people who are al-ready paying their taxes are being fa-cilitated by reducing tax burden onthem. “In the current fiscal year’sbudget, we have done away with manytaxes and tax slabs have also been re-duced to benefit the tax payers”, he re-marked. He said that this year, thefocus would be on expanding incometax base while the government duringthe past year had focused on sales taxand had brought about many changesin the overall taxation system.
On the other hand, the borrowingsof the government have also reducedas compared to its income, he said andadded the country’s income was Rs10,000 billion four years ago, which isnow Rs 20,000 billion.
“If borrowings have increased, theincome has also increased,” he saidand added that the government cannotborrow more than 56-60 percent of theGDP. The government did not forgetthe poorest of the poor as three mil-lion vulnerable families were providedsocial safety net under Benazir IncomeSupport Programme (BISP) for whichthe country is being appreciated theworld over, he said adding the pro-gramme would help empower women.
The federal minister said that theoverall growth rate decreased by 2 per-cent due to floods which caused dam-age amounting to 10 billion dollars.
However, he maintained that theeconomic expansion has been reducingall across the globe. Citing example ofIndia’s growth which is forecast to re-main under 5%, with China 6%, Eu-rope and the United Kingdom innegative while the United States 2%.He said that the government has regu-larized 3,000 contract governmentemployees and reinstated 30,000 em-
ployees. He said that the govern-ment has launched about 650
projects worth Rs 3000 bil-lion during the past fouryears which created jobsand would help in the overall development of thecountry. Talking about the
challenges of food secu-rity, he said that Pak-istan has been far better
than many countries inthis sector.Going back to the past, the FinanceMinister said, when the present gov-ernment came into power, the eco-nomic growth momentum was sloweddown while the GDP was at 2% in2008 with inflation touching the high-est 25%.The country’s stock marketwas almost closed while there was bigburden on current account and fiscaldiscipline and the foreign exchangeswere reduced as low as $ 5 billion.
The value of rupee was also depre-ciated from Rs 60 to Rs 80 against dol-lar while there was no increase inelectricity generation capacity andabove all the law and order situationwas deteriorated.
It was this situation when the gov-ernment had to take hard decisionsand go to International MonetaryFund for loan under a standby agree-ment. Dr Hafeez Shaikh said thathuman resource development, exportcapabilities and private sector growthwere imperative for growth and aboveall, the rule of law was most importantto ensure growth and stability.
Dr Shaikh said that the govern-ment had laid down strong founda-tions for the prosperous future ofPakistan and “new Pakistan is emerg-ing.” Institutions are independent intheir domain as the Bank of
Pakistan, Securities and ExchangeCommission of Pakistan, Competitionof Pakistan, Courts and other institu-tions including media are independentwhich is a positive development to-wards bright future.
He said that democracy is back ontract, Constitution has been restored,parliament is strengthened, provinceswere made autonomous and a goodpolitical culture has been createdwhere institutions work in their re-spective domain. The finance ministertermed the 18th Amendment and Na-tional Finance Commission award astwo historic decisions of the presentgovernment, which would help build aprosperous Pakistan.
The federal minister for Financesaid that although the responsibilitiesof provinces have increased as the fed-eral government has provided Rs 5000billion to them to manage their affairs.
NEW YORK
AGENCIES
The U.S. dollar and the yen advanced,while the Australian dollar weakened, asinvestors shed growth-linked currenciesin favor of safe havens.
Growth in Germany, Europe’slargest economy, is likely to slow in thefourth quarter and the first threemonths of 2013, the Economy Ministrysaid. Industrial production in France,Europe’s second-largest economy,shrank in October and the country’scentral bank said it expected to slip intorecession at the end of 2012.
“It’s the core Europe now, not just theperipheral Europe, that may be slidinginto a recession,” said Boris Schlossberg,managing director of FX Strategy at BKAsset Management in New York. “If thathappens, then China will lose its exportmarket and the whole global economywill begin to contract.”
“The market is really afraid that Eu-rope could drag the whole global econ-omy down.”
The euro fell as low as $1.2688 onReuters data, the weakest since Septem-
ber 7, and was last down 0.27 percent at$1.2710. It also hit a one-month low of100.38 yen and was last down 0.32 per-cent at 100.94 yen. Traders said the eurocould target the 100-day moving averagearound $1.2636 and the September 7low of $1.2625.
