profit.com.pk Monday, 4 June, 2012

RIsky tImes

g Depression prevails on cotton market; textile to receive Rs13b in budget

WASHINGTON/LONDONREUTERS

In a shock that sent global equity markets into adive, the U.S. economy added just 69,000 jobsin May, less than half what analysts expectedand well below what is seen as needed to keepthe jobless rate moving lower. Readings for theprior two months were also revised down, whilethe unemployment rate rose for the first time inalmost a year, to 8.2 percent.

The Labor Department report dealt a blow toconfidence in the U.S. economic recovery, whichuntil recently had contrasted with Europe's dete-riorating economic situation and seemingly in-tractable political crisis over government budgetdeficits. "The negative employment data caps therecent deterioration in global economic data.From China to Europe to the U.S., all the datahave shown real slowing," said John Kilduff,partner at Again Capital LLC in New York.

The jobs figures, which raised expectationsfor another possible round of monetary easingfrom the Federal Reserve, also carried an impor-tant political dimension.

If sustained, the weakness in employmentcould threaten President Barack Obama's bid forreelection in November. His challenger MittRomney said the data was "devastating news" forAmerican workers.

Worsening economic conditions were alsobeing felt in major emerging countries such asBrazil and India, causing some economists towonder just where growth is going to come from.

"The global economy downshifted sharply inMay, and judging by these data, the U.S. fol-lowed suit," said Michelle Girard, economist atRBS.

U.S. stocks fell sharply as the employmentnumbers compounded worries about upcomingelections in Greece and banking troubles inSpain, pushing the Dow Jones industrial averagedown over 2 percent on the day, and negative forthe year. Treasury bond yields, in contrast, con-tinued to hit record lows across the board as in-vestors scurried for safety.

In Britain, manufacturing activity shrank atits fastest pace in three years last month as theglobal economic slowdown hit demand for itsgoods. Markit's Eurozone Manufacturing Pur-chasing Managers' Index dropped to 45.1 in Mayfrom 45.9 in April, slightly above a preliminaryreading but marking its lowest level since June2009. It has been below the 50 mark that dividesgrowth from contraction for 10 months. Simi-larly, the output index fell to 44.6 from April's46.1, also the lowest since June 2009.

U.S. manufacturing proved a bit more re-silient, with the Institute for Supply Manage-ment's index falling modestly in May but still ata respectable level of 53.5. New orders also roseto their highest since April of 2011.CORE CONSTERNATION

Earlier data from France and from Germany,Europe's largest economy, showed their manu-facturing sectors contracted at the fastest pacein nearly three years. It was only Germanstrength that had prevented the euro zone falling

into recession in the first quarter.Italy's factories contracted for the tenth

straight month, while in Spain the PMI fellbelow that of Greece's, and posted the lowestreading of all the countries surveyed.

The news in Britain, linked inexorably to thefortunes of the euro zone, was little better.

The UK economy is mired in its second re-cession in two years and its PMI plunged to 45.9last month, its lowest reading since May 2009and the second-steepest fall in the survey's 20-year history. Analysts had expected a more mod-est dip to 49.8.

The euro zone's economic deteriorationprompted more than a third of economistspolled by Reuters this week to say the EuropeanCentral Bank will cut interest rates from theirrecord 1.0 percent low before the end of the yearto boost growth.

"Fundamentals certainly justify a rate cutany time soon. However, the ECB might keepsome powder dry at next week's meeting andwait for the outcome of the Greek elections - andfuture of the monetary union - to change its pol-icy stance," said Annalisa Piazza at Newedge.

Greece, which unleashed the financial mael-strom that has ravaged the bloc, is due for a cru-cial second election on June 17 that maydetermine whether it remains a member of thecurrency union.

Recent Reuters polls of fund managers,economists and money market traders have allsuggested that the battered economy will still bea member of the 17-nation bloc come 2014.

BRICS TAKE A HITDeclines in two gauges of China's manufac-

turing sector were particularly worrying for in-vestors looking to the world's second-biggesteconomy - the main engine of global growth inrecent years - to pick up the slack created by Eu-rope's debt crisis and the sluggish U.S. economy.

China's annual economic growth is expectedby analysts to fall to 7.9 percent in the secondquarter, the first dip below 8 percent since2009. That could pile pressure on authorities toattempt further stimulus.

The country's official purchasing managers'index - covering China's biggest, mainly state-backed firms - fell more than expected to 50.4 inMay, the weakest reading this year and downfrom April's 13-month high, with output at itslowest since November 2011.

India was also feeling the pain. Growth in itsgross domestic product slumped in the firstquarter to a nine-year low of 5.3 percent as themanufacturing sector contracted.

