By levying CVT, the government has, for all intents and purposes, usurped the taxing domain of the Securities Commission. I am amazed that there is no indication of the regulators being concerned or having opposed the levy of CVT.
I am of the view that the government must correct this invidious situation by either abolishing CVT or, alternatively, dedicating the proceeds of CVT to a Trust or a distinct Fund, with the Securities Commission as Trustee or Manager, the funds being utilised to strengthen the capital market through appropriate infrastructure investments, regulatory capacity enhancement, investor education and awareness, investor protection etc.
What do you think about the economic reform programme introduced by the government over the last few years? What more needs to be done?
Since General Musharraf took the reins of power in October 1999, Pakistan has undergone major structural reforms in almost all aspects of the economy. There has been a paradigm shift in the conduct of economic activity and a strengthening of institutions related to he economy.
Without wishing to sound as though I am flattering the present Prime Minister, it is fact that it was his stewardship of the Finance and Economic Affairs Divisions that saw this change, for which he deserves due credit.
Implementing a broad range of structural reforms and institutional capacity building is, in its very nature, a painful affair. A number of eggs are broken and adjustment can be difficult. I believe - and I am not an economist - it took a couple of years to absorb the pain and lay a sound foundation for future growth and development.
Very nearly all economic indicators are now positive, and while exogenous factors did help. I feel the underlying strong tone of the economy has its roots in the reforms implemented.
While investment has yet to take off vigorously, there are signs that this is gathering steam and high levels of investment may well be in evidence, sooner rather than later.
In expressing these positive sentiments, I must mention a note of caution, namely, there are certain overarching fundamentals that have yet to be addressed, albeit these are, for the most part, somewhat difficult and intractable issues that will take considerable long-term efforts to resolve.
Here, I refer to: firstly, the elusiveness of real peace externally at the borders and internally in the matter of resolving divisive ideological issues that have actually worsened rather than improved; secondly, the ineffectiveness of the government's writ outside the main cities as well as the overall poor law and order situation; thirdly, the fact that the judicial system is largely dysfunctional; and fourthly, the fact that governance standards are inadequate.
While we must engage in serious efforts to tackle all these issues, it is clear that governance, in particular corporate governance is the low hanging fruit and quicker results should be possible in this respect.
Relatively speaking, the other issues are likely to prove to be harder nuts to crack with respect to which it should take far longer to make tangible progress or achieve a breakthrough.
In my opinion, substantive progress on the governance front should make a big difference and vastly improve the environment for investment even if progress with respect to other overarching issues is at best quite slow. I feel all aspects of governance, both public and corporate, are significant and need to be addressed decisively.
However, I would like to particularly stress that cogent steps be taken to ensure regulatory competence and independence - I cannot emphasise this enough since this is an important element to both improve the investment climate and realise financial stability.
WHAT DO YOU CONSIDER TO BE YOUR GREATEST ACHIEVEMENTS? This is a difficult question for me. I would like to draw your attention to several points that come to my mind.
First, I sincerely believe that whatever I was able to accomplish during my three-year stint at the Securities Commission was by the grace and will of Almighty Allah.
Second, even at the residual human level, this could be largely attributed to the yeoman efforts of the professional team I was able to put together by the grace of Almighty Allah.
Third, it is very difficult to pinpoint a particular achievement as the greatest since the approach was comprehensive, covering a broad range of elements that were supportive of each other and, as it were, hanged together.
Overall, the aim was: to achieve a sound regulatory agency of close to international standards, a regulatory framework that actually worked and realised a transparent, efficient and fair market as well as substantial reduction in systemic risk; and a properly governed corporate sector that looked after the interests of all stakeholders. In large measure, though perhaps not entirely, this overall aim was achieved towards the end of my tenure.
Fourth, I am deeply conscious of the fact that all human accomplishments are frail, despite best efforts to render them as solid and secure as possible. Even a Rolls Royce car cannot survive a hammer wielded relentlessly, recklessly and with the necessary vigour.
What I was able to accomplish by the grace of Almighty Allah can only be sustained if Allah so wills it! If my successors do not share my vision and approach, the reform programme implemented during my tenure will not be sustainable and would be demolished or substantially adjusted to suit the requirements of, perhaps, a different concept for the market, the corporate sector, and the Securities Commission.
For these reasons, I would not really like to talk of any great achievements. I did my best and let it rest at that.
Although the economy is picking up, the rate of new listings on the stock exchange remains low. What can be done to ensure a more vibrant primary market?
In the first place, the stock exchanges must actively engage in marketing the benefits of IPOs, getting listed etc. This could be done at both a general level and also by specifically targeting corporate entities and groups that research shows are in need of risk capital. Secondly, regulators and stock exchanges must encourage the business of investment banking and the underwriting as well as placement of securities.
The regulators must accord due recognition, precedence, and accommodation to investment houses that are active in facilitating new issues of securities.
Of course, the real driver of new listings is obviously an all round tangible increase in the level of investment which has yet to occur in a significant way so that there is real demand for accessing resources through the capital market in addition to internal funds generation and access to the banking system.
WHAT FURTHER MEASURES DO YOU THINK ARE REQUIRED FOR INVESTOR PROTECTION? I believe the regulatory framework that is in place is largely sufficient to ensure an adequate measure of investor protection. Of course, systems and procedures, rules and regulations, can always be adjusted, tweaked, and improved in order to enhance their effectiveness.
However, above all, what is really needed is sincere, determined and competent enforcement carried out without any shadow boxing and with an emphasis on substance over form. Changes in rules and regulations are meaningless unless these are properly enforced. Every effort must be made to build capacity and greatly sharpen enforcement - this will bear the greatest fruit.
HOW DO YOU SEE THE FUTURE OF THE CORPORATE SECTOR IN PAKISTAN? WHAT FURTHER REFORMS ARE REQUIRED? Here, I would simply like to point out that regulators and policy makers need to take careful note of developments that are occurring globally in the area of corporate governance and should take necessary steps to ensure that our corporate governance norms are in alignment with international best practice.
We live in a global village and if we are to attract capital, we must keep pace with the world in the matter of governance.
Other than this, I think our corporate sector has a great future if our corporate law administration is geared to not only implement company law but also, importantly, become a genuine service institution that is inter alia really helpful to the general public in resolving basic doubts and issues in relation to "going corporate", and that actively facilitates and fosters a sound corporate culture.
The corporate law administration must be re-oriented to become pro-active in providing guidance and assistance to the business community, and effectively play a promotional role in connection with the development of the corporate sector in Pakistan. Some efforts were made in this direction but a lot more needs to be done.
Courtesy Blue Chip (Concluded)
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