KARACHI, Jan 5: The number of joint stock companies listed on the Karachi Stock Exchange (KSE) has fallen continuously for the last few years.

A similar trend is evident for foreign firms registered or incorporated outside Pakistan.

In industrial countries, modern technology is shifting the focus from firms to the market, forcing a debate as to the future of companies in the fast changing scenario that is shifting the balance in favour of networking.

The range of forecasts vary from one extreme to another. Some say “big companies are a thing of the past.” Others visualize “flexible, large and lean companies” working for profits as well as “social ends” by moving into territories ceded by governments to private sector.

In Pakistan, a variety of factors have combined to make the number of companies shrink at the local bourses including mergers and corporate deaths. Floating of the new scrips has been very few over the last several years. The total number of companies quoted at the KSE has dropped from 782 in 1997 to 759 in 2001. It is a continuing trend. The numbers fell by 10 between 1999 and 2001.

No company issued shares in 1999 and there were three public offerings in 2000. Four companies (including NBP) offered IPOs in 2001 of which two were undersubscribed. However, TFCs worth Rs12 billion were floated by listed firms in 2001.

A brokerage house reckons that 5-6 companies have been de-listed by KSE and sees an equal number of firms on the defaulters counter meeting the same fate.

Asked why the number of listed companies are falling, Jahangir Siddiqui, a majority stakeholder of a leading brokerage house and investment bank, says family-managed private companies are reluctant to go public because of stricter regulations and disclosure requirements. The modern corporate culture has yet to strike roots in the emerging market.

Yet, it is because of lack of business confidence that foreign firms have been folding up. According to a State Bank report, the number of foreign firms and companies operating in Pakistan has declined from 134 in 1997 to 103 in 1999. The trend has been further strengthened since then.

Addressing a seminar organized by the Management Association of Pakistan on Thursday, the State Bank governor said the reforms introduced by the government has impacted on the renter class and they were no longer making investments. He says it is period of transition from crony capitalism thriving on handouts to a competitive market environment with even-playing field. He, however, added there was some local investment in textiles and foreign investment in oil and gas sector.

But businessmen disagree. They complain that the government is IMF-friendly and anti-business.

Dr Junaid Ahmad of APTECH Worldwide says that “the feel good factor”, that encourages investment, is missing.

And noted independent economist Dr Kaiser Bengali believes that foreign policy focussed on security, should be restructured to work for an agenda for peace and economic growth.

In industrialized countries, the future of joint stock companies, described as the basic agent in modern economy, at least in the present structure, shape or form, is coming into question. In Silicon valley, to quote foreign experts “the hierarchical organizations are dissolving into fluid network of treaties.”

A study by Booz-Allen Hamilton, a consultancy, reckons that alliances have grown by 25 per cent, a year over the preceding decade and by more in Europe and Asia. As it would appear, the companies are losing their identity in extended enterprises and getting past the idea of being a self-contained unit.

Last year, says the minister of science and technology Dr Ata- ur Rehman, the total IT-related investment stood at

Joint stock companies in rough waters $140 million. The target for current year, which has received a setback due to September 11, was set at thrice that amount.

Pakistan is making a major bid to attract investment in IT technology since Dr Ata-ur-Rehman has taken over as a minister and is also encouraging investments by private sector through venture capital.

As much as 80 per cent of the cost of a project is provided by the ministry as interest free loan and 20 per cent has to be shared by individual co-sponsor of the joint venture with a government institution. The management rests with the private sector. Ownership is transferred to management once the loan is repaid.

Dr Ata- ur-Rehman told Dawn that his ministry has sanctioned 20 projects located all over the country with loans ranging between Rs40-50 million for each venture. He said he was willing to finance any idea/proposal that could help set up enterprises in non-traditional fields.

While Pakistan’s emerging market is being integrated into world economy, it cannot remain immune to the global trends shaping the future of joint stock companies.