Investment council for KP, Fata planned

ISLAMABAD: The federal government was establishing an investment promotion council for Khyber-Pakhtunkhwa and Fata for the growth of business and local economy.

Federal Minister for States and Frontier Regions Shaukatullah Khan chaired a meeting here on Thursday on the establishment of the council and stated that foreign and local investment in Fata was need of the hour as floods and terrorism had ruined economy of the region.

He stated that the government was determined to concentrate on its core functions including security, regulation, provision of social and municipal services and creation of an enabling environment for investment.

He emphasised the need for encouraging the use of cluster-based approaches for efficient economic development in marble, fossil fuel, minerals, agro-based industry and manufacturing industries since Fata had been identified as areas with rich natural resources. There was need to establish training and incubation centres for entrepreneurial and skill development projects in Khyber-Pakhtunkhwa and Fata, he said.

The minister asked all the stakeholders to work closely with the state and provincial agencies, while banks and financial institutions should extend facilities of access to credit for business and economic growth of Fata and KP.

Chairman of Regional Institute of Policy Research and Training (Riport) Khalid Aziz informed the meeting about the setting up of the council.

Safron Secretary Habibullah Khan, representatives of USAID, Fata parliamentarians and other officials attended the meeting.

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Pakistan, India report progress on key pipeline

NEW DELHI: India and Pakistan said Wednesday they were closer to an agreement on a pipeline to import gas from Turkmenistan that would signal a further warming of economic ties between the traditional rivals.

Turkmenistan has the world’s fourth-largest gas reserves and energy-hungry India and Pakistan are both eager to tap this source through the pipeline that would run through the Central Asian nation’s eastern neighbour, Afghanistan.

“There has been considerable progress in our talks,” said Indian oil minister S. Jaipal Reddy after a meeting in New Delhi with his Pakistani counterpart, Asim Hussain, on energy cooperation.

The 1,700-kilometre (1,050-mile) TAPI pipeline, aims to transport over 30 billion cubic metres of gas annually from the Dauletabad gas fields in southeast Turkmenistan.

“The issue of transit fees is being discussed with Afghanistan. A joint strategy is being evolved between India and Pakistan,” Hussain said.

“Whatever deal we reach will apply to both countries,” Reddy added.

Reddy said Pakistan would also consider a proposal to import Indian petroleum products and cited the savings in freight costs for Pakistan as several Indian refineries are located near the border.

Deepening economic engagement between the neighbours is seen as crucial to lasting peace in the South Asian region.

The Asian Development Bank estimated the cost of the TAPI pipeline in 2008 when the four countries signed a framework agreement at $7.6 billion.

Reddy said conflict-racked Afghanistan, which also desperately requires gas, was “very keen on the project” and had pledged security for the pipeline.

But energy experts have said instability in the region could yet scuttle the plan.

“We consider it a pipeline of peace,” Reddy added. “Everyone needs gas.”The minister indicated that an earlier plan for a pipeline to carry gas from Iran to Pakistan and then India was now on the backburner.

“We do what is more easily possible,” Reddy said, referring to the Turkmenistan project.

Washington, which has spearheaded sanctions against Iran over its nuclear programme, favours the TAPI pipeline and has pressured both India and Pakistan to hold off on a pipeline deal with Tehran.

Reddy said New Delhi was continuing to import oil from Iran and was not bound by new sanctions imposed by the European Union on the Islamic Republic earlier this week.

“We, as a member of the UN, are obliged to follow UN sanctions. Other sanctions imposed by big blocs of countries —we can have some freedom there,”Reddy said.

Iran is India’s second-largest oil supplier after Saudi Arabia.

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Report sought from Ogra

LAHORE: The Lahore High Court on Tuesday sought a report from Ogra about the action taken against manufacturers of substandard CNG cylinders.

Earlier, the court had sought reports from federal and Punjab governments on the matter.

A deputy attorney general told the court on Tuesday Ogra was taking action in this regard. At this, Justice Umar Ata Bandial directed Ogra to file its report by Feb 28.

Advocate Rana Mehtab filed the petition pleading that some companies were playing with the lives of people by manufacturing substandard CNG cylinders which were being installed in vehicles particularly in public transport. He pointed out that 45 people had lost their lives in accidents caused by CNG cylinder blasts during the recent past. — Staff Reporter

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Index shoots up by 263 points

KARACHI: The KSE 100-share index on Monday shot up by about three per cent or 262.98 points and breached through the barrier of 12,037.68 points on panic covering purchases, triggered after the acceptance of SECP proposals by the finance minister, notably two-year freeze on Capital Gain Tax and cut in cash margin requirements to 15 per cent.

“But what seems to have significantly boosted the sentiment was government assurance that no source will be asked about the funds invested in shares,” said a leading analyst Ahsan Mehanti.

He said there was a perception that more funds would inflow in the shares business in future from various quarters, which could push the benchmark as well share values to new peak levels in the coming sessions.

