BIG FOREIGN, LOCAL BANKS PUT TO SHAME

Sunday, 4 November, 2012

Sindh governor mulls improvingEuropean fish exports

KARACHI

APP

Governor of Sindh Dr. Ishrat ul Ebad during his recent visit to UnitedKingdom had talks with experts from the fishery sector that may pave way forexport of shrimps from Pakistan to the members of European Union.According to a handout issued from Sindh Governor House, Saturday, Dr.Ishrat ul Ebad had detailed meetings with experts and consultants in Belfastto address reservations registered in European Union community aboutshrimps and fish exported from Pakistan. The Governor of Sindh assured thatinternational standards would be strictly complied for export quality shrimpsand importers would be provided no chance to complain about the same. Therequired standards, he said would be maintained right from the fishingprocedure and practices to their dispatch to final destinations. Special care, hesaid would be ensured in terms of hygiene and quality of the product. On theoccasion the Sindh governor and European experts extensively discussedmodes that may help Pakistan acquire the required export quality standards.The experts referred to promotion of aqua culture technique in Pakistan andexpressed their keenness to visit Pakistan.

Traders, industrialists welcomeliberalised visa regime with India

KARACHI

STAFF REPORT

Traders and industrialists in this commercial hub of the country have laudedIslamabad’s decision to sign an agreement on liberalized visa regime withIndia. They believe the move would relax curbs on issuing travel documentsto traders, elderly people, tourists, pilgrims, members of the civil society andchildren living across the Line of Control. In a joint statement Patron In-ChiefKorangi Association of Trade and Industry (KATI) S M Muneer, ChairmanMohammad Zubair Chhaya, President All Karachi Industrial Alliance, MianZahid Hussain and Vice Chairmen, Niaz Ahmed and Najmul Arfeen termedthe development a good omen towards bilateral relations between the twocountries. They said the 38-year-old visa pact had been replaced with the newpact that says visa has to be issued in a period of not exceeding 45 days ofapplication which is a good move. The industrialists said under the newsystem, one could visit five places instead of three at present and those above65 and children below 12 years of age and eminent businessmen wereexempted from police reporting. The traders welcomed the federal cabinet’sdecision to approve three agreements regarding customs and certificationissues, which were also signed by officials of the commerce ministries of bothcountries in September. S M Muneer, who is also of president India-PakistanChamber of Commerce and Industry (IPCCI), said due to IPCCI’s efforts andwith the help of both countries’ apex trade bodies, many milestones forstrengthening bilateral trade relations had been achieved.

KARACHI

ISMAIL DILAWAR

DESPITE repeated warn-ings from the State Bank,the commercial bankskeep putting to risk thecountry’s interest rate

corridor by reserving billions of rupees ofcash in excess of the mandatory Cash Re-serves Requirement (CRR).

According to State Bank data, the com-mercial banks cumulatively held ExcessCash Reserves (ECR) of over Rs 68 billionduring the week ranging from September28 and October 04. A break-up shows thatthe conventional banks possessed Rs51.383 billion while their counterparts inShariah-compliant banks held Rs 17.221billion during week under review.

On average, the banks’ daily reserveswere calculated at Rs 9.80 billion, Rs 7.34billion by conventional and Rs 2.46 bil-lion by the Islamic banks. This holding ofsurplus billions by the otherwise liquid-ity-scarce banks makes the analysts won-der that if the banks are able to maintainsuch big amounts in addition to the com-pulsory what they are required by theregulator, why the State Bank is injectingbillion into the banking system to avoid apurported liquidity crunch.

Some analysts tend to perceive that

the weekly pumping of billions by thecentral bank is a sort of indirect budget-ary lending to the cash-strapped govern-ment that borrows the injected sumsfrom the scheduled banks thorough auc-tioning its risk-free securities, like Treas-ury Bills, Pakistan Investment Bonds andIjara Sukuk. The central bank figures re-veal that during a short span of onemonth, October 4 to September 1, theregulator pumped liquidity into themoney market to the tune of over Rs 3trillion in eight different reverse repoopen market operations (OMOs).