Brazil's economy barely expanded in the firstquarter, setting the stage for another disappoint-ing year and casting new doubt on the health ofemerging markets. The economy grew just 0.2percent compared to the final three months of2011, less than half the pace economists ex-pected.

Things look to have remained weak so far inthe second quarter too, with HSBC's manufac-turing index for Brazil holding steady at 49.3,below the 50 mark that separates growth fromcontraction.

History offers anugly precedent fora Greek Euro exit

Page 02

World growth at risk as US employment stumbles

Textile industryin low cotton

KARACHIONLINE

DEPRESSION prevailed in the cotton mar-ket while Textile Sector would be bene-fited by receiving Rs 13 billion in thebudget 2012-13. The Karachi Cotton As-

sociation kept the spot rate unchanged at Rs 5,600.In ready business approximately, 1400 bales of cot-ton changed hands between Rs 5400-6000. The ratein Punjab and Sindh is between Rs.4700 to Rs. 5700.

According to the market sources, the cottontraders were hoping that the activity may improve inthe coming days as the dollar's rise was attracting theexporters. Sharing the same views Naseem Usmanappreciating the government's decision to withdrawfive percent sales tax (ST) on sizing, weaving andwarping sectors and allow sales tax zero-rating facilityto these sectors of the textile chain in budget (2012-13). In fact, despite pessimism about the world and

country's economy and political conditions, at the endof third quarter of out-going fiscal year, the textilesector has earned over nine billion dollars, indicatingthat the country may achieve better earnings from theexports of ready-made garments and cloth.

Naseem Usman said that upward trend in the dol-lar likely to help in reviving the exports activity assome importing countries were taking interest inpurchasing cloth of good quality.

The ginners, who were worried about the resentfall in the prices of cotton, trying to sell at the pre-vailing rates just to get rid of fears of losses, theysaid. They said that decline in the cotton prices, par-ticularly in the NY cotton market where, within ayear, the rates came down from 2.27 dollars perpound to 70-72 cents.

Thus, within 45 days, NY futures lost nearly 16-18 cents per lb to 70-72 cents, which propelled theginners to sell to save themselves from the futurelosses, he said.

Auto vendorspumped up!g Welcome changes

in income tax and salestax regimes in budget

LAHORE ONLINE

Pakistan Association of AutomotiveParts & Accessories ManufacturersChairman Syed Nabeel Hashmi hastermed the Budget 2012-13 normal,as under the circumstances its notvery bad. Whilst commenting on the Budget,he stated that changes in the incometax and sales tax regimes are wel-come. We are happy to see Rs 10 bil-lion allocated for export promotionactivities. We hope that now substan-tial amount shall be allocated to theEngineering and auto sector. Reduc-tion of withholding tax from 1% to½% on export proceeds shall furtherencourage exporters. We also wel-come Hybrid vehicle tariff changesthat may allow green vehicles intoPakistan."Our strong demand to insure sales

tax at auto parts markets and retailstage has once again not being imple-mented," he added.Further control on import of usedcars regime that has so far takenaway over 22,000 jobs from the Pak-istan automotive industry is regret-ted. Some of the extensive proposalsgiven to the government for enhance-ment of revenues including correc-tions of US$ import values of usedcars remain unchanged which is verysurprising. How can seven years oldvalues still be used to assess values ofnow expensive vehicles.Many of the details are still being re-

viewed and the association shall fur-ther comment on the same once adetailed review is completed, he said.

ICCI’s sage adviceg Government should allocate more

funds for crippling power shortagesISLAMABAD

INP

Government should have allocated sufficient fundsfor the development of water and power sector inthe announced budget 2012-13 to cope with energycrisis.There is dire need to initiate various power projectsto bridge supply and demand gap as it is high timeto develop all available energy generating resourcesincluding hydel, thermal and wind to end the en-ergy crisis, Yassar Sakhi Butt, President IslamabadChamber of Commerce and Industry (ICCI) madethese remarks during a meeting held at ChamberHouse.ICCI President said that the industrial sector couldnot wait for long, therefore government shouldpresent quick solution to fill in the gap between de-mand and supply of energy. He said that Govern-ment should have allocated more funds in theannounced budget for tapping Thar Coal potentialbecause these reserves could play a pivotal role inmeeting energy crises both in long term and shortterm which would enhance industrial competitive-ness due to cost effectiveness.He expressed concern over the allocation of verydiminutive money which has been set for the devel-opment of water and power sector that is only 6percent of the total budget outlay and also stressesa mini budget every month in the form of gas andelectricity price hike is destroying the industry andmeasures should be taken on immediate stop onthese mini budgets.Yassar Sakhi Butt said that Government should alsostrive hard to attract foreign investors by givingthem lucrative incentives to invest in energy proj-ects in Pakistan, aiming to bring down expensiveoil-based energy generation in the country.He said that Pakistan’s electricity demand was in-creasing by 7 per cent annually and allocation ofsmall amount of funds in the budget 2012-13 fornew dams and water reservoirs were insufficient.ICCI President said that high power tariff, a burdenon businesses and consumers, could be reduced byutilizing the available water resources more effi-ciently as the water is the most viable and cheapestway to produce electricity.

