“Yes, the President‑elect does support the legislation that you (Kerry) were part of, Vice President‑ elect (Joseph) Biden and Senator (Richard) Lugar also. We want to try to begin to some extent to separate our military aid from our non military aid.”

“The tripling of non‑military aid is intended to provide resources that will both support the Pakistani people and also give some tools to the democratically elected government to try to start producing results for the people of Pakistan,” she told the Senate Foreign Relations Committee at her confirmation hearing.

The former first lady appeared for her hearing exactly a week before the Obama Administration takes charge on January 20.

Clinton was asked by Senator Kerry if she could affirm that the new administration remains absolutely committed to the Biden‑Lugar measure (now likely to be named Kerry‑Lugar) that seeks to enhance economic assistance for Pakistan to $ 1.5 billion annually over a number of years.

On the military aid aspect of the legislation, she said, the Administration wants to “look hard and see whether we can condition some of that on the commitment for the counter‑insurgency, counterterrorism missions.”

“So we certainly are inclined to support, where appropriate, the legislation you are referring to,” she added.

The New York senator, who has been a member of the influential panel, told her fellow lawmakers that Pakistan faces the complex problem of extremism but its government is determined to curb the menace. 

“Pakistan has a particular complexity because of its nuclear weapons capacity. But the democratically elected government has been saying a lot of the right things with respect to the threat posed by extremists and terrorists particularly along the border and in the FATA region in Pakistan.”

“So, I am hopeful that we will have a very active, positive relationship with the new Pakistan government. I know that there is a lot of work being done by the outgoing Administration to deepen ties between our country and various institutions in Pakistan,” she stated in answer to a question from a member of the panel.

At the same time, she reminded that the menace of violent extremism is a complicated problem in the region.

“But this is a tough problem. It is a very complicated problem.  It has many dimensions to it. As you pointed out, the relationship with India, the relationship with Afghanistan. The role that Iran and others are playing in that region.”

“We have to approach this with the same level of attention and comprehensive understanding that our military is attempting to do as it ramps up our troop commitment in Afghanistan and works more closely with the government of Pakistan to protect them from violent extremists as well as to root out al‑Qaeda and other remnants of the terrorists network so that they don’t find safe haven in Pakistan to plan attacks against us or any other country.” 

Chairman Senate Kerry, who has succeeded Vice President‑elect Joseph Biden, underscored the need for supporting Pakistan in overcoming its economic challenges.

He raised his concern on a number of counts with respect to pursuance of the war on terror in Afghanistan and pointed out the need for clear definition of the U.S. goals. He suggested a review of the terms like war on terror and their possible replacement with counter‑insurgency.

Clinton sounded agreeable to chairman of the panel Senator John Kerry’s call for examining efficacy of targeting and taking out suspected terrorists in tribal areas along Pakistan‑Afghanistan border in the face of counterproductive impact of such actions on hearts and minds campaign. -APP

Pakistan’s banking sector has remained remarkably strong and resilient, despite facing pressures emanating from weakening macroeconomic environment since late 2007, said the SBP report.

However, the report cautioned that excessive dependence on the banking system to meet the financing needs of economy, as well as other participants of the financial sector, is quite stark in comparison with other emerging economies, where in general, the growth in other components of the financial sector, such as capital markets, and complements supplements the financing capacity of the banking sector.

The report also bitterly criticised the long suspension of capital market operation through floor system which it said shocked the economy.

While financial markets (money market and foreign exchange market) remained resilient to developments in the macroeconomic environment and functioned well in maintaining financial stability, the imposition of the floor of 9,144 points on the KSE-100 index in August 2008 has adversely impacted investor sentiments by effectively blocking the exit mechanism generally taken for granted in a market based system, said the report.

Incidentally, there is no known precedent of placing a floor on a market index, albeit temporary suspension of trading in equity market has been implemented in some cases as an extreme measure, it said.

The review said the banking system is on strong footing and has long term potential – a feature which has served to attract a substantial amount of FDI in the sector, with established global financial institutions now active participants in the domestic financial sector.

The report states that with strong regulatory oversight, there has been a significant enhancement of capital and risk-weighted capital adequacy, supported by high provisioning requirements which were tightened in 2007.
Stringent loan provisioning requirement has built sufficient reserves against the nonperforming loans [NPL]s’ portfolio.

“In contrast to the liberalised financial system in the west which took its toll in the form of the current global financial crisis, there are stringent regulations and adequate policies in place to help the banking system manage its risks,” said the report.

The Report said solvency profile has improved, and given the pressures from the macroeconomic environment, there is an indication of marginal deterioration in asset quality, which banks are well-equipped to handle.

Stress tests conducted on June-2008 data indicate that the large banks are relatively robust, with the medium and small-sized banks positioning themselves in niche markets, it added.

Capital adequacy of the banking system is strong, 12.1% at end-June 2008, well above the internationally acceptable minimum requirement of 8.0%, it said and added core capital constitutes about 80.0% of the total capital, and Tier 1 to risk weighted assets ratio of the banking system is at 9.7%.

“This strong capital base is accompanied by adequate reserves on the back of stringent provisioning requirements against classified assets – the net NPLs to net loans ratio is reasonably well-contained ie at 1.3% in June 2008, comparable to international best standards,” the report said.

