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| December 9, 2005 | Friday | Ziqa’ad 6, 1426 |
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Changing the Hudood laws
More than a gesture
Governance of stock exchanges
ON November 29, the Securities and Exchange Commission of Pakistan (SECP) issued directives to the Karachi, Lahore and Islamabad stock exchanges directing them to amend their constituting and governing documents to ensure that the chairperson of the exchanges would be elected only from amongst the independent, non-member directors, rather than from among the member directors, of the exchanges.
THE inter-provincial conference of education ministers held in Karachi this week took what may seem major decisions. From 2006, the academic year for schools will begin in September and end the following May. Students enrolled in classes nine or ten, and the first or second year of intermediate, will sit for combined examinations from 2007 and 2009, respectively. The meeting, thankfully, did not agree to a recommendation by the Punjab government to stop students from studying in the O- and A-level system by extending the domestic system of examination to all schools. According to the federal education minister, no decision will be made on this for five years or till such time that the standard of the mainstream examination system improves.
Perhaps, the change in the schedule of the academic year contains some practical benefit for students as well as teachers since it allows for a complete break between each year in the form of summer holidays. However, the rest of the decisions are by no means ground-breaking and more administrative in nature. They will do little to change the quality of education imparted in government schools, or to improve standards of teaching. Regrettably, not much has been done by the federal or provincial governments to raise the quality of learning and teaching in government schools, which is precisely why there has been an exodus over the years of students from public-sector institutions to those in the private sector. Take the two basics of any modern education system: teaching and curriculum and textbook development. Most governments in this country have promised a lot but delivered little on the issue of teacher training. On paper, government school teachers are supposed to be trained before they start teaching and also provided with opportunities for professional advancement via in-service training. However, all this exists more in theory than in practice with the government-run provincial teacher training institutes lying moribund. The issue also relates to the way change is perceived in our society, and sadly it has to be admitted that most people often resist it and opt for the status quo. Training, however, requires teachers to refine their pedagogical skills and improve them by learning new ways of teaching. This implies a willingness to accept and be an initiator of change. But even if there are teachers who have such qualities, they often end up facing stiff resistance from their principals or seniors, or from the education bureaucracy, all of whom discourage them from making the classroom experience more interesting for their students.
As for curriculum and textbook development, the less said the better. The curriculum is said to have been revised several times, but what these revisions are no one has ever heard of through any official communication. As for the textbooks, they are riddled with poor content, shoddy editing and often contain material that breeds a culture of intolerance and conformity in society. Besides, the education ministry seems to be still living in the 1960s given that the objectives for learning contained in the national curriculum are ideal only if the aim is to create an army of brainwashed automatons, all willing to lay their lives for some vaguely defined and amorphous ‘national ideology or interest’. Changes in the academic year and examinations are all well and good but unless more substantive problems are tackled and it is acknowledged that the education bureaucracy itself is perhaps the biggest obstacle to any meaningful reform, there is unlikely to be any real change in our education system.
IT SHOULD have come as no surprise, least of all to the MQM, that a bill one of its MNAs submitted to the National Assembly on Tuesday, seeking an amendment to the Hudood Ordinances, would be rejected. Any legislation aimed at ending gender biases is usually doomed before it is even presented. More often than not, as was the case with the honour-killing bill, such bills are usually watered down to appease the religious lobbies. When the MNA presented the bill seeking to amend the law of evidence, which requires a woman to produce four male witnesses to prove that she has been raped, he did so saying that no other Islamic nation, besides Saudi Arabia, had these laws. It was expected that the MMA would oppose any such move given that it sees the Hudood laws as sacred but the ruling party’s rejection of the bill is disappointing especially given that in mid-November PML-Q chief Chaudhry Shujaat Hussain had hinted at introducing a legislation to amend the controversial law. Yet there was considerable resistance to Tuesday’s bill. The MQM has said that it plans to move a new bill on the same issue in the NA. This is a welcome initiative as it shows the party’s commitment to women’s issues but until it is able to convince its coalition partners, the bill is likely to be rejected again. But it should not deter it from persevering.
It is hard to fathom what prevents the government from taking a firm stand on a law which jurists, activists and Islamic scholars have declared as being un-Islamic. Scores of women continue to be harassed by these discriminatory laws and the country gets bad global press as a result. The government cannot afford to ignore this thorny issue any longer especially in light of recommendations made to it by the National Commission on the Status of Women, a body set up by President Musharraf himself, which has called for the repeal of the Hudood Ordinances.
