News: SECP advises merging Lahore, Islamabad bourses
Publication: The News International
Date: September 8, 2012
Web Address:- http://www.thenews.com.pk/Todays-News-3-130611-SECP-advises-merging-Lahore-Islamabad-bourses/
SECP advises merging Lahore, Islamabad bourses
Saturday, September 08, 2012
From Print Edition
ISLAMABAD: Following the demutualisation of the stock exchanges, and to attract foreign bourses to invest into the Pakistani capital market, the Securities and Exchange Commission of Pakistan (SECP) has advised the merger of Lahore and Islamabad stock exchanges since they do not have enough volume to attract the world’s big exchanges independently, said SECP chairman Muhammad Ali.
“We want consolidation; their merger will reduce cost, improve volumes and their balance sheets will become stronger. It will attract foreign investors,” Ali said here on Friday while talking to media persons in his office.
He further said: “We will talk with the big exchanges of the world to buy stakes in our exchanges, and for this merger will be an appropriate way for attraction.”
The merger of all three exchanges including Karachi, Lahore and Islamabad has also been suggested to attract foreign and local investors, he added. He said: “However, the final decision will be of these stock exchanges”.
Ali said the rules for Capital Gains Tax (CGT) have also been vetted by the law ministry and will be implemented on the transaction of shares by next week, after the Federal Board of Revenue (FBR) gives its approval.
He also further said the Public Sector Enterprises (PSEs) code of governance would be finalised in a few months to improve the performance of these state run entities. These rules will be constituted with consultation of the finance ministry.
For this, a task force has been constituted in the Ministry of Finance to finalise its submissions by October this year and by December, the code of governance will be finalized, he said.
Ali said: “These rules will be applicable on the listed and unlisted public companies and no minister would be allowed to become the head of the board of governors in any company”.
The SECP is working on these rules for the last eight months and so far it has held three roundtable meetings, he added.
The PSE’s are eating up approximately Rs400 billion a year of the taxpayers’ money. Institutionalisation of the PSE’s will be a great way forward and will improve monitoring and implementation and will attract local and foreign investment, Ali said.
The draft regulation of the PSEs’ corporate governance calls for organizing these entities on corporate lines with professional and independent directors’ board, having a chairman from within the same board.
There are 114 PSE’s under the federal government and since the provinces also have many PSEs, the government has engaged them too.
An official in the commission told the News: “The corporate governance rules seem to be inapplicable on some state run entities. Even though some entities run as companies, they have legal protection against the complete implementation of the Companies Ordinance since the role of several ministries is too strong in their affairs,” he said, adding some firms like Pakistan Railways and the National Highway Authority do not even have a company status.
He said the launch of the code of corporate governance and its implementation will help boost institutional development and bring openness for scrutiny, attract investment and protect Pakistan’s status in the international market.
It will put pressure on the PSE’s to be transparent and ensure disclosure, transparency and integrity of professionals, he said. However, it is an uphill task to bring all the PSE’s under a single legal ambit and alter their legal structure, he added.
Ali said that to promote and develop the securities markets, the internet and sub-broker regime would be introduced to increase its outreach and facilitate more people for investment in stocks, as currently 80 percent of share holders belong to Karachi, Lahore and Islamabad.
“The SECP is working on developing distribution network to enhance investment in security market”, he added.
At present, the majority of the CDC account holders are in Karachi with the strength of 140,000 accounts, followed by 51,000 CDC account holders in Lahore, 25,000 each in Rawalpindi /Islamabad and Faisalabad has 6,000 stock market investors. This shows that people in other cities do not even have access to trading in the stock markets, Ali said.
The SECP chairman said the World Economic Forum’s Global Competitiveness Index has hailed the commission’s performance and reforms in local securities markets, as its rank has improved by 15 points.