KARACHI, Sept 17: The revival of investment process in Pakistan remains the most demanding challenge for the government, the Federal Finance Minister Shaukat Aziz said on Tuesday while recounting the achievements of the present government in last three years.
“Although encouraging trends are visible everywhere to see, particularly in textile and oil and gas sectors, but in comparison with the transformed environment, it still remains low,” the minister remarked while drawing the attention of the audience of a seminar towards “unprecedented level of foreign exchange reserves, comfortable liquidity positions of the banks, stability of exchange rate, buoyancy of stock market, stable prices, satisfactory performance of agriculture and industry and the overall economic growth in the economy.”
“These results are reflective of the strengths, our economy has acquired, its ability to withstand the shocks and its potential to grow in future,” Shaukat Aziz asserted.
He was speaking at a seminar on ‘role of professionals in the development of financial sector’ on Tuesday while performing the inauguration of the Pakistan chapter of the investment professionals (PCIP), the local chapter of Association for Investment Management and Research (AIMR).
Earlier, Khalid Mirza, Chairman of Securities and Exchange Commission of Pakistan (SECP), the key note speaker of the seminar, came down heavily on investment professionals and educated persons in the financial sector. “Every reform measure has been opposed by them,” Mirza blasted the professionals. He spoke of his personal experience in dealing with professionals and complained “the most vociferous, perhaps even vicious, opposition has come from investment professionals and educated intellectuals.”
Later, the minister in his speech conceded that Pakistan offers very limited options for professional training, mostly limited to business administration and accountancy. “Many chartered disciplines such as financial analyst and corporate secretaries are not fully developed,” he said.
He however, spoke at length on the reforms taken up in different areas of the economy by the government in last more than two years because of which “we have faced the challenges of September 11 last year, hostility from India and drought without any disruption.”
All these reforms, he said, covered all the key sectors of the economy, which are fiscal management, tax policy, agriculture, industry, privatization, banking and finance, capital market, oil and gas, water and power and public finance management.
The underlying philosophy of these reforms, he pointed out, was government’s firm belief that business is an exclusive domain of the private citizens and their groups, and unless warranted on account of market failure or strategic considerations, the government has no role in any business.
The government’s role, he said, remains that of an enabler, a facilitator and a regulator. In this direction he said the State Bank of Pakistan and Securities and Exchange Commission of Pakistan have been revamped and strengthened. The functions of the Auditor General and Controller General of Accounts have been properly defined and separated. He also named the regulatory bodies that have been set in place in various sectors to facilitate entry of private sector.
Thirdly, he said that it has now been left to the market forces to determine the allocation of resources, interest and exchange rates, prices of the industrial goods and agricultural commodities.
The minister informed the audience of the losses amounting to 2 per cent of the budget suffered by the government because of the controls. He said the government had been picking up huge losses of public sector corporations, banks, utilities, railways and airlines. These losses, he explained, were incurred precisely on account of tampering with their natural cost and benefits.
Shaukat Aziz held the economic policies pursued in the past responsible for low investors’ confidence. Tightly controlled exchange rate, regulated interest rates, restrictions on credit expansion and stifling corporate laws have inhibited the growth of the capital market.
He exhorted the investment professionals and executives of the financial institutions to comprehend the challenges that await them in their career in performance of their first obligation that is to protect the interest of the investors.
First and foremost, he said, in Pakistan, a proper corporate sector with modern division of ownership and management is missing. Much of the corporate sector, he said, comprises closely held firms, even when the companies may have been listed on the stock exchange. Management of public funds under such circumstances is fraught with situations of conflict of interest.
Then auditing is being carried out as merely a statutory obligation and is not the most reliable guide on the health of the firms. Under such circumstances, the SECP is yet to get full control of the affairs of the listed company, much less the affairs of the unlisted companies.
Shaukat Aziz stressed the need for enlarging the base of the stock exchanges as these capital markets are the main channels of providing risk capital. “Unless its base is expanded, the level of economic development will remain below the real potential of the economy,” he observed.
He regretted that the lack of specialized fund managers and a very narrow base of mutual funds have inhibited the investors to come in a big way in the capital market.
The government he said has responded to these challenges by undertaking reforms in various areas and “today, we see a market, that is known for its best performance, if not globally, then at least regionally.”
Khalid Mirza, the Chairman of the SECP stressed upon the professionals to raise the standards and should not compromise on quality. He also urged the executives and investment professionals to ensure maintenance of high standards of compliance of ethical conduct.
Earlier, the organizers showed a video address of Thomas A. Bowman, Chairman of the US-based Association of Investment Management and Research. Muhammad Shoaib, President PCIP, presented the address of welcome. Zaigham Mahmood Rizvi of Pak Kuwait Investment Company delivered a speech.
