Dealing with market manipulators

THE Security and Exchange Commission of Pakistan (SECP) for once seems to have acted well in time. Unlike its response to the mayhem of March 2005, which came too late after the event, or the recent so-called bloodbath in April this year, which the SECP had appeared to ignore completely, this time the commission has arrived promptly on the scene of the “crime” with a 15-member investigating team. It has also very rightly issued stern warnings of dire consequences for those who are caught with their hands in the till, but with an assurance of leniency for those who correct their premeditated manipulations on their own. The market in Pakistan revolves around some half a dozen blue chips. Those who operate in this limited but highly lucrative market have turned a capital mobilisation activity into a gambling game in which the casino owners (the brokers in this case) never lose and where gamblers with limited means never win. Even the most uninitiated in the complexities of the capital market knew very well in February-March last year that the steep jump of thousands of points in the index that was taking place almost every week was too artificial to last for long. But neither the government nor the SECP made any attempt to intervene. In fact, the government was seen promoting the artificial increases in the index as a ploy to strengthen the economy.

Perhaps what one saw in the week that ended on Saturday or what was witnessed earlier in April would not have happened if the government had made public, in its entirety, the report prepared by the SECP on the March 2005 market debacle. Instead, its actions made it appear as if the SECP had been rendered a handmaiden of the manipulators of the market. These manipulators tend to play with the changes in market sentiments brought about by many relevant and irrelevant factors. In the present case, the budgetary proposal to double the Capital Value Tax (CVT) on stock purchases from 0.01 to 0.02 per cent is said to have caused the market sentiments to depress. But then it could also be a manipulated depression to force the government to withdraw the proposal. Then, with the cut-off date for exemption from the Capital Gains Tax (CGT) on stock trading now only 12 months away, the brokers may have decided to manipulate the market to force the government to start thinking of extending the exemption for another five years starting from July 1, 2007.

In fact, one cannot rule out the possibility of the brokers keeping the market depressed throughout the next fiscal year, leaving the government to face elections with no option but to accede to their demand on the CGT in the next budget. There is also the story that the brokers have deliberately depressed the market to lower the reserve price of the soon-to-be divested National Investment Trust (NIT), the largest mutual fund in Pakistan with around Rs 85 billion under its management. But no matter what the reason for the current volatility in the stock market, one would expect the SECP to investigate the seemingly man-made crisis with a fine toothcomb to uncover the real truth and plug the holes that the manipulators use to push up or push down the market at will, for the benefit of a small group of market players.

Another cruel verdict

YET another girl has fallen victim to a barbaric jirga verdict in which she is being made to pay for a crime she has not committed. This time the jirga was convened in a village near Sukkur on Friday to settle a matter between two rival clans embroiled in a karo-kari dispute. They ordered that the girl be married off into a rival clan to settle the dispute. That women can be treated as mere pawns to settle disputes is appalling and belies the government’s claims that the lot of the country’s women is improving. The regular occurrence of such incidents also speaks volumes about the official commitment to protect women’s rights and interests. Despite a Sindh High Court ruling in 2004 that banned jirgas, the system continues to operate without the least apprehensions as to the legal implications of its actions. Friday’s incident was shocking — and more so because its proceedings were attended by the area nazim and other nazims and naib nazims. This shows an utter contempt for the Sindh High Court verdict — which makes the jirga and the nazims and naib nazims, present on the occasion, liable for action. Not only is it bad enough that the nazims and naib nazims participated in the jirga, it is disappointing that they did not use their influence to convince the jirga members to safeguard the girl’s future. Instead, a cruel verdict was pronounced — one that has no legal standing whatsoever. Now it is for the government to ensure that it is not carried out.

The only encouraging aspect of the sorry episode is that activists from some political parties like the PPP-P, PPP-SB and Jeay Sindh Qaumi Mahaz, among others, strongly protested against the jirga’s decision. Only this kind of political activism on oppressive customs and traditions can put an end to such atrocious crimes that are widely prevalent in the country. Such activism needs to be encouraged and its momentum maintained. NGOs and the intelligentsia, too, must join hands to work against the brutalities of the jirga system which makes a mockery of justice.

Sports industry’s challenge

THE significant reduction recorded in the global share of Sialkot’s football manufacturing industry this year as the World Cup tournament kicked off in Germany should be cause for serious concern. Orders for millions of footballs from around the world have gone to China, India and Thailand instead, the reason being competitive prices of the sports item. A Sialkot industry spokesman has partly blamed the loss of their custom on the high taxes that the government has imposed on the export of international quality, mostly handmade, sports goods. If the trend continues, the industry will also face similar challenges from international competitors in other sports items. Footballs being manufactured in the countries that bagged this year’s lucrative supply orders are mostly machine-stitched and perhaps do not involve the stigma of child labour attached to the local sports goods manufacturing industry. This could be one of the reasons based on political correctness on the part of the buyers who opted for machine-made footballs from China and elsewhere instead of the handmade ones from Pakistan. The International Labour Organisation has a programme in place to support the children involved in the sports manufacturing industry in Sialkot, but that seems not to have made much difference to the perception of the industry abroad.

In view of the changing global preferences and growing competition in the international market, the local sports goods sector needs fresh incentives and facilitation from the government. As the new Sialkot international airport, being built entirely with investment by local industrialists, opens for business later this year, the need for keeping in tune the city’s exports manufacturing sector — mainly sports goods and surgical instruments — with emerging global trends cannot be over-emphasised. This calls for putting in place a competitive export strategy, failing which Pakistan will risk losing even the existing market share rather than increasing it.