State Bank leaves far behind others in earning profit, reports 268 billion profit in 2014

During FY14, State Bank of Pakistan spent a huge amount of Rs 6,146 million on the printing of currency notes compared to the expense of Rs 5,635 million during the previous year ; an increase of 9 percent.

Special Report by J. Choudhry/KARACHI: For the financial year ended June 30, 2014, surplus profit of the Bank stood at Rs 268,634 million, showing 14 percent increase compared to the profit of Rs 235,892 million in the preceding year.

The increase is mainly attributable to higher discount, interest/markup and/or return earned and increases
in other operating income partly offset by the accumulated loss on re-measurement of defined
retirement benefits (due to revision in International Accounting Standard 19 – Employee Benefit).

The Bank earns discount income on its holdings of Market Treasury Bills (MTBs), whereas interest/markup and return is derived on the foreign and domestic financial assets held by the Bank.
The gross income under the head increased by Rs. 55,280 million, posting an increase of 22 percent compared to the last year. The increase is mainly attributable to increase in quantum of lending.
Interest/markup expenses are incurred on borrowings from International Monetary Fund, deposits of international organizations and foreign central banks and payable currency swap arrangement. Expenditure under the head increased by 100 percent as compared to previous year due to increases in borrowings under currency swap arrangements and expense on securities sold under agreement to
repurchase. This increase is partly offset by decrease in expense on IMF borrowings.

Commission Income
The Bank derives commission income from management of instruments of public debt, Market treasury bills, prize bonds, national saving schemes and government securities as well as issuance of drafts and payment orders.
The commission income during FY14 decreased by 2 percent and stood at Rs 1,727 million compared to Rs 1,759 million during the previous financial year.

Exchange Gain – Net
The net exchange gain / (loss) arise from Bank’s foreign currency assets and liabilities. The exchange gain mainly arises due to depreciation of PKR vis-à-vis foreign currencies particularly US$ and SDR. Specifically, the foreign currency assets of the Bank are mainly denominated in US$ whereas the foreign currency liability exposure is mainly denominated in SDRs. Accordingly, the depreciation of PKR vis-à-vis US$ results in exchange gain to Bank and vice versa, while the depreciation of PKR vis-à-vis SDR results in exchange loss and vice versa.
The net exchange gains amounted to Rs. 14,112 million during the FY 2013-14 as against the
income of Rs 6,703 million during the previous financial year marking increase of Rs. 7,409
million. The increase was mainly due to decline in exchange loss payable to IMF amounting to Rs. 10,319 million and SDR amounting to Rs. 1,100 million due to strengthening of PKR vis-à-vis SDR. However, this is partly offset by decrease in exchange gain from foreign currency placements, deposits and other assets amount to Rs. 3,980 million, forward covers under Exchange Risk Coverage to Rs. 21 million during the current year from previous year again due to strengthening of PKR.

Dividend Income
The State Bank holds the equity investments in banks and financial institutions. The breakup of
dividend income on Bank’s listed and unlisted equity investments as of June 30, 2014. The dividend income of the Bank decreased by Rs 4,353 million during the current financial year which is 26 percent lower than the income in the previous financial year.
Other Operating Income / (loss) – net
During the year under review, the gain of Rs 28,502 million was recorded under this head against the
loss of Rs 1,020 million in the previous financial year. The main reason for increase in Bank’s net
other operating income in the current year as compared to previous year is the gain on sale of shares
of UBL i.e. Rs. 31,186 million.
Expenditure
The total expenditure (including reversal of provisions against impaired assets) amounted to Rs.
35,471 million as against the expenditure of Rs 31,254 million during corresponding year; an increase
4,217 million. An analysis of main elements of Bank’s expenditure is given as under;
Bank Notes Printing Charges
During FY14, expense under this head stood at Rs 6,146 million compared to the expense of Rs 5,635
million during the previous year ; an increase of 9 percent.