Profitability of the banking system continues to be impressive, largely emanating from the persistent growth in high-yield earning assets and expanded business volumes.

Before-tax Return On Assets of the banking system remains strong at 2.3% in June 2008. The strengths built up over the years are now coming in handy in managing the recent financial strains.

The Report mentioned that the demand for credit from both the government and the private sector resulted in liquidity strains faced by some individual banks, which also emanated from the combined impact of their weak deposit mobilisation and low interest rates offered on deposits.

The government and public sector organisations’ excessive borrowings from the banking system posed another challenge for the banking system.

Notwithstanding, the liquidity strains were temporary and the inter-bank market is now functioning normally. — Internews

Speaking at a round table discussion on “The impact of power shortage on national economy” FPCCI president Tanvir Ahmad Sheikh said the country is currently facing the worst power and gas crisis in memory, and that uninterrupted supply of power is a pre‑ requisite for country’s economic growth and development.

He said without reliable power supply there can be no production and no industry, and issues like fulfilling our international trade commitments will no longer matter.

He said industry and agriculture are vital national sectors requiring smooth electric and gas supply for development.

“In view of the power situation confronting the country today, construction of water reservoirs and dams is absolutely necessary to

meet water‑power shortage,” he said, adding that consensus on this should be obtained at the earliest if our economy is to survive.
He said that international experts and studies conducted here by international bodies such World Bank, after detailed research have identified certain sites feasible for a big dam from technical point of view.

Speaking on the occasion, Iftikhar Ali Malik co‑chairman Businessmen Panel in FPCCI said new dams are inevitable to meet the ever increasing demand for inexpensive energy sources, and will also help bring down the cost of everything including essential commodities.

“Big water reservoirs and dams are vital for country’s industrial progress and prosperity, as well as for a green revolution,” he said,

adding that we can get rid of power loadshedding and outages only if new dams are built on war footing.

New dams will also help reduce the frequency and severity of flood havoc in downstream of river Indus, especially in Sindh province, he added.

He assured that no official of tax collecting department would harass any industrialist or other tax‑payers.

On pointation from Chairman KATI , Mian Zahid Hussain, Mr Tareen said he had already directed the Federal Board of Revenue (FBR) authorities to rush to Karachi and address the complaints of businessmen about the Customs especially the demurrage issue at the sea‑ports here.

He agreed to the proposal from KATI member that for better management KESC can be bifurcated into two or three distribution companies, and that like in Lahore the generation and distribution can be separated.

He noted that KESC has shown no improvement even after its privatisation and that it continued to incur billions of rupees losses every year. KESC has been nothing to power supplying agencies like PEPCO and it owes billions of rupees.

“ KESC is getting just free power supply from Government. Even than it has failed to deliver to people,” he remarked.

He said a high level Government meeting is scheduled to be held in Islamabad on January 05, 2009 where various important issues would be discussed including KESC and practical solutions would be found and the decisions would be taken to provide some relief to industry and the general public on various accounts.

The PM’s Advisor informed the business community that the Government is working out to solve gas and electricity supply, and the tariffs issues.

He said new policy on gas and electricity will be announced soon. This is based on equalization of tariff for all kind of consumers—industry, small business units and domestic‑to slash the burden on the industry of subsidies being given to other categories of the consumers. This will help in reducing the cost of doing business for industrialists in the country.

“ I strong believe that all the consumers should pay same price of electricity and gas ,” he asserted adding that if the Government wants to provide some relief to any category of the consumers it should give subsidy directly to them.

He said the Government was going to take various important decisions soon on gas and power to the satisfaction of the business community.

He said the Government has also initiated the formulation of national industrial policy and the process would be carried on through maximum participation of business community of the country.

He assured that due representation of the business community would be ensured on the boards of all policy‑making Government institutions including Federal Board of Revenue ( FBR) , National Power Regulatory Authority (NEPRA) and Oil and Gas Regulatory Authority (OGRA) to make the polices and systems more practical and targeted‑oriented.

The present Government’s main focus is to strengthen manufacturing and agriculture sectors which have great potential to grow and diversify , he said.

The PM’s Advisor on Finance and Economic Affairs said the Government was using all options and resources to bring the inflation and interest rate down to single digit.

On pointation from the business leadership that during the last few years the banks have been earning undue profits, with spread up to 7 percent, the Advisor suggested that through interactive meetings of the bankers and the business community the issue would be weighed and settled to the satisfaction of all the stakeholders.

“ I would like to request the bankers to provide maximum relief to the businessmen and the public,” he said.

He said the core inflation was coming down and when the data of December 2008 would come out, there would be significant decline in the inflation rate.

About the interest , he said he would arrange meetings of the business representatives with the new Governor State Bank of Pakistan to provide both sides a platform to convince each other so that the banking policies should win the confidence and support of the businessmen.

Mr. Tareen said that he would not support tight monetary policy in the country when oil and food prices were coming down.

He assured the KATI leadership of his full support in establishment of the proposed S.M.Muneer Economic University in Karachi.

Others who spoke included Patron‑in‑Chief of KATI, S.M. Muneer, Chief Executive Officer of KITE Limited and senior businessman Abdul Haseeb Khan.

Federal Advisor on Textile Industry and Chairman of Baig Group of Industries, Dr. Mirza Ikhtiar Baig was also present.