A PICTURE published in Dawn showing Norwegian Prime Minister Jens Stoltenberg playing with child survivors of the Oct 8 earthquake should warm any heart. All said and done, this world is not without its quota of decent human beings who believe in sympathy and compassion for others irrespective of differences. Sitting cross-legged in eastern fashion, Mr Stoltenberg is seen in a joyful mood, trying to cheer up children who survived the quake but have lost homes and may be the most precious of their assets — parents. For the people of Pakistan, Norway is now more than just the cold home of communication technology, for Mr Stoltenberg seems to represent all that is best in Nordic culture. The Norwegian leader is among the nearly 80 countries whose leaders have either visited Pakistan and Azad Kashmir or rushed relief goods and pledged large amounts of donations. These nations range from the US in the Americas and hot and steaming Uganda in Africa to oil-less Latvia in the freezing Baltic.
Those who pulled out the dead and the injured and are still tending to the sick in the harshness of winter come from different ethnic, cultural and religious backgrounds. The question that invariably comes to one’s mind: must it take a disaster like the Oct 8 earthquake to make us all feel and act like members of one indivisible family? Why can’t this spirit of human brotherhood perpetuate itself? For those extremists in Pakistan who equate the West with all that is evil, there is food for thought in the example of the Norwegian prime minister and “ordinary” volunteers who have flocked to Pakistan from Europe and America. It is a gross mistake to blame the West for the follies of some governments, just as it is equally foolish to equate all Muslims with Al Qaeda terrorists.
The directives met with a mixed reception. The Islamabad Stock Exchange (ISE) welcomed and unanimously adopted the direction at a meeting of its Board held in Islamabad on December 1 and has now called an extraordinary general meeting (EOGM) for December 9 to approve of the amendments to its Articles of Association. The Lahore Stock Exchange (LSE) is not required to hold an EOGM to approve of the amendments, its board, having endorsed the concept in principle as part of the proposed demutualization process, is expected to adopt the measure at its next meeting, while the Karachi Stock Exchange (KSE) represen-tatives have also endorsed the concept as part of the demutual-ization process. It appears from media reports that certain members of the KSE are of the view that the timeframe stipulated in the directive does not allow them sufficient time to hold an EOGM and to approve of the required amendments.
The issue raised by certain members of the KSE is being given wide publicity in the print and electronic media and, unless clarified, it is likely to have a negative impact on investor confidence in the working of the capital market. The purpose of this discussion is, therefore, twofold: to clarify some of the issues being raised in the media and to allay any misgivings created thereby in the minds of the investing public.
The first issue highlighted by the media is the timing of the directive, that is, immediately before the elections of the Board of KSE (scheduled for December 16) and on the eve of the meeting of the demutualization committee of the KSE which was held on November 30. The first aspect of the timing of the directive, immediately prior to the date of the elections of the KSE Board, is deliberate and well thought out. Had this directive been issued earlier, it would have negatively impacted on the position of the incumbent chairman and the board and therefore the institution of the exchange; had it been issued any later, there would have been a hue and cry against failure to make appropriate disclosure prior to the election. The present timing resolves both these issues: it does not affect the incumbents and ensures that the persons seeking election to the Board of the exchanges are fully aware of the rules of the game at the very outset.
The second aspect of the timing of the directive, pertaining to its issuance on the eve of the SECP’s meeting with the Demutualization Committee, is unfounded. The directive has been issued as part of SECP’s ongoing implementation of the recommend-ations made in the report of the task force to review the Stock Market Situation (June 30). Paragraph 87 of the report, specifi-cally states that: “Until demutualization is achieved, the independence of the KSE Board should be further enhanced, by requiring the appointment of an independent, non-broker, chairperson of significant standing in the community.”
The process of implementation of the recommendations made in the report of the task force commenced in July, with the support of the government and the Parliament. To this end, the SECP has already levied fines on more than 97 brokerage houses for indulging in market distorting practices such as insider trading and wash trades. The SECP is also investigating other market abuses as indicated in the report. The issuance of the present directive is, therefore, just one more step in this process. The fact that it came on the eve of the meeting of the demutualization committee was by way of coincidence and not design.
