Rs 40bn power sector financing, Rs 960m for 2-month salary of Steel Mills

IshaqDar

Harry Javed/ISLAMABAD: The Economic Coordination Committee of the Cabinet in its meeting chaired by Finance Minister, Senator Mohammad Ishaq Dar here Saturday approved an amount of Rs.960 million for payment of two months salaries to workers of Pakistan Steel on urgent basis.

Chairman Pak Steel briefed the meeting about current profile of Pak Steel and said some difficulties were being faced in production due to power and gas shortage. He also requested ECC’s approval for specific amount for workers salaries.

The Chairman added that despite difficulties the PSM, boosted by the special Rs. 18.5 billion bailout package by the Government last year, had achieved 50% production capacity, starting from a mere 1%. He said the PSM management eyed 70% capacity target in March.

The chair while approving the amount for payment of salaries, directed for formation of special committee including Secretary Finance, Chairman /Secretary Privatization Commission, Secretary Industries, headed by Chairman SECP to look into affairs of PSM. He also asked the Privatization Commission to table its proposal for the restructuring of PSM at the next ECC meeting.

On a proposal submitted by Commerce Division, the meeting approved disposal of 28,999 MT of unsold sugar stock available with the TCP. Utility Stores Corporation would procure sugar from TCP and this being an arrangement between two government entities, transparency would be ensured.

The chair remarked that USC would sell sugar to the customers at appropriate price and would not receive any subsidy whatsoever. While announcing this decision the chair directed the concerned authorities to keep vigil on demand and supply situation of sugar and wheat in the country as these were important commodities of everyday use and their availability to the masses was to be accorded due care.

On a proposal by Ministry of Water & Power, the ECC accorded ex-post facto approval for issuance of sovereign guarantee by Ministry of Finance in respect of syndicated term finance facility amounting to Rs. 40,000,000,000/-(forty billion rupees) for the Power Sector. The loan had been arranged on behalf of power distribution companies by Power Holding (Pvt) Limited from consortium of local commercial banks.

The Ministry of Petroleum and Natural Resources proposed that in view of the widening gap in natural gas demand/supply on the gas supply network, especially M/s SNGPL network, up to 12 MMCFD gas from Miano Tight Gas field may be allocated to M/s SNGPL through swapping arrangements. M/s SSGCL, having the nearest transmission network may take delivery in their system and supply to SNGPL. The ECC after due consideration approved the proposal.

Ministry of Petroleum and Natural Resources also proposed that 3 MMCFD gas from Maru-East-1 Gas field be allocated to M/s Engro fertilizer during the EWT (extended well testing) period. Further, the commerciality/D&P lease of the field may also be approved. The proposal was accordingly approved by the ECC. M/s Engro Fertilizer had expressed their interest to receive gas from Maru East-1 as it would help them to produce 14,000 tons extra urea in the country.

The ECC today also passed a resolution eulogizing the services of Mr. Sanaullah, Joint Secretary (Committee), Cabinet Division who is due to retire from government service. All participants of the meeting wished him well in his future endeavours.

Hotline KSE Talk Show of Business Plus TV Channel _ Feb 24, 2015

HOTLINE BusinessPlus Feb24

I pointed out important issues in this talk show….Crude oil prices have increased by 10-12 dollars in last two weeks that would lead to increase in domestic prices; 2nd the government has wasted 1860 billion rupees (US$18 billion) in budget deficit in last 18 months, from June 2013 to Dec 2014. How Pakistan can afford this colossal financial bleeding.

The PML(N) Govt must trim it as much as possible to save massive losses; the third issue was loadshedding. Despite availability of surplus electricity and diesel/furnace at half price in this winter, the govt opted for loadshedding. Before Feb 15, 2015, the generation of electricity was 10,000 MWs, out of existing installed capacity of 23,000 MWs and the demand was just 13,000 MWs. The Govt could not get 3,000 MWs of electricity from 13,000 available capacity.

