profit.com.pk Friday, 11 November, 2011Pages: 8

The flat tax debate Page 3Pakistan shipping corporationloses interest in $40 million loan Page 8

OGDC: Zinblock too earlyto determine

KARACHI

STAFF REPORT

in recent days, the Zin block ofthe Oil and gas developmentCompany (OgdC) has been inthe limelight because of the

potential it holds for eliminating gascurtailment, which has crippled thecountry’s industrial activity. it has had a positive impact on stockprice of its operator, OgdC, whichhas outperformed the broader KSE-100 index by 10 per cent in the last6-trading sessions. “Though it is high profile, wecontinue to flag that it is aspremature to coin Zin as a successstory on account of field not enteringthe final testing stage,” viewednauman Khan of Topline Securities.On the other hand, the analyst saidvolumetric impetus to OgdC’s FY12growth story comes fromcommissioning of long-awaited KPd-TaY integrated and Sinjhorodevelopment projects along withaugmented production flows fromnaspha and Tal blocks. He said therecent price rally had already factoredin the likely increase in thecompany’s profit in FY12 along withthe news of Zin discovery. as per latest Pakistan Petroleuminformation Services (PPiS) report,OgdC has reached the target depth ofthe exploratory well of the highlyanticipated Zin Block. Furthermore,because of its close proximity to othermajor gas producing fields like Sui,Kandkhot and Uch, hopes were highof a potentially large size gasdiscovery from the field. “However,we would like to be less optimistic, asthe final testing phase has not beencompleted. and thus, it is prematureto dwell on the actual flow size fromthe field.” For this reason, the analystsaid, we had not included anyproduction flow from the block in ourcompany’s valuation. “We believe major price trigger forthe company are commissioning ofstalled developmental programs ofSinjhoro and KPd&TYa. (KunnarPasahki deep – Tando allah Yar).”The 1st stage of both the stalledprojects were expected to come onlineby the third quarter of FY12, whichwould cumulatively add 2,400 barrelper day and 115 million cubic feet ofoil and gas, respectively, to OgdC’sproduction profile, Khan said.

KARACHI

STAFF REPORT

EUrOPEan Union (EU),which is waiting for the ap-proval of the proposed uni-lateral tariff preferences for

Pakistan through getting a waverfrom the World Trade Organisation(WTO), for the last year, has hoped aunanimous agreement on the issuesoon at WTO.

Though the issue was vetoed byBangladesh in recently held sessionof council for trade in goods (CTg)of WTO after india, the EU, appli-

cant of the move, has affirmed thatit would like to consult with allmembers to approve the draft waverin the next session.

according to the report of CTgmeeting held on 7th november, theEU representative said in the meetingthat it has done its best to respond tothe consultations, but it was clear thatsome complexity remained. it wouldlike to consult with members, andhoped for a unanimous agreement assoon as possible.

EU recalled that almost a year agoit tabled its request for tariff prefer-ences for Pakistan to help the country

recover from massive flooding. it hasnow submitted a revised request thattakes into account the systemic con-cerns expressed by several members,and stressed that the measure is fortwo years only. United States and nor-way supported the EU request. Viet-nam said its concerns had beenaddressed in bilateral talks, and that itwas now ready to support the EU re-quest. Morocco said it could supportthe EU request but would have pre-ferred prior consultations with the EUsince the waiver request covers tex-tiles, a capital sector of its economy.

Bangladesh, indonesia, Peru and

argentina said they were still studyingthe revised request, and requestedmore consultations with the EU. Brazilexpressed reservations about the re-quest and asked the EU for consulta-tions on possible effects on Brazilianexports. according to the report, Pak-istani representative informed themeeting that the revised EU requesthas made clear that this waiver wouldnot be a precedent for the future. Thusit had addressed the systemic concernsof some members.

Besides, the council has taken noteof the statements and agreed to revertto this matter at its next meeting. it is

worth mentioning here that, earlierEU had put forward the draft bill inWTO for ‘waiver from gaTT articles iand Xiii’ concerning autonomouspreferences for Pakistan. But no posi-tive development emerged, even aftersix meetings of WTO since the Euro-pean Council in its meeting on 16thSeptember, 2010 decided to grantPakistan special concessions to sup-port its ailing economy in the wake ofdevastation sustained by the unprece-dented floods. The total worth of thesetariff lines was expected to be about$1.03 billion and the average tariff onthese products around 8.86 per cent.

EU hopes unanimous agreement on trade concession to Pakistan

Rebirth of a company:the Wateen story 2

ISLAMABAD

AMER SIAL

Trading Corporation of Pakistan(TCP) has awarded contract for theimport of 215,000 tonnes of ureaeven though the EconomicCoordination Committee of the

Cabinet (ECC) had granted it permission toimport 700,000 tonnes of urea to bridge thedeficit just before the commencement of wheatsowing in the country. an informed source said the red tape has delayedurea imports and the country was facing a difficultsituation. With the start of wheat sowing seasonfrom november there will be an acute shortage ofurea and there will be strong push from officers todo away with all regulatory mechanisms for swiftimports. ECC had directed TCP to import urea onan urgent basis to help growers in sowing theirwheat before the deadline of 15th december. Theurea off-take in the current rabi season isexpected to be more than 3 million tonnes. Thefertiliser companies have low inventory as theyfaced an unprecedented natural gas shortageduring the current year. according to the Sensitive Price index (SPi) thereis an unprecedented increase of 113 per cent inthe prices of urea. The price of urea has risen tors1,770 per bag as compared to rs30 per bag inOctober last year. While there is another 55 percent hike in daP prices which has increased from

rs2,705 per bag last year to rs4,189 per bag inOctober this year. Ureaprices have increasedfrom rs800 per bag tors1,700 per bag overthe last two years ascompared to rs750 perbag increase in the last32 years.Pakistan is faced with a gassupply shortage of 1 billioncubic feet per day duringsummers which mainlyaffected the fertiliserproduction and the shortageexpected to double during thewinters the supply to thefertiliser sector will becompletely cut off for threemonths. The government willbridge the urea deficit byincurring a cost of $400million on importing 700,000tonnes of urea and will have toprovide subsidy of rs26billion on the cost and freightof price of $530 per tonne.TCP had awarded the contract for the import ofurea at $538 per tonne costand freight.The increase in urea

prices and low availability will directly impact itsuse by the farmers. Without a suitable support

price the farmers will nottake risk for using balancedfertiliser, as the high cost ofproduction may not be

compensated through theofficial support price. it is

important to mention that ureais the major fertiliser used byfarmers which meets 46 per centof the nitrogen content. Theindustry estimates 90 per cent ofrecommended urea dosage wasapplied in 2010 which resulted inbumper wheat harvest of over 24million tonnes last year.The country has annual ureademand of 6.5 million tonnes ofurea which could be easily fulfilledby the local fertiliser industryhaving capacity to produce 6.9million tonnes per annumprovided they get feedstock gassupplies. The annual productionfor the current year is estimatedto be 5 million tonnes with anestimated urea shortage of 1.3million. The government has

already imported 500,000tonnes of urea during the

current year.

g Government has already imported 500,000 tonnes of urea during current year

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Friday, 11 November, 2011

02 debate

THE Wateen job turned out to be one ofthose paradoxical interviewassignments that make an editor’s jobextremely difficult and pretty

rewarding at the same time. and in hindsight itwas for the better that this was not our usual‘Lunch with Profit’ outing, or Fujiyama’sinviting sushi would’ve been left feeling just asignored as the latte served at the CEO’s spaciousoffice, and unfairly so. For, no sooner than wepresented the mundane employee turnover,annual losses and company restructuringquestions did Mr naeem Zamindar take us on atangent, only to reconnect with telecomspecifics, associating industry dynamics withwider social currents at play across the world.

ThE TURNAROUND sCRIPTMr Zamindar finds interesting parallels betweenrunning a company relying predominantly oncustomer satisfaction and writing a stage playbanking on audience appreciation. and thescript of this particular narrative is ‘rebirth of acompany’, an ambitious project especially sincethe first edition waseventually discarded bydisappointed users afterbuilding quite a followingin the early chapters.Luckily for the turnaroundman, the breakdown owedmore to generalmismanagement andinability to translate thecompany’s long-termvision well enough forcustomers to stay loyalonce initial rigidities begansurfacing. There weren’ttoo many technicalinefficiencies to speak of,which enabled him to focusmore on identifying and enabling a visionbefitting the outreach of the platform heseemingly volunteered to inherit. it is hardlysurprising that Wateen began going seriouslyastray around the fateful fall of ’08, when macrofinancial contraction compromised the telecomindustry on an international scale. also, muchof its problems were typical of emiratienterprises of the time, name-staffing,ineffective human resource management andvery loose monitoring and evaluation. So asimple return to fundamentals must not havebeen the most demanding task for an industryveteran of 20 years. His touch involves muchfiner details.