Islamic banking expanding briskly in Pakistan

Islamic banks assets cross Rs1 trillion mark in June 2014: SBP survey finds overwhelming demand of Islamic banking in Pakistan. Strategic Plan ready to promote IB from 2014-18

Special Report by J. Choudhry/KARACHI:

Islamic Banking industry of Pakistan expanded briskly during the last decade and the trend continued in FY14. From June 2013 to June 2014, total assets of the industry recorded a phenomenal growth of 20.5 percent. As of June 2014, the industry’s asset base reached above Rs 1 trillion and constituted nearly 10 percent of the overall banking industry.

Deposits of Islamic banking industry increased to reach Rs. 932 billion having a share of 10.6 percent in overall banking industry deposits. Similarly, the outreach of Islamic banking institutions (IBIs) witnessed considerable expansion and presently a network of 1335 branches across Pakistan. Three conventional banks started Islamic banking operations through opening Islamic banking branches (IBBs) during FY14. State Bank of Pakistan as its strategic objective played a key role in the expansion and promotion of Islamic banking industry in the country. To support the performance of the industry, following key initiatives were taken during the year under review.

Strategic Plan for Islamic Banking 2014-2018

SBP prepared a strategic plan in consultation with internal and external stakeholders to improve public perception of Islamic banking and to make the industry a distinct and viable alternative financial system capable to address the demand for financial services of the public in general and business community in particular. The strategic plan comprises vision, mission, values, strategies and the action plans for the next five years.

The main strategies are following: Strengthening legal, regulatory, supervisory, liquidity management, financial accounting & reporting structure and coordination with FBR to resolve taxation issues. Improving Shariah governance and compliance through standardization and harmonization of Shariah practices, as well as facilitating the creation of distinct Islamic banking products and services.
Enhancing coordination and collaboration amongst internal and external stakeholders to increase awareness about Islamic finance and capacity building of the stakeholders. Market development by means of increasing product diversification and financial inclusion.

Market Research Findings
To assess demand for the Islamic banking in Pakistan, SBP has completed a survey-based study on
“Knowledge, Attitude and Practices of Islamic Finance in Pakistan”. The study is based on first hand
information collected through a survey from both banked (Islamic and conventional) and un-banked
sectors of the country with a sample of 10,000 household (retail) and corporate respondents.

According to the study there is an overwhelming demand for Islamic banking in Pakistan in both
retail and corporate sectors.
Developments Regarding Promotion of Islamic Banking Industry
 Taxation Issues of Islamic Banking
Ensuring a level playing field is one of the key challenges in development of Islamic banking
industry as an alternative banking system in Pakistan. In this connection, proposals prepared
by SBP in consultation with Pakistan Banks’ Association Sub-Committee for Islamic Banking
to address the long outstanding taxation issues of Islamic Banking industry were forwarded to
Federal Board of Revenue (FBR) through Ministry of Finance for their consideration and
resolution.
Permission for Three New Islamic Banking Institutions
Summit Bank, Allied Bank, and Sindh Bank were permitted to start Islamic banking
operations through Islamic banking branches in 2014. It is pertinent to mention that Summit
Bank has also announced to convert the bank into full fledged Islamic Bank in next 3-5 years.
 Establishment of First Islamic Banking Subsidiary- MCB Islamic Bank
MCB Bank has been granted license by SBP for establishing of first Islamic Banking
subsidiary (IBS) in the country with the name of “MCB Islamic Bank Ltd.”. It is expected
that other larger conventional banks having IBBs will also follow this path and more IBS will
be formed. SBP granted an approval to NRSP to establish an Islamic Microfinance branch in
Bahawalpur. NRSP is going to be the first Microfinance Bank to start Islamic Microfinance
operations in Pakistan.