However, as relief will be effective from April 1, most of leading investors played safe and did not go out for scrips, ensuring higher capital gains.

The benchmark early soared to new high of 12.070.89 or 2.23 per cent after the volume figure touched the one year high at 210m shares. There was a beeline of investors trying to pick up stocks of their choice at the prevailing prices in a highly oversold market.

Fertiliser, oil, banking and blue chips on the other counters were main target of investors, but bulk of the support remained confined to low-priced shares, such as JS & Co, Lotte Pakistan, Azgrad Nine and Fatima Fertiliser for obvious reasons.

“At one stage, all roads seem to be leading to the stock market and it was natural,” another analyst Samar Iqbal said, adding “the finance minister gave more than they asked for.”

Advancing shares led the list under the lead of Colgate Pakistan and MCB, up by Rs33.38, and 7.99, while losers included Nestle Pakistan and Siemens Pakistan, off Rs53.75 and 11.83, respectively.

Traded volume soared to 230.138m shares from the previous 179m shares as gainers held a strong lead over the losers at 221 to 61, with 76 shares holding on to the last levels.

The active list was topped by JS & Co, steady 94 paisa at 6.49 on 36m shares followed by Lotte Pakistan, firm by 73 paisa at 10.68 on 27m shares, Bank AlFalah, up 37 paisa at 12.16 on 18m shares.

Azgard Nine, firm by 63 paisa at 4.06 on 15m shares, DG Khan Cement, higher by Rs1.05 at 22.05 on 11m shares, Fatima Enterprise, steady by three paisa at 22.53 on 11m shares and National Bank, higher by Rs.2.08 at 44.21 on9m shares.

They were followed by Fauji Fertiliser Bin Qasim, upRs2.09 at 50.19 on 6m shares, Arif Habib Corporation, higher by Rs1.35 at 29.26 on 6m shares and TRG Pakistan, steady 29 paisa at 1.88 also on 6m shares.

FUTURE CONTRACTS: National Bank led the list of actives, higher by Rs2.09 at 44.29 on 2.255m shares, followed by Fauji Fertiliser Bin Qasim, up Rs2.22 at 50.30 on 1.521m shares and DG Khan Cement, firm by Rs1.02 at 22.11 on 1.140m shares.

They were followed by Lotte Pakistan, steady by 73 paisa at 10.70 on 1.097m shares and Fauji Fertiliser, sharply higher by Rs7.13 at 180.27 on 1.048m shares.

DEFAULTER COs: Dost Steel again came in for active support and rose by 20 paisa at 1.51 on 81,772 shares followed by Kohinoor Industries, steady by seven paisa at 0.94 on 17,570 shares and Kohinoor Power, firm by nine paisa at1.60 on 12,509 shares.

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IDB to give $3bn for development

ISLAMABAD: The Islamic Development Bank (IDB) will provide around $3 billion to Pakistan during 2012-15 to help it achieve sustainable socio-economic development.

The IDB plans to provide the funding under a new partnership strategy, a copy of which has been obtained by APNA.

The assistance will be used for infrastructure development in energy and transport sector; supporting sustainable agriculture and rural development; and enhancing human development in education and health sectors.

Among other areas of prospective financing, 10 per cent will be earmarked for the private sector development and 5pc for the Islamic finance and capacity building.

The financing will be firmed up during the IDB group programming missions to Pakistan. The size of the financing will be eventually determined by the borrowing appetite of the government, identification of bankable projects, resource mobilisation by the IDB group and partnership with other donors.

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High connections: David Miliband joins Pakistani private equity firm

KARACHI: In what appears to be a coup for the fledgling Pakistani private equity industry, Indus Basin Holdings has managed to get Britain’s former foreign secretary David Miliband on board as a senior adviser.

“We are delighted to be able to bring on board the expertise of Miliband who knows the region and its challenges well,” said Indus Basin founder and CEO Aamer Sarfraz, according to a press release issued by Miliband’s office. “He shares our conviction that investment in Pakistan’s agricultural sector can have substantial long-term impact on the country’s poorest farming communities.”

“I am delighted to be advising Indus Basin Holding, a company that is investing in Pakistan’s future at a time of such fundamental importance,” said Miliband in a press statement. “I care deeply about Pakistan, the development of its economy and its future in the wider region. IBH is committed to developing an agricultural sector which has huge potential, but currently lacks investment. I look forward to working with IBH in building support and investment in Pakistan’s agricultural capacity and productivity.”

Officials at the company say they had been trying for the past year and a half to secure the contract with Miliband, who served as Britain’s foreign secretary between 2007 and 2010. He also served as Britain’s secretary of state for the environment, food and rural affairs previously.

Some of the largest private equity firms in the world are known for employing high profile non-serving statesmen on their advisory boards. This practice was made famous by the Washington-based Carlyle Group which employed both former US president George Bush Senior and former British prime minister John Major on its various advisory boards. More recently, former Pakistani prime minister Shaukat Aziz joined the advisory board of the US private equity firm Blackstone Group.