“There has been a rather poisonouscocktail that is dragging the euro downwith weak European numbers today andrenewed fears of the euro zonecrisis with Greece back onthe agenda,” said ArneLohmann Rasmussen,head of FX strategy atDanske markets. “Wewould not be surprised ifwe saw the euro drop to the $1.25level within the next three to fourweeks.” Investors were also nervousahead of a Greek vote on Sunday onthe country’s 2013 budget, the next bighurdle towards unlocking access to ur-gently needed international aid afterWednesday’s tight vote in favor of an aus-terity package worth 13.5 billion euros.
However, euro zone finance ministerswere unlikely to sign off on the nexttranche of aid for Greece at a meeting on
Monday, according to a senior EU offi-cial. Uncertainty over whether Spain willapply for financial aid also cast a shadowover the euro. Such a move would allowthe European Central Bank to buy itsbonds and lift the euro. Spain has so farresisted asking for aid. The prospect of
ECB support has driven its borrowingcosts down and it has met its 2012 bondissuance target. “We are looking at agame of chicken between Spanish PrimeMinister Mariano Rajoy and the bondmarkets for looking at a bailout,” saidJohn Hardy, FX strategist at Saxo Bank.DOLLAR STRENGTH: As the euro
wilted, the dollar’s index against abasket of currencies .DXY rose 0.30
percent to 81.037, havingearlier risen to 81.087, atwo-month high.
Worries over a looming“fiscal cliff” for the
United States, whichcould trigger tax
rises and spend-ing cuts if unre-
solved, was likely toprompt investors to
buy the safe-haven dol-lar. But for now, Europe re-
mains a bigger worry, someanalysts said.
“I think everybody under-stands and appreciates that
if there won’t be any kindof a compromise, there
will be some sort of a delay,” BK AssetManagement’s Schlossberg said, refer-ring to the U.S. fiscal cliff. U.S. PresidentBarack Obama, fresh from his re-electionvictory over Republican candidate MittRomney, called on the U.S. Congress tomeet with him next week to work out acompromise budget plan to avoid the“fiscal cliff.”
Obama insisted any plan would re-quire a tax increase for the very richwhile John Boehner, the RepublicanSpeaker of the House of Representativesrepeated his party’s commitment not toraise anyone’s tax rates as part of a dealto address the fiscal crisis. The dollar fellto a three-week low of 79.06 yen, beforerecovering to 79.42 yen, little changed onthe day. Data showing U.S. consumersentiment rising to its highest level inmore than five years boosted stocks andTreasury yields, helping the dollar re-bound against the yen. The Australiandollar lost 0.11 percent to $1.0388. TheSwedish crown weakened against theeuro and the dollar as industrial outputsaw its largest fall for more than threeyears. Analysts said this raised expecta-tions of a rate cut in December.
‘We dragged the economyout of a veritable quagmire’
Euro at two-month low versus dollar on European growth concerns The euro dropped to a two-month low against the US dollar and could extend losses further as fears mount that the euro
zone’s debt crisis and deteriorating economic conditions could drag down global economic growth
PRO 11-11-2012_Layout 1 11/11/2012 12:14 AM Page 1
02
Sunday, 11 November, 2012
Business
NEW YORK
AGENCIES
With $600 billion in tax increases andautomatic spending cuts due to takeeffect in January, investors say theywould welcome an agreement thatdelays most changes until Congress
can hammer out a long-term deficit reduction deal inearly 2013.
“At the very least, I would like to see some kind ofconciliatory rhetoric on both sides of the aisle to give in-vestors assurance that a grand deal is coming,” said JackAblin, chief investment officer at Harris Private Bank.
Without that, things could get ugly in markets. U.S.stocks accelerated a recent losing streak in the days fol-lowing this week’s election, in which voters returnedPresident Barack Obama to the White House but left Re-publicans in command of the House of Representativesand Democrats controlling the Senate. That same combi-nation dragged out long negotiations over raising thedebt ceiling in August 2011.
In President Obama’s first public statement since theelection on Friday, he reiterated his demand to raise taxeson high earners. Earlier in the day, Republican HouseSpeaker John Boehner restated his opposition to such amove. “What that means is that fiscal cliff negotiations arepicking up exactly where they left off,” said Ward Mc-Carthy, chief financial economist at Jefferies & Co. “Fastenyour seat belt, it will be a bumpy end of the year in Wash-ington.” A majority of economists polled by Reuters saidconsumer and business confidence would wilt and theeconomy suffer if talks to head off the budget crisis collapse.
The Congressional Budget Office has warned thatsailing over the cliff would trigger “a significant reces-sion” and the loss of about 2 million jobs.NO RETREAT, NO SURRENDER: Worries about thedanger the fiscal crisis poses for the U.S. economy putglobal stocks on track for their worst week since June.
The main sticking point is taxes: Obama wants toraise rates on households earning more than $250,000
while Republicans want to focus on spending cuts, sayingtax hikes would hurt growth.