History of Islamic Banking in Pakistan

The full-fledged Islamic banking took off in Pakistan in 2002 when Meezan Bank was established. Meezan Bank acquired the Pakistan operations of Societe Generale and concurrently Al Meezan Investment Bank converted itself into a full fledged Islamic commercial bank. The first Islamic banking license was issued to the Bank and it was renamed Meezan Bank. President General Pervez Musharraf inaugurated the new Islamic Commercial Bank at a formal ceremony in Karachi. The other full-fledged Islamic banks in Pakistan are Al-Baraka Bank, Bank Islami Pakistan, Dubai Islamic Bank Pakistan and Burj Bank Ltd.

PAKISTAN NAVY WINS INTER SERVICES SAILING

CHAMPIONSHIP – 2014

Karachi 31 October, 2014: Pakistan Navy won the Inter Services Sailing Championship – 2014 held at Sea Survival School PAF Base, Korangi Creek. Air Vice Marshal Azhar Hasan Rizvi Officer Commanding, Southern Air Command was the Chief Guest at the occasion.

Chief Guest gave away the medals to the sailors and the championship Trophy to Pakistan Navy Team. In this competition, teams of Pakistan Air Force, Pakistan Army and Pakistan Navy participated which was held from 26 to 31 October, 2014. In this event PAF Sailing Team earned 01 Gold 04 Silver Medals, Army Sailing Team 02 Silver Medals while Pakistan Navy Team fetched 06 Gold and 01 Silver Medals.

Hotline KSE Talk Show of BusinessPlus Channel

Friends, here are glimpses of my participation in the 45-minute long live talk show “HOTLINE KSE” of BusinessPlus TV channel. The programme was broadcast live today at 5.15pm

The key point of the discussions were”

Karachi Stock Market to stay above 30,000 points in case the political mess further fizzles out and the Govt-PTI develop patch up after departure of PAT chief Dr Tahirul Qadri last week. KSE-100 index had gained about 600 points, now around 30,300 plus points, after departure of PAT dharna a week ago.

PML(N) Govt should give up ad-hoc approach and work out a precise plan to put economy on track in a sustainable manner

Govt should not only further reduce oil prices, but ensure the people get benefit of recent cut of about 8-10 rupees per liter price of diesel and petrol. OPEC crude oil prices have declined by 26-28 dollars a barrel in recent months, and the government should give this benefit to the people in prices, electricity bills because price of diesel and furnace oil (used for 4000 to 5000 MWs of electricity) have also dropped in the OPEC markets.

Consumers must be protected from undue price hike

(Picture with Muhammad Yasir (right), host of the programme. One of the youngest and the nicest host of the Talk Show)

Govt officials involved in overbilling must be punished and exposed as well. Prime Minister’s Inspection Commission says in its report on recent over-billing that the speedo-meters (30-35 percent faster than old meters) were installed in 2012-13 during PPP tenure, but the meters ‘performed’ after one-year tenure of PML(N) Govt. How this happened” Govt must expose it.

Changes in Insurance Rules _ CCP expresses its concern & conveys it to SECP

ISLAMABAD, 31 OCTOBER 2014: The Competition Commission of Pakistan (CCP) has conveyed its concerns to the Securities and Exchange Commission of Pakistan (SECP) on the proposed changes in Insurance Rules, 2002, stating that the proposed changes may affect competition in the Insurance Surveyors Market.

SECP has proposed to change the Insurance Rules, 2002, by raising the paid up capital requirement for insurance surveyors from PKR 1 million to PKR 5 million, and raising indemnity insurance requirement for insurance surveyors from PKR 1 million to PKR 10 million.

SECP, in its letter dated 10 September 2014 to CCP, stated that the changes have been proposed to ‘establish surveyors on better footing’, ‘to check casual entry and exit of the surveyors’, and to ‘develop an element of responsibility and sensitivity into the surveyor class.’

CCP, in its comments to SECP, appreciated the fact that the latter was striving to improve standards in the market, for which it has statutory oversight. However, it noted that since the insurance surveyors rely more on professional skills rather financial strength to undertake their work, the proposed changes – a five-fold increase in capital requirements and a ten-fold increase in indemnity insurance – will do little to improve either the standards in the industry or inculcate responsibility in the surveyors.