PRO 04-06-2012_Layout 1 6/4/2012 1:16 AM Page 1

news02Monday, 4 June, 2012

NEWYORK REUTERS

Technology glitches and a communications breakdownmarred Facebook's $16 billion IPO on May 18, leadingmany observers to believe the initial stock was overval-ued, contributing to its free-fall over the past twoweeks. Still, the company isn't value-free and at someprice, shares represent an opportunity, portfolio man-agers say. "There is no company in the Internet areathat has gained such a huge market share in such ashort period of time," said Mark Hawtin, portfoliomanager of the $64 million GAM Star Technology

Strategy, a portfolio for offshore investors launched inFebruary 2011. "It's absolutely a value asset in the In-ternet world." Hawtin believes $18 to $25 a share"would be a great entry point."

While many analysts are concerned about Face-book's ability to generate revenues from advertising,Hawtin believes the model for the social media websitewill eventually be fee-based, which could prove veryprofitable. "I think they will be the launch page for peo-ple to get to the Internet," he said. Under a fee-basedstructure, vendors would pay Facebook for every userthat goes to their site from Facebook. For example, ifNetflix Inc paid Facebook $10 for every person who

came to their website, that could be $10 billion in rev-enue for Facebook, Hawtin said. The fact that Face-book's stock did not go up right away and keepclimbing in its debut may serve the company well inthe long run, said Jerry Jordan, manager of the $67.2million Jordan Opportunity Fund. "If they were well-coached by their bankers, they may have been told towait for three to four months after the IPO (to an-nounce) any big projects," Jordan said. "You don'twant to show your leverage before an IPO." Jordan re-ceived a "tiny" allocation of Facebook stock pre-IPOand sold it the Monday after it started trading at a verysmall loss, he said. He may buy shares for the fund

again if it hits $25 per share, he said. Zack Shafran,manager of the $1.1 billion Ivy Science and TechnologyFund is also unfazed by the concerns surrounding thestock's decline. "A lot of the time there is a real discon-nect between a company and a stock, and the FacebookIPO is a good example of that," Shafran said. Shafranbelieves Facebook has a strong brand and organiza-tion, but is not convinced the company has shown ev-idence of a clear path to sustainable profitability. Evenso, Shafran said if the stock comes down enough, hewould strongly consider buying it because of its prod-ucts, management team and brand recognition. He didnot have a specific stock price in mind.

Portfolio managers would buy Facebook stock, at lower price

SEAN VANATTA

LOOKING over the precipice of national default and anuntimely exit from the international monetary sys-tem, the Greek leader issued a somber warning to Eu-rope’s economic leaders: “Bear in mind that if you

leave the small states without assistance, a black future awaitsEurope.” Delivered by Prime Minister Eleftherios Venizelos onApril 15, 1932, less than two weeks before his nation would sus-pend loan repayments and exit the gold standard, the prescientremark and the trials that followed offer urgent lessons for thecurrent Greek crisis.

Before the euro bound the continent’s disparate economiesinto one monetary system, European governments relied onthe gold standard to direct international monetary flows. Thispromised stability, but also required the vigorous coordinationof each country’s central-bank policy. The turmoil of WorldWar I disrupted the international order, pushing Greece andthe rest of Europe off the standard, a blow from which themonetary system would never fully recover.MODERN STATE: Nevertheless, in the absence of alterna-tives, gold remained the standard for much of the rest of thedeveloped world, and Greece made the drachma convertibleto gold in 1928 under the leadership of Venizelos’sLiberal Party. A centerpiece of the government’sreform agenda, the return to gold, com-bined with vigorous economic devel-opment and large-scale publicworks, promised to turnGreece into a “syn-c h r o n o nkratos,” orm o d e r ns t a t e .Further, re-gilding thedrachma offeredpride to a Greeknation that had re-cently suffered pro-longed inflation andpolitical turmoil. This tri-umphant return was not only de-sired from within Greece, butimposed from without. Venize-los’s project was largely de-pendent on foreignfinancing, both in the form ofgovernment loans and direct for-eign investment. The drachma’s con-vertibility was thus also meant to appeaseinvestors. So too was the regime’s simultaneous creation of theBank of Greece, the country’s first true central bank, which re-placed the privately owned National Bank of Greece as the is-suer of the drachma.