FIbRE-OPTIC REvOLUTIONWith innovation increasingly driving the worldeconomy, particularly since the onset of the 21stcentury, fibre-optic technology is at the centreof the revolution integrating the world on anelectronic platform. and with its own cable tv,six channels, longest fibre-optic and satellitenetwork, Wateen is best placed to representPakistan in this ‘new world order’. a grandstrategy envisioning nothing short of totaltransformation of society enabled bytechnological innovation has also been set inplace. all that remains is tacticalimplementation of the newvision, meant to changePakistan forever. On the micro level, thiswill be done in threephases. First, theorganisation willbe made morecustomer-focusedand dynamic,probably areaction toexcesses of thepast that derailed avery spiritedinitiativereachingout intothree

continents. Second, ensuring stable funding willbe crucial. Even as the company turns toprofitability, fine-tuning the balance sheet willtake some time. and thirdly, it will invest insystems, adding value to lives.

IDEAL DEMOGRAPhICs; GENIUs FOR INTEGRATIONit turns out that Pakistan’s current social anddemographic state provides near-ideal ‘labconditions’ for the CEO to experiment hisvision for the company. approximately 60 percent of the population is under 30 years old,the most tech-savvy segment of society. Thisgroup has been at the forefront of thecommunications revolution for more than adecade. in places not much different than ourown country, this group has tapped theinternet’s genius for integration to engineerserious deviations in social, political andhistorical narratives, upsetting a regressivestatus-quo that went back decades. it is thisvibrant portion of the population that will be

at the forefront of the Wateenmiracle, first filling loopholesand overcoming bottlenecks thatretard their progress and thenelevating them to integrate withinternational crosscurrents on anequal footing. One of the mostsignificant features of therevolution will comprise tacklingfault lines in the nationaleducation system, with electronicdevices connected through thefibre optic network making thecurrent paralysed systemredundant. The social spillover ofsuch exercises can be ascertainedto a large extent by linkagesalready formed by the mini

mobile phone revolution of the last decade.

PERsONAL sTORy; ThE ZEN INFLUENCEand here’s the most fascinating part of thisstage play. Enjoying a pretty profitable careeras a venture capitalist riding the dot combubble in silicon valley, Mr Zamindarlearned much from the subsequentmarket crash that decimated financeexecs like himself in the early yearsof the new century. it was then thatthe exercise of finding value andopportunity in debris and collapsefashioned an integral part of hisprofessional outlook. and it was thenthat he associated spiritual lessonsof balance, harmony andassimilation with the graterconscious with the technical nicetiesof the telecom industry. in amesmerising and animatedsermon, Mr Zamindarexplained how spiritualmantra regards thepresent time as afocal point in thelarger narrativeof the world.it

represents a crossroads where human beings asa whole must evolve to a higher paradigm,rendering much of the present system obsolete.For those that fall behind the curve in this epictransformation, the coming half decade or sowill indeed spell apocalypse, those resistant tochange being rubbished to the dustbin of historyforever. He finds the telecom industry at thethreshold of a similar existential evolution. notonly will the sector be at the heart of mankind’soverall transformation to a more efficient andconnected way of living, it will also undergotremendous overhaul itself.

AGE OF AbUNDANCE; INFRAsTRUCTUREAND vALUE ADDITION

The coming era will mark the age of abundanceof knowledge. Machines will continue to getsmarter than humans, and in addition toeducation, mobile technology will take over allfinancial, information transfer andcommunication services. Present systems willno longer matter, unlocking unprecedentedproductive capacity in entire economies. Evenbetter, steps are under way to connect regionalcountries through fibre-optic technology.nature has provided Pakistan with a naturalgeographic lottery. it is the ideal gatewayconnecting many regional economies.Therefore, linkages are being formed with iran,afghanistan, China and india, tapping windfalltransit opportunities in the process.

ThE JObs EFFECTOne of the most interesting themes to come out ofthe brief interaction with naeem Zamindar wasthat technical compulsions of running andmanaging a large entity being one thing, it is theguiding vision that is most important, the restautomatically falls into place once a grandstrategy is finalised and the will to implement itmustered. For making ambitious advances in the

complicated yet fascinatingworld of fibre-optic

technology, he citesthe inspiring

example of perhapsthe greatest techwizard of themall, the late greatSteve Jobs, andtakes a deepbreath, staringinto emptyspace, quotingfrom hisfamous addressto Stanfordgraduates: Stayfoolish, and stay hungry!

ShAhAb JAFRy

NAEEM ZAMINDAR,CEO WATEEN TELECOM

g With an MBa from France’sprestigious inSEad and overtwenty years of progressive workexperience in the field oftelecommunications, Mr naeemZamindar is the charming andvibrant chief executive ofWateen Telecom.

g Mr Zamindar attained hisprofessional certification as apublic accountant from the Stateof Washington, following hisgraduation from the Universityof Texas at austin with aBachelor’s degree in Businessadministration. Mr Zamindarthen joined KPMg Peat Marwickas an auditor, before going on toestablish Comnet, Pakistan’sfirst cable TV operator, in 1992.

g Mr Zamindar’s first foray intomobile telecommunicationscame as a senior manager atMobilink, where he held variousroles, including financialcontroller and head of customerservices. as one of the foundingmembers of Mobilink and its keyStrategy and Businessdevelopment operative, Mr.Zamindar effectivelydemonstrated his leadershiptraits and strategic planningabilities as he propelled thecompany to become the telecomgiant that it is.

g Following his MBa frominSEad, Mr Zamindar joinedSilicon Valley venture capitalfirm inter Capital as a seniorinvestment manager, focusingon fibre optic networks, as wellas WiFi and WiMax. Thisexperience proved invaluablewhen establishing ZamindarCapital, a firm that developedand provided consultativesupport to companies leveragingtechnology to leapfrog socialand economic development.

g Coupled with Mr Zamindar’ssubsequent stint as Mobilink’shead of broadband business,this provided Mr Zamindar withthe strong knowledge base henow brings to Wateen’soperations.

g despite being a savvybusinessman and keenentrepreneur, Mr Zamindartakes an extremely Zenapproach to life. He is thefounder and chairman of thePakistan chapter of The art ofLiving Foundation, a multi-faceted organisation thatpromotes holistic health, andmeditates on a regular basis.

g as an individual who perfectlywalks the tightrope between thefast-paced life of a successfulentrepreneur and the meditativeexistence of a Zen master, MrZamindar is the perfect personto lead Wateen in its mission tobecome Pakistan’s leadinglifestyle company. Mr Zamindarbelieves that the high speedbroadband and modern daytelecommunications have thecapacity to not only connect uswith one another and the world at large, but also toaffect our lives and influencepositive change.

Rebirth of a company: the Wateen story

Technical compulsions ofrunning and managing alarge entity being one thing,it is the guiding vision thatis most important, the restautomatically falls intoplace once a grand strategyis finalised and the will toimplement it mustered

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THErE is a rising crescendo in the USregarding a flat tax system – a policyof income tax which in principle as-sesses a single rate of tax for all –where pundits are criticising this ex-

ercise for its apparent flaw that it increases tax onthe less privileged to reduce tax on the relativelywealthy. However, what we should analyse is thatif flat tax was really a bad idea, then why is it thatso many nations across the globe have worked to

embrace it?When studied in

detail, most countriesthat have managed theflat tax regime mainlyin post communistcountries of EasternEurope, along withmicro states across theglobe, suggest thatthere are three funda-mental reasons fortheir success. Firstlysome states are rela-

tively poor with negligible domestic capital,therefore they choose to drop rates mostly as atool to attract foreign investors. Other countriesare small and inefficient at raising revenue,therefore they cannot afford to employ a progres-sive tax regime. Lastly, some countries have bat-tled with corruption and therefore give the rich arate cut to induce them to pay any taxes at all.

none of these conditions exist for the UnitedStates, therefore it is not clear why a flat tax rateis really needed. Those countries from the postcommunist era that adopted the flat tax regimeincluding Estonia, Latvia, Lithuania, Macedonia,Ukraine amongst others, were lacking in invest-ment capital. in these countries that are compet-ing rigorously for foreign investment, a flat taxregime is a signal to investors that they are wel-come, that they will be allowed to retain their

wealth and earnings. according to an iMF report, flat tax is conse-

quently less effective in countries that have a recordof inward investment and abundance of capital.Therefore, when making an analysis of developedcountries that we use as comparison, the flat taxregime has not been adopted by any and China isno exception in this case either.

Other countries that have adopted the flat taxregime are micro states, including Seychelles, Ja-maica, Tuvalu, Mauritius and others. The only ex-ception to the micro states in this aspect is thestate of Paraguay which adopted a flat tax systemlast year. Therefore, the analysis one can makefrom these cases is that in places where an effec-tive progressive tax system cannot evolve owingto administrative limitations, as is the case withthese micro states, a flat tax regime might actuallymake sense. Countries and states that are largerin size have the ability to design more equitableways of raising tax revenues.