CCP feels that the proposed changes will most certainly lead to the exit of smaller insurance surveyors and make the entry of new ones more difficult, thereby affecting competition in the insurance surveyors market. The proposed increase may have the effect of excluding capable and professional insurance surveyors unable to meet the proposed financial requirements from competing in the market.

CCP strongly recommends that SECP should drop the raise in capital requirements and indemnity insurance in favor of better competency-based regulations encompassing education, examination, licensing, and continued education requirements. Improved competency-based regulation would be a more pertinent, reasonable, and a less competition-restrictive way to improve standards and inculcate responsibility in the industry.

Economic Indicators for You

Germany-Pakistan Trade Investment launched

Karachi: Consul General of the Federal Republic of Germany Dr. Tilo
Klinner and  Chairman GPti Qazi Sajid Ali addressing the launching ceremony of the German-Pakistan Trade and Investment at German Consulate in Karachi. Below is the Group photo of the event. EFU Chairman Saifuddin Zoomkawala, other officials of EFU Group and businessmen are also seen in this group picture.

New UNICEF chief Angela speaks high of better Child Rights in Pakistan

With financial support from the Saudi Fund for Development, UNICEF has handed-over furniture, IT and library equipment to the Education Department, Government of Khyber Pakhtunkhwa, for more than 1,000 schools including 343 girls’ schools in Khyber Pakhtunkhwa (KP) and the Federally Administrative Tribal Areas (FATA) benefitting more than 128,000 students and teachers.

Shahnaz Javed/ISLAMABAD:

The newly-appointed UNICEF Representative in Pakistan, Ms. Angela Kearney, has said that Pakistan made significant progress in protecting and promoting the Child Rights in last years, adding that due to increasing number of polio cases in Pakistan one of the major challenges and priorities in her new function would be UNICEF’s continuous support to the country’s polio eradication
programme. She made these remarks while presenting her credentials to the Government of Pakistan, here in Islamabad.

In the framework of the country’s UN Delivering as One Programme Ms. Kearney, a national of New Zealand, informed that she first joined UNICEF in 1998, as an emergency officer in Sudan, while In 2002 she transferred to Afghanistan as Deputy Representative.and now inPakistan she will head a multi-sectorial operation in health, nutrition, water and sanitation, as well as in education and child
protection across the country.

Before coming to Pakistan she was the UNICEF Representative in Indonesia. For four month following the Typhoon Haiyan disaster in the Philippines she led the UNICEF emergency response. She has also been
the UNICEF Representative in Angola from 2006 to 2009 and in Liberia from 2003 to 2006.

“As we are approaching the 25th anniversary of the Convention of the Rights of the Child to which Pakistan is signatory, I can see that the country has made significant progress in protecting and promoting the rights of its youngest and most vulnerable citizens,” said Ms. Kearney. “Much more needs to be done, however, to ensure that each child has a good start in life with access to health care, vaccination, a balanced and sufficient diet, education, hygiene and clean water. Most importantly all children must be protected from violence and abuse”, she further said.

Angela Kearney, while addressing at another ceremony, also expressed her gratitude to the Saudi Fund for Development (SFD) for its support towards improving the teaching and learning environment through its generous contribution to provide furniture and other necessary supplies to schools in KP and FATA.

With funds from SFD, UNICEF has hand-over school supplies including furniture, IT and library equipment of worth 14.4 Million US Dollars to the Education Department, Government of Khyber Pakhtunkhwa, for more than 1,000 schools including 343 girls’ schools in Khyber Pakhtunkhwa (KP) and the Federally Administrative Tribal Areas (FATA) benefitting more than 128,000 students and teachers.

“The importance of a good school environment cannot be over-emphasised to ensure quality teaching and learning and most importantly the holistic grown of the child.” Ms. Kearney addressed.

