SHABBIR HAMZA KHANDWALA has assumed office of the Chief Executive of KASB Securities (Pvt) Limited on 1st November 2003. KASB Securities is the mirror image of Khadim Ali Shah Bukhari & Company, which was merged with the KASB Bank in June 2003. KASB Securities is the premier full service securities firm and affiliated with Merrill Lynch, one of the largest securities and investment banking firm, in research and investment banking areas. He has been executive board member of KASB Group since 1995. He has also held position of Executive Director (Finance) of KASB and Chief Financial Officer and Company Secretary of KASB Bank. He is member of various committees of KASB Bank. He has also held the position of Chief Executive Officer of KASB Premier Fund. He is also a director of KASB Leasing. He has also worked as Manager (Finance) Attock Cement Pakistan from December 1990 to January 1995. Shabbir is Fellow of the Institute of Chartered Accountants of Pakistan.

PAGE: What is your outlook on Pakistan's economy?

SHABBIR KHANDWALA: The Government has done a good job till now in managing the economy, with nearly all economic indicators showing improvement over the previous years. This was verified by the recent upgrade of Pakistan's debt rating by Moody's and Standard & Poor's. The only real concern left, as the State Bank of Pakistan pointed out in its annual report, is the slow growth in jobs in the country. However, the Government's new focus on construction should help solve this problem. Particularly, if the Government manages to resolve outstanding issues and commences construction of dams, it will go a long way in improving economic conditions in Pakistan. Overall, we have a positive outlook on the economy, and expect strong economic growth in the coming years.

PAGE: Can you explain the causes behind the slump in the stock market? Where do you see it heading to in the future?

SHABBIR: The stock markets in Pakistan experienced a major bull run during the past couple of years. All bull runs are followed by a correction. This holds true not just for our market, but for all markets in the world, as witnessed by the movement of the stock market in the US following the bull run of the last decade. Our market is currently in the correction phase and is consolidating itself. In the long run, our market has very encouraging prospects. In addition to the positive impact of a growing economy, the market is being helped by the Government's efforts to bring it on the international investors' map. New offerings in the stock market, as part of the divestment process, are helping the market in reaching the US $20 billion capitalization mark, which will make it very difficult for foreign investors to ignore us.

PAGE: What role is the SECP playing in making the markets more attractive?

SHABBIR: The establishment of the Central Depository Company (CDC) and the launching of electronic trading were big steps towards developing Pakistan's stock market. Taking on a very active role, Securities and Exchange Commission of Pakistan (SECP) has significantly built upon these improvements. Introduction of measures such as the T+3 trading system and futures trading have helped further improve the credibility of the market. Moreover, a very positive development is the fact that SECP is developing as a strong independent institution, with newly inducted professionals, who are looking after the interest of the investors. This again will help a lot in attracting investors, both local and foreign.

PAGE: What role is the KSE playing in this regard?

SHABBIR: The Karachi Stock Exchnage (KSE), like the SECP, has taken a very proactive role. The introduction of measures such as new exposure rules and capital adequacy requirements have significantly aided in avoiding any crisis like situation despite a significant drop in the market over the last few months. Such measures have improved the integrity of the stock market and help raise the confidence of investors.



PAGE: ADB and other international financial institutions have complained in the past that there is a strong need to improve corporate governance in Pakistan. Do you feel there have been any development on this front?

SHABBIR: This issue is currently being addressed, and interestingly, the public sector organizations have been the key catalyst for improvement in governance. The managements of some public sector companies have brought about visible changes, which is reflected by improved operations and earnings of these companies. While private sector companies easily dominated over such companies in the past without much effort, they are now being forced to gear up to face the new challenges. Furthermore, as I mentioned earlier, the SECP has introduced rules to protect minority shareholders. These regulations encourage, if not force, companies to act in a more transparent manner. Moreover, the code of corporate governance issued by SECP and made part of listing regulation has made listed companies to follow principles of good governance and improved corporate governance to a level which is comparable to a progressive developing country.