Lastly, as mentioned before, if public institu-tions of a particular country are suffering the rotwhere oligarchs have made a habit of stealing withimpunity, then a good way for the government toinduce the rich to pay taxes would be to introducethe flat tax regime. Therefore in the year 2001, therussians became the first nation to induce the flattax system to overcome the crises of corruption andtax evasion.

What can be understood when studied in detailis that almost in all countries that have adopted theflat tax, government revenues from income taxhave relatively decreased. That is why the adoptionof the flat tax is simultaneously coupled with an in-crease in value added tax rates, something that wasimplemented by Eastern European countries.

Most importantly, it needs to be understoodthat republican presidential candidate HermanCain’s “9-9-9” plan is demanding the implementa-tion of a nine per cent rate of personal and corpo-rate tax, along with nine per cent national sales tax.What we can decipher from this is – something thegods have suspected for a long time now while hop-ing it was not true – that america is now like aschool boy who has run out of luck and pocketmoney, broke, struggling for inward investment, illgoverned, and run by a bunch of self interested oli-garchic bourgeoisie.

The writer is a seasoned banker with morethan 30 years of experience and is currently chief

manager SME bank.

PaKiSTan’S trade concession atthe EU seems an inherent non-starter. Suddenly it seems allthe effort behind cajoling newdelhi into a more

compromising posture, even throwing in theMFn concession for good measure,apparently risks going waste. Whether or notthere have been behind-the-scenesdiscussions between delhi and dhaka,especially since the deal in no way impedesupon the latter’s trade position, is bettertaken up elsewhere in the press. But it bearsnoting that the EU gambit is time bound, andthe more our neighbours delay progress, themore Pakistan loses out, with india perhapsthe biggest winner, MFn and all.

The pitfalls on the trade road ought tohave taught some valuable lessons to ourpolicymakers. Far from the ‘win-win’ euphoriaof the Sharma-Fahim summit, we seem tohave played into india’s hands yet again. This‘one step forward, two steps back’ position issymptomatic of our relations with india of

late. Ever since the Musharraf days, whenCBMs were all the rage, there was alwaysreluctance on india’s side to reciprocate. Eventhe coveted MFn status, which india accordedPakistan way back in ’96, was blunted bydelhi’s carefully crafted non-tariff barriers.

as regards trade, we will move awayfrom puerile concerns once our exportbasket is no longer miniscule. We continueto rely on agriculture and related industry tocomprise the bulk of our revenue base. asthe world moves into production and valueaddition, we are already left far behind in theoverall trade narrative. instead of falling ontime-barred concessions, we must becomeproactive in enhancing export earnings. andthe way to that is through increasedproduction and manufacturing. and for that,the most pressing concern is energyshortfall, which is already largely responsiblefor underutilisation of capacity. Once we areself-sufficient, india and Bangladesh will beunable to exert downward pressure on ourtrade earnings.

Now Bangladesh

A progressiveincrease of taxburden on the poorwhile reducing taxobligations of the rich

The flat tax debate

Javed Gilani

Civil servantsresist cut in perks

Prime Minister Syed Yusuf raza gilani issaid to approve or reject the monetisa-tion package for cutting perks of the civilservants. it is a good step and i am gladthat the government has finally realisedthat other than spending so much moneyon these perks, they can allocate thesame money elsewhere in order to bene-fit Pakistan. But there has to be some-thing done about the politicians etc aswell. How about putting up an estimateof the privileges of the generals andpoliticians? after all, everyone in Pak-istan knows that currently, no one elseother than them is enjoying the most re-muneration and perks.

SAMAn SALeeM

ISLAMAbAd

Pakistan to miss wheat sowingtarget

There has been a great increase in theprices of fertilisers, seeds, electricity andpesticides along with the other inputprices, which is why the farmers are reluc-tant to cultivate wheat. Similarly, the gov-ernment is not even providing enoughsubsidies and high wheat support pricesto the farmers, which is why the farmersare facing a lot of losses. These subsidiesare without any doubt, going to the pock-ets of the ministers. if the governmentdoes not take immediate steps then we arevery much likely to face a wheat produc-tion shortfall and the farmers will surelymiss out on the wheat sowing target. it istime the government makes an efficientand effective plan to aid the farmers.

SAjjAD ALI

kARAchI

E D I T O R I A L

Leasing in Islam

THE baseline rule in shari'ais that only those assets thathave an inherent usufructcan be leased with the con-dition that the leased asset

is used only for shari’a compliant activities.according to jurists, the lessor and lesseemust agree on the lessee benefiting from theusufruct and that the leased asset must havethat usufruct. according to the Shafi'i schoolof thought, it is not sufficient to agree uponbenefiting from the inherent usufruct of theasset, rather they require further specifica-

tions as to what extent and what manner thelessee may benefit.

imam abu Yousuf and some laterHanafis are more liberal when it comes tothe conditions of a lease. according to them,the two parties can lease an asset as long asit has a usufruct, without having to specifyin detail its exact usage. There are two leas-ing-based contracts under use in contempo-rary islamic banking & finance: ijara andijara wa iqtina'.

it is preferred that the lessor must havethe asset to be leased at the time of enteringinto the lease contract. However, this is onlya preference and not a strict requirement, asit is acceptable for someone to enter into alease agreement with another party before itacquires the asset to be leased. However, itis required of the lessor to acquire the assetbefore the actual lease period starts andmake it available to the lessee.

The issue of possession may follow fromownership but it is possible for someone tolegitimately possess an asset. For example,

an agent may hold an asset on behalf of aprincipal who has instructed him to lease theasset to a third party. The baseline rule isthat the lessor must possess the asset to beleased before the actual lease period starts,whether as a principal or an agent or even insome other cases.

There are many Western-educatedMuslim economists who argue that interestis nothing but rent for renting money tosomeone for a specified period. as leasing orrenting is acceptable in islam, so should bethe lending of money for a return. This rea-soning is based on a lack of understandingof the treatment of leasing in islam.

applications of leasing in modern is-lamic banking and finance are abound. On aretail level, some islamic banks offer auto fi-nancing on the basis of leasing. There aresome leasing-based home financing prod-ucts as well. The most widely practiced useof leasing in capital markets is that of a leas-ing-based sukuk.

While all these products broadly follow

shari'a requirements,there is one area thatneeds re-thinkingand improvement, i.e.with regards to theresponsibility of on-going maintenance ofthe leased asset. in order to understand thispoint more adequately, we may use an ex-ample.

a bank buys a car from the market forthe price of £50,000 and leases it to a clientfor a period of five years for a monthly rentalof £1,000. if this lease is part of a hire pur-chase deal, then the bank must undertakesto sell the leased asset to the lessee for anagreed price once the lease period has lapsedand the lessee has fulfilled all its obligations.The lessee in turn undertakes to purchasethe car for a price, from the lessor if the for-mer is in breach of the lease contract duringthe lease period. The price is normally de-termined by a formula based on theamount outstanding in favour of the lessor

pursuant to the lease agree-ment and a profit margin.

during the lease pe-riod and before the leasedasset is sold to the lessee,the responsibility of main-tenance remains with the

owner. However, in practice this is givento the lessee by way of a service agree-ment between the lessor and the lessee.The estimated maintenance charges areincluded in the rental agreed in the leaseagreement.

it appears as if the use of ijara wa iqtina'as a financial lease is problematic from ashari'a viewpoint. it is indeed a complicatedstructure but the way it is practiced by is-lamic banks by and large fulfils the generallyacceptable shari’a requirements.

The writer, PhD (Cambridge), is aShari'a Advisor and Chairman of Edbiz

Consulting Limited. He can be contactedat hdar@edbizconsulting.com

Humayon Dar

For comments, queries and contributions, write to:

Email: profit@pakistantoday.com.pk Ph: 042-36298305-10 Fax: 042-36298302 Website: www.pakistantoday.com.pk

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Use of ijara wa iqtina' asa financial lease isproblematic from ashari'a viewpoint

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shARI’A MATTERs

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Friday,11 November,2011

We feel that these students alsodeserve an opportunity, just likecollege students

04news

Afair number of Pakistanis whocollectively slaughtered 5 mil-lion goats and 2 million cows onEid ul adha last year remainedunable to perform the ritual this

time due to increased poverty, surging in-flation and high cost of living. accordingto surveys, this year witnessed 25-30 percent decline in the number of slaughteredanimals as compared to last year.