The Great Depression, though, came at an inopportunetime for the fledgling Greek financial system. When the worldeconomy began to decline in 1929, Greek exports dwindled,creating an acute imbalance -- more foreign currency leftGreece through the purchase of imports than came in throughthe sale of exports, draining the currency reserves of the Bankof Greece. This situation was exacerbated by the country’s for-eign debts, which also had to be repaid in foreign currencies,such as the U.K. pound and the French franc. As effectivelygold equivalents, these monies undergirded the drachma; asthey left Greece, each successive loan payment made defendingthe currency more difficult.

To make matters worse, the country’s commercial banksbegan speculating against the drachma. Led by the recentlydisplaced National Bank of Greece, these institutions pur-chased Greek national bonds, securities denominated inpounds and francs, on foreign exchanges -- securities that

would be worth more if the drachma was devalued.SpREADINg CONTAgION: Yet while Greece’s develop-ment had been financed by foreign borrowing, the governmentcould hardly be accused of profligacy. As Greece’s exchangecrisis increased during the late 1920s and into 1931, Venizelos’sgovernment still managed a budget surplus, and relative toother nations the Greek economy suffered less from the globaldepression. Nevertheless, as economists such as Barry Eichen-green have conclusively shown, the gold standard, like the euroin recent years, spread economic contagion.

The Venizelos government searched for a solution. In thefirst salvo of the “battle for the drachma,” the Greek parliamentconsidered a regulatory package aimed at strengthening theBank of Greece’s control over the country’s commercial-bank-ing sector. But the National Bank of Greece and its allies inter-vened, so weakening the bill as to make it virtually ineffectual.

As the crisis deepened, the government sought interna-tional assistance, turning next to the Europe-dominatedLeague of Nations Finance Committee. The fight for the

drachma was quickly draining Greece’s finan-cial resources, and the government’s 1931

surplus flipped to a sharp deficit in1932. To meet this shortfall, to

keep up its bond paymentsand to retain the gold

standard, Greeceneeded an in-

jection offoreign capi-

tal. In a famil-iar tune, most

recently sung in a Ger-man accent, Europe’s fi-

nancial leaders demandedausterity as the price for assis-

tance. The French delegate advocatedclosing schools and cutting the salaries of

public employees by 20 percent.These were harsh terms, and Venizelos

feared that the sacrifices demanded by the guardiansof the international monetary system would doom his

liberal regime and perhaps democracy in Greece. To buildnational unity, he reached out to the opposition PopulistParty, hoping to form a coalition and share the burden ofleadership. The party’s leader, Panayis Tsaldaris, curtly

refused.By April 1932, Greece was out of options. Without substan-

tive foreign intervention, the combined pressures of foreigndebt service and hemorrhaging currency reserves finally forcedGreece off the gold standard and into default. By tying hisregime to the integrity of the drachma, Venizelos also ensuredhis fall from power, while the subsequent decline of his centristLiberal Party shattered the Greek political system.COup, FASCISM: After default the Greek economy actuallybegan a steady recovery as the nation turned its efforts towardself- sufficiency outside the global market. But in this case, theinward-looking recovery was a false friend, and the politicalinstability that followed the drachma’s devaluation paved theway for a successful coup by General Ioannis Metaxas.Whether his regime was a fascist one or merely conservative-authoritarian is an academic debate that accepts a simple fact:It wasn’t democratic.

It is unlikely, whatever the outcome of Greece’s presentcurrency crisis, that fascism lies in the nation’s future. Venize-los believed that liberal democracy couldn’t withstand the bur-dens imposed by the international monetary system, and hissolution was to exit that system, with unfortunate results. Al-though to date Greek leaders have made different choices, ablack future may still await Venizelos’s country -- and Europe- - if Greece and similar small states are left without assistance.

Courtesy: Bloomberg

History offersan ugly precedentfor a Greek Euro exit

STEPHEN S ROACH

ASIAN authorities were under-standably smug in the after-math of the financial crisis of

2008-2009. Growth in the regionslowed sharply, as might be expectedof export-led economies confrontedwith the sharpest collapse in globaltrade since the 1930’s. But, with thenotable exception of Japan, whichsuffered its deepest recession of themodern era, Asia came through anextraordinarily tough period in ex-cellent shape.

That was then. For the secondtime in less than four years, Asia isbeing hit with a major external de-mand shock. This time it is from Eu-rope, where a raging sovereign-debtcrisis threatens to turn a mild reces-sion into something far worse: a pos-sible Greek exit from the euro, whichcould trigger contagion across theeurozone. This is a big deal for Asia.

Financial and trade linkagesmake Asia highly vulnerable to Eu-rope’s malaise. Owing to the former,the risks to Asia from a Europeanbanking crisis cannot be takenlightly. Lacking well-developed capi-tal markets as an alternative sourceof credit, bank-funding channels areespecially vital in Asia.

