APTMA complains that SECP did not consult it
before finalizing the regulatory framework
By SHABBIR H. KAZMI
May 06 -12, 2002
Strangely many corporates in Pakistan do not wish to
be regulated, operate in a transparent manner and avoid even
self-regulatory mechanism. This has resulted in poor development of
capital market, minority shareholders not getting desired return on
their investment and, on top of everything, sponsors of public limited
companies thriving at the cost of all the other stakeholders. Since the
corporates fail in evolving self-regulatory mechanism, often the
regulators have to come up with unilateral regulations in the larger
interest of protecting the interest of all the stakeholders of public
Lately, the Securities and Exchange Commission of
Pakistan (SECP) has come up with the Code of Corporate Governance.
Though, it was adopted by the three stock exchanges operating in the
country, it seems that the SECP is trying to delay its implementation.
This impression has emerged due to a number of seminars and meetings
arranged at the request of the SECP. It also seems that the Chairman of
SECP is seeking an exit on the pretext that corporates wish to delay
implementation of the Code.
The most vehement disapproval of the Code, so far,
has come from All Pakistan Textile Mills Association (APTMA). A meeting
of APTMA members was recently held with Khalid Mirza, Chairman, SECP, at
Karachi. In his welcome address Nadeem Maqbool, Chairman, APTMA,
requested that the implementation of the Code be deferred for at least
six months for necessary consultation with the representatives of the
Nadeem also emphasized, "Inspite of the most
significant contribution of the textile industry, we regret to point out
that SECP did not consult APTMA before finalizing its regulatory
policies and procedures." He also pointed out, "Immediately
after the draft of the Code was placed on the SECP's website on March 4,
2002, APTMA forwarded its critical comments and observations on major
issues. We are also preparing a point-wise response to the Code which we
hope will be studied by SECP and due consideration accorded to practical
problems and issues which may arise due to its implementation."
Responding to the presentations of Chairman and
members of APTMA, Chairman SECP apprised that the Code of Corporate
Governance is very diluted and mild as compared to the Code already
implemented in developed as well as other developing countries.
Chairman, SECP was of the opinion that those companies which implement
the Code as part of up-gradation of their management and system would be
the ones that will prosper and attract investment in future."
According to an analyst, "Chairman, APTMA,
boosted that listed textile companies have a representation of 44 per
cent on the Karachi Stock Exchange, but most probably forgot to tell the
number of textile companies on defaulters counter. He also forgot to
tell the share of total paid-up capital and market capitalization of the
listed textile companies.
The number of listed textile companies may be high
but their share in the total listed capital is certainly not really
According to the annual report of Karachi Stock
Exchange for the year 2001, out of 749 listed companies, 220 belong to
textile sector. The paid up capital of textile companies is around Rs
23.6 billion as compared to the total listed capital of Rs 233.9
billion. As regards dividend payout, the situation is not enviable. For
the year 2000, out of 224 listed companies, 157 posted profit and only
116 paid dividend (this include companies paying cash dividend as well
as issuing bonus shares).
According to another analyst, "The history shows
that the sponsors of textile companies often resist any effort to
improve performance of listed companies. It is on record that they did
not agree to cost audit and even approached the court of law to avoid
becoming 'live' on Central Depository System. They wish to defer
implementation of the Code of Corporate Governance and are also
resisting promulgation of the Take-over Law."
Lately, the SECP has encouraged voluntary delisting
and way is also being paved for the easy exit. Many analysts say,
"Since a large number of public limited companies are like 'sole
proprietorship', the sooner the stock exchanges delist them the better
it will be". As such bulk of the daily trading volume pertains to
less than two dozen companies. They suggest that companies with less
than Rs 50 million paid up capital should be delisted immediately.
The carrot and stick policy followed by the SECP has
already caused huge losses to investors. While the sponsors of erring
companies have thrived, the regulators have hardly responded to outcry
of small investors.