On Friday, it did not seem either side was ready to givein. Obama said he was “open to compromise” but said amajority of voters agreed with having the wealthiest Amer-icans pay more. Boehner restated his opposition to raisingtaxes on the rich, saying it would depress hiring andgrowth. In 2011, a similarly divided government’s failureto agree on deficit reduction set up the fiscal cliff show-down the economy now faces. It also provoked Standard& Poor’s to strip the United States of its coveted AAA creditrating and pushed the CBOE Volatility Index, Wall Street’sgauge of investor anxiety, to levels associated with panic.
As Congress has punted on the hard decisions, thenumbers have hardly changed: Federal red ink is ex-pected to be more than $1 trillion in 2012 for the fourthstraight year. James Dailey, portfolio manager at TEAMAsset Strategy Fund in Harrisburg, Pennsylvania, worriesthat investors who were complacent about the risks be-fore the election may rush for the exit if it seems the econ-omy is going to fall over the cliff.REASON TO HOPE: The issue is of such concern toinvestors because the U.S. economy has outperformedother developed economies and has shown signs of im-proving further. Recent U.S. economic data, includinga survey showing consumer confidence hit a five-yearhigh this month, has been encouraging. “There’s a lotat stake, and there’s a lot of momentum that could belost if lawmakers don’t get their act together,” said JoeManimbo, analyst at Western Union Business Solu-tions. Some are hopeful a deal can still be reached. TheCBO said this week that letting income tax rates risefor households earning more than $250,000 - a stapleof Obama’s re-election campaign - would have little im-pact on the economy. Not all investors disagree, assome interviewed in recent weeks said they would bewilling to pay more taxes if it helped balance the coun-try’s budget. Some, like Vassili Serebriakov, a currencystrategist at BNP Paribas, also said a deal could proveeasier to reach now that Obama is no longer runningfor re-election.
NEW YORK
AGENCIES
Stocks later trimmed gains after Presi-dent Barack Obama said any deal withCongress to avert a fiscal crisis mustcome with higher taxes on the wealthiestAmericans.
U.S. Treasury bonds cut losses totrade almost flat on Obama’s remarks, inwhich the newly re-elected president in-vited congressional leaders to the WhiteHouse next week to start negotiating.
The so-called fiscal cliff, aimed at cut-ting the federal budget deficit, could takean estimated $600 billion out of theeconomy in automatic spending cuts andtax hikes, severely hindering economicgrowth. “Clearly taxes are going up andthat is something the market doesn’t like.There is concern the economy continuesto weaken, and there is not much left inthe tank in terms of making corporateprofitability better,” said Stephen Mas-socca, managing director at WedbushMorgan in San Francisco.
The surprisingly strong sentiment
survey showed American consumers feltmore optimistic about employmentprospects and the economic outlook, ac-cording to a Thomson Reuters/Universityof Michigan index, easing the gloom fromEurope. The MSCI world equity index.MIWD00000PUS has lost more than 2percent since Monday and looked set toclose on Friday with a weekly decline thatwould be the steepest since June. Theindex was little changed at 323.37.
In late trading, the Dow Jones indus-trial average .DJI was up 12.65 points, or0.10 percent, at 12,823.97. The Standard& Poor’s 500 Index .SPX was up 4.39points, or 0.32 percent, at 1,381.90. TheNasdaq Composite Index .IXIC was up14.63 points, or 0.50 percent, at2,909.99. European shares provisionallyended flat, paring losses on the U.S. data,which included a government report thatwholesale inventories rose in Septemberby the most in nine months. Inventoriesare a key element in the government’smeasure of economic growth.
The FTSE Eurofirst 300 index.FTEU3 of top European shares closed
down 0.05 percent at 1,097.18 after trad-ing higher briefly before the market’sclose. Falling industrial output in France,Italy and Sweden and a warning from aGerman ministry that Europe’s largesteconomy was expected to slow furtherrattled investors.
Also weighing on investors was newsthat euro zone finance ministers are un-likely to release a new tranche of loans toGreece on Monday because there is noagreement on how to make its debt sus-tainable. “It’s the core Europe now, notjust the peripheral Europe, that may besliding into a recession,” said BorisSchlossberg, managing director of FX
Strategy at BK Asset Manage-ment in New York. “If that hap-pens, then China will lose itsexport market and the wholeglobal economy will begin tocontract.
“The market is veryafraid that Europe coulddrag the whole globaleconomy down.”
Oil pushedhigher inc h o p p y
trading, lifted by the improved U.S. con-sumer sentiment and Chinese data indi-cating a strengthening economy.