Indeed, the Asian DevelopmentBank estimates that European banksfund about 9% of total domesticcredit in developing Asia – threetimes the share of financing providedby banks based in the United States.The role of European banks is espe-cially significant in Singapore andHong Kong – the region’s two majorfinancial centers. That means thatAsia is far more exposed to an off-shore banking crisis today than itwas in the aftermath of LehmanBrothers’ collapse in 2008, which ledto a near-meltdown of the US bank-ing system.

The transmission effects throughtrade linkages are just as worrying.Historically, the US was modernAsia’s largest source of external de-mand. But that appears to havechanged over the past decade. Se-duced by China’s spectacular growth,the region shifted from US- toChina-centric export growth.

That seemed like a good move.Combined shipments to the US andEurope fell to 24% of developingAsia’s total exports in 2010 – downsharply from 34% in 1998-1999.Meanwhile, over the same period,Asia’s dependence on intraregionalexports – trade flows within the re-gion – expanded sharply, from 36%of total exports in 1998 to 44% in2010.

These numbers seem to paint acomforting picture of an increasinglyautonomous Asia that can betterwithstand the blows from the West’srecurring crises. But research by theInternational Monetary Fund showsthat, beneath the veneer, 60-65% ofall trade flows in the region can beclassified as “intermediate goods” –components that are made in coun-tries like Korea and Taiwan, assem-bled in China, and ultimatelyshipped out as finished goods to theWest.

With Europe and the US still ac-counting for the largest shares of

China’s end-market exports, therecan be no escaping the tight linkagesof Asia’s China-centric supply chainto the ups and downs of demand inthe major developed economies.Moreover, there is an important andworrisome twist to those linkages:China itself has tilted increasinglytoward Europe as its major source ofexternal demand. In 2007, the Euro-pean Union surpassed the US asChina’s largest export market. By2010, the EU accounted for 20% oftotal Chinese exports, while the USshare was just 18%.

In other words, a China-centricAsian supply chain has made a bigbet on the grand European experi-ment – a bet that now appears to bebackfiring. Indeed, in China, a now-familiar pattern is playing out yetagain – another slowdown in domes-tic growth stemming from a crisis inthe advanced economies of the West.And, as goes China, so will go therest of an increasingly integratedAsia.

The good news is that, so far, thedownside has been much better con-tained than was the case in late 2008and early 2009. Back then, Chineseexports went from boom to bust injust seven months – from 26% an-nual growth in July 2008 to a 27%decline in February 2009. This time,the annual export gain has slowedfrom 20% in 2011 to 5% in April2012 – a significant deceleration, tobe sure, but one that stops well shortof the previous outright collapse.That could change in the event of adisorderly euro breakup, but, barringthat outcome, there is reason to bemore sanguine this time around.

The bad news is that Asia seemsto be learning little from repeatedexternal demand shocks. In the end,internal demand is the only effectivedefense against external vulnerabil-ity. Yet the region has failed to con-struct that firewall. On the contrary,private consumption fell to a record-low 45% of developing Asia’s GDP in2010 – down ten percentage pointsfrom 2002. In these circumstances,immunity from external shocks – or“decoupling,” as it is often called –seems fanciful.

As with most things in Asianowadays, China holds the key tosupplying Asia’s missing consumerdemand. The recently enacted 12thFive-Year Plan (2011-15) has all theright ingredients to produce the ulti-mate buffer between the dynamismof the East and the perils of a crisis-battered West. But, as the euro crisiscauses China’s economy to slow forthe second time in three and a halfyears, there can be little doubt thatimplementation of the Plan’s pro-consumption rebalancing is lagging.

There are no oases of prosperityin a crisis-prone globalized world.That is equally true for Asia, theworld’s fastest-growing region. AsEurope’s crisis deepens, the twinchannels of financial and trade link-ages have placed Asia’s economies ina vice. Rebalancing is the only wayout for China and its partners in theAsian supply chain. Until that oc-curs, the vice now gripping Asia willonly continue to tighten.

Courtesy: Project Syndicate

ASiA expoSed

PRO 04-06-2012_Layout 1 6/4/2012 1:16 AM Page 2

news

Monday, 4 June, 2012

03

Chairman nomination forPakistan-saudi Arabia BusinessCouncil of FPCCIISLAMABAD: Mr.Shah Faisal Afridi – ThePresident & CEO of Ruba SEZ Group & HaierPakistan has been elected as the Chairman ofPakistan-Saudi Arabia Business Council ofFPCCI (Federation of Pakistan Chambers ofCommerce and industry) in the elections held on21st May, 2012. With a rich business experienceand his exposure to the international trade,Mr.Faisal will add value to the Pak-Saudi tiesand would help promote joint ventures and col-laboration between the two nations. The businesscommunity at both ends will immensely benefitfrom Mr.Faisal’s appointment as the Chairman.