The second issue being given much importance in the media is that the directive is not capable of implementation because of paucity of time. This issue is entirely misconceived and without any foundation. The media is referring to a section in the Companies Ordinance, 1984, which stipulates a 21-day time period required by the exchanges to hold an EOGM. In this selective reference to the Companies Ordinance, 1984, the media has ignored the proviso in the very section it refers to, which allows the exchanges to obtain a waiver of 21 days from the Registrar of Companies. The ISE has already exercised this option and has obtained the necessary waiver: it is holding its EOGM within ten days of the meeting of its board.
It also needs to be clarified in this regard that the SECP is not required to allow the exchanges to refer the matter to their general bodies for final approval. The SECP is fully empowered to issue a directive and require it to be complied with, within a time period stated in the directive (in this case, 10 days). In case that the exchanges fail to implement the directive given, the SECP may then implement it itself. A directive so implemented takes effect in the same manner as if it had been implemented by the exchanges. The SECP has, however, been supportive of the move of the exchanges to refer the matter to their general bodies, in order to build the maximum consensus in the reform process, and thereby to bring about viable and sustainable change.
The media’s critique of the directive, sponsored perhaps by certain financial intermediaries who have a vested interest in maintaining a status quo, is not uncharacteristic. Whenever reforms have been introduced in the exchanges anywhere in the world, they have been greeted with initial misgivings. Reforms in the Pakistani capital market have met with a similar fate. Any attempt at improving the governance of the exchanges and thereby empowering the investors, is perceived by the interested financial intermediaries as wresting power and control from them.
In criticizing the timing and implementation of the directive, the media has detracted from the inherent value of the reform measure proposed. Most importantly, the media has failed to note that the directive does not seek to impose a chairperson on the exchanges, but merely requires them to elect an independent non-member person as their chairman. The ultimate choice of the chairperson rests with the board, which comprises of both member and non-member directors. Therefore, anyone who is chosen for this office will do so only if the collective will of the board is exercised in his or her favour.
Furthermore, the media has failed to emphasize the fact that this measure is not only in keeping with the principles of international best practices but has also been specifically recommended in the Pakistani context, not only by the task force report referred to earlier, but also by the report of the expert committee on demutualization and integration of Sept 2, 2004.
The norms of international practice are evident from examining the management trend for exchanges across different jurisdictions: the Australian Stock Exchange (ASX), Hong Kong Exchange and Clearing Limited (HKEx), Singapore Exchange Limited, London Stock Exchange (LSE) and the New York Stock Exchange — all have independent non-broker members as their chairpersons. Closer at home, in India, a group constituted by the securities and exchange board of India (SEBI) under the chairmanship of Justice (Retd.) M.H. Kania, former Chief Justice of India, had recommended that: “the Chairman should be a person who has considerable knowledge and experience of the functioning of the stock exchange and the capital market and the Chairman of the Board should not be a practising broker”.
The view of the Indian committee has been echoed for the Pakistani capital market in the Report of the Expert Committee on Demutualization and Integration, which states at point (iii) and (iv) that: “all elected and nominated directors, including the Chairman, should be non-executive and that the Chairman should not be associated with brokerage business.” This issue was, however, lent immediacy by the report of the task force, which specifically recommended that the measure be recommended in the run-up to demutualization.
It is interesting to note in this regard that the SECP and the exchanges are in complete agreement on the issue of an independent, non-member chairperson, post-demutualization. This agreement exists because of the universal realization that appointment of a member director as the chairperson of an exchange is more likely than not to give rise to issues of conflict of interest.
It is then entirely unwarranted to decry this measure in the pre-demutualization scenario, when the value of this measure is of even greater practical and symbolic value. In the present mutualized structure of the exchange, the brokers are also the owners of the exchange. This has led to the criticism that the exchanges are merely “clubs” run by the brokers to further their own interests. It is also widely believed that these brokers are either unable or, worse still, unwilling to discipline their peers and to take appropriate and speedy decisions in the interests of the investors.
The SECP has made a firm commitment to the Special Standing Committees of the Senate and the National Assembly established specifically to examine the stock market situation of March this year that it would take all necessary steps to implement the recommendations of the task force report and to ensure transparency and good governance in the exchanges at an accelerated pace.
The writer is chairman of the Securities and Exchange Commission of Pakistan.