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Cover Story

An interview with Khawaja Hamad Saeed, Chairman, LSE

Jan 24 - 30, 2000

Five time elected Chairman of LSE has proved his genius in directing the Stock Exchange Management during the rainy days of it. In the history of second largest stock institution in the country (LSE), Khawaja Hamad Saeed has a unique honour of being elected as its first Chairman after the completion of restructuring of capital market in Pakistan, under the package of Asian Development Bank. After the restructuring of LSE Board of Directors, with seven outsider professional directors, the working of LSE management became more difficult rather complex and stringy. It started taking a real task to go through the process of getting approvals for the things to do. But Kh. Hamad Saeed with his administrative acumen, and strength of his knowledge about LSE, has managed the things to sail smoothly. In his exclusive interview he narrated his views about various issues of the Economy and capital market in Pakistan.

Question: Would you like to opine on the ongoing economic scenario after the Military Action on October 12, 1999?

Presently most of the macro and micro economic indicators are moving in the positive direction. The present Government is trying her level best to achieve the confidence of international bodies, including World Bank, International Monetary Fund, and Asian Development Bank. After the partial lifting of economic sanctions by the US administration, IMF Executive Board is expected to reschedule our payments and release the 2nd tranche of package. Our foreign exchange reserve position is satisfactory enough to carry on the usual business.

Stock market has been suffering from liquidity crunch for a long time. Various government policy packages and incentives offered by the previous Govt., to boost different sectors of the economy could not bear the desired results. Even approval of relief package by IMF and release of foreign exchange payment under ESAF & EFF titles had not created any positive impact on the deteriorating stock market situation. The early and quick solution of the issues of Independent Power Producers (IPP) and freezing of Foreign Currency Accounts (FCA) must be given due care and proper handling and must be resolved without any further delay, because it has cast dark shadows on our capital market sentiments. The illiquidity is prevailing in the market had also affected badly. Due to that overall situation, market was depressed, but the institutional buying and lowering of interest rate by the government has given boost to the market.

Question: What is about the overall performance of the capital market in Pakistan?

The capital market is constantly and continuously facing pressure since a long time. The freezing of Foreign Currency Accounts, and handling of IPP issue has put things in a dolldrum. Uncertainty prevailed in the market and whole economic and political scenario changed due to it. Local and foreign investors have withdrawn their intentions to invest in Pakistan. Various incentives given and policies announced by the deposed government to rectify the deteriorating investment climate in Pakistan have not proved fruitful for the overall expansion of the capital market. Market was under selling pressure since a long time. The six nuclear detonations on May 28th & 30th, 1998, had exposed the real economic financial conditions of the country vis-a-vis the capital market. Presently our economy is passing through an era of panic and uncertainty. The handling of IPP (Independent Power Producers) issue has also put serious strains on the capital market performance. After the six nuclear detonations, the handling of delicate economic matters including financial and monetary affairs, by the deposed Government had cast deep rooted impact on the financial management of the country.

Although the foreign exchange crunch has not come out suddenly yet freezing of FCAs had aggravated it and shaked the local and foreign investors' confidence. Now the government has successfully managed the foreign exchange reserves and the issues relating to it. The donor agencies are expected to help us in taking our economy to the right path.

Question: Would you like to suggest how to put the economy on the right track?

The policies introduced by the deposed Government of Nawaz Sharif were well thought and good but could not bear fruits due to economic sanctions and various steps taken by the Government. Stock Exchanges can act as an instrument in streamlining the foreign exchange issues. If the Spot trading of foreign exchange is made compulsory, the unauthorized dealing in foreign exchange would be eliminated and unusual fluctuations would become minimal. The foreign exchange market would come out of the grip of money launderers. The issuance of dollar bonds was a good step towards the correction of the damage caused by freezing foreign currency accounts, but new government has again banned the issuance of new FEBC. Some bankers are creating problems in the encashment of Dollar bonds which is contrary to the policy announced by the government. The scheme could bring fruitful results, only if the relevant factors support the scheme.

Question: What are your plans about the development of LSE this year?

Continuation of information & restructuring of LSE would also take its final shape during the year 2000. In line with the present Government policies, capital market would flourish. There are a variety of problems, including, tax issues, disputes between member-member and member-investor, change of manual trading habits of the people developed through the practice of decades etc., which are common to any stock exchange in transition phase. There are a number of procedural problems which we have planned to resolve through arbitration. We have an in-house arbitration committee which is responsible for resolving disputes. Most of the problems arise in the market due to deteriorated law and order situation and bad performance of various sectors of the national economy. During such bad conditions common people specially jobbers and small investors start loosing money. Speculators and adventurous people become dissatisfied due to their financial losses. They are bound to pay their losses to the members and hence disputes erupt. Real investors rarely loose money in the stock market. We are sure that proper and adequate measures taken by the government would bring expansion and prosperity in the national economy. The future of country's capital market is bright. Foreign capital would definitely flow into Pakistan and bring fortune to the people. LSE is ready to play a key role in the expansion of capital market in Pakistan.