Pakistan Railway reduced just 2 to 3% fare of four/five trains only and did not provide benefit to the consumers regarding 35% cut in domestic oil prices in recent months. The tariff of electricity was also not reduced till the day the programme went on air live. Last week NEPRA announced 3.59 rupees cut in electricity tariff that would be endorsed in the March bills instead of Feb 2015 bills. Two months ago Prime Minister and NEPRA announced 2.70 rupees decrease in the power tariff, but Finance Ministry threw this order away in the trash box.

Pakistan gets rid of a stigma, removed from FATF Grey List

Harry Javed, ISLAMABAD:

FATF

The Financial Action Task Force (FATF) in its Plenary held in Paris, France has removed Pakistan from its Public Statement (Grey listing) which contained adverse remarks on Pakistan since February 2012.

The FATF in its decision about Pakistan said that it welcomed Pakistan’s significant progress in improving its Anti-money Laundering/Combating Financing for Terrorism (AML/CFT) regime and noted that Pakistan had established the legal and regulatory framework to meet the commitments in its Action Plan regarding the strategic deficiencies that the FATF had identified in June 2010.

The FATF decision further stated that Pakistan was no longer subject to FATF’s monitoring process under its ongoing global AML/CFT compliance process. Pakistan would work with the Asia Pacific Group as it continued to address the full range of AML/CFT issues identified in its mutual evaluation report, in particular, fully implementing UNSC Resolution 1267, FATF said in its decision.

It may be added that FATF, the international body which sets standards for AML/CTF, placed Pakistan on its Grey list in February 2012 which meant that the country was not fully compliant with the standards set by FATF for effectively combating the twin menaces of money laundering and terrorist financing. Such a designation is not only a scar on the country but a major risk to its dealings in the international financial sector

The present government has expended painstaking efforts in the last 21 months to create the conditions that have led to this much-needed vindication of Pakistan’s AML/CFT regime. All deficiencies in various facets of the regime were removed, including additional legislation to fill the gaps that existed between AML and CFT. The most significant task was to amend the Anti-Terrorism Act 1997, enabling law enforcing agencies to pursue the cases of terrorist financing alongside anti-money laundering as well. The law was amended twice to bring it in line with the international standards set by FATF and the UN.

Equally important, Pakistan met the concerns of Asia Pacific Regional Review Group (AP-RRG) on enforcement actions against the UN-designated entities. Financial institutions have also been prohibited from providing any financial services to such entities and associated individuals. Personal accounts have specially been prohibited for the use of any type of charitable donations.

FATF’s Regional Review Group visited Pakistan in December 2014 for an onsite review of AML/CFT reforms and generally expressed satisfaction on Pakistan’s technical compliance to the requirements of the FATF Action Plan to which Pakistan had agreed. Pakistan’s delegation at the FATF Plenary strongly presented Pakistan’s case and convinced the FATF members about the significant progress made by Pakistan in fully implementing the Action Plan. As a result Pakistan’s exit from Grey list was approved.  Finally, the Finance Minister wrote on 21st February 2015 a detailed letter to FATF President explaining the initiatives and actions taken by Pakistan in the last two years by the PML(N) Government, urging him for proper recognition of the hard work, and to delist Pakistan from the list of countries included in the Grey list.

On the occasion, the Finance Minister, Senator Ishaq Dar, while commenting on the decision, said that Pakistan’s removal from FATF Grey list is a timely and welcome development, which is an outcome of the tireless efforts made by the economic managers under the leadership of Mian Mohammad Nawaz Sharif. The government has taken very seriously the menace of terrorist financing and taken measures to strengthen the regime and build capacity of the law enforcing agencies to pursue such cases. He said Pakistan had not only completed the FATF Action Plan but also developed its own National Action Plan to continually take counter measures to combat money laundering and terrorist financing. The measures included increased enforcement against all proscribed organizations and individuals including those attempting to operate under new names, increased vigilance of Non-profit Organizations and enhanced capacity building of the authorities concerned to strengthen the implementation of recently reformed CFT law. It was significant that Pakistan had been removed from the Grey list after a period of three years due to persistent efforts of the present government.