The flip side is that the leather indus-try which is struggling due to shortage ofraw material in the local market is upsetdue to lower figures of animals slaugh-tered on Eid which provides the biggestquantity of animal hides to the industry.it is unfortunate that the yield of animalhides which is the only raw material forleather industry is declining year by year.The value added exports of leather marketthat have amounted to more than one bil-lion dollars has significantly decreasedsince the last three years. during fiscalyear 2007-08, the country's export ofleather goods stood at $1.15 billion, during2008-09 at $943 million and during2009-10 Pakistan's leather goods exportswitnessed a further decline to $860 mil-lion. The declining trend in the exports ofleather products is alarming but the bitterfact that is more alarming is that we arelosing to our competitors in the globalmarkets. For example, in 2009-10 the sec-tor faced a sharp decline of 28 per cent inleather goods export, while on the otherhand indian exports of the same com-modity witnessed a 26 per cent increaseduring the same period.

according to a Federal Bureau of Sta-tistics report, Pakistan's second biggest ex-port-earning segment, leather and leathergoods, witnessed an 18 per cent fall duringJuly-June 2009-10, as against the sameperiod last year. during 2009-10 the coun-try's leather exports went down by about7.57 per cent, leather garments exports de-clined by 12.53 per cent, exports of leather

gloves fell by 37 per cent and exports ofother leather-based goods declined byabout 31.60 per cent.

The leather industry has a long-stand-ing demand to ban live animal export toafghanistan and iran, saying that thiscauses acute shortage of skins – a basicraw material of the leather industry. Theministry of commerce issued a notificationin august which said that the governmenthad placed a ban on the export of live ani-mals along with meat exports. But, after agap of five hours, the ministry issued an-other notification saying that it was just aproposal and the final decision will betaken by the Economic Coordination Com-mittee (ECC). The leather industry wantsa complete ban on export of livestock.Contrary to the leather industry’s interests,there are also a significant number of busi-nessmen who hope to make a living in thelivestock and meat export business. Whichindustry will get its wishes fulfilled is any-body’s guess as the ministry of commercehas sent the proposal of banning live ani-mal exports to the ECC. Pakistan Tannersassociation (PTa) says that the govern-ment should immediately ban live animalexport to western and neighbouring coun-tries. The tanners are not against the ex-port of meat as this has little impact on theavailability of skins which remain in thecountry. The leather goods exporters areunanimous that the leather industry is pri-marily hurt by the exports of live animalsand not by growing meat exports.

analysts say that when we export a liveanimal, it means we are giving away theanimal hide for free which has pushed thelocal leather industry to the verge of col-lapse. it is pertinent to note that we candouble the amount of foreign exchange byprudent export strategy through the exportof mutton and finished leather. The primebenefit of this policy is to create employ-ment for thousands of skilled workers invalue added industry dealing with tanningand leather product manufacturing.

There is yet a bigger challenge faced byour leather industry that is more seriousthan animal export. The smuggling of ani-

mals to iran and afghanistan has increasedmanifolds due to laxity of law enforcementagencies. government authorities have ac-knowledged that huge numbers of live an-imals are being smuggled to afghanistanand iran. according to statistics, Pakistanexported over $53 million of meat andmeat preparations during the year 2011.This is the tip of an iceberg as compared tothe illegal money earned from the smug-gling of animals. according to rough esti-mates, live animals worth over $500million are smuggled out of Pakistan everyyear which is 10 times of our meat exports.

Pakistan is now earning huge foreignexchange from its packaged meat exportsto Middle East region due to its geograph-ical proximity to the arab world. This in-dustry should be encouraged so that wecan grow our market share in growingMiddle Eastern markets. The promotionof mutton export automatically means thepromotion of local leather industry due toincreased supply of raw material.

Leather industry is solely dependent

on local raw material and according tocareful estimates currently there are over1,000 registered and unregistered leatherunits in Pakistan mostly located in Lahore,Kasur and Multan. giving the reasons be-hind declining trend in the export ofleather products, the leather stakeholderssay that shortage of raw material is mainlydue to smuggling of at least 100 trucksloaded with livestock/cattle to afghanistanand iran every month. in addition to thathundreds of animals are also reportedlysent to Middle East by boats. Moreover,thousands of animals have perished dur-ing two major floods in Pakistan which hasaggravated the shortage.

Eid ul adha is a good opportunity toresuscitate the dying leather industryowing to an inflow of 5 million cowskins and 2 million goat skins duringEid to the raw material market of theleather industry. Leather marketsources say that an average price of agoat skin is rs500/ whereas a cow skinfetches around rs4,500/.

ANIMAL SACRIFICE BIG BOOSTTO DYING LEATHER INDUSTRY

KSE remains stable despite wary investor sentimentsKARACHI

STAFF REPORT

LOCaL bourse trailed regionalpeers in today’s session as tradingcommenced amidst wary senti-

ments after the prolonged Eid holidays. asitaly replaced greece at the center of Eu-ropean debt crisis, fear of a split in theeuro-zone kept global equities under pres-sure. investor participation remained dis-mal with 49 million shares traded duringthe day as the benchmark index could notsustain 12K level amidst profit taking.

Since local fundamentals remainmostly impervious to the latest develop-ment in euro-zone, the reaction at thelocal bourse appears transitory. Positivenews flows especially in energy sector in-dicating speedy resolution of circular debtdepict possible re-rating in the sector thuspositively influencing the overall index’sperformance in the intermediate term.

The KSE 100 index closed at 11969.05levels with the gain of 11.75 points, whileKSE 30 index gained 7.81 points to closeat 11300.38 levels. all Share index closedat 8281.27 levels after gaining 7.10points. Total 96 scrips advanced 108 de-

clined and 110 remain unchanged out oftotal 314 scrips traded.

The local bourse, on syndicated effortsenergised by positive developments, re-structuring of maturing T-bills and meetingof Pak-india leadership, successfully resis-ted otherwise an extensive decline, mainlyon the fierce meltdown in international andregional equities and commodities. Theindex failed to sustain the initial low vol-ume high of 12000, supported by OgdCand MCB. The stocks contributed almost40 points to the benchmark 100, for it toomanaged an unchanged status on closingbesides keeping the benchmark in brownzone during the closing hour.

issuance of bonds and T-bills to offsetinterest receivables of the local banks didinspire the accumulators to adopt an ag-gressive stance, as the step will createspace for financing to the OMCs andiPPs, although the plan to settle circulardebt by securing loans from internationallenders seems far fetched. Since LOCfrom iMF stays a major pre requisite, thefinancial transaction executed will pro-vide some breathing space to the men-tioned beneficiaries, thus keeping theinterest in banking stocks alive. Cued up

sellers on strength following the old say-ing “act on rumors and react on news”however, disallowed the sector stocks aswell as various high priced stocks fromstaging a rally, thus leading to a weakermarket. This was reflected by low vol-umes despite news flash suggesting im-proved relations with india.

The propagation did inspire snap ral-lies in frontline cement and textilestocks, absence of follow-up however dis-allowed aggressive display despite corpo-rate participation, thus forcing the

strength to defuse after change of handson strength. Therefore, stagnation in-vited low volume price erosion duringthe closing hour. Fauji group stocks fromthe fertiliser sector undoubtedly led themarket during early hours inviting re-newed buying after staying under correc-tion phase for quite a few sessions. Thejunior partner lost steam quite earlywhile range bound activity and lack of in-terest disallowed the elder brother FFCto find consolidation on strength.

“The stock however managed to stay

in green zone, while Engro on fears ofgas supply and high debt portfolio wit-nessed off-loading from various quar-ters, thus keeping the stock underpressure. Covering purchases howeverdid allow the stock to resist bottom lockand managed to trade around lower tra-jectory for most part of the session,while fears of low volume price erosionmainly due to shallowness kept the likelyentrants in search of panic sell, cautionwas therefore quite evident,” said Has-nain asghar ali at aziz Fida Husein.

EID UL AZHA

ANALYSISFARAkh ShAhzAd

LCCI urgesgovt to tacklefinancial instability

LAHORe

STAFF REPORT

LaHOrE Chamber of Commerce andindustry urged the government toprepare a fool proof, well designed

and well thought out strategy to avertdownward spiral of financial instability thatis currently sweeping the euro zone. in anissued statement, the LCCi President, irfanQaiser Sheikh said that the presenteconomic situation being faced by thecountry needs urgent measures as theshocks caused by the deepening debt crisisin Europe is likely to create ripples for adeveloping country like Pakistan. "if we donot act now, the economy will run the risk ofa downward spiral of uncertainty, financialinstability," he said. The LCCi President saidthat an appropriate economic roadmapbacked by a well thought outimplementation and monitoringmechanism, is a prerequisite to economicrevival of the country. The two sides, thegovernment and the private sector wouldhave to sit together as early as possible toachieve this much cherished goal. He saidthat the private sector has the ability to makethis country a hub of economic activities.irfan Qaiser Sheikh said that the factremains that Pakistan is faced with multipleinternal and external challenges. Theeconomy is in bad shape and the law andorder situation are deteriorating. There areissues of governance because of which weare sinking slowly, but surely. He said that atthe international front, the country’s imageis plunging with every passing day. its goodsare fast becoming uncompetitive whileforeign investors are reluctant to even visitthis country. The LCCi President said thatdespite having all the resources, Pakistanibusinessmen are fast losing hope because ofthe high costs associated with the business.There is a daily upward fluctuation in theprices of inputs and high markup rather thehighest one, not only in the developingworld but also in the developed countries.He said that the President of Pakistan, thePrime Minister, the governors, the ChiefMinisters, the Federal and Provincialcabinets and all the leading Chambers ofCommerce need to have a joint sitting inorder to identify the solutions of theproblems being faced by the country sincethe time is running out. He said that if thesituation remains the same for quite sometime, a large number of businessmen wouldnot be able to pay their dues to the banksand would be bound to default.