The handover ceremony was attended by Jassim M. Al-Khaldi, Acting Ambassador of the Kingdom of Saudi Arabia and a high level SFD delegation led by Saeed Almshaikhi, Chief Specialist. On the occasion,
the Director, Curriculum and Teacher Education, Bashir Hussain Shah received the school supplies.

Angela Kearney brings with her more than twenty years of experience in leading positions in protecting and promoting child rights. Before working for UNICEF Angela Kearney held various positions within
Save the Children in Iraq, Angola and Afghanistan. She is well familiar with the region as she was also Regional Coordination Officer with the UN Office for the Coordination of Humanitarian Affairs (UNOCHA) in this Northern neighbour country of Pakistan from 1997-1998.

Salaries eat up 90% of education budget in Pakistan, says WB

Shahnaz Javed/ISLAMABAD:

Teachers are considered the main input within schools for helping students learn. The positive impact of a high-performing teacher is not limited just to test scores.  A student’s exposure to a high-performing teacher for as short as one school year can be enough for long-lasting, positive effects on future education, employment, and earnings outcomes. New research shows that individual teachers impact child learning differently. This was discussed in recently held Pakistan Education Sector Review workshops organized by the World Bank in Lahore and Islamabad. Below is the World Bank’s Picture.

Ninety percent of the education budget in Pakistan goes toward paying salaries of approximately 1.5 million teachers in public and private sector schools.  The fact that students’ learning outcomes are mostly not up to the mark can only mean that something is amiss in teacher’s performance because it is reflected in the student’s learning.

One of the important determinants of teacher performance is the prevalent multi-grade teaching system. With 70 students being taught by 2 teachers under the same roof, quality cannot be ensured without adequate training. Introduction of modern techniques for managing multi-grade classrooms is imperative, as is the need for continuous professional development of teachers.

Multiple participants felt that the state of accountability and governance in the public education system is a major contributing factor for poor teacher performance. They urged that the public sector draw lessons from successful private sector governance models and tailor them to its needs.

Evidence from a World Bank survey of the lowest performing schools in three districts of Punjab shows that, even within schools, it is teacher performance that determines varying degree of student learning. Standard indicators like teaching experience, school tenure, and teacher training do not appear to be associated with average student test scores. “This lack of association is consistent with a storyline of weak governance and accountability in the public schools, which impairs the real acquisition and application of teacher skill,” Dhushyanth Raju – Senior Economist, World Bank said while underlining the factors affecting teachers’ performance.

Private schooling is an important feature of the educational landscape in Pakistan. The recent expansion of low-cost private schools has made them a viable alternative, even for the poor.  More than a third of all children in the country are now enrolled in private schools, where tuition averages less than $5 a month in rural villages, a small fraction of average household income. Studies of these schools have generally found that student learning is higher and teachers perform better, although teachers are paid less and are often less educated than their counterparts in government schools. This shows that knowledge or degrees alone do not ensure good teachers. It is incentives for good performance and disincentives for shirking responsibility that drives behaviors and resultant performance.

Head teachers’ status and role is also important. The amount of time spent at schools and the value added by the head teacher can make a difference in both teacher accountability and motivation as well as student achievements.  Head teachers are usually present in the private schools, however in public schools head teachers are mostly involved in other activities like immunization campaigns, election duties etc.

Risk and opportunity in child school participation was another subject that was discussed at length during the workshops. A large proportion of the children aged 6-15 years are out-of-school or at the risk of dropping out. There is, however, notable variation in the extent of risk and opportunity across provinces and schooling levels. Although vast majority of in-school children are safe but the percentage of at-reach, out-of-school children exceeds the percentage of at-risk, in-school children. In Punjab and Khyber Pakhtunkhwa, the percentages of at-reach, an out-of-school child is more than the percentages of hard-to-reach, out-of-school children. Studies show that raising the income levels of the poor, raises the probability of retaining these children in school.

