Wednesday, 27 June, 2012 Page 02 As political concerns ease, KSE bulls say cheese KARACHI ISMAIL DILAWAR T HE outgoing financial year 2011-12 saw the country’s external account failing to repeat what the economic observers said the sterling performance of fiscal year 2010-11 and once again turned red. FY11 had seen the current account balance registering a $ 542 million surplus against a deficit of $ 3.946 billion in FY10. By end-June FY12, however, the current account gap is expected to hover around 1.8 percent of the GDP with poor foreign inflows making it difficult for the economic mangers to finance this deficit through financial account. Overall, the country’s dollar re- serves, peaking to all-time high of $ 18.3 billion in July 2011, are estimated to have shrunk by $ 3.3 billion to $15.0 billion by the mid of this month June and are ex- pected to fall further due to more debt servicing. For the weakening of country’s ex- ternal account, the analysts cite unfa- vorable prices of commodities, tense Pak-US relationship, reduced foreign in- flows and higher debt repayments as major attributing factors. This, resultantly, pressured Pak Rupee that depreciated by 8.8 percent from Rs 86.1 to Rs 94.4 against the dol- lar in the inter-bank market during FY12YTD. “This compares unfavorably with FY11’s 1 percent depreciation and 10 years average depreciation of 4 per- cent,” viewed Topline analyst Nauman Khan. The currency dealers in open market also see sea- sonal factors like an- nual Hajj ritual, which every year increases demand for the greenback in the local money market by $200-$300 million, respon- sible for “temporary” appreciation of the American currency. “The current hike is a routine as last year too the dollar had appreciated to Rs 93 and then came down to Rs 88,” recalled Malik Bostan, chairman Exchange Companies Associ- ation of Pakistan. Recent weeks saw the rupee devalu- ing to the lowest level of Rs 96.80 against a dollar. However, on Monday it recovered on the currency market and gained 10 paisa for buying and 95.80 and 96.00 for selling. The analysts, however, predict fur- ther pressure on the rupee in prospect. “Pressure on the PKR is expected to continue in FY13 with further increase in the debt payment, including $ 2.2 bil- lion IMF debt repayment, uncertain Pak-US relationship and reduced foreign flows,” Khan said. On the flip side, the analyst said, material- ization of Coali- tion Support Fund, PTCL’s privatization receipts, auction of 3G license and sub- dued oil prices could pro- vide the m u c h - needed relief to the rupee. “Our assessment suggests that for every $10 per barrel decline in oil prices, annual oil import bill reduced by $1.2 billion,” he said. A timely decision by Islamabad to resolve the lingering Nato supplies issue and a likely re-entering into the IMF program are other factors, the analysts believe, would provide some respite the rupee would be direly needing in FY13. Inflation is another negative that was not let deflate by the cash-strapped government’s massive bank borrowings to finance the mounting fiscal deficit. During FY12YTD up to June 8, the funds-starved federal and provincial governments borrowed an additional Rs 1.2 trillion from the banking system, of which Rs 502 billion constitutes infla- tionary borrowing from the central bank, approximately Rs 285 billion dur- ing January-MarchFY12. This, having adverse implications on the interest rates particularly in the sec- ond half of FY12, made the central bank halt further easing of the monetary pol- icy from the current 12 percent. Coupled with government’s bank borrowings, weakness in the external ac- count also negatively impacted domestic liquidity position, especially during the second half, January-JuneFY12, when the budget deficit was largely financed through local channels. During 1H, the State Bank had cut the discount rate by 200 basis points staggered in two stages, while main- tained the same in the 2H as pressure on the rupee and liquidity re-emerged. As a result the benchmark 6-month T-Bill yield, which fell to lowest level of 11.5 percent in January 2012 from 13.7 percent at the beginning of FY12, recov- ered to 11.93 percent at end-June. “There seems little room for further cut in the policy rate but could see a round of rate hikes if the liquidity issue is not resolved,” said Khan who sees more pressure on country’s external ac- count owing to traction in oil