struxureWare Data Center Operationsuite v7.1 with increased flexibility toalign with organisational processesLAHORE: Schneider Electric, a global specialistin energy management, introduced StruxureWareData Center Operation Suite v7.1 featuring up-dated and flexible change management with acustomizable approach to work flow managementand maintenance processes. The suite provides ITmanagers with the confidence that all organiza-tional policies and projects are easily imple-mented and universally applied within the datacenter. Schneider Electric’s StruxureWare DataCenter Operation Suite provides end to end DataCenter Infrastructure Management (DCIM) soft-ware for monitoring and operating power, cool-ing, security and energy usage from the buildingthrough IT systems and gives customers com-plete visibility and control over their data cen-ter’s daily operations. The StruxureWare DataCenter Operation Suite v7.1 also offers an inte-gration with BMC Remedy Change Management,part of the market-leading BMC Remedy IT Serv-ice Management Suite, and ensures that relevantinformation flows seamlessly between the twosystems. This update continues to enhance theflexibility and scalability of Schneider Electric’s

DCIM platform in multiple ways including: Cus-tomizable workflow templates - Data Center Man-agers and staff have the flexibility to adaptindividual work orders ensuring organizationalpolicies and projects are easily applied to moves,additions and changes within the data centerMaintenance Scheduling - Facilitates schedulingof service and equipment maintenance to ensureservice windows are planned, provide visibility toall service plans and avoid scheduling conflictsLive Dashboard - Increases transparency to datacenter key performance indicators through easilyconfigured, customizable web dashboards BranchCircuit Monitoring - Supports live measurementsfrom branch circuit monitoring to calculate ca-pacity utilization if no metered PDUs are avail-able DCIM Migration Service – Enables seamlessmigration from leading DCIM system to theStruxureWare Data Center Operation Suite.

tDAP to approach FBR onsmuggling in leather sectorKARACHI: The officials of TDAP and represen-tatives of PTA sat together for resolving the is-sues of the leather exporters. The ChiefExecutive TDAP assured full support for facili-tating the development and export of leathersector, especially to stop the smuggling and mis-declaration in export of wet blue leather. In thisconnection, he said the FBR would be ap-proached for checking the exports by unscrupu-lous elements. Tariq Puri Chief Executive ofTDAP briefed the participants regarding actionstaken by TDAP on some of the concerns of theleather exporters. He also directed the con-cerned Division of TDAP to take urgent actionon measures suggested by PTA for controllingthe mis-declaration and smuggling of pickle andwet blue. The Director General TDAP and therepresentative of PTA will also visit member ex-ports and brief him on the issue. The TDAP chiefassured the PTA that all subsidies of PTA mem-bers in connection with exhibitions would be re-leased within one month and subsidies related tooutstanding claims on lab test and effluent treat-ment plant would be released once PTA mem-bers submit complete documents and funds arereleased by the Ministry of Finance. S MNaseem, Chairman PTA; Mr. S.M Muneer,

Chairman of Din Group; Naseem Shafi andGulzar Firoz attended the meeting.

mobilink Jazba launches mobileGame Development contestLAHORE: Mobilink Jazba has launched an ex-citing Mobile Game-Development Contest provid-ing a platform for students and independentsoftware developers to test their skills at creatinggaming software for mobile platforms. MobilinkJazba’s mobile game development contest hasbeen designed to evaluate the concept, techniqueand creative acumen of participants, whilst at thesame time providing a new avenue for local mo-bile technology developers to develop content formobile users. Winners of the competition will getcash rewards up to Rs. 500,000, as well as othervaluable prizes such as handsets and internshipopportunities within Mobilink. The announce-ment of the game competition was preceded by aseries of nationwide workshops conducted byMobilink in partnership with ‘We R Play’, whereparticipants were introduced to the basics tech-niques of mobile game development. Mobilinkwill also provide an additional incentive for par-ticipants by publishing all submissions onJazzBananas.com, which is Pakistan’s first mobileapplication store, with developers earning rev-enue for each download through the store. Mo-

bilink Jazba has also set up a web resource for as-piring mobile game developers, where they willhave access to tutorials and unique game devel-opment kits. This resource can be accessed atwww.jazba.com.pk/gbg.

ICI Pakistan Limited dividesits paints business KARACHI: In May 2011, the Board of Directorsof ICI Pakistan Limited decided that the PaintsBusiness of ICI Pakistan Limited would be sepa-rated from ICI Pakistan Limited and vested intoanother company, Akzo Nobel Pakistan Limitedwhich will be listed on the Karachi, Lahore andIslamabad Stock Exchanges. ICI Pakistan Limitedwould retain all other businesses of ICI PakistanLimited and will continue to be listed on theKarachi, Lahore and Islamabad Stock Exchanges.The Scheme of Arrangement for the reconstruc-tion of ICI Pakistan Limited, which was approvedby the shareholders at the Extraordinary GeneralMeeting on February 08, 2012, has been sanc-tioned by the Honorable High Court of Sindh byits order announced on May 17, 2012 and has inaccordance with its terms become operative onJune 01, 2012. As a consequence of this recon-struction, the Paints Business formerly carried onby ICI Pakistan Limited will henceforth be car-ried on by Akzo Nobel Pakistan Limited.

