22 August 2004	Sunday	05 Rajab 1425

ISLAMABAD: The government is trying to provide good alternative and new investment opportunities to the middle class people in an environment of globally declining interest rates, says Investment and Privatisation Minister Dr Abdul Hafeez Sheikh.

In an interview with Dawn, the minister said more than 33 per cent of the population was poor who did not have enough money at their disposal to invest and hence "we have to see what options of investments are available to the middle income and upper-middle income class".

Dr Hafeez said the interest rates were declining all around the world and this phenomenon had many benefits as well. "Above all, the greatest benefit is that cost of establishing or undertaking new investment is low because the cost of capital is cheaper. Therefore, there is greater economic growth."

"If we look at the private sector, its credit has more than doubled from Rs150 billion to Rs300 billion in the past year that means this creates opportunities for the middle class people and for lower income people and this means more economic activities," the minister observed.

On the other side, when the interest rates decline, this becomes an issue of concern because some people used to fix their incomes and those fixed income instruments are not available now as they were before.

"The government in the current budget made some amendments in the banking and housing laws so that people can avail the opportunity of investing in the housing sector. The laws were adjusted in such a way that one can get house business mortgage easily. So this is a good instrument so that one can construct his own home and make and sell such houses," the minister explained.

Secondly, a new window of investment has been opened through offering of shares to the general public. "About a year ago, only 70,000 people had shares in the stock market, but in the last 10 months, we have added 400,000 new people to this number and now there are 470,000 people who are part of the capital market."

And more importantly, the value of their investment has increased by Rs12 billion in 10 months. "So if you add the income of 400,000 people by Rs12 billion within less than a year, this is an investment opportunity that was not available to the people in the history of Pakistan," Dr Hafeez said.

The minister says to ensure that a maximum number of people get benefit from shares business, the government gave preference to small applicants and the size of lot was also reduced from 1000 to 500 shares. "So this is an effort to create an investment opportunity to the middle class people and this practice will be continued in future."

In reply to a question, Dr Hafeez said: "Clearly this was not an alternative to the national saving schemes but one should understand that we have to respond to an environment where interest rates are low globally which impact Pakistan. And mind it, the people who invest Rs32,000, 27,000 or Rs10,000 are not big people, they are small investors and this is a dramatic change where people with total investment of Rs20 billion could earn a profit of Rs12 billion in a short span of few months."

Responding to another question, the investment minister said the limit of Bahbood saving scheme, investment for widows and pensioners had been increased from Rs1 million to Rs2 billion, where they can earn a profit of 11.04 per cent. And the annual 10 per cent withholding tax deduction on such certificates has been withdrawn and hence the effective rate of return on such schemes is about 12 per cent.

Similarly, the pensions of people retired before 1994 have been increased by 16 per cent. For the borrowers of House Building Finance Corporation, the amount has been frozen at July 4, 2004 level to be payable in 36 instalments that would benefit about 38,000 lower income people.

Furthermore, the people with over 65 years of age have been allowed cut in their income tax liability by 50 per cent if their income is less than 200,000.