The State Bank injected Rs 487 billionon Oct 4, Rs 99.5 billion in two OMOs onOct 8, Rs 603 billion on Oct 11, Rs 527 bil-lion on Oct 18, Rs 146 billion on Oct 22,Rs 641 billion on Oct 29 and Rs 521 billionon November 1. The State Bank, perhaps,itself may not recall when it had last con-ducted its Mop Up operation. The regula-tor, however, has been cautiouslymonitoring and publishing the banks’holding of ECR to deter the banks,though unsuccessfully.

It was in December last year when thecentral bank had warned the banksagainst holding ECR that, according tothe regulator, adversely impacts smoothfunctioning of the interest rate corridor.

The State Bank since December 2011 ispublishing the banks’ ECR data on weekly

basis perhaps to shame the later on disturb-ing the interest rate corridor by “hoarding”the direly needed additional money. As ifthis was not enough, the regulator on Fridaylast moved again and notified the banksthat it, from now onward, would make pub-lic bank-wise data of the ECR.

“The SBP expects that disseminationof this data will bring more transparencyand efficiency in the domestic moneymarket,” said the State Bank.

The bank-wise data on ECR revealsthat all major public and private and local

and foreign commercial and Islamic bankshold excess money to the disadvantage ofinterest rate corridor. The United BankLimited (UBL) tops the list of the conven-tional banks by maintaining on averageECR worth Rs 465 million every day. Onthe Shariah-compliant banking front, theIslamic Bank Branch (IBB) of the Bank Al-Falah secured the top slot by reserving Rs386 million on average per day.

Other conventional banks to follow,according to SBP data, are Habib Bank,Barclays Bank, MCB Bank, National Bank

of Pakistan, Habib Metropolitan Bank,Bank Al-Falah, Standar Chartered Bank,Faysal Bank, Allied Bank, First WomenBank, Bank of Punjab, Samba Bank andBank Al-Habib. The daily average ECR ofthese banks during September, respec-tively, were recorded at Rs 455 million,Rs 383 million, Rs 319 million, Rs 311million, Rs 254 million, Rs 254 million,Rs 215 million, Rs 170 million, Rs 163million, Rs 126 million, Rs 116 million, Rs109 million and Rs 108 million.

The Islamic banks are no exceptionwith Meezan Bank possessing Rs 267 mil-lion, Dubai Islamic Bank Rs 264 million,Standard Chartered Bank Rs 146 millionand Albaraka Islami having reserved Rs106 million during the said month. Theseare the banks with daily average excessbalance of over Rs 100 million. The centralbank on Friday said it had “now” decidedto publish bank-wise data on ECR main-tained by the banks “over and above” theminimum required CRR.

“Excess cash reserve not only ad-versely impacts smooth functioning of theinterest rate corridor but also has implica-tions on banks’ own liquidity manage-ment,” the bank warned. To be disclosedwith a lag of one month, the SBP said, thedata would help in differentiating betweenthe relative performances of various banksin their money market operations.

SBP exposes banks with excess cash

NEW YORK

AGENCIES

The dollar climbed to a more-than-six-month peak against the yen and a three-week high versus the euro after U.S.employers stepped up hiring and the un-employment rate ticked higher as moreworkers renewed job hunts, a hopeful signfor the economy.

But other data highlighted a mixedpicture. Demand for U.S. factory goodsrose in September by the most in over ayear, but a gauge of business investmentplans showed lackluster momentum in therecovery despite a slight upward revision.

“The (jobs) report itself was good butjust not good enough, especially after thepre-rally we had yesterday,” said ToddSchoenberger, managing principal at the

BlackBay Group in NewYork, referring to the 1.1

percent surge in

the broad-based S&P 500 index on Thurs-day, its best gain since September 13.

The employment data was the lastmajor report card on the U.S. economy be-fore Tuesday’s presidential election. Pollsshow President Obama and RepublicanMitt Romney locked in a dead heat in arace that may hinge on the nation’s feeblejobs market.

“With the election next week and theoutcome of that still so uncertain, somemodest downward pressure is to be ex-pected for the rest of the day,” Schoen-berger said. Much of Thursday’s rally wasrooted in the belief that significant EastCoast storm damage will force capitalspending, rebuilding and help boost em-ployment far more quickly than wasthought a week ago, Andrew Wilkinson,chief economic strategist at Miller Tabak& Co, told clients.