CORPORATE CORNER

NEW YORKREUTERS

FEDERAL Reserve Chairman Ben Bernankewill be back on Capitol Hill on Thursday to tes-tify before a congressional committee aboutthe state of the U.S. economy. He's not going

to get an easy ride. The blue-chip Dow average .DJI ofstocks is now negative for the year. Employment appearsto be slowing to a snail's pace and Europe remains miredin crisis. "This puts the Fed firmly in play and they willlikely feel compelled to respond," said Tom Porcelli, chiefU.S. economist at RBC Capital Markets in New York,after data on Friday showed U.S. job growth in May wasthe weakest in a year. "The missing ingredient preventingthe Fed from action had been the equity market, but nowwe are seeing it softening," he said. "Equities are fallingand that was the last hurdle for Fed policy action becauseall the other criteria have been met."

For the week, the Dow Jones industrial average fell2.7 percent, the Standard & Poor's 500 index.SPX wasdown 3 percent and the Nasdaq composite index .IXICfell 3.2 percent. The Fed's next policy meeting occurs onJune 19-20. A Reuters poll of 15 dealers gives a 35 per-cent chance of the Fed extending its stimulative operat-ing twist at that meeting. The poll showed that dealersexpecting further quantitative easing, or QE3, rose to 50percent from 33 percent in May.

Stock market rallies in each of the past three yearswere fueled by combinations of massive central bank andgovernment stimulus spending. That maybe the onlyhope for equities this year, too. The world's economicoutlook darkened on Friday as reports showed as well asslowing U.S. employment growth, Chinese factory outputbarely grew and European manufacturing fell deeperinto malaise. "It certainly suggests that perhaps the soft-ness in Europe is either influencing the U.S. or that theU.S. recovery may not be strong enough to overcome thesoftness in Europe," said Jack Ablin, chief investment of-ficer at Harris Private Bank in Chicago.

"I underestimated the relationship or the alignmentof the world markets to the European markets," he said."I felt that Europe could potentially proceed in their own

little corner of the world. For right now anyway it justdoesn't seem that way." Nothing tells the story of theglobal economy at the moment better than the world'sequity markets. Bear markets are raging in Spain, Italy,Brazil and Russia. Asian stocks have been weak. Most ofEurope's other markets are negative for the year, and thatis where U.S. stocks are going - and fast.

"I don't see any compelling reason to think that weare going to have any sustained recovery absent new fis-cal, monetary stimulus, not only here in the UnitedStates but perhaps even more importantly elsewherearound the world," said Clark Yingst, chief market ana-lyst at Joseph Gunnar. Yingst said that signs of morestimulus may be a compelling reason to get bullish. Wewill be "watching very closely for new fiscal and mone-tary stimulus from a variety of countries. I think thesource will be important, I think the magnitude, thescope will be important," he said. On Friday the S&P500 fell 2.5 percent, edging below its 200-day movingaverage for the first time since December. The level isclosely watched by investors, and a significant breachthere could open the way for steeper losses. That lookslike a distinct possibility at the moment. Greece will facenew elections in two weeks. A victory for parties that op-pose the bailout led by the European Union and Inter-national Monetary Fund could start the ball rolling onthe country's withdrawal from the euro zone. Such anevent would have unforeseen consequences for theglobal economy and financial markets. Part of the 6.3percent drop in the S&P 500 in May - its worst monthsince September - was about pricing that in. But it isanyone's guess how far stocks will fall if a Greek exitsparks the Lehman-type event that some investors fear.Fears the euro-zone debt crisis is spilling over to theUnited States sparked fresh buying of U.S., German,Japanese, Swiss and Nordic government debt, which areperceived as safe havens in times of market turbulence.Yields on the benchmark 10-year Treasury note hit 1.442percent, the lowest level in records going back to theearly 1800s. At the same time, funding options are nar-rowing for companies across the globe as issuers areshut out of markets due to risk aversion for weaker cred-its and demand for spread that is sending costs soaring.

time for some more stimulus?WALL stReet Week AHeAD

g things are shaping up for another hot summer on Wall street,and there is a long, long way to go yet

