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"Bourses are capable"— Lakhani

Dec 13 - 19, 1999

Yasin Lakhani, president of Karachi Stock Exchange has said that bourses in Pakistan certainly have the required depth to accommodate government's plan to privatise public sector entities through stock exchanges.

Talking to PAGE, the KSE president said that the Habib Bank alone collected around Rs12 billion against its prize schemes while the overall collection of public by three major banks under the prize scheme was estimated Rs65 billion. Moreover the Government's prize bonds did not lag behind and so far attracted Rs 72 billion out of the market.

Lakhani referred these examples of overwhelming public response to the prize schemes launched by the finance sectors both in the public as well as private sector and said these are the solid grounds to prove that market is responsive to the secured financial schemes and people are willing to invest provided the schemes are trustworthy. When asked to comment on the scope of foreign investment, Lakhani said that foreign investment comes only when the local investors are happy and satisfied. So, for broad basing the investment specially through share markets, the government will have to lookafter the interest of the local investors.

The KSE president however said that instead of putting smaller units which are causing huge losses annually to the government, only large units should be placed on sale through stock exchange, while the government should get rid of the smaller units at the earliest. He said that government has nothing to do with running these industrial units. Shift in the financial or other policies is one of the major reason for stagnant foreign investment in this country. He referred to the incidents of delayed remittances due to policies of the State Bank which also discouraged foreign investors in Pakistan.

Criticising the attitude of former governor State Bank of Pakistan Dr. Mohammad Yaqub, who was responsible for various harms to the financial sector, Lakhani said that departure of Dr.Yaqub should have taken place much earlier. During his long tenure Dr.Yaqub did not tired of talking autonomy of the State Bank but always toed the line of the governments.

The fraudulent investment companies were plundering people open handedly in Karachi, but Dr.Yaqub who always claimed to be champion of autonomy never took any action against these companies. He allowed the fraud investment companies to loot people with the argument that they are out of his jurisdiction. The loot continued unless the majority of the so-called investment companies fled away.

Hubco Power and IPPs issue have already done a great damage especially on the foreign investment front. Dragging the issue makes no sense. If some is guilty prove legally and penalize. Hanging in balance has not only adversely affected business at stock market but also created a bad impression among the investors both at home and abroad. This problem should come to an end in accordance with law. Matter of similar nature has been resolved with Gul Ahmed and Tapal why not with Hubco.

Meanwhile the government idea to carry out its privatization programme through share market has been welcomed by some financial experts also.

Imtiaz Lodhi, a prominent financial expert has said that privatization of state owned units through stock exchanges is the only transparent and effective route to deliver the goods.

He was of the view that privatization through bourses will not only result in a broad-based ownership but will also boost the activities of all the bourses which unfortunately have become centres of speculations.

The broad-based ownership of these units will eventually lead to more professional management leading to a positive growth in these units. He, however, strongly recommended that no individual buyer may be allowed to buy more than 5000 shares in a given time.

The Finance Minister Shaukat Aziz, it may be recalled, has floated an idea into market that stock exchanges would have to play an important role in the privatization process. The privatization process would include using capital markets to allow participation of the general public in the process. The government was giving high priority to restore the confidence of investors by well throughout policies.

Currently, the government is faced with enormous task of trying to re-profile the debt acquired by past governments, especially under circumstances where a large portion of these loans had not been utilized in productive investment.

It was however made clear that in certain strategic areas, the government would have to be an active partner whereas the rest of the privatization would be carried out in a transparent manner.

The assets to be privatized are owned by the public and their privatization means that the government interference is stopped. Privatization ensures that market forces would be allowed to prevail, the business decisions will be made on a business basis by business class itself and not on political consideration at the governmental level, Shaukat admitted.

The government's role in some strategic industry would remain intact but it would come to an end in the financial sphere. He said smuggling was a curse which was not only causing huge loss of revenue but also adversely affecting the domestic industry.