ISLAMABAD, April 15: The Minister for Finance, Shaukat Aziz, on Thursday urged the private sector to avail itself of the prevalent conducive environment and participate in the future economic progress of the country.

This was stated by him in his address read out by additional secretary finance Ismail Qureshi at a presentation meeting organized by the Karachi Stock Exchange for the diplomatic missions in Islamabad. About a dozen ambassadors and other diplomats from numerous countries were present.

Over recent years, the minister said, the Pakistani capital market had witnessed phenomenal growth as illustrated in the spectacular performance of the KSE 100 Index which had now crossed 5400 points which is more than double to that of January 2003.

The market capitalization had improved from Rs595 billion to Rs1.4 trillion, depicting a growth of 141 per cent. He appreciated the performance of Securities and Exchange Commission of Pakistan that had introduced ground-breaking reforms in the fields of risk management, governance, transparency and investor protection. These had contributed significantly towards the growth and development of the capital market and upsurge in investor confidence, Aziz remarked.

The minister also commended the stock exchanges because they had shown vision by wholeheartedly accepting and successfully implementing the reforms. As a result of the reforms, he added, the Pakistani capital market was ranked as one of the best performing markets in the world.

The chairman of the SECP, Dr Tariq Hassan, gave an overview of the major reforms undertaken by the commission since its establishment four years ago. He began by outlining the investment policy of the government that, inter alia, allowed foreign investors to operate freely in the capital market.

Characterising the SECP's regulatory policy as "efficient and cost effective", he said, the SECP did not merely play the policeman's role but also focused on development and facilitation of the capital market.

The SECP, he continued, had implemented a well thought-out reform programme to address numerous distortions in the capital market and the corporatesector with a view to evolving a fair, transparent and efficient market that engenders investor confidence.

At the same time, he said, the SECP ensured stringent enforcement to curb market abuses, particularly, in the securities market.

The future agenda of the SECP, Dr Hassan stated, included extension of the Code of Corporate Governance to unlisted companies andstatutory corporations, corporate social responsibility and socially responsible investing.

Earlier, the KSE chairman, Arif Habib, gave an impressive presentation of the recent strides of the largest stock exchange of Pakistan which contributed 80 per cent of the country's turnover.

Characterising the KSE as the best performing market in the world in calendar year 2002, Mr Habib said the KSE Index had increased by 270 per cent during the period January 1, 2002 to March 4, 2004. This compares with 130pc for Thailand, 78pc for Bombay, 19pc for Hong Kong and 5pc for the US Dow Jones.

In terms of returns on various asset classes, the stock market was ahead of all with 19.1pc returns as compared to 10.8pc for T. Bills, 8.4pc for bank deposits and 15.8pc defence saving certificates during the period 1980-2004.

He envisioned a bright future for the capital market in Pakistan on the basis of continued real growth in corporate earnings, privatization, low interest rates, increase in development expenditure, and Pakistan being a part of the international community after recent flotation of Eurobonds (carrying an interest rate of nearly 7 per cent).

Neither the KSE Chairman nor other speakers, however, acknowledged the role of the tax policy of the present government under which the poor people's savings in the banks and national savings schemes are subject to taxes, while the big players such as brokers and speculators are exempted from the tax on their windfall profits derived from manipulation of the market.

The test for the continued buoyancy of stock market would come when and if the government re-imposes the capital gains tax after expiry of the current exemption on June 30, 2004, remarked an independent economist.

Mr Habib also presented a table according to which the profits of foreign companies soared during the period 1999-2003 amidst spiralling cost of living for the ordinary Pakistanis.

Highest on the list was Unilever with a 5-year average of 96pc, followed by Nestle (45pc), Gillette (33pc) etc. The lowest on the rung was GlaxoSmithKline with average profit of 18pc per annum.

Asked as to why the foreign investors still found Pakistan unattractive, the KSE Chairman frankly admitted that "our status as an ally in the war on "terrorism" had led United States and European countries to issue travel advisory vis-a-vis Pakistan which discouraged investors."