prices, strained Pak-US ties and above expecta- tion contraction in foreign flows. “The CA deficit is expected to hover around 1.8 percent of GDP in FY12 against the government’s target of 0.6 percent and SBP’s 1.5-2.5 percent,” the analyst said. ISLAMABAD AMER SIAL Noting that the foreign direct investment in the country has reduced significantly during the current fiscal year, Chairman Intellectual Proterty Rights (IPO) Pakistan has stressed the need for enhancing the law enforcement against piracy and infringement of Intellec- tual Porperty Rights (IPRs). He said this while chairing a media consultative forum on IPRs under the European Union (EU) funded Trade Related Technical Assistance (TRTA-II) programme on Tuesday. Showing concern that Pakistan was in- cluded in the priority watch list against IPR violation for the last several years and there was need to improve law enforcement against piracy and infringement by the law enforcement agencies especially FIA and Customs. “ Ministry of Interior has assured us to hold an international conference to ap- prise the international community about the steps against piracy of IPRs”, he added. It is a fact that the countries which have protected IPRs have developed, as it gives more confidence to investors and reduces capital flight, he said adding that the IPR or- diance has already given shape and enact- ment of the bill into an act was awaited from the parliament. He said establishment of IPR tribunals was proposed under the ordinance to speedily decide IPR cases. He said that the offices of IPO will be soon opened in Balochistan and Kyber Phatunkhwa and an electonic trademark general will be soon available online, to pro- mote registeration and protection of IPRs in the country. Noting that if IPRs laws were strictly implemented in the country then the late eminent singer Medhi Hassan would have no need to seek financial support from anybody during his illness. The royalty of his numerous famous songs would have been enough for him and his family. “We are working on a collective management organ- ization to protect the IPRs of writers, singers and other artists”, he added. Dr. Mansur Raza of World Intellectual Property Orginazation (WIPO) said it is im- portant to inform businesses that IPRs pro- vide economic rights which result in benefits for over the years. He gave the example of Korean music which was poplualr in all east asian countries and resulting in economic re- turns, which was only achived by first imple- menting IPRs locally. Promoting IPRs in the country will lead to flourishing of small companies by patent- ing technology. He said that unfortunately rank of Pakistan in global innovation list was below Bangladesh. Dr. Arshard of NUST said that his uni- versity was formulating a IPR policy with the help of IPO. And a technology incubation center is established at the university and 4 companies have graduated while 19 other were still in incubation. Cue Chinese Biryani g China’s discovered gene boosts Pak Basmati rice yield 14 percent BEIJING APP A research carried out by Chinese scientists revealed that it could help increase the pro- duction of Pakistan’s flagship Basmati rice to 14 percent more without compromising on its quality. While studying the Basmati rice from Pakistan that is world famous for its high quality, Fu Xiangdong at Chinese Academy of Sciences and his colleagues found a gene named GW8 which could in- fluence the quality of rice, reported Xinhua news agency. The Chinese researchers while identifying the key gene in rice stated that it could en- hance both quality and productivity of rice at the same time, as they reported in the journal Nature Genetics on Sunday. The gene could improve shape and color of rice grain, enhancing its quality of appear- ance. On the other hand, it could also change the arrangement of starch inside the grain, enhancing its quality for eating. Further study showed that the GW8 gene also exists in some types of high yield rice grown in China. However, it’s a different variant of that gene, whose major effect is not on quality, but on the grain weight, thus enhancing the productivity of rice. HDIP ousted! g From inspecting CNG/LPG storage ISLAMABAD STAFF REPORT The inter-ministerial wrangling over au- thority to carry out inspections of CNG/LPG cylinders, tanks and other storage devices of petroleum products has taken a new turn, as the Department of Explosives (DoE) of Ministry