Mr. Dar further stated that Pakistan’s exit from the FATF Grey list would further encourage the inflow of foreign investment in Pakistan and will provide grounds for better assessment of Pakistan’s credit rating in the international market. He also added that Pakistan looks forward to continue to work with FATF and individual members for fighting against money laundering and terrorist financing in order to bring peace and provide security for life and property to people of Pakistan and international community.

Pak Navy gets command of CTF-151 to counter sea-pirates in Somalia, Africa

PakNavy CTF151

BAHRAIN: Pakistan Navy has taken over the Command of Multinational Combined Task Force 151 (CTF-151) for the sixth time. The Command was handed over to Pakistan Navy at a formal and impressive Change of Command ceremony held at Bahrain. Commodore Asif Hameed Siddiqui, took over the command of CTF-151 from Rear Admiral Pakorn Wanich of the Royal Thailand Navy.

The CTF 151 is responsible for counter piracy operations off the coast of Somalia and Horn of Africa under the overall ambit of Combined Maritime Forces (CMF). Vice Admiral John W Miller, the Commander of Combined Maritime Forces (CMF), presided over the Change of Command ceremony.

Speaking on the occasion, PN CTF-151 Commodore Asif Hameed said that we are passing through uncertain and unpredictable times, where diverse threats are posed to the seagoing community at high seas. Piracy, although low at the moment, continues to present an intricate and extraordinary threat that still impacts energy security, freedom of navigation, global security and stability. He further added that no one nation alone can resolve this menace, as piracy is a shared challenge which can only be addressed through collaborative and comprehensive international efforts.

“During the command, I shall continue to deter and disrupt piracy while maintaining a flexible approach in coordination with CMF”, he said.

Combined Maritime Forces (CMF) is a Multinational Naval partnership of 30 nations, which is tasked to promote security, stability and prosperity across approximately 2.5 million square miles of international waters, which encompass some of the world’s most important shipping lanes. Pakistan Navy in the backdrop of UN Security Council Resolution, joined Task Force 151 in 2009 to combat piracy and since then is an integral part of the Task Force. Commanding CTF-151 for sixth time by Pakistan Navy speaks volumes of its competence and professionalism and also reflective of the Pakistan Navy’s commitments towards ensuring a safe and secure maritime environment in the region.

A number of distinguished military and civilian dignitaries including US Ambassador to Bahrain, Thai Ambassador, Commander EURONAVFOR 465, Senior Officials from Pakistan Embassy and officers from various nations attended the ceremony.

SECP asks public not to deal with 6,000 defunct Cos, list issued

secp1

ISLAMABAD, February 27: The Securities and Exchange Commission of Pakistan (SECP) has advised the public in their own interest, to be prudent while dealing with companies whose registration has been cancelled by the SECP.

The SECP has issued the list of companies, which have ceased to exist in the last five years. So, they are no longer legal entities.

These companies were struck off either on their own choice by availing themselves of Company Easy Exit Scheme (CEES)/voluntary wind-up, or their registration have been cancelled by the Registrar due to their non-operational/dormant status.

The said list, which contains over 6,000 companies, may be viewed on the SECP’s website athttp://www.secp.gov.pk/CLD/cld_ceased_companies.asp.

Islamic banks are less prone to panic

IMF Workingpaper

Rapid growth of Islamic banking in developing countries is accompanied with claims about its relative resilience to financial crises as compared to conventional banking. However, little empirical evidence is available to support such claims. Using data from Pakistan, where Islamic and conventional banks co-exist, we compare these banks during a financial panic. Our results show that Islamic bank branches are less prone to deposit withdrawals during financial panics, both unconditionally and after controlling for bank characteristics.

The Islamic branches of banks that have both Islamic and conventional operations tend to attract (rather than lose) deposits during panics, which suggests a role for religious branding. We also find that Islamic bank branches grant more loans during financial panics and that their lending decisions are less sensitive to changes in deposits. Our findings suggest that greater financial inclusion of faith-based groups may enhance the stability of the banking system.

Background on Islamic Banking in Pakistan

Pakistan has a bank-centric financial system, where conventional and Islamic banks coexist. Islamic banking started developing in the 1980s and its growth was spurred by favorable regulation in the late 1990s. The financial industry was permitted to set up regular conventional banks (CBs), full-fledged Islamic banks (IBs), and Islamic banking subsidiaries or standalone Islamic banking branches (ISs) of existing CBs.