But Wilkinson said the so-called fiscalcliff — when higher tax rates and cuts ingovernment spending are scheduled tokick in early next year if Congress fails toact — has made investors reluctant to buyfurther into the equity rally.

The Dow Jones industrial average .DJIwas down 115.92 points, or 0.88 per-

cent, at 13,116.70. The Standard &Poor’s 500 Index .SPX was

down 9.98 points, or0.70 percent, at

1,417.61. TheN a s d a q

C o m p o s -ite Index.IXIC was

down 25.87points, or0.86 per-

cent, at 2,994.19.In Europe, the FTSEurofirst 300 index

of top European shares .FTEU3 closed up0.5 percent at 1,115.19.

The MSCI all-country equity index ofworld shares .MIWD00000PUS slipped0.27 percent to 330.90.

Oil fell as weak European data rein-forced a gloomy picture for the demandoutlook. Euro zone manufacturing shrankfor the 15th month running in October asoutput and new orders fell, a surveyshowed. Weak growth, high prices andbetter vehicle fuel efficiency pushed downfuel consumption in most of Western Eu-rope over the summer, official statisticsshowed. Also, the auto market in westernEuropean maintained a sharp descent to-ward levels last seen nearly 20 years agoas consumers worried about unemploy-ment and euro zone austerity affected cardealerships in October.

Brent crude for December fell $1.75 to$106.42 a barrel, while U.S. crude for De-cember delivery fell #2.23 to settle at$84.86. The U.S. dollar index .DXY was up0.65 percent at 80.567, and the euro wasdown 0.80 percent at $1.2838.

The data were viewed as positive forthe economy, but not strong enough tojeopardize the Federal Reserve’s accom-modative monetary stance. “Incomesaren’t really growing, and if incomes don’tgrow, how can spending grow?” saidWilmer Stith, vice president and portfoliomanager of the Wilmington Broad MarketBond Fund in Baltimore. “By no means isthe economy out of the woods.”

The benchmark 10-year U.S. Treasurynote pared losses to trade up 1/32 in price,with its yield at 1.726 percent.

Global shares, crude oil dipdespite stronger US jobs Global stocks and crude oil retreated even after a US employment report for October surpassedexpectations, as investors looked beyond next week’s presidential election to the looming “fiscal cliff”

g Central bank says ECR ‘adversely impacts’ interest rate corridor g UBL, Bank Al-Falah top the list by holding Rs465m and Rs386m dailyg Habib Bank, Barclays, MCB, NBP, Habib Metro, Bank Al-Falah, Standard Chartered Bank, Faysal Bank, Allied Bank, First Women Bank, Bank

of Punjab, Samba Bank and Bank Al-Habib also reserve billions g Meezan, Dubai Islamic, Standard Chartered and Albaraka Islami are

Islamic banks possessing excess money g SBP injected over Rs3tn only in October to avoid liquidity crunch in banking system

PRO 04-11-2012_Layout 1 11/4/2012 12:48 AM Page 1

02

Sunday, 4 November, 2012

Business

ISLAMABAD

ONLINE

FISCAL transparency is a critical element ofeffective fiscal policymaking and risk man-agement, but the recent crisis has high-lighted the gaps in governments andunderstanding of their financial position.

In the wake of the crisis, a new International Mone-tary Fund(IMF)Paper calls for improvements in fiscal re-porting standards, faster adoption of those standards bymember countries, and improvements in the way the IMFand others monitor fiscal transparency.

It said the past 15 years have seen improvements inboth fiscal reporting standards and practices. However,the recent crisis has underscored that, even among ad-vanced economies, governments’ understanding of theirfiscal position—and the risks to that position—remainsinadequate.

“Now is the right time to review our approach to im-proving fiscal transparency,” said Carlo Cottarelli, headthe IMF’s Fiscal Affairs Department. “The crisis has re-minded us that comprehensive, reliable, and timely in-formation about the public finances is the foundation ofeffective fiscal management. It has also highlighted thegaps in both fiscal reporting standards and practices. Im-provements in fiscal transparency should therefore be acentral element of any government’s fiscal policy re-sponse to the crisis.”