CEO Pak-Qatar insurance, Ahmed Pervaizexplaining the need for hiring seminary students

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05

Friday,11 November,2011

news

CORPORATE CORNER6th Jazz sMs khazanaawards 50 tolas of gold

Lahore: Mobilink has announced the grand prizewinner of the 6th Jazz SMS Khazana offer who wasawarded 50 tolas of gold as grand prize. The Jazz SMSKhazana has been one of the most heavily participatedSMS campaigns in Pakistan. The winner of the grandprize, Mr Javaid, a resident of Lahore, wasoverwhelmed at the occasion, saying, “SMS Khazanahas changed my life and has made all my dreamscome true. i am extremely thankful to Mobilink andJazz for giving me an opportunity to win this amazingprize.” PRESS RELEASE

samsung brings smartphonefor the youth - Galaxy y Lahore: Samsung electronics, a global leader in digitalmedia, telecommunications and convergence technologies,has launched galaxy–Y. This is an innovative smartphone,customised to suit the communication needs and budget ofthe youth. The Samsung S5360 galaxy Y promises theandroid experience at a bargain. it has a highly economicalprice with amazing features. Moreover, the android marketalso offers plenty of games, handy tools and productivityapps for the galaxy Y users. Samsung Pakistan’s Managingdirector, Mr Hee Chang Yee said, “Using the advancedtechnologies in the smartphone market, Samsung electronicswill enable the young consumers to enjoy a smart life withthe galaxy Y smartphone.” PRESS RELEASE

silkbank announces ‘swipe, spend andGain’ promotion for debit cardholdersKarachi: Silkbank has launched its latest promotionalscheme, “Swipe, Spend and gain” which offers excitingperks to the users of Silkbank’s visa debit card. Throughthis scheme the visa debit card users will enjoyguaranteed 5 per cent cash back on all retail transactionsof rs500 or above within or outside Pakistan and winfabulous prizes through monthly lucky draws. Expressinghis views about this new scheme, Country Manager,Pakistan and afghanistan, ViSa, Mr amer Pasha said,“The programme was developed in response to thegrowing need for tailored products in Pakistan and so wedecided to reward the customers for their preference ofVisa debit Cards.” PRESS RELEASE

We have gone pretty far inwhat we can do but there isnot much more that can beexpected from us

kARAchI: The consul General of UAE and dean of thediplomatic corp, Mr Suhail bin Matar Al ketbi, presenting atraditional silver shield to the out going consul General ofAfghanistan, Mr Abdul Ahad khaliqyar, at a simpleceremony at UAE consulate premises. PRESS RELEASE

kARAchI: The honorary consul General of Morocco, MrIshtiaq baig hosted a dinner in honour of the newlyarrived diplomats, consul General of Turkey Mr MuratMustafa Onart, and consul General of Germany, dr andMrs Tilo klinner, at his residence. PRESS RELEASE

‘WORLD’S POOREST 137 MILLIONRECEIVED MICRO LOANS IN 2010’

ISLAMABAD

STAFF REPORT

MOrE than 137.5 million ofthe world’s poorest familiesreceived a micro loan in

2010, an all-time high, according to areport released by the MicrocreditSummit Campaign (MSC) on Thursday.

The report’s release precedes theglobal Microcredit Summit to be held inValladolid, Spain on november 14-17.The summit will be inaugurated byQueen Sofía and grameen Bankfounder, Muhammad Yunus. at the firstMicrocredit Summit in 1997, only 7.6million of the world’s poorest familieshad been reached. While the growth innumbers has been inspiring, we mustkeep our attention on the wisdom of theclients. The report tells us that whenasked what they want for themselvesand their families, their answers in-clude, ‘education for their children,

health for their family, decent housingthat keeps the rain and cold out, andregular, nutritious meals.’ This is whatwe will pursue when we gather at theMicrocredit Summit in Valladolid”, ProfYunus said. assuming an average of fivepersons per family, these 137.5 millionmicro loans affected more than 687 mil-lion family members, which is greaterthan the combined populations of theEuropean Union and russia. Microloans are used to help people living inpoverty in both industrialised and de-veloping countries to expand a range ofsmall businesses, such as selling prod-ucts in a local market, making clothes,and providing computer and other busi-ness services in rural areas.

as a strategic partner of MSC,Pakistan Poverty alleviation Fund(PPaF) supports the work of MSC inPakistan. PPaF works closely withMSC for inclusive and improved fi-nancial services to the underserved.

Since its inception, PPaF has dis-bursed more than $775 millionthrough 4.7 million microcreditloans. Currently, almost 45 per centof Pakistan’s 2.1 million borrowersare financed by PPaF through its 52partner organisations in 92 districtsacross the country.

While more than 205 millionpeople worldwide received a microloan in 2010, this multi-year cam-paign focuses on outreach to thepoorest clients. according to the re-port, over the last 13 years, the num-ber of very poor families with amicro loan has grown more than 18-fold from 7.6 million in 1997 to 137.5million in 2010. The latest datacomes from more than 3,600 insti-tutions worldwide, with more than94 percent of the information havingbeen collected within the last 18months. The report also highlightsthe number of poorest women

reached. not only have these womenbeen excluded from traditionalbanking, but they are also the onesmost likely to ensure that the in-creased income is used to improvethe lives of their children. From 1999to 2010, the number of poorestwomen reached has increased from10.3 million to 113.1 million.

MSC aims to reach 175 million ofthe world’s poorest families by 2015and ensure that 100 million of thosefamilies move above the WorldBank’s $1.25-a-day poverty thresh-old. MSC is a project of rESULTSEducational Fund, a U.S.-based ad-vocacy organisation committed tocreating the will to eliminatepoverty. The campaign was launchedin 1997 and, in 2007, surpassed itsoriginal goal of reaching 100 millionpoorest families with credit for self-employment and other financial andbusiness services.

Italy eyes unity cabinetas EU dithers on crisis

ReUTeRS

ROME

iTaLY moved closer to anational unity governmenton Thursday, followinggreece's lead in seeking arespected veteran Euro-

pean technocrat to pilot painful eco-nomic reforms in an effort to avert aeuro zone bond market meltdown.

after four days of chaotic hag-gling, former European CentralBank vice-president Lucas Pa-pademos was appointed to head aninterim crisis cabinet charged withsaving greece from default, bank-ruptcy and an exit from the eurozone. in rome, former EuropeanCommissioner Mario Montiemerged as favorite to replace ital-ian Prime Minister Silvio Berlusconiwithin days and lead an emergencygovernment that would implementlong delayed reforms of pensions,labor markets and business regula-tion. Political and economic turmoilin italy has spurred fears of a possi-ble break-up of the euro zone withborrowing costs for Europe's thirdbiggest economy at unsustainablelevels and the 17-nation currencybloc unable to afford a bailout.

german Chancellor angelaMerkel, Europe's main paymaster,called for broad political support for re-forms in greece and said she believeditaly was winning back confidence, butpolitical clarity was still needed inrome. She rejected talk of a possibleshrinking of the currency area, saying:"We only have one goal, that is to bringabout a stabilization of the euro zone inits current form." European Union of-ficials continued to dither and pass thebuck on how best to fight the worsen-ing sovereign debt crisis.

Three senior ECB policymakersrebuffed pressure from investorsand foreign governments to inter-vene massively as a lender of last re-sort on bond markets to shield italyand Spain from rapidly spreading fi-nancial contagion.

"We have gone pretty far in whatwe can do but there is not much morethat can be expected from us. it is nowup to the governments," ECB govern-ing council member Klaas Knot toldthe dutch parliament. Knot, who isalso dutch central bank chief, saidbond-buying only had a temporary ef-fect. The ECB has bought more than180 billion euros of peripheral eurozone bonds and traders said it was ac-tive again in the market on Thursday,but the purchases have failed to lowerborrowing costs durably. Stepping upthe scale of bond-buying would even-tually force the ECB to start printingmoney with the risk of stoking infla-tion, which was why the EU treaty hadexcluded such action, Knot said.