The purpose of employing such high profile people on a company’s advisory board is two-fold. Firstly, their experience as statesmen gives them extraordinary macro-level insight in terms of the opportunities that exist around the world. Secondly, their connections both in governments as well as amongst large corporations and wealthy individuals often make them a valuable resource in opening otherwise inaccessible doors and closing deals.

Indus Basin Holdings is only a relatively recent entrant into Pakistan’s nascent private equity and venture capital space but already began to attract a lot of attention for the kinds of big-name investors it was able to attract in its fund, which is focused on capitalising on opportunities presented by raising productivity levels in Pakistani agriculture.

The company’s investors include Tim Draper, the famous American venture capitalist known for being an early investor in Skype and Hotmail, and Baron Lorne Thyssen-Bornemisza, a Swiss aristocrat whose family owns the ThyssenKrupp, a German technology conglomerate with over 670 subsidiaries and 200,000 employees worldwide.

Indus Basin’s investments currently include Agroventures, a Faisalabad-based breakfast cereal manufacturer, and Rice Partners, a company that is focused on contract farming and marketing Pakistani rice directly to North American and European retailers.

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Finance minister to visit KSE today

KARACHI: Federal Minister for Finance, Economic Affairs, Revenue and Statistics Dr Abdul Hafeez Shaikh, accompanied by the Chairman of Securities and Exchange Commission of Pakistan (SECP), Mohammad Ali, would visit the Karachi Stock Exchange on Saturday (Jan 21).

The minister would exchange views with the members at 3:30 in the afternoon. There was a rush of blood as the announcement was made at the KSE on Friday morning.

Equities all across the board galloped with the KSE-100 index running up 367 points to highest 11,516, but pulling back 100 points and close at 11,775.

The investors were enthused by the hope of a change of heart on the part of Federal Board of Revenue (FBR) in regard to thelong held grievances of investors in equities over the Capital Gains Tax (CGT).

The Friday’s announcement at the Exchange pointed to a possible solution. “The reason for the visit is to appraise members of the Exchange about the progress made between the SECP and the FBR with regard to CGT as well as other important issues related to capital markets,” the KSE said.

To fuel the fire of optimism, investors noted that the visit was following on the heels of the Jan 13 letter written by the SECP tothe FBR.

A copy released at the stock exchanges, stated, in brief, that there was “a general consensus in discussion between the SECP and the FBR that: “maintaining status quo on CGT was not in the interest of the economy as it had adversely impacted tax revenue collection as well as trading volume at capital markets (CM).

Besides CGT had adversely affected investor’ sentiments, capital formation and overall functioning of the CM.

SECP proposed revamp of CGT regime in a manner which not only addressed issues as well as met the overall objectives of FBR, SECP and CM.

In Pakistan, securities trading had remained exempt from CGT for 36 years, since 1974 till June 30, 2010.

Imposition of CGT from July 1, 2010 had not only impacted the tax revenue (less than 10 per cent of figure three years ago) but it had also reduced average traded value to the lowest level during the last ten years.

The adverse impact on price discovery; withdrawal of investors; business viability; capital formation and resource allocation were also explained by the SECP.

Regarding “The Issues in CGT implementation and Objectives of Stakeholders,” the Regulator had stated that since the CGT had remained exempt for past 36 years, it had created an anomaly in shape of un-documented gains accrued through transactions in the CM during that period.

Even though the requirement of filing of tax returns was there, yet it was neither followed by CM nor implemented by FBR.

This led to a situation where CM investors ended up with legitimate but undocumented gains.

Abrupt change from exempt regime without factoring this anomaly had forced investors to withdraw funds from CM. The other issue was the cumbersome calculation and documentation requirements embedded in CGT regime.

Prior to CGT imposition, CM was under the presumptive tax regime under which tax was deducted and deposited by the Exchanges. And lastly continuation of withholding tax (WHT) after CGT was double taxation, i.e. taxing both turnover and net income. Equity demanded that with imposition of CGT, WHT on turnover should be done away with.

SECP recommendation on measures in CGT regime that could address the issue and achieve objectives of all stakeholders included the following: As the documentation was not available to substantiate the gains made from CM transaction during the exempt period, SECP proposed that applicability of Section 111 of Income tax Ordinance 2001, requiring unexplained income or assets may be deferred for funds invested in CM till June 30, 2014; and to freeze CGT rate at the current rate applicable for year 2011-12. To simplify calculation and ensure timely deposit of tax revenue generalised collection mechanism at National Clearing Company of Pakistan was recommended. The apex regulator also discussed advantages and disadvantages of its proposed ‘way forward’.

The SECP nonetheless highlighted “The tax collection by the Government from CGT and other income, for all times to come once an investment is made and documented will be far greater than one time upfront charge.” “The ‘way forward’ would not only retain overall spirit of CGT regime but also achieve various stakeholders’ objectives and revive CM”, the chief regulator concluded.

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