During the 2000s, the Islamic banking sector grew at double digits. Currently, there are 13 CBs, 5 full-fledged IBs, and 15 CBs with Islamic branches (representing about 7 percent of total banking sector assets) in Pakistan. For ease of exposition, we refer to IBs and ISs together as Islamic banking institutions (IBIs).

How do IBIs differ from their conventional counterparts, and how do those differences impact their behavior during a financial panic? Unlike CBs, IBIs cannot engage in interest-based lending or borrowing. Profit and loss sharing (PLS) contracts are considered to be the ideal form of financing by Islamic banks. However, due to moral hazard problem in such equity-like contracts, Islamic banks often use asset-backed fixed return arrangements like deferred payment sales (Murabahah), operating leases (Ijarah) and diminishing musharakah as primary modes of financing.

In Pakistan these three types form over 80 percent of the total financing provided by Islamic banks whereas the share of strictly PLS contracts remains small (Baele, Farooq and Ongena (2014); Zaheer, Ongena and van Wijnbergen (2013)). Hence, the contemporary portfolio of IBIs’ financing exhibits asset-backed arrangements rending them relatively less susceptible to financing crisis. In addition, the scarcity of appropriate shariah-compliant liquidity management instruments, small and underdeveloped Islamic money markets, and a lack of lender of last resort facility in some countries (due to the absence of an alternative to the discount rate) renders liquidity management an important challenge for Islamic banks (Errico and Farahbaksh (1998); IIFM (2010)).

This leads IBIs to maintain higher cash reserve buffers, which is cost inefficient. The higher unremunerated (excess) reserves are equivalent to a tax on financial intermediation (IMF (2003)), and adversely affect the performance and profitability of Islamic banks in competitive markets (Hasan and Dridi (2010)). Thus, to offset part of this disadvantage, the SBP requires Islamic banks to keep a lower level of Statutory Liquidity Reserves (SLR) than CBs2 .Banks in Pakistan, especially Islamic banks, hold significantly lower reserves than in other jurisdictions. The liability side of IBIs mainly consists of current accounts (transaction deposits), profit & loss sharing saving and investment accounts (PSIAs), and equity. 3 Current accounts are similar to those of CBs and can be withdrawn on demand by deposit holders. IBIs raise transaction deposits on the basis of an interest-free debt contract (Qard).

IBIs are required to maintain a certain fraction of demand deposits as reserves either in cash or in form of shariahcompliant government bonds (sukuk). Therefore, as far as these deposits are concerned, IBIs may be affected by financial panics in the same way as CBs. PSIAs are unique to IBIs. Since IBIs cannot mobilize funds by paying interest, they primarily use a mudarabah contract to raise funds in the form of PSIAs from mudarabah account holders (MAHs)4 . MAHs, like shareholders, are contractually bound to share profit or loss subject to the outcome of the banking operations and in proportion to their investment.

Therefore, neither the return nor the principal amount of PSIAs is guaranteed. As PSIA depositors share in profit and loss of the banks, they are exposed to risk of capital loss, whereas, PSIAs provide an extra line of protection to Islamic banks (besides equity) when losses occur. Since PSIAs are not mobilized through a debt contract, MAHs are not considered creditors and, in the event of insolvency, are not the first claimants on the banks’ assets. On the contrary, these accounts are not customary equity either. Unlike equity which is irredeemable, MAHs’ funds are invested for a fixed period of time and withdrawals can be made from these accounts, with or without some penalty according to the individual mudarabah contracts. Therefore, we can think of PSIA as limited-duration equity investments.

Khalid Mirza, Moin Fuda inducted in ISE, LSE boards

secp1

ISLAMABAD – February 26: In accordance with its policy to strengthen and empower the frontline regulators and safeguard investors’ interests, the Securities and Exchange Commission of Pakistan (SECP) has initiated the process of overhauling the Boards of Directors of stock and mercantile exchanges to improve their effectiveness.

