Pakistan’s Budget 2012-13

Economic Review

The federal budget 2012-13 was presented by the party in rule onthe eve of last year of its 5-year tenure, in a situation when the fiscalhealth of the economy is not at satisfactory level to support such abudget. The Law & Order situation in the country is still notappreciable, which makes the sustainability and survival forbusiness community difficult. Domestically, economy was struck byheavy rain and floods in Sindh and Baluchistan costing $ 3.7 billion.Current account balance was affected due to sharp increase in oilprices and import of 1.2 metric ton of fertilizer.

Energy plays a vital role in the economic development of anycountry. It is considered as the mother of all the crises prevailing incurrent scenario in developing countries like Pakistan. Energycrises crammed up all the wheels of the economy. Industrialists andother businesses are testing their destiny by shifting theirbusinesses units outside Pakistan in countries like Bangladesh,United Arab Emirates, Canada and other countries, who offer themattractive facilities and guaranteed power solutions.

The GDP growth for 2011-12 was projected at 4.2 percent on theback of 3.4 percent growth in Agriculture, 2 percent growth in LSMand 5 percent in Services sectors. However, the torrentialr rains inSindh province during August 2011 compelled the government torevise its GDP growth target to 3.6 percent from 4.2 percent on thebasis of 2.5 percent growth in Agriculture, 1.5 percent in LSM, and4.4 percent growth in services sector. The revised growth targetshave been marginally exceeded. The economy has shown

resilience. GDP growth for 2011-12 has been estimated 3.7 percentbased on nine month data as compared to 3.0 percent (revised) inthe previous fiscal year 2011

The agricultural sector recorded a growth of 3.1% as compared to2.4% of previous year. The agricultural sector got damaged by theheavy rains in triggered flood in the Sindh and BaluchistanProvinces. According to the Damage & Needs Assessment (DNA)report of Asian Development Bank (ADB) and World Bank, about9.6 million people were affected in the provinces of Sindh &Baluchistan as a result of these rains.

Commodity producing sector has comparatively performed betterin the outgoing fiscal year by projecting a growth rate 3.3 % against1.5% during last year.

Per capita real income grew at 2.3 percent in 2011 -12 as comparedto 1.3 percent growth last year. In dollar terms, it increased from $1258 in 2010-11 to $ 1372 in 2011-12

Real Investment has declined from 13.1 percent of GDP last year to12.5 percent of GDP in 2011-12; fixed investment has declined to10.9 percent of GDP in 2011-12 from 11.5 percent of GDP last year.Similarly Private investment also contracted to 7.9 percent of GDPin 2011-12 as compared to 8.6 percent of GDP last year. Publicinvestment as a percent of GDP is 3.0 percent in 2011-12 againstthe 2.9 percent last year. National savings are 10.7 percent of GDPin 2011-12 as compared to 13.2 percent last year.

Price stability remained the priority of the government. Inflation hasdeclined for the third consecutive year. CPI was 10.8 percent during

By Tariq Mustafa Ramzan & Co. (TMRC)

Cost & Management Accountants

Brief Comments

Management Accountant, May-June, 2012 9

FOCUS SECTION

Management Accountant, May-June, 201256

programmes. While most businesses give charity and makedonations for noble causes, the reporting and accountingmechanism for stakeholders is still vague. In 2009, the SECPissued the Companies (Corporate Social Responsibility) GeneralOrder, applicable to all public companies. According to the saidorder, every company is required to provide descriptive as well asmonetary disclosures of the CSR activities undertaken during eachfinancial year in the directors' report to the shareholders annexed tothe annual audited accounts. The companies, however, were atliberty to choose the content and format of CSR report, if issued,generating a strong perception that most reports are public relationtools adopted by large companies and not a form of accountability.Stakeholders, therefore, were facing difficulty to assess thepositioning of company regarding CSR priority areas, evaluate theutilization of resources and their implementation effects.

Keeping in view global learning and local market practices, a set ofguidelines have been developed by the SECP to encourageadoption of voluntary measures ensuring transparency andcorporate accountability in implementing the CSR activities. Theguidelines shall be applicable to all public companies and areexpected to be take effect from July 1, 2012.

Through the said guidelines, the SECP has exerted upon twoaspects, i.e., the governance practices and independentassurance. Thus as a primary step, the policy related to the CSRactivities are expected to be prominently disclosed by companieson appropriate medium of communication for stakeholders.Thereafter, assurance from an independent external party isrequired for verification of reported activities. Nevertheless,companies shal l cont inue to enjoy the l iber ty ofdeveloping/implementing CSR projects as per their aspirations,however, board of directors are expected to play a proactive role informulating CSR policy. The implementation strategy so adopted isrequired to be embedded in policy and strategic framework of thecompanies duly disclosed to all stakeholders. The adoption ofthese guidelines will be a significant step towards strengthening thepolicy and implementation pyramid within reporting companies.Moreover, the proposed the CSR framework shall create favorableenvironment for sustainable growth, responsible business behaviorand corporate accountability. The Draft Corporate SocialResponsibility Guidelines, 2012, are placed on the SECP website.For facilitation of stakeholders, comments sent on email addresscsr.guidelines@secp.gov.pk are also acknowledged.

SECP Signs MOU with Moroccan Counterparthe Securities and Exchange Commission of Pakistan (SECP)and its Moroccan counterpart, Conseil Deontologique des

Valeurs Mobilieres (CDVM), have signed an MOU, paving the wayfor enhanced cooperation and information sharing between them.On the sidelines of the annual meeting of the InternationalOrganization of Securities Commissions (IOSCO) in Beijing,Muhammad Ali, the SECP chairman, and Hassan Boulaknadal, theCDVM DG, signed the agreement, says a statement issued by theCommission.

Ther agreement reiterates the two regulators' commitment to worktogether in ensuring that securities and commodities markets in thetwo countries are fair, transparent, efficient and regulated to worldstandards. Both the SECP and CDVM are signatory to the IOSCOmultilateral MOU, the international standard for information sharingbetween the securities regulators and this bilateral MOU wouldsupplement the cooperation extended under the umbrella ofmultilateral MOU. The MOU has been inked in the backdrop ofevolving globally integrated financial markets, necessitating forregulatory agencies of capital markets to develop cooperativelinkages to ensure information sharing for enforcement of securitieslaws and facilitate detection and combat cross-border violations.The SECP is promoting cooperation with other regulatoryauthorities of the capital market at the bilateral, regional andinternational levels. The SECP has already signed MOUs with theregulatory agencies of India, the Maldives, Australia, Bhutan, SriLanka, Iran, China, Turkey and Oman. It outlines a framework forcooperation and information sharing in areas of mutual interest.The scope of document also includes assistance in actions againstinsider dealings, market manipulation and other fraudulentpractices in securities dealings, enforcement of relevant laws, rulesand regulations, monitoring the markets for their compliance withlaws and regulations, promoting high standards of fair dealing intheir conduct or business, and technical assistance among the tworegulatory bodies.

The Chairman SECP said that it is a significant milestone in thedevelopment of the capital markets of two brotherly countries whichcements an already excellent level of co-operation between the twoindependent agencies. Each regulator will be able to rely on theMOU to ensure compliance with applicable legislation and tocollaborate in regulating inter-jurisdictional dealings as well asshare technical know-how and joint training in enhancing thecredibility of financial markets and protect investor rights. The MOUaims at minimizing the risk that is usually associated with financialmarket transactions and will also help prevent fraud, moneylaundering, market manipulation and other prohibited practices inthe securities markets of both countries.

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