NILA L KHRUSHCHEVA

VLADIMIR Putin’s new presidential term is justbeginning, but it increasingly looks like the be-ginning of the end. Whenever Russia’s people

pour into the streetsen masse, as they currently aredoing, from that point on things never work out well forthe authorities. In 1917, Russian Emperor Nicholas IIhad to abdicate in the wake of mass street protests, clear-ing the way for the Bolshevik Revolution. In 1991, the So-viet Union – then seemingly an unbreakable monolith –collapsed in just a few months. Hundreds of thousandswent into the streets to confront the hardline coupagainst Mikhail Gorbachev’s perestroika. Now it isPutin’s turn. Moscow boasts Occupy Abai, modeled onthe Occupy Wall Street movement in the United States(and located on a boulevard next to a statue of Kazakhpoet Abai Kunanbaev, whose work has gone from re-gional obscurity to one of the top Russian Internet down-loads in a month). Other cities are witnessing protests aswell, all echoing the same call: Putin must go.

Russians are famously patient and slow to rebel.And who would blame them? If protests have turnedout badly for Russian governments over the centuries,they have ended even more disastrously for the protest-ers. In 1917, liberation from absolute monarchy usheredin an even more despotic form of absolutism. After1991, Boris Yeltsin’s unruly privatization reduced mil-lions of people to penury, and elevated a corrupt oli-garchy into virtual rulership.

But, despite being well aware of their history, onceRussians turn on the man at the top, they don’t stopuntil he is out. History debunks Putin’s myth that themajority of the country supports him because they want“stability,” and that the protests, headed by “Westernstooges,” are about to subside. They won’t abate. Andthe appointment of Igor Kholmanskikh, a tank factoryforeman who had offered to come to Moscow with aburly cohort of his fellow assembly-line workers to de-fend Putin’s regime, to rule the vast Ural region will notscare them. Soft power has the upper hand today, andtanks can’t shut down the Internet.

In nominating his new cabinet (which he deemedso important that he could not attend the G-8 summit),Putin’s Soviet origins could not be more obvious.Leonid Brezhnev used to have his culture and agricul-ture ministers swap places, as if – bound by the wordculture – they were one and the same field of expertise.Putin’s new cabinet is a similar reshuffling of the in-competent with the unqualified. This debunks another

myth – that Putin, now back in charge, will abandon hisvulgar anti-Western rhetoric and become a reformer,understanding that only a democratic Russia can main-tain its territorial integrity and sovereignty. And thereason that he won’t embrace reform is that he can’t,because that old truism – absolute power corrupts ab-solutely – has proven itself once more. After more thana decade in power, Russia’s leaders are no longer capa-ble of pursuing better polices. Their personal interests,and riches, are too dependent on maintaining the statusquo. Of course, Russia has seen this pattern before aswell. I will never forget what my great-grandmotherNina used to say about the corrupting nature of powerin our own family. “Regrettably, the Khrushchev of1962 wasn’t the Khrushchev of 1956.” My great-grand-father denounced Stalin’s cult of personality, only to beworshipped – for example, in the over-the-top docu-mentary Our Nikita Sergeevich (1961) – for his “supervision” of how to diminish imperialism and “catch upwith West.” Khrushchev’s self-eulogizing flatly contra-dicted his earlier de-Stalinization campaign, the pointof which was that Stalin betrayed communism by doingall that he could to resemble the royals of the past.Everything officially said about him was superior andsuperlative: “best friend of Soviet athletes,” “father ofall children on earth,” etc. That is the bombastic lan-guage of absolute monarchy.

Later, Yeltsin, upon assuming office as Russia’sleader in 1990, denounced all Nomenklatura privilegesas his first order of business. In his book A Confession,he wrote, “As long as [Russians] are so poor and dismal,I can’t eat sturgeon and caviar, I can’t race cars, ignor-ing traffic lights, I can’t take imported super-pills,knowing that a neighbor has no aspirin for a child. Be-cause I am ashamed.” When he left the Kremlin in2000, his secret fortune, from real estate, yachts,horses, and other properties, was estimated to be worthat least $15 million. In January 2000, the novice Pres-ident Putin gave a slew of persuasive interviews toRussian TV networks, praising the rule of law andpromising not to remain in office a day beyond his twoconstitutional terms, or if he lost popular support.These are the “rules of the game, of democracy,” he said.After two presidential terms, followed by a stint asPrime Minister and now a third presidency, Putin is en-tering his 13th year in power with 40% of the popula-tion desperately wanting him out. If history is anyindication, that number will only grow.

Courtesy: Project Syndicate

Putin’s final act

LAHORE: Member TEVTA Board Ismail Khurram is addressing the 2nd Consultative meeting of industrialists andemployers to identify Technical Vocational Education and Training(TVET) priority areas. President Board ofManagement Sialkot Mian Naeem Javaid, Acting President FPCCI Sh. Abdul Waheed Sandal and General ManagerTEVTA Prof. Javed Iqbal Malik are also seen in the picture.

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