ECB executive board memberPeter Praet said it was not the task ofthe central bank to intervene "whenthere are fundamental doubts aboutthe sustainability of some coun-tries". Outgoing ECB chief econo-mist Juergen Stark earlier rejectedcalls for the ECB to act as lender oflast resort like the U.S. Federal re-serve or the Bank of England.

in Brussels, a euro zone officialsaid there were no plans to use thebloc's 440-billion-euro ($600 bil-lion) rescue fund to help italy, evenwith a precautionary credit line.

"Financial assistance is not inthe cards," the official said. a secondofficial said: "The ECB will be drawnlike every one else by the weight ofgravity (to act)."

MARKETS STEADIERitalian 10-year bond yields

steadied at around 7 percent, a levelseen as unquestionable in the longterm, due to signs that the politicaldeadlock may be easing. rome paidless to sell 1-year treasury bills thanmany had feared.

Sources in Berlusconi's conserva-tive PdL party said he was now con-vinced it would be better not to callelections at the moment, an abruptreversal. The billionaire media mag-nate has agreed to resign within daysafter parliament approves long de-

layed economic reforms demandedby European partners.

PdL parliamentary floor leaderFabrizio Cicchitto said the party wasconsidering backing a unity govern-ment led by Monti, a respected econ-omist favored by the center-leftopposition. Berlusconi's populistcoalition partner, the northernLeague, said it would not support aMonti government.

Monti, 68, was appointed a sen-ator for life on Wednesday in a movethat appeared to prefigure his possi-ble rise to the premiership, but hehas made no public statement and itis unclear what conditions he mayset for taking office. in athens, Pa-pademos said after agreeing to heada crisis coalition: "The greek econ-omy is facing huge problems despitethe efforts undertaken.

"The choices we will make willbe decisive for the greek people. Thepath will not be easy but i am con-vinced the problems will be resolvedfaster and at a smaller cost if there isunity, understanding and prudence."

The euro rose from a one-monthlow and world stocks inched up onhopes that new governments beingformed in italy and greece couldhelp fend off a euro zone break-up.

SMALLER EURO ZONE DENIEDMerkel, French officials and the

EU's executive Commission all triedto quash talk of a possible shrinkingof the euro area, although theyraised the possibility last week thatgreece might leave the single cur-rency. EU sources told reuters thatFrench and german officials hadheld informal discussions on a two-speed Europe with a more tightly in-tegrated and possibly smaller eurozone and a looser outer circle.

The discussions among seniorpolicymakers, still in the realms ofthe theoretical, have focused on howto protect the euro zone from break-ing up via tighter common policieswhich some members may by unableor unwilling to live with.

European Commission President

Jose Manuel Barroso issued a starkwarning of the dangers of a split inthe European Union. "There cannotbe peace and prosperity in the northor in the West of Europe, if there isno peace and prosperity in the Southor in the East," Barroso said in aspeech in Berlin.

Merkel called on Wednesday forchanges in EU treaties after FrenchPresident nicolas Sarkozy advocateda two-speed Europe in which eurozone countries accelerate anddeepen integration while an expand-ing group outside the currency blocstays more loosely connected.

The head of the internationalMonetary Fund called for politicalclarity in efforts to tackle italy's debtcrisis, warning that the world couldface a "lost decade" if Europe's prob-lems were not tackled boldly.

Uncertainty around who wouldsucceed Berlusconi was fuellingmarket volatility, Christine Lagardesaid on a visit to China. "no one ex-actly understands who is going tocome out as the leader. That confu-sion is particularly conducive tovolatility," she told a news confer-ence in Beijing. "Political clarity isconducive to more stability and myobjective from the Fund's point ofview is better and more stability."

a senior g20 source said the ideaof convening an emergency meeting offinance ministers of the world's lead-ing economies to discuss supportmeasures for the euro zone before theFrench presidency ends at the end ofthe year had been dropped. Theywould meet next in Mexico in Febru-ary. Euro zone finance ministersagreed on Monday on a road map forleveraging the currency bloc's rescuefund to shield larger economies likeitaly and Spain from a possible greekdefault. But markets are runningfaster than policy and there are deepdoubts about the efficacy of thosecomplex leveraging plans, and withitaly's debt totaling around 1.9 trillioneuros even a larger bailout fund couldstruggle to cope.

ECb Governing Council Member Klaas Knot

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top 5 perForMers sector wisesyMbOL OPEN hIGh LOW CURRENT ChANGE vOLUME syMbOL OPEN hIGh LOW CURRENT ChANGE vOLUME

Food ProducersAbdullah Shah 8.00 8.00 7.00 8.00 0.00 53Colony Sugar Mills 1.75 1.75 1.70 1.74 -0.01 23,501Engro Foods Ltd. 23.52 23.90 22.50 22.54 -0.98 91,748Habib Sugar Mills 28.10 28.50 27.50 27.88 -0.22 70,820Habib-ADM Ltd.XD 11.58 11.70 11.50 11.50 -0.08 2,995

Household Goods(Colony) Thal 1.70 1.11 1.11 1.11 -0.59 1,000AL-Qadir Textile 11.25 11.25 11.25 11.25 0.00 500Amtex Limited 1.67 1.70 1.45 1.60 -0.07 132,822Annoor Textile 13.00 14.00 14.00 14.00 1.00 1,000Artistic Denim XD 18.50 18.50 18.25 18.49 -0.01 1,049

Personal GoodsAHCL-NOV 31.00 31.00 29.45 29.51 -1.49 376,500AHCL-OCT 30.82 30.82 29.28 29.32 -1.50 516,500ANL-OCT 4.01 4.25 3.90 3.95 -0.06 24,500ATRL-NOV 120.42 121.50 117.90 119.21 -1.21 201,000ATRL-OCT 119.16 120.30 116.50 117.71 -1.45 200,000

Future ContractsAbbott Laboratories 102.49 103.00 101.00 102.10 -0.39 1,283Ferozsons (Lab) Ltd. 80.00 80.00 78.10 80.00 0.00 45GlaxoSmithKline Pak. 68.92 68.26 67.01 68.06 -0.86 1,557Highnoon (Lab) 28.09 28.09 27.65 28.09 0.00 100IBL HealthCare XD 10.92 11.92 10.99 11.92 1.00 25,154

Pharma and Bio TechP.T.C.L.A 10.89 10.98 10.65 10.71 -0.18 470,873Pak Datacom LtdXD 35.03 34.01 34.01 34.01 -1.02 500Telecard Limited 0.95 1.00 0.90 0.90 -0.05 68,502Wateen Telecom Ltd .68 1.70 1.52 1.65 -0.03 152,954WorldCall Telecom 1.13 1.19 1.00 1.06 -0.07 235,458

Fixed Line TelecommunicationP.T.C.L.A 11.47 11.77 11.42 11.64 0.17 4,752,418Pak Datacom Ltd. 31.65 32.66 31.65 32.66 1.01 1,430Telecard Limited 1.09 1.09 1.01 1.03 -0.06 194,249Wateen Telecom Ltd 1.51 1.68 1.47 1.50 -0.01 449,333WorldCall Telecom 1.32 1.35 1.15 1.28 -0.04 649,632

ElectricityGenertech 0.50 0.50 0.36 0.50 0.00 1Hub Power Co.XD 36.38 36.50 36.10 36.10 -0.28 1,022,035Japan Power 0.75 0.77 0.70 0.71 -0.04 38,682K.E.S.C. XR 1.70 1.70 1.56 1.60 -0.10 752,756Kot Addu PowerXD 41.36 41.80 41.25 41.53 0.17 220,355

BanksAllied Bank Ltd 63.16 64.00 62.50 62.69 -0.47 32,694Askari Bank 11.15 11.29 10.75 10.89 -0.26 944,906B.O.Punjab 5.94 6.08 5.79 5.83 -0.11 319,287Bank Al-Falah 11.15 11.35 10.70 10.89 -0.26 1,929,563Bank AL-Habib 29.95 30.20 29.55 29.91 -0.04 175,090

Non Life InsuranceAdamjee Ins XD 49.64 49.50 48.60 49.40 -0.24 6,785Ask.Gen.Insurance 8.50 8.50 8.10 8.47 -0.03 1,651Atlas Insurance 34.49 35.00 33.86 33.99 -0.50 1,110Central Ins Co. 48.67 50.00 48.00 49.79 1.12 3,909Century Insurance 7.16 7.50 7.06 7.50 0.34 1,500

Life InsuranceAmerican Life 14.50 14.50 13.50 14.50 0.00 2East West Life Assur 1.40 2.34 1.40 1.40 0.00 1EFU Life Assur 65.53 68.80 65.53 65.53 0.00 157

Financial ServicesAMZ Ventures A 0.32 0.35 0.22 0.30 -0.02 9,463Arif Habib InvesXD 15.89 15.50 14.89 14.89 -1.00 13,487Arif Habib Ltd. 17.96 18.34 17.20 17.71 -0.25 19,659Dawood Equities 0.88 1.09 0.86 0.86 -0.02 9,495Invest & Fin.Sec. 7.26 7.26 7.25 7.25 -0.01 2,100