In order to improve education system in Pakistan, teachers should be provided with pre-service and in-service training that equips them with up-to-date teaching methods and to see the results the students should be consistently tracked to measure the learning outcomes.

Singapore on top in list of business-friendly economies: World Bank

KARACHI: Singapore tops the list of business-friendly economies globally, while five of the top 10 most improved countries are in sub-Saharan Africa, according to the World Bank Group’s Doing Business 2015 rankings.

The 12th annual report finds that the 10 economies with the most business-friendly regulatory environments are Singapore; New Zealand; Hong Kong SAR, China;Denmark; the Republic of Korea; Norway; the United States; the United Kingdom;Finland; and Australia.

The 10 economies that have improved the most since the previous year areTajikistan, Benin, Togo, Côte d’Ivoire, Senegal, Trinidad and Tobago, the Democratic Republic of Congo, Azerbaijan, Ireland, and the United Arab Emirates.

Sub-Saharan African countries had the highest number of regulatory reforms — 75 of 230 around the world — while emerging Europe and Central Asia had the highest percentage of improving countries.  Progress was uneven in the Middle East and North Africa, with conflict-affected Syria near the bottom. South Asia saw the lowest number of reforms.

While 80% of countries in the study improved their business regulations last year, only about one-third moved up in the rankings. However, the gap between the best- and worst-performing countries continues to narrow as countries improve their business climates, said Rita Ramalho, manager of the Doing Business Project.

“It’s easier to do business this year than it was last year, than it was two years ago or 10 years ago,” she said. “We see that the economies that score the lowest are reforming more intensely, so they are converging toward the economies that do the best.”

For example, in 2005 it took an average of 235 days to transfer property in the lowest-ranked countries and 42 days in the top-ranked countries — a difference of 193 days. The gap now has narrowed to 62 days (around 90 days for the lowest-ranked and less than 40 for the top-ranked).

The report measures the ease of doing business in 189 economies based on 11 business-related regulations, including business start-up, getting credit, getting electricity, and trading across borders. The report does not cover the full breadth of business concerns, such as security, macroeconomic stability, or corruption.

This year’s report, “Doing Business 2015: Going Beyond Efficiency,” uses new data and methodology in three areas: resolving insolvency, protecting minority investors, and getting credit.

“We want people to be aware this is a different report and that we’re measuring new areas we weren’t measuring before,” said Ramalho.

For that reason, the report cannot be directly compared with last year’s, she said.  (The 2014 rankings have been recalculated based on the new methodology and are available on the website.)

“Doing Business is by and large about the efficiency of regulations — how fast, how cheap, how simple it is to get a transaction completed. But now we’re branching out to also measure the quality” of regulations, she said.

New data reveal regulatory efficiency and regulatory quality go hand in hand. “We see a high correlation between the two. Countries that do it fast and cheaply are also likely to do it well,” said Ramalho.

The resolving insolvency indicator, for example, previously focused on the efficiency of the bankruptcy court system. This year’s report looks at the strength of the underlying legal system governing insolvency and whether laws follow good practices.  Countries that rank low on this indicator often have outdated laws or lack an insolvency law altogether. Some countries have good laws on the books but do not implement them efficiently. Yet, without a well-functioning insolvency process in place, it’s more difficult for entrepreneurs to get financing and less likely they would risk failure or venture into a new business, said Ramalho.

“No one, looking ahead, would start a business if it’s very hard to close one,” she said. “Failure is part of life, so you want to have a legal system that knows how to deal with that.”

The 2015 report also includes data from two cities rather than one for 11 countries with more than 100 million people (Bangladesh, Brazil, China, India, Indonesia, Japan,Mexico, Nigeria, Pakistan, the Russian Federation, and the United States). In most cases, the report did not find significant differences between the two cities in terms of business climate.

Next year, Doing Business will enhance methodology, data collection, and analysis for five more indicators: obtaining construction permits, getting electricity, registering property, paying taxes, and enforcing contracts.