BOJ’s policy welcomefor world growth:IMF’s Lagarde

Business Desk

A huge monetary stimulus package to

be unleashed by the Bank of Japan this

week is a welcome step in supporting

growth in the world economy, the

managing director of the International

Monetary Fund (IMF) said on Sunday.

“Monetary policies - including

unconventional measures — have

helped prop up the advanced

economies, and in turn, global growth,”

Christine Lagarde told a forum in south

China. “The reforms just announced by

the Bank of Japan are another welcome

step in this direction.”

India’s high fiscal

deficit a concern

Business Desk

India’s high fiscal deficit is a concern

because it doesn’t allow banks to lower

the rate at which it lends to borrowers,

Reserve Bank of India Governor Duvvuri

Subbarao said Saturday. The central bank

had cut its key lending rate in March to

help revive economic growth, but banks

didn’t pass the reduction to borrowers. If

the fiscal deficit remains high, banks may

be reluctant to reduce the lending rates,

even if the central bank were to cut the

policy rates, Mr. Subbarao said.

01

BUSINESS

BMonday, 8 April, 2013

Business Desk

The Cyprus bailout shows banks can be wound downdespite difficulties, european Central Bank (eCB)policymaker Jens Weidmann said in an interviewbroadcast on Sunday, adding the situation on the is-land had stabilized.

Weidmann, chief of Germany’s Bundesbank, toldDeutschlandfunk radio he wouldn’t rule out that Cyprusmight need yet more liquidity, but stressed it was longerterm structural reforms that would solve Nicosia’sproblems and not more cash. To secure a 10 billion euroeU/IMF bailout last month, Cyprus forced heavy losseson wealthier depositors. Initially it had also pledged tointroduce a levy on deposits of less than 100,000 eurosbefore reneging in the face of protests. The agreementalso includes the winding down of the island’s second-largest bank Cyprus Popular Bank.

Cyprus’ bailout was not a template, Weidmannsaid, due to the large size of its financial sector, al-though it was crucial that those who bore responsibil-ity for getting banks into trouble bore some liability.

“It is important to draw the lesson from Cyprus thatbanks can be wound up, despite all the difficulties alongthe way in working out the program. This is a positive

signal, and should help limit uncertainty,” he said. Weid-mann pointed to discussions at european level on a di-rective for dealing with failed banks. “We can’t always

rescue banks which have got into difficulties with taxpay-ers’ money. It is about winding down banks in such a waythat it doesn’t endanger the financial system.” The euro-pean Commission is currently drafting a directive on banksafety which would incorporate the issue of investor lia-bility in member states’ legislation. Weidmann warnedthat the appetite for making structural reforms in europewas waning, and this posed a problem. Commenting onItaly he said although the country seemed to be function-ing on auto-pilot and sticking to measures already agreed,so long as it lacked a government it would trigger uncer-tainty over whether it could tackle its problems.

“It is not that we have too little liquidity in the eurozone or that the central banks have not been active ...the problems are rather a lack of competitiveness in cer-tain countries and doubts over financial sustainability.We need to fix this, and only governments can do that,”he said. Weidmann added, “Managing the crisis won’tbe a matter of months, I think it is something we willbe working on for years, because winning back com-petitiveness and consolidating state budgets are huge,wideranging challenges which will take a long time.”

BloomBerg

The Bank of Japan’s new governor, haruhikoKuroda, didn’t disappoint investors with his an-nouncement yesterday: he laid out plans for thebiggest, fastest unconventional monetary stimu-lus any large economy has ever seen. By defini-

tion, financial markets never expect “shock and awe,” butthey expect it least of all from the hyper- cautious BOJ.For once, for the first time anybody can recall, “shock andawe” is what they got.

On balance, this bold move is the right one. Prime Min-ister Shinzo Abe and his government now need to do theirpart. There’s no risk-free exit from Japan’s economic woes.Nonetheless, with a combination of long-term fiscal con-trol, supply-side reform and an end to deflation — Kurodacan deal only with the third piece — Japan’s prospects canfinally improve. Kuroda’s program of additional quantita-tive easing is enormous. The BOJ’s balance sheet is sched-uled to expand by 30 percent of gross domestic productbetween now and the end of 2014. For comparison, sincethe U.S. Federal Reserve embarked on Qe, its balancesheet has grown by less than 15 percent of GDP - - and ittook almost five years, rather than less than two, to do so.