In pursuance of this policy, the SECP had recently appointed seasoned professionals on the board of the commodity exchange.

In continuation, the SECP has appointed Mr. Khalid Aziz Mirza and Mr. Moin M. Fudda on the Boards of Lahore Stock Exchange Limited (LSE) and Islamabad Stock Exchange Limited (ISE), respectively. Both these individuals are well-known figures of the Pakistani capital and financial markets with vast experience of the regulatory domain, financial and public sectors and the academia.

Mr. Khalid Aziz Mirza has had the distinction of heading the SECP and the Competition Commission of Pakistan (CCP) in the past. During his tenure at the SECP, he spearheaded implementation of a major program for the capital markets and corporate sector reforms and took steps to enhance the institutional capacity of the SECP. He also played a key role in the transformation of the Monopoly Control Authority into a modern competition agency. Mr. Mirza has also served as the International Finance Corporation’s (IFC’s) Chief of Mission in Turkey and IFC’s Chief of Regional Mission in Thailand. Later, he served as the Sector Manager for Financial and Private Sector Development, East Asia and Pacific Region at the World Bank. He is presently the Professor of Practice at the Lahore University of Management Sciences.

Mr. Moin M. Fudda,  is presently the Country Director of Center for International Private Enterprise, Washington, (an affiliate of US Chamber of Commerce). He has led CIPE Pakistan Office by focusing on projects involving chambers and associations development, corporate governance, outreach and availability of microfinance, and creation of Securities Market Institute of Pakistan. Prior to joining CIPE, Mr. Fudda was Managing Director of the Karachi Stock Exchange Limited for three years. The Government of New Zealand has appointed him as its Honorary Consul-General for Pakistan.

It is expected that these new appointments will greatly benefit implementation of SECP’s vision for development of a vibrant stock market and will also play a pivotal role in implementing further reforms/transformation in the capital market, especially in the demutualized environment.

World Cup winner wheelchair cricket team visits JS Group HO

JS Group wheelchair

KARACHI: Pakistan’s wheelchair cricket team made history by beating the host Nepal in all 3 T-20 matches and won the International Wheelchair Cricket Winter Cup series. If anybody wants to take inspiration to play cricket then these players are the perfect role model for everyone in Pakistan. The team members were hosted at the JS Group’s Head office and their performance was widely appreciated.

Mr. Jahangir Siddiqui, Chairman JS Bank along with Mrs. Mahvash Siddiqui, Chairperson Mahvash and Jahangir Siddiqui Foundation (MJSF) commented on the occasion, it is our immense pleasure to have provided the specialized Walkabout Foundation wheelchairs to the Pakistan Cricket team as we strongly believe in giving back to the society.

The team’s excellent performance has been widely appreciated especially since this was the first time that the national wheelchair team has won this title.

Dawar, who led Pakistan to a 3-0 sweep of Nepal in the International Wheelchair Cricket Winter Cup Series, held in Kathmandu, appreciated Mahvash & Jahangir Siddiqui Foundation for supporting the cricket team. He stated, the specialized wheelchairs provided them with much more flexibility to perform to their best capabilities”.

 “Pakistan has the spirit and the best talent for cricket. We look forward to continue supporting the Pakistan cricket team and have them give this nation many more victories to celebrate”, Muhammad Ali Charanya, representative of Mahvash and Jahangir Siddiqui Foundation.

MJSF in collaboration with US based Walkabout Foundation provided the wheelchairs for Pakistan Wheelchair Cricket team. Mahvash & Jahangir Siddiqui Foundation is also organizing a domestic cricket competition which will feature teams from 12 cities across Pakistan.

NBP reports record pre-tax profit of Rs22 billion

NBP ATM Point2Staff Reporter

KARACHI

The National Bank of Pakistan has reported a record pretax profit of Rs 22 billion in 2014. The Profit before tax increased by 211 % in 2014 and stood at Rs. 22 billion. Profit after tax increased by 173% from Rs. 5.5 billion in year 2013 to Rs. 15 billion in year 2014. This profit after tax represents a return on average assets (RoA) of 1.1 %, compared to the RoA of 0.4 % in 2013.  Earnings per share were Rs. 7.06 in year 2014 as against Rs. 2.59 of last year, an increase of 173%. Cost to income ratio has improved to 0.52 from 0.57 in 2013.