of Industries has said the Hydro- carbon Development Institute of Pakistan (HDIP), which works under the Ministry of Petroleum is not authorized to conduct in- spections. In a statement issued on Tuesday the DoE said that HDIP is not authorized to conduct inspections of CNG/LPG Cylinders, tanks and other storage devices of petroleum products. HDIP is a testing laboratory which does not have expert inspectors for the inspection of such storages devices. Therefore, HDIP is not authorized to in- spect and certify petroleum and gas stor- ages equipments and any such inspections will be considered as illegal, it said. Exports rise playfully g Export of sports goods up 3 percent in current year ISLAMABAD APP The exports of sports good from the country witnessed positive growth of 2.96 percent during the first eleven months of the ongo- ing fiscal year against the exports of same period of last year. The exports of sports good were recorded at US$302.206 million during July-May (2011-12) as compared to the exports of US$293.525 million during July-May (2010-11), according to the data of Pakistan Bureau of Statistics (PBS). Among the sports good, the major increase of 9.82 percent was recorded in the exports of footballs, as it grew from US$128.448 million last year to US$141.056 million dur- ing the ongoing year. However, the exports of sports gloves de- creased by 7.06 percent during the period under review, the PBS data revealed. The exports of gloves stood at US$101.016 mil- lion during 2011-12 against the exports of US$108.687 million in 2010-11. The exports of other sports goods also in- creased by 6.64 percent by going up from US$56.390 million last year to US$60.134 million during the ongoing fiscal year. Legends of the fall g Banking spreads fall by 15bps in MayFY12 KARACHI STAFF REPORT The banking spreads of the country’s banking sector during the month of May decreased by 15 basis points Month-on-Month to 7.07 percent from 7.22 percent of the previous month. The banking spreads is the difference between banks’ lending and deposit rates. However, on YoY basis, consid- erable decline of 58bps was witnessed in the banking spreads compared to spread of 7.65 percent in May FY2011, said the analysts at InvestCap quoting the State Bank figures. The average interest rate spread during 5MCY12 (Jan-May) stood at 7.25 percent as compared to 7.57 percent in the same period last year, showing a decline of 32bpsYoY. Furthermore, the spreads based on gross disbursement and fresh deposit appreciated by 52bpsCYTD to 6.7 percent in May-12 from 6.2 percent in Dec-11. The weighted average deposit rates on outstanding deposits including zero percent markup increased by 12bpsMoM to 5.88 percent during May-12 compared to deposit rate of 5.76 percent last month. On CY12TD basis, the rate on outstanding deposit remained flat at 5.88 percent. High- est deposit rate witnessed in Public sector funds which stood at 6.10 per- cent (declined 4bpsMoM) followed by deposit rate on private sector funds which stood at 5.84 percent (up 16bpsMoM). Yields on outstanding loans including 0 percent markup fell by 3bpsMoM to 12.95 percent during May-12 compared to 12.98 percent witnessed last month. While during CY12TD the rate on outstanding loans fell by 51bps compared to 13.46 percent of Dec-11 rate. Highest lending rates witnessed in Public sector loans which stood at 13.53 percent (declined slightly by 1bpMoM) followed by lending rate on public sector loans which stood at 12.98 percent (declined by 4bpsMoM). However, the 6M KIBOR, which is the benchmark for almost 80 percent lending to private sector hovered in very low range of 11.95 percent to 12.0 percent during the last five months or so, therefore the spread on fresh lending are on consistent downward trajectory largely after the downward adjustment in lending rates. On the other hand, stagnant deposit rate is the result of the slower inflow of funds into the banking system that made deposit mobilization task harder resulting into the fall in raising the rate of deposits. Oops! Boom Boom Afridi! g Hameedullah Jan Afridi launches a blitzkrieg against infringement of IPRs and stepped down the pitch to wallop piracy out of the ballpark g FY12 to see huge falls in C/A, rupee value, dollar reserves, t-bill yield g The ‘sterling’ performance of FY11 shall not be repeated, much to the horror of economic observers PRO 27-06-2012_Layout 1 6/26/2012 11:52 PM Page 1