DEMUTUALIZATION OF STOCK EXCHANGES
Pakistan must examine pros and cons and should not make hasty decision
Jan 19 - 25, 2004
A seminar on the "Implications of Demutualization of Stock Exchanges" was recently held at Institute of Business & Technology (BIZTEK). Arif Jatoi, Minister for Food and Agriculture Sindh was the Chief Guest at this occasion. His Excellency, Sun Chunye, Counslar General of Peoples Republic of China and Salahuddin Haider, Advisor to the Chief Minister Sindh for Information and Archives were the guests of honour. Habib-ur-Rehman, Chairman ABAMCO; Muhammad Aslam, former chairman NDFC; Professor Iqbal Ismail and Shabbir H. Kazmi, Editor Special Projects, Pakistan & Gulf Economist discussed the topic at length.
Demutualization of stock exchanges is taking place around the globe. In some of the countries it has already become a reality and others are also moving in this direction. Asian Development Bank has suggested to the local stock exchanges to consider this and also promised the necessary assistance. The economic implications and consequences of demutualization need to be discussed without prejudice and BIZTEK provided the opportunity.
Arif Jatoi said, "Stock market is the major driving force for economic development. Therefore, discussion of stock market issues at this time is extremely important." He said that the country was passing through the transitory process. The time of bi-polar division of the world has been over. The glossary of third world, cold war, communism and closed economies have become redundant terms. Therefore, people should talk about transitional economies and prepare ourselves for free trade regime and to face the challenges of globalization.
In the welcome address, Dr. S. M. Makhdumi, Director Academics of the Institute highlighted the objective of the seminar and the role BIZTEK wished to play in creating awareness among the future business managers of Pakistan.
Shabbir Kazmi talked about the need for demutualization and the concerns of investors, particularly small investors. He was also of the view that most of the equities market crises were 'broker led' indicating the weakness of regulatory structure. Since the brokers have assumed different roles, leading to conflict of interest, there is a need to minimize the influence of brokers' fraternity in day to day affairs of stock exchanges.
Professor Iqbal Ismail talked about the objectives, approach and the whole process of demutualization. He suggested that Pakistan can benefit from Indian experience. The Indian model may not be the best but appears to be more realistic.
Habib-ur-Rehman highlighted the problems related to decision making and implementation of policies at Karachi Stock Exchange (KSE). He was also of the view that the SECP nominated directors at KSE often failed to make a positive contribution, mainly because they did not attend the Board meetings.
In his concluding remarks, Dr. Ayub Mehar, Dean, BIZTEK said that a large number of members of the Federation of International Stock Exchanges favoured the process of demutualization. However, it is important that internationally, demutualization does not change the functions of an institution, it changes the governance structure. Dr. Mehar also informed that the seminar was part of core activities being undertaken by the Institute. He also informed that the institute would conduct a series of discussion programmes and workshops on this important issue and finally prepare the official research report on the topic.
The event was finally concluded with the distribution of plaques as the token of appreciation to the respected speakers and the honorable guests by Noman Abid, Chancellor of BIZTEK.