Timely disinvestment

THE decision of the Privatization Commission Board (PCB) to offload shares of four public sector entities worth around four billion rupees in the first quarter of the next financial year is timely. These entities are PIAC, NBP, SSGC and OGDCL. The timing is right because never before in their short history have the domestic stock exchanges shown so much of dynamism and that too over such an extended period. In the last one year or so the Karachi Stock Exchange has become one of the most investment attractive places in the region. A number of factors have gone into triggering and sustaining this upswing in the stock markets, not the least of them being the 9/11-induced reverse flow of private capital into the country. Remittances which had amounted to about 1.5 billion dollars annually before 2001 shot up to over three billion dollars during the current year.

Meanwhile, bank interest rates have declined sharply because, as a result of the continuing recessionary trends in the economy, the demand for credit is not keeping pace with the increase in deposits. Above all, industrial demand for credit has continued to stagnate as the politico-economic conditions still remain too volatile to inspire confidence about large-scale investment. This is in spite of the macroeconomic stability that has been achieved over the last three years by containing the public sector expenditure. So, in a situation where bank deposits are mounting, interest rates are declining and the base of stock exchanges showing no signs of expansion as their lists remain static year after year (with only four or five scrips making up as much as 80 per cent of the base), it was but natural for investors to make a bee line for the few blue chips and push up their prices to artificial levels. The bubble is ballooning. So, unless something is done quickly to expand the base and provide the investors with a larger choice of the blue chip variety, nothing can stop the bubble from busting.

It is in this context that the decision to offload shares of the four highly profitable public sector enterprises in the first quarter of the next fiscal year is considered appropriate and timely. And by limiting this disinvestment to shares worth only four billion rupees, the PCB has injected a necessary element of conservatism into its decision which, while broadening the base of the market, will also bring some balance to the market, thus eliminating the bubble phenomenon. The plan is to list 3.2 per cent shares of NBP in mid-July, five per cent shares of SSGC in August, 2.5 per cent shares of OGDCL in September and five per cent shares of PIAC in the same month. One would have thought that since the offloading is being planned in a phased manner, the PCB could have, without the danger of causing any upheaval in the market, disinvest at least 10 per cent shares of each of these four entities. There is enough cash in the market to absorb a disinvestment of this size over a period of three months. But then it may be better to proceed with deliberate caution on this front because sentiment and perceptions play a more important part in determining the developments in the stock markets.

G-8 disappoints Africa

IT is a shame that the world’s eight richest nations could not find it possible to increase their aid commitment to the world’s poorest, hungriest, malnourished, and disease-ridden continent. The just concluded G-8 summit at Evian, France, came out long on rhetoric and promises but very short on action, failing to convince anyone that the world’s richest countries are supportive of Africa in its battle against poverty, hunger and disease. In recent years, the economies of several major African countries have been ravaged by the spread of AIDS. The situation has become so bad that the GDPs of several countries have fallen as a result of deaths and decline in labour productivity caused by the scourge. While America has made a pledge of $15 billion to help Africa fight AIDS, much of that money is still in the pipeline and hence of little immediate value. In fact, the actual amount pledged by the G-8 this year is far short of the $10 billion that the UN estimates is needed to fight the spread of major diseases in Africa. Also, a much-needed recognition by the G-8 of the right of African nations to import, or produce on their own, cheaper generic versions of life-saving drugs is sorely missing.

Apart from not making any significant allocations to alleviate poverty, hunger and disease in Africa, the G-8 nations have done nothing to dismantle the elaborate structure of state subsidies to their own farmers. These subsidies give a massive unfair advantage to European and North American farmers, making their agricultural products very cheap all over the world. Oxfam estimates that these countries spend more than $300 billion a year to subsidize their farmers, and this is 25 times more than the $12 billion they gave in aid to sub-Saharan Africa. Such a disparity is patently unfair. The unfortunate consequence is that farmers in Africa have taken a massive beating in many countries being flooded with cheap western farm imports. The G-8 must realize the great harm their subsidy policies do to African and other Third World countries. If financial aid cannot be increased then at least the continent’s right to produce cheap life-saving drugs should be recognized. As for the subsidies issue, it seems extremely hypocritical for countries like America and the EU — vociferous backers of the WTO regime — to continue subsidizing their own farmers on such a large scale.

Heat wave: do’s & don’ts

THE sweltering heat wave sweeping across the plains of Punjab and Sindh show, yet again, nature in full fury. Daytime temperatures have soared to 52 degrees Celsius in parts of Sindh and southern and central Punjab and, as a result, an increasing number of people are reported to be suffering from sunstroke and dehydration in the affected areas. The high incidence of exposure to sun and the resulting complications can prove fatal if certain precautions are not observed. A similar spell sweeping through central parts of neighbouring India has already killed over 450 people. Fortunately, the situation in Pakistan is not that bad yet, but there have been cases of heat-related deaths in some areas.

Physicians recommend ceasing or limiting all outdoor activities under the prevailing hot conditions. Where exposure to sun is unavoidable, the covering of head and a steady and much higher-than-normal liquid intake should be made a marked priority. These precautions must be adopted particularly in the case of the elderly, the infirm and the children because they are more vulnerable to the vagaries of the weather. It is also imperative that signs of exhaustion from heat, such as excessive sweating, fatigue, fainting or fever must not be ignored. If one or more of these signs appear it is best to seek medical help at the earliest possible to avoid dehydration which can lead to death. Electronic media can play a vital role by issuing advisories to the general public on how best to avoid exposure to the killer heat.