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 1. INTERNATIONAL   2. INDUSTRY
 3. FINANCE  4. POLICY
 5. TRADE  6. GULF

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POLICY

June 17 - 23, 2002

INTRODUCTION OF INTEREST-FREE SYSTEM NOT POSSIBLE, SC TOLD

The federal government on Thursday informed the Supreme Court that transformation of economy into the interest-free mode was impossible and any such attempt would result in anarchy in the country.

Advocate Raza Kazim, representing the federation before the Shariat Appellate Bench of the apex court, stated: "The federal government has found that transformation of entire financial system is not practicable, and if attempted there is high degree of risk and likelihood of a permanent damage to the already fragile economy of the country". However, he continued, the government was committed to allowing the Riba-free banking as a parallel banking system in the country and had already allowed setting up of Al Meezan Bank.

He said the government supported the review petition filed by the UBL, seeking reversal of the Riba judgement on the grounds that it was based on erroneous interpretations of Holy Quran. The arguments advanced by the UBL counsel were adopted by the federation.

The Shariat Appellate Bench consisted of Chief Justice Sheikh Riaz Ahmad, Justice Munir A. Sheikh, Justice Qazi Mohammad Farooq, Justice Dr Khalid Mehmood, and Justice Dr Rashid Ahmad Jullundari.

The counsel raised objections about the jurisdiction of the Federal Shariat Court to decide matters of far-reaching implications like the present case. He said the federal government believed that the Constitution was a document which was the result of Ijmah, and Chapter 3 of the Constitution, providing the establishment of a Federal Shariat Court, could not be permitted to nullify the rest of the provisions of the Constitution.

He said the Constitution, which to him was dominant to Chapter 3 of the Constitution, already provided under Article 38 that Riba would be eliminated from the country "as early as possible".

Justice Farooq inquired if the counsel was saying that deadline for the implementation of the Riba judgement should not be there.

SITARA CHEMICAL

Sitara Chemical Industries Limited the flagship company of the Sitara group is all set to issue the country's first quoted private sector corporate bond, that would be based on profit and loss sharing.

Around 22 Term Finance Certificates (TFCs) have been floated by the corporate sector in the country's debt market so far: five this year; 12 last year and ten during all of the five years before. The earliest such debt instrument was perhaps the Rs232 million TFC of Packages Limited that was issued on February 7, 1995. But while all of those TFCs have offered a floating yield, Sitara Chemical's upcoming TFC would be the first to offer the investors, a return on profit and loss sharing basis.

The size of Sitara's TFC expected to hit the private debt market on June 19 and 20 would be Rs360 million with pre-IPO at Rs255 million and Initial Public Offering (IPO) amounting to Rs105 million.

DEWAN GROUP MAY MERGE COS IN DSFL

Market talk suggests that the Dewan group is taking a hard look at the possibility of merging all three textile companies into the flagship fibre unit.

"There have been 'rumours' in the market that the group is actively considering merger of Dewan Textile Mills; Dewan Mushtaq Textile and Dewan Khalid Textile into Dewan Salman Fibre Limited (DSFL)," say analysts at brokerage, Taurus Securities.

If the group gives in to the urge to merge, it would be following in the footsteps of DSFL's principal competitor, Ibrahim Fibres Limited, which had recently amalgamated with Ibrahim group's textile mills and the captive power plant.

The recently released results of Dewan group's textile companies for the half year ended March 31, showed Dewan Textile making an operating profit of Rs130 million; Dewan Mushtaq Rs27 million and Dewan Khalid Rs24 million.

DISTRICTS TO HAVE 40PC SHARE

The Sindh Finance Minister Abdul Hafeez Sheikh announced on Thursday the outlines of the proposed interim award of the Provincial Finance Commission (PFC) of Sindh which provisionally suggests allocation of 60 per cent funds for the provincial administration and 40 per cent to be shared by the 16 districts.

26PC HBL SHARES OFFERED FOR SALE

The Privatization Commission (PC) has offered a minimum stake of 26 per cent of government shares in Habib Bank Limited (HBL) for sale to strategic investor to proceed with the privatization of another major transaction in the financial sector after the bidding process of UBL conducted on Monday.

PUBLIC INVESTMENT

The State Bank of Pakistan has suggested the government to accelerate the pace of public investment and "raise it by at least 20 per cent" in the forthcoming budget, compared to actual utilization in the current fiscal year, to strengthen the foundation for growth and to stimulate the economy.

KARAMAT CALLS ON CHIRAC

French President Jacques Chirac on Tuesday said he would do "everything in my power" to help bring about a de-escalation in the Sub-continent.

Mr Chirac gave the assurance at a meeting with former army chief Gen (retd) Jahangir Karamat, President Pervez Musharraf's special envoy

ABDULLAH OFFERS HELP TO RESOLVE DISPUTE

President Gen Pervez Musharraf had an extended meeting with Crown Prince Abdullah bin Abdul Aziz of Saudi Arabia on Tuesday in which all subjects of mutual interest were discussed.

Sources said that during the one-to-one meeting Pakistan-India relations and the overall situation in the Middle East came under discussion. The situation confronting the Ummah was also discussed. Sources indicate there was complete unanimity of views on these issues.