U.S. crude futures gained 98 cents tosettle at $86.07 a barrel, while Brent fu-tures settled $2.15 higher at $109.40 abarrel.
The euro dropped to a two-month lowagainst the U.S. dollar and could extendlosses as fears mount that the euro zone’sdebt crisis and deteriorating economicconditions could drag on global economicgrowth. The euro was down 0.23 percentat $1.2715 and was seen vulnerable to fur-ther losses. The dollar index .DXY rose0.3 percent to 81.014.
Gold hit a three-week high of$1,738.66 an ounce before pulling backslightly. Spot gold prices rose 97 cents to$1,730.90.
Prices of safe-haven U.S. Treasuriesslipped as stock gains sparked by im-proved consumer sentiment whettedinvestors’ appetite for riskier assets.
The benchmark U.S. Treasury 10-year note fell 1/32 in price to yield
1.6148 percent.
ISLAMABAD
APP
The Islamabad Chamber of Commerce and In-dustry (ICCI) here Saturday stressed the needfor equipping the new generation with mod-ern education and technology to ensure sus-tainable economic stability in the country.
President ICCI while talking to a delega-tion of Pakistan Computer Association (PCA)led by its President, Munawar Iqbal said thatInformation Technology (IT) was one of theareas that can offer enormous opportunitiesfor creating countless jobs, thus governmentshould give attention to promote and capital-ize this potential. Bakhtawari said that by tap-ping full potential of IT and
Software products, Pakistan could alsograb a substantial share in the internationalIT market and enhance its exports as well.
He said USA, Canada, Middle East,Malaysia, UK and other countries greatly de-pend on IT as its usage could enhance the per-formance of almost every sector of economyby improving business processes, cutting costsand increasing productivity.
ICCI President said that that there wasdire need to improve the export of software
products, adding that the neighbouring coun-try India was exporting software productsworth of $69.1 billion while Pakistan’s exportof software products stood less than $2 bil-lion. He said that modern education requirescomputers but poor students could not affordto buy a computer and advised the banks togive soft loans to needy students to ensuregood quality of education. Bakhtawari saidthat over the last two decades IT sector hasemployed over half a million youngsters in dif-ferent capacities ranging from software devel-opers, hardware engineers, Call Centreoperators and cable handlers etc.
He added that it has still great potential toassimilate another half a million youngstersimmediately with serious efforts of the gov-ernment policymakers. He stressed upon thegovernment to take measures for enhancingeducational enrollment and particularly ITtraining capacity of the citizens to promote ITculture and improve the competitiveness ofPakistani software products and exports.
Arshad Mehmood, General Secretary PCA,Abdullah Malik, President and Javaid Iqbal,General Secretary of Pakistan Computer Asso-ciation Islamabad Chapter were also presenton the occasion.
Wall Street to Washington:Time to compromise on fiscal cliff
US stocks, oil rebound on strong consumer data
Information Technology wouldsolve unemployment: ICCI
Chinese minister warns ofgrim trade situation BEIJING: Chinese Minister ofCommerce Chen Deming onSaturday warned of lingeringpressure on the country’sforeign trade from weak globaldemand, rising domestic costsand growing tradeprotectionism.“The trade situation will berelatively grim in the next fewmonths and there will be manydifficulties next year,” Chen toldreporters at a group interviewon the sideline of the 18thNational Congress of theCommunist Party of China,which opened Thursday.China’s exports rose 11.6percent from one year earlier inOctober, exceeding marketexpectation for a rise of 9 percent and stronger than the 9.9-percent increase inSeptember, according to latest figures from the General Administration of Customs.Imports climbed 2.4 percent year on year last month, unchanged from the growth inSeptember. Despite the recovering export growth, China’s total foreign trade in the first10 months expanded only 6.3 percent from the same period last year. It will be an arduoustask to achieve the annual trade growth target of 10 percent but authorities will continueto work for that end, Chen said. He cited lack of fundamental improvements in globaldemand, rising production costs of Chinese labor-intensive industries and strongerprotectionism sentiment as the main factors dragging down exports. Meanwhile, China’simport growth remains tepid mainly because of lower commodity prices in the globalmarket, Chen said. APP
Investors are looking for a compromise to keep the US economyfrom sailing over the fiscal cliff. It’s just not clear that thepoliticians in Washington are ready to deliver one
US stocks and oil prices gained on a rise in US consumer sentiment to a more than five-year high, outweighinggloom that the ‘fiscal cliff’ in the United States and Europe’s economic woes may lead to a world recession
PRO 11-11-2012_Layout 1 11/11/2012 12:14 AM Page 2