Equity Investment Instruments1st.Fid.Leasing Mod 1.70 1.50 1.50 1.50 -0.20 15,000AL-Noor ModarXD 3.98 4.00 3.60 4.00 0.02 25,100Allied RentalModXDXB 19.90 19.90 19.88 19.90 0.00 3,700Atlas Fund of Fund 6.00 6.10 5.90 5.90 -0.10 414,000B.F.ModarabaXD 5.56 5.56 5.00 5.56 0.00 7

MiscellaneousCentury Paper 14.02 14.20 13.81 13.86 -0.16 22,200Pak Paper Prod. 32.07 32.88 32.07 32.07 0.00 100Security Paper 35.60 36.39 35.60 35.60 0.00 86Pakistan Cables 32.14 31.00 31.00 31.00 -1.14 1,500Pak.Int.Con. SD 70.00 70.99 69.85 69.94 -0.06 4,603TRG Pakistan Ltd. 1.75 1.79 1.67 1.70 -0.05 42,103Murree BreweryXDXB 70.15 72.95 70.55 72.30 2.15 2,304Pak Elektron Ltd. 4.45 4.59 4.30 4.50 0.05 4,504Singer Pakistan 13.00 13.00 12.00 13.00 0.00 305Tariq GlassXD 8.70 8.80 8.60 8.72 0.02 1,758Grays of CambrXD 25.00 25.99 25.00 25.00 0.00 25Pak Tobacco Co. 62.59 62.59 60.50 62.59 0.00 26Philip Morris Pak. 140.00 140.00 133.00 140.00 0.00 1Shifa Int.Hosp.XD 29.28 30.73 29.28 29.28 0.00 300Hum Network XD 16.50 16.50 16.50 16.50 0.00 1,500P.I.A.C.(A) 2.20 2.29 2.10 2.22 0.02 46,002P.T.C.L.A 10.80 10.94 10.50 10.90 0.10 947,959Telecard Limited 1.06 1.10 0.93 1.00 -0.06 10,953Wateen Telecom Ltd 2.12 2.20 2.06 2.10 -0.02 106,937WorldCall Telecom 1.14 1.24 1.12 1.21 0.07 94,631Sui North GasXDXB 18.07 18.19 17.61 17.66 -0.41 5,075Sui South GasXDXB 20.33 20.49 20.07 20.19 -0.14 5,522East West Life Assur 1.06 1.20 1.06 1.06 0.00 300EFU Life Assur 69.59 68.50 68.50 68.50 -1.09 66

syMbOL OPEN hIGh LOW CURRENT ChANGE vOLUME

Oil and GasAttock PetroleumXD 403.85 404.69 396.00 396.87 -6.98 61,485Attock Ref.XD 118.78 120.40 116.10 117.57 -1.21 833,559Byco Petroleum 6.89 6.98 6.75 6.77 -0.12 399,510Mari Gas Co.XB 91.01 93.80 89.30 92.03 1.02 91,674National Ref.XD 325.19 334.90 308.94 310.82 -14.37 314,938

ChemicalsAgritech Ltd. 15.00 15.00 14.00 15.00 0.00 1,500Arif Habib CoXDXB SD 30.83 31.05 29.29 29.30 -1.53 2,485,646Biafo IndustriesXD 68.59 71.99 65.17 70.64 2.05 855Clariant Pakistan 140.69 143.49 137.50 139.79 -0.90 4,017Dawood Hercules 38.96 40.80 37.06 37.39 -1.57 244,529

Industrial metals and MiningCrescent Steel 23.90 24.70 23.25 23.59 -0.31 40,885Dost Steels Ltd. 1.45 1.50 1.41 1.45 0.00 8,285Huffaz Seamless Pipe 8.93 9.00 8.60 9.00 0.07 3,035Int. Ind.Ltd. 34.98 35.00 34.00 34.50 -0.48 25,300Inter.Steel Ltd. 11.56 11.52 11.00 11.00 -0.56 63,850

Construction and MaterialsAl-Abbas Cement 2.00 2.00 1.90 1.92 -0.08 26,799Attock CementXD 51.11 51.99 50.81 51.02 -0.09 108,952Berger Paints 11.79 12.00 11.60 11.91 0.12 4,762Bestway Cement 8.11 9.11 8.11 8.11 0.00 100Cherat Cement 7.66 8.19 7.50 8.01 0.35 197,042

General IndustrialsCherat PackagingXD 29.62 30.40 28.14 28.14 -1.48 14,022ECOPACK Ltd 2.49 3.25 2.21 3.08 0.59 614,084Ghani Glass LtdXD 41.17 42.00 39.12 39.60 -1.57 16,802MACPAC Films 7.72 7.95 7.01 7.65 -0.07 993Merit Pack 22.00 22.00 20.95 22.00 0.00 70

Industrial EngineeringAdos Pakistan 6.93 7.90 6.93 6.93 0.00 10AL-Ghazi Tractors 184.30 184.30 184.30 184.30 0.00 90Bolan CastingXD 28.50 28.50 28.25 28.26 -0.24 5,055Ghandhara Ind. 7.00 6.90 6.25 6.70 -0.30 5,004Hinopak Motor 108.00 108.00 102.60 108.00 0.00 2

Automobile and PartsAgriautos Indus.XD 58.00 58.00 58.00 58.00 0.00 2,000Atlas Battery Ltd. 169.52 170.00 168.50 168.94 -0.58 240Atlas Honda Ltd. 117.00 118.00 117.00 117.94 0.94 302Dewan Motors 2.63 2.79 2.43 2.51 -0.12 39,802Exide (PAK) 168.53 169.99 168.53 168.53 0.00 31

BeveragesMurree Brewery Co. 110.49 111.43 109.00 111.18 0.69 1,170Shezan Int’l 150.02 150.00 145.05 145.58 -4.44 203

Mutual Funds

Fund Offer Repurchase NAvAlfalah GHP Cash Fund 501.2900 501.2900 501.2900 Askari Islamic Asset Allocation Fund 114.7196 111.8516 111.8516Askari Islamic Income Fund 103.6501 102.6136 102.6136 Askari Sovereign Cash Fund 100.6900 100.6900 100.6900 Atlas Income Fund 519.3500 514.2100 514.2100 Atlas Islamic Income Fund 519.0900 513.9500 513.9500Atlas Money Market Fund 516.9700 516.9700 516.9700 Atlas Stock Market Fund 453.1500 444.2600 444.2600 Crosby Dragon Fund 82.9800 81.3500 81.3500

Fund Offer Repurchase NAvHBL Money Market Fund 100.2768 100.2768 100.2768 HBL Multi Asset Fund 87.0103 85.3042 85.3042 HBL Stock Fund 97.6745 95.2922 95.2922 IGI Income Fund 101.8987 100.8898 100.8898IGI Stock Fund 112.3545 109.6141 109.6141 JS Principal Secure Fund I 121.5000 111.5200 117.3900 JS Principal Secure Fund II 104.1200 96.5000 101.5800 KASB Cash Fund 0.0000 0.0000 100.1087Lakson Equity Fund 106.3763 103.2779 103.2779

Markets

Friday, 11 November, 2011

06

top 10 sectors

55% 01%Construction & Materials

Chemicals Food Producers

01%Electricity

02%10%

Fixed Line Telecommunication

01%General Industrials

Financial Services

11%Banks10%Oil & Gas05%Personal Goods07%

International Oil PriceWTICrude Oil

$96.44

BrentCrude Oil

$112.31

STOCK MARKET HIGHLIGHTS

Index Change Volume Market ValueKSE-100 11969.05 +11.75 43,892,446 3,230,255,806 LSE-25 3171.71 -24.7 969,974 46,949,351ISE-10 2656 +13.75 68,550 2,860,239

Major Gainers

Company Open High Low Close Change TurnoverUnilever Pak Foods 1673.33 1690.00 1689.99 1690.00 16.67 20Bhanero Tex.XD 229.00 235.00 235.00 229.00 0.00 30MCB Bank Ltd 155.77 161.50 156.10 160.41 4.64 1,363,637Linde Pakistan Ltd. 100.00 104.35 100.04 102.84 2.84 410National FoodsXD 58.56 61.48 59.11 61.34 2.78 710

Major Losers

Nestle Pakistan 3152.15 3197.87 3100.00 3161.93 9.78 131Attock Petroleum 424.74 427.00 405.10 415.68 -9.06 90,668Rafhan Product 2604.86 2651.00 2501.09 2600.16 -4.70 803Engro Corporation 135.84 138.09 129.85 131.49 -4.35 3,902,316UniLever Pak Ltd. 5603.60 5850.00 5328.09 5624.93 21.33 5

