November 29, 2002	Friday	Ramazan 23, 1423

LAHORE, Nov 28: The Asian Development Bank is expected to finalize and approve its financial market governance programme, aimed at strengthening Pakistan’s weak financial sector, next month.

This was stated by ADB representative in Islamabad Mashruk Ali Shah while addressing a seminar on strengthening corporate governance in Pakistan organized by the SECP in collaboration with UNDP here on Thursday.

The ADB official said the FMG programme would help alleviate poverty in the country by facilitating private sector-led economic growth and generating jobs. He said the programme would also help the financial sector mobilize resources on a long-term basis through savings and investment.

He said the companies law was also being changed and updated to provide legal cover to the provisions of the programme. Further, the implementation of the programme would also put an end to monopoly of the National Insurance Company.

He said the ADB was assisting 55 projects in Pakistan costing Rs4 billion. He did not give the cost of the FMG programme being approved next month. He said political stability was required for attracting investment in any country.

Shah also reiterated his bank’s support for broad-based reforms being introduced to improve governance in all areas where the issue has been identified as the key underlying cause of poverty. “We want particular focus on the promotion of a dynamic, market-based financial sector for efficient provision of financial services,” he said.

He said Pakistan’s financial sector was neither large nor diversified. “The bank deposits constituted only 52 per cent of GDP while the M2 to GDP ratio is only 44 per cent. The banking sector accounts for 61 per cent of deposits as 34 per cent are with the National Saving Schemes and five per cent are mobilized through non-banking institutions.”

He was of the view that poor governance had resulted in poor access, limited choice, and low quality of financial services and products — major factors explaining low saving rate of 13 per cent of GDP.

He said poor governance of the capital markets — which remains 11 per cent of GDP — had retarded their growth in the past. The development of capital markets in the country depends upon the framework of corporate governance. He said the credibility of the capital markets remained very low because of hurdles in the way of their enhanced governance standards. “The public perception that only a few insiders control the markets still exists.” He called for updating criteria for listing companies on the exchanges.

Similarly, he stated, life insurance premium stood stagnant on only 0.3 per cent of the GDP. He also pointed out the need for proper regulation of private pension and provident funds.

SECP chairman Khalid Mirza spoke about the efforts of the SECP to improve corporate governance and reforms launched for the purpose during the last couple of years or more.

In response to a question, he said foreign investment was coming to Pakistan through TFCs. He was, however, hopeful that equity capital would also start flowing into the country in the coming months.

He also dilated on the requisites — political stability, good governance, law and order situation, etc. — for attracting capital and investment into any country.

A UK fund manager Catherine Martens Malik said corporate governance should focus on investors protection. The nations with poor corporate governance standards lose (foreign) investment which goes to places where there is greater transparency. She said the international investors from her country had been publishing lists of corporate governance principles outlining their expectations from companies being considered for investment. These principles, however, varied from country to country with the assumption that basic investor protection mechanisms are already in place.