The Board of Directors of National Bank of Pakistan in their meeting held on Thursday at the Bank’s Head Office Karachi approved the financial statements of the bank for the year ended December 31, 2014.

The Board have proposed final cash dividend of Rs.5.5 per share (55%) for the year ended December 31, 2014. This will be presented for approval in the forthcoming Annual General Meeting of the bank by the shareholders. This translates into 86 % dividend payout of the bank’s distributable profit for the year 2014 (after statutory reserve allocation) and is the highest in the banking industry. This high payout shows bank’s strong capital position with continuous focus on increasing stakeholder value by capitalising on opportunities to drive strong performance for the organisation and even higher payouts to the shareholders in the years ahead.

Net interest income increased from Rs. 38.2 billion in 2013 to Rs. 44.2 billion in 2014 reflecting an increase of 16% due to balance sheet re-profiling and growth. Non-interest income increased by 23% from Rs. 25.6 billion in 2013 to Rs.31.5 billion in 2014. The increase in non-interest income was primarily due to higher capital gains and growth in other income streams. Total deposits increased by 12% from Rs. 1,101 billion at December 31, 2013 to Rs.1, 234 billion at December 31, 2014. The current and savings account (CASA) ratio was 72% at December, 2014 compared to 69% at December 31, 2013 which helped in reducing the cost of funds and in improving profitability of the bank.

The Net NPL ratio (after provisions) improved to 3.62% from 4.21% at December 31, 2013. Provisions were lower by 39% in 2014 due to realization of some good recoveries from non-performing loans. 2014 was a year in which the bank focused on further strengthening businesses, network, technological capabilities and other operating and financial parameters.

Our strong and diversified franchise, large distribution network, healthy capital position and sustained improvements in balance sheet & profitability profile give us the ability to leverage opportunities for profitable growth. In 2015 some initiatives include Core Banking Application roll out in 1100+ branches, ATM expansion, mobile banking, branchless banking and other operations.

end

Get 100 runs for Rs 0.1 million _ Spend money to test your luck

stanchartered

Whole the nation is in shock over the humiliating defeat of Pakistani cricket team, first at the hands of Indians team and then the West Indies players in the ongoing World Cup-2015 that had opened a new chapter of anti-cricket sentiment and unexpected scandal of Casino visit by team leader Moin Khan.

Setting aside dejecting performance of Pakistani cricket team in the first matches of the World Cup, many companies in the country have launched different schemes to attract customers to sell more products, earn revenue and popularize their brands.

Standard Chartered Bank of Pakistan (SCBP) had also come up with a novel idea of motivating its customers having credit cards  and debut cards to spend money, earn runs and participate in lucky draw. So, one thing is sure, the bank would earn money from its customers and a few lucky winners will get the reward/prize.

If you spend one thousand rupees through credit card, you will get one run from the SCBP scheme and you need to spend 25,000 rupees to qualify to enter into lucky draw. The bank would give one entry every time you spend upto 25,000 rupees.

What the customers would get through lucky draw from the ‘Make Your Debut’ scheme envisaging 25,000 rupees expenditures _ autobiographed bats or world cup kits for 100 customers that too through lucky draw.

And if any customer spends Rs 100,000/- (0.1 million), he/she would get 100 runs and the customer would qualify for the lucky draw of 40 inches LCD TVs, a total of 10 LCDs would be given to the lucky customers of the Standard Chartered Bank of Pakistan. Maximum two entries are allowed to one person in this category.

‘The Play a Captain’s Innings’ category of this scheme involves expenditures of Rs 250,000/- (0.25 million) that would lead to one entry into lucky draw for a trip to Melbourne, Australia. Only one lucky winner will be picked up through draw who would be given two Business Class air-tickets plus five days hotel stay in Australia.

The bank’s customers would get one entry into lucky draw each time they spend 250,000 rupees. Text and Picture by J. Choudhry.