Volume Leaders

Bank Al-Falah 11.47 11.95 11.30 11.74 0.27 6,414,600National Bank 45.17 46.20 44.56 44.89 -0.28 4,395,422Engro Corp 135.84 138.09 129.85 131.49 -4.35 3,902,316Arif Habib SD 31.51 31.98 30.92 31.10 -0.413 766,883Fauji Fertilizer 181.93 186.30 179.80 182.64 0.71 2,863,727

Bullion MarketPer Tola (PKR) Per 10 Gm (PKR) Per Ounce US$

Gold 24K 57,482.00 49,334.00 1,772.00Gold 22K 51,608.00 44,245.00 –Silver (Tezabi) 1,098.00 942.00 35.05Silver (Thobi) 1025.00 880.00 –

Interbank RatesUS Dollar 86.4483UK Pound 137.7467Japanese Yen 1.1126Euro 117.7166

Buy SellUS Dollar 86.00 86.70Euro 116.88 118.99Great Britain Pound 136.35 138.70Japanese Yen 1.0894 1.1109Canadian Dollar 84.03 87.83Hong Kong Dollar 10.85 11.18UAE Dirham 23.28 23.61Saudi Riyal 22.75 23.11

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Friday,11 November,2011

PNsC is not planning to get the loanof $40m from ECO because of therecent decline in the internationalshipping industry, and buying a vesselat this time would be a bad decision

news

07 Official sources

INTERNATIONAL shIPPING CRIsIs

KARACHI

WAQAR hAMzA

PaKiSTan national ShippingCorporation (PnSC) has seemingly lostits interest in getting the $40m loanfrom Economic Cooperation

Organisation (ECO) that they had applied for, due to a recent dip in theinternational shipping market. Though the Minister of Ports and Shipping andthe Chairman PnSC have recently announcedthat they are planning to buy new vessels, yetthe dip in the international shipping industrywould not improve till the year 2013. Official sources at the corporation told Profitthat they are not planning to get the loan of$40m from ECO because of the recent declinein the international shipping industry, andbuying a vessel at this time would be a baddecision. This is seemingly against the will ofthe minister and the chairman of the PnSC whorecently announced their plan of purchasingnew vessels. Sources further informed that most shockingdecision in this regard is that theadministration of the corporation has decidedto scrap two of it’s bulk carriers namely M.V.Sargodha and M.V Multan soon, which willleave the corporation with a fleet of 7 vessels,although they don’t have to buy new vessels.

after the scrap of thesevessels they would go to

buy new vessels withthe help of loan,

which means they would like to increase theliabilities on the corporation, sources added. The need of new loan does not arise as thecorporation already has $20m left with themfrom the previous loans they got for buying 6vessels, sources reasoned. The previousadministration took a $130mloan of total and bought 6new vessels with $110m, sothe current administrationstill has $20m. in addition the carriers theyare scrapping would give thePnSC around $6m, as each ofthem would be sold for $3m,sources added. a new vesselof the same capacity beingscrapped is available for$15m. it is pertinent to mention thatEconomic CooperationOrganisation (ECO) is anintergovernmental regionalorganisation established in1985 by iran, Pakistan andTurkey for the purpose of promoting economic,technical and cultural cooperation among theMember States.it is also to be noted that PnSC has alreadybeen exposed to a variety of financial risks thatinclude credit risk, market risk (includingforeign exchange risk, cash flow, fair valueinterest rate risk, price risk) and liquidity risk.For example, according to annual report of thecorporation, in the previous financial yearout of the total financial assets,

financial assets of the company that are subjectto credit risk amounted to rs3,548.898 million(2010: rs3,133.362 million). Similarly, the corporation has a high exposureto interest rate risk due to the financingobtained during the reported year, and if

interest rates on borrowings hadbeen 250 basis pointshigher/lower with all othervariables held constant at the endof the last financial year, profitafter taxation for the year wouldhave been lower/higher by rs21.981 million (2010: rs nil).Moreover, during the year, thecorporation has obtainedfinancing facility of rs10,300million (June 30, 2010: nil). Thefinancing was obtained in theform of a syndicated term financeloan of rs9,000 million and theremaining amount of rs1,300million in the form of TermFinance Certificates (TFCs) witha face value of rs5,000 each by

way of private placement.The Corporation has also paid loanarrangement fee amounting to rs106.662million out of which rs88.160 million (June 30,

2010: nil) was included in theamortised cost of the long term

financing whereas theunamortised portionamounting to rs18.502

million (June 30,2010: nil) hasbeen included indeposits andshort-termprepayments.

KARACHI

ISMAIL dILAWAR

THE massive budgetaryborrowings by the cashstrapped federal andprovincial governments

from the commercial banks haveincreased the latter’s net domesticassets (ndas) by over 68 per centduring first four months of thecurrent fiscal year, 2011-12.despite this astronomical increase inndas, the monetary expansion inthe inflation stricken country was setin the red zone and was recorded at

0.07 per cent or rs4.882 billion, inmonetary terms, during the July-October 28 period. The expansion inbroad money, also called M2, was1.94 per cent or rs112.036 billionduring the corresponding period lastyear. The decrease in monetaryexpansion, the analyst believe, isbecause of the banks’ declining netforeign assets (nFas) that during thereview period contracted to minusrs96.098 billion against a positivegrowth of rs52.140 billion duringthe same period last year.as expected, the banks’ ndas areupward and skyrocketed by

rs41.083 billion to rs100.979billion during the period underreview. Last year, the same wascounted by the central bank atrs59.896 billion. The economicobservers attribute this exorbitantincrease in the banks’ domesticassets to heavy budgetaryborrowings by the funds starvedgovernment.according to State Bank, thegovernment loans from the bankingsystem climbed by 36.4 per cent orrs64.337 billion to rs241.087 billioncompared to rs176.750 billion of lastcorresponding period.

The government, however, hassucceeded in arresting its loans fromthe central bank at rs64.597 billionagainst last year’s rs126.618 billionin order to check what the analystswarn, already double digitinflationary pressures. But, it isborrowing extensively from thecommercial banks which during thereview period lent rs176.496 billion,up 252 per cent or rs126.365 billioncompared with last year’s rs50.131billion. The economists believe thatcontinued and excessive governmentborrowings from the risk aversebanks would lead to a sharp rise in

the latter’s domestic assets in thenear future. Other indicators of themonetary expansion are alsoshowing a downward trend withcurrency in circulation shrinking tors91.068 billion from rs140.915billion in last year. The analystswarn the resource constrainedgovernment against opting for easysources of money led by bankborrowings instead of introducinglong-term economic reforms that,they say, might prove to be shortterm bitter political pills, but wouldbring the ailing economy back ontrack in the long run.

budgetary loans make banks’ NDAs cross Rs100 billiong Monetary expansion down at 0.07 per cent due to declining foreign assets g Cash strapped government’s bank loans up by 36.4 per cent to Rs241 billion

g Dip in international shipping industry to remain till 2013 g PNsC exposed to various financial risks

Exports grow by13pc during July-October 2011

KARACHI

STAFF REPORT

PaKiSTan’S exports duringOctober 2011 were valued at$1.896 billion which was 2.2

per cent lower than the $1.938 billionworth of goods exported duringOctober 2010. imports duringOctober 2011 were valued at $3.607billion registering an increase of 12.9per cent from the $3.196 billion worthof imports in October 2010.according to available statistics, thecumulative figure shows thatPakistan’s exports during July-October 2011-12 were worth $7.899billion, while in the correspondingperiod last year exports were valuedat $6.996 billion, which shows a 12.9per cent growth in numbers. Whereasthe imports during July-October2011-12 were worth $14.313 billion ascompared to $12.225 billion duringthe same period last year; registeringa 17.1 per cent increase.

Dollar reservesdecrease to$17.028 billion

KARACHI

STAFF REPORT

THE country’s liquid foreignexchange reserves, that havebeen showing a week long

downward trend, shrank to $17.028billion. Compared with last week’s$17.146 billion, the country’s latestweek’s dollar holdings depict adecline of 0.6 per cent or $118million, the central bank reported.State Bank of Pakistan also countedits dollar reserves at $13.280 billion,0.9 per cent or $129 million downwhen compared with $13.409 billionof the preceding week. The weekunder review however, saw a slightincrease of $11 million in the reservesof the commercial banks that stood at$3.748 billion against $3.737 billionof last week. during the previousweek, the foreign exchange reservesof the banks, a major stimulus for thecountry’s overall reserves, hadcontracted by $29 million. SBP chiefspokesman, Syed Wasimmudinattributes such ups and downs inforeign exchange reserves to growthin the banks’ deposits, withdrawalsand routine debt repayments.

Pakistan shipping corporationloses interest in $40m loan

The administration ofthe corporation hasdecided to scrap two ofit’s bulk carriers namelyM.V. Sargodha and M.VMultan soon, which willleave the corporationwith a fleet of 7 vessels

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