No less important is the announced shift toward buy-ing long-term debt. Up to now, the BOJ’s bond buying hasbeen not just small but also confined to short maturities.Short-term public debt isn’t much different from money,and swapping one kind of money (short-term bonds) foranother (reserves at the central bank) is mostly pointless.The new bond-buying program, like the Fed’s, will focuson longer-term debt — raising long- term bond prices and

suppressing long-term yields, thus encouraging investorsto buy other long-lived assets instead, including equities.That way, the stimulus is much stronger.

This reasoning, of course, exposes the main risk.Kuroda wants to shatter Japan’s deflationary mindset, andcause investors to expect a modest increase in inflation to2 percent — an outcome devoutly to be wished. But whatif investors think the BOJ has simply lost its grip and thatmuch higher inflation is on the way? Then long-termyields would probably surge, not fall, in both nominal andinflation-adjusted terms. For Japan, whose public debtsstand at more than 200 percent of GDP, the consequencecould be an outright fiscal collapse.

Kuroda has drawn two lines to lessen this danger andkeep inflation expectations in check. he has ruled out per-manent monetization of public debt — the most inflation-ary form of monetary stimulus. In other words, like theFed, he’s promising to reverse the Qe in due course. Sec-ond, for now at least, the BOJ won’t be buying foreign-currency securities, signaling it has no intention to drivethe yen much lower (though the central bank doubtlesswon’t be too upset by a moderate decline).

Over the coming weeks and months, Kuroda (andeverybody else) will be watching the currency and long-term yields to see whether the mix he’s proposing —massive unconventional easing but with significant ges-tures of restraint — will move inflation expectations to

2 percent, but no higher. For now, we think he has gotthe balance right.

When Abe, the new prime minister, began pressuringthe BOJ to raise the inflation rate, he said this was just oneof three “arrows.” Abenomics was also to include furtherfiscal expansion and a program of supply-side reforms tospur private investment and growth. he needs to thinkagain about the second and get moving on the third.

Abrupt fiscal contraction would be unwise but Abeshould put much greater emphasis on medium- and longer-term restraint. After years of indecisive and ill-timed fiscalstimulus, Japan has become far too vulnerable to a fiscalcalamity, and even now rising debt-service costs are athreat to more productive forms of government spending.Abe has said fiscal expansion isn’t forever, but he shouldsignal greater resolve to address the debt issue. An increasein the sales tax due later this year should go ahead, andplans for longer-term spending cuts should be announcedand, so far as possible, enacted promptly.

Abe has promised to say more about the third arrow— supply-side reform — in a few months, when severalbodies that are charged to come up with proposals are dueto report. This exercise may well produce a lot of talk andno action. Japan’s calcified and overregulated economyneeds supply-side radicalism as much as it needs Kuroda’smonetary kind. For the first time, the BOJ is doing its part.Abe and the rest of his government must now do theirs.

Lesson from Cyprus is banks can be wound down: Weidmann

Japan’sbrave newmonetaryera

The Bank of Japan’s new governor, haruhiko Kuroda

iSLaMaBaD: Pakistan’s broadband segment is making rapid progress and posted steady growth during the year 2012,

said the annual report of Pakistan Telecommunication Authority (PTA). The segment is led by country’s

leading integrated telecommunication services provider, Pakistan Telecommunications Company Limited

(PTCL), which further strengthened its position by claiming more than 60% share in the broadband

market, the report stated. The telecom service provider has strengthened its position in the

broadband market, up from 57% the previous year. The report also stated that PTCL has

more than 1.26 million broadband subscribers (as of June 2012), depicting a growth of

49% during the last fiscal year. Sources said the total number of customers served by

the company has increased significantly over the last few months as statistics in the

report are till June 2012. PTCL broadband network currently covers more than 2,000

cities, small towns and rural areas and this proliferation of broadband internet is

driving ICT growth in remote areas of the country. PTA report further stated that the

country has 5.87 million Local Loop subscribers and PTCL remained the most dominant

player in both the Local Loop Teledensity (LLT) and Wireless Loop Teledensity (WLL),

with more than 74% share in the overall LLT subscriber base. The total broadband

internet subscribers in Pakistan reached 2.35 million till December 2012, and broadband

penetration rate by June 2012 stood at 1.2%- up from 0.89% in 2011. Since 2007, the

broadband industry has maintained a growth rate of 127%, and coincidently, it is the same

year that PTCL started its broadband operations. Overall, a record 0.6 million broadband

subscribers were added in 2012, a major chunk of which went to PTCL. ONlINe

Tariq Saud appointed