According to the IMF, despite the advances madeto date, current understanding of governments’ under-lying fiscal position and the risks to that position re-mains inadequate. This was demonstrated by theemergence of previously unreported fiscal deficits anddebts in the wake of the crisis in Greece and Portugal.It could also be seen in the United States where finan-cial problems in quasi-public enterprises, like FannieMae and Freddie Mac, remained largely out of sightuntil government bailouts were needed. Elsewhere, incountries with large domestic banking sectors, such asIceland, Ireland, and the United Kingdom, the biggestshock to the public finances came from the crystalliza-tion of large, mainly implicit, gov-ernment liabilities to thefinancial sector.

It added that theseshortcomings in fis-cal transparencywere due to a combi-nation of gaps and in-consistencies in existingfiscal reporting standards,delays and discrepancies incountries’ adherence to thosestandards, and a lack of effectivemultilateral monitoring ofcompliance with those standards.

NEW YORK

AGENCIES

Energy stocks were a drag on the market afterChevron Corp, the second-largest U.S. oil company,posted a profit that missed expectations. The stockfell 2.9 percent to $108.26 and was one of the biggestdrags on the Dow industrials.

The dollar’s strength also hurt energy and mate-rials shares. Eventually, all 10 S&P 500 sectors suc-cumbed to selling pressure to end lower.

For the week, the Dow shed 0.1 percent, but theS&P 500 gained 0.2 percent. The Nasdaq ended theweek down 0.2 percent. The trading week was short-ened by a historic two-day market closure on Mon-day and Tuesday, spurred by superstorm Sandy’sdevastating sweep through the U.S. Northeast.

“We started off on strength, with nonfarm pay-rolls coming in above expectations. Then we driftedlower during the day. It’s hard to determine what di-rection we are in - with the two days off, it’s reallybeen a strange week,” said Fred Dickson, chief mar-ket strategist at D.A. Davidson & Co, in Lake Os-wego, Oregon. From New York City’s Staten Islandto the popular beach towns of the Jersey Shore, res-cuers and officials continued on Friday to face wide-spread destruction wrought by Sandy, as well as arising death toll and frustration over delayed reliefand fuel shortages.

Government data showed employers added171,000 people to their payrolls last month, toppingexpectations. The jobless rate ticked up to 7.9 per-cent as more workers restarted job searches, a posi-tive signal for the economy. The jobs report is thelast one before the U.S. presidential election on

Tuesday, and it could improve President BarackObama’s odds at the ballot box, though polls con-tinue to indicate a close race between Obama andRepublican candidate Mitt Romney.

Chevron also was the second-largest weight onthe S&P 500. The S&P energy index, down 1.7 per-cent, was one of the worst performers among the 10major S&P 500 sector indexes. Strength in the dollarwas also cited for a decline in crude prices, whichhurt energy shares as well.

The S&P materials index fell 2 percent, pulledlower by a slide of 8.4 percent in Newmont Mining

Corp to $48.74 after its profits missed expectations.According to Thomson Reuters data through Fri-

day, of the 378 companies in the S&P 500 that havereported earnings so far, 61.9 percent have toppedexpectations, in line with the 62 percent quarterlyaverage since 1994.

The revenue picture is much bleaker, with only38.2 percent of companies having posted revenueabove expectations, well below the 62 percent quar-terly average since 2002 and the 55 percent averageover the past four quarters.

“Generally, we’ve seen the market trend lower,

primarily related to disappointing revenue reportscoming out of the third-quarter earnings stream,”Dickson said.

The Dow Jones industrial average dropped139.46 points, or 1.05 percent, to 13,093.16. TheStandard & Poor’s 500 Index lost 13.39 points, or0.94 percent, to 1,414.20. The Nasdaq CompositeIndex declined 37.93 points, or 1.26 percent, to closeat 2,982.13. The S&P 500 index is down 3.5 percentfrom a recent peak on September 14, and is below its50-day moving average, amid investor caution aheadof the election and tough government budget nego-tiations at the end of the year.

Starbucks Corp jumped 9.1 percent to $50.84after raising its profit forecast for the fiscal year assales in the United States, its top market, beat expec-tations, providing the company optimism that haseluded much of the U.S. restaurant industry in re-cent months. Restoration Hardware shares soared29.6 percent to $31.10 in their market debut after theupscale furniture retailer’s initial public offering waspriced at the high end of the expected range. Theshares hit an intraday high at $33.15 - up 38.1 per-cent from the IPO price of $24.

Verizon said it expected fourth-quarter results tobe hurt significantly due to superstorm Sandy, butcould not estimate the effect at this time. The stockslid 1.4 percent to$44.52.

Volume was modest, with about 6.35 billionshares traded on the New York Stock Exchange,NYSE MKT and Nasdaq, slightly below the daily av-erage of 6.5 billion for the year so far.

Declining stocks outnumbered advancing oneson the NYSE by a ratio of 7 to 3, while on the Nasdaq,about three stocks fell for every one that rose.

ISLAMABAD

ONLINE

The Pakistan Sugar Mills Association (PSMA)has envisaged a production of about 5 millionmetric tons(MT) sugar during forthcomingcrushing season against domestic requirementof approximately 4.2 million tons.

A representative of Pakistan Sugar MillsAssociation told “Online” on Saturday that atotal quantity of about 5 million MT sugar isexpected to be produced during the season2012-13, which is likely to surpass all previousproduction figure. He said with anticipatedcarryover of 0.4 million tons sugar and meet-ing the domestic requirement of approxi-mately 4.2 million tons.

He said a total quantity of 4,670,379 mil-lion tons sugar was produced during thecrushing season 2011-12 at the beginning ofthe crushing season 2011-12 the left overstocks from 2010-11 were 0.9 million tons.The average annual domestic consumption ofsugar is around 4.2 million tons and about 1.5million tons sugar was calculated as surplus.

The Economic Coordination Committee(ECC) of the cabinet had allowed export of atotal quantity of 300,000 tons sugar out ofwhich 100,000 metric tons in Januarywhereas 200,000 tons in May 2012 andplaced export quotarestriction of

5,000 per sugar mill. Reportedly 95 per centof the quantity allowed has been allocated tothe sugar mills. However, only 133,471 tonssugar has been actually exported them.

On the request of Prime Minister of Tajik-istan, export of 30,000 tons sugar has been al-lowed to Tajikistan on government togovernment bases from Trading Corporation ofPakistan (TCP) reserves at preferential price,however, the export has not materialized yet. Therepresentative said a total quantity of 3,080,586tons sugar has been sold by sugar mills to theopen market till September 25th, 2012.

“TCP had procured 687,000 tons sugarduring 2011-12 from local sugar mills out ofwhich a quantity of 358,119 tons sugar hasbeen sold to Utility Stores Corporation of Pak-istan (USC) and 150 tons to Pakistan Navy till27TH September, 2012,”a TCP official said,adding that in addition to that 30,000 sugarwould be exported to Tajikistan whereas aquantity of 298,731 ton sugaris presently available withTCP which is expected tolast up to February nextyear for surplus toUSC 50,000 tonssugar per month.

IMF calls forrenewed fiscaltransparency effort

Envisages 5m tonne sugar production in 2013

Wall Street ends storm-shortened week with a selloff

PSMA TO GIVE EXCHEQUERSOME SUGAR

NTC incurs Rs 35m loss ISLAMABAD: National Telecommunication Corporation (NTC) administration caused Rs 35 million loss tothe national exchequer in acquiring unduly and unjustified land in Gwadar. According to the available report ofFact finding committee on coastal fiber project 2012 it is learnt that NTC administration purchased land inGwadar for its regional office and paid Rs3.6 million for the land however land has not been transferred to theNTC. Fact finding report revealed that NTC administration purchased land at two different places with the samesite while huge variations in price were observed regarding the purchase of land per sq ft/ per sq yard. Report

revealed that 1482 sq yard land purchased in GawadarRs 3,622,000, 8694 sq ft land purchased in Jiwaniwith a cost of Rs 130,410 and another piece of 1 acreland was purchased in Pasni with Rs 304,920. 4500 sqfeet land purchased by the NTC administration 31,500, 1022 sq yard land purchased in Hub over a costof Rs 421,127 and 600 sq yard land purchased at Rs452,484 which shows huge variations. Report alsomentioned that area of land purchased through PSDPfunding for the project is totally irrational regardingscope of project and is waste of public money. Thestatus of ownership of land in Gawadar is also aquestion mark on management of the project. Factfinding committee showed extreme displeasure overstatus of owner ship of land in Gawadar andunjustified land acquisitions. ONLINE

PRO 04-11-2012_Layout 1 11/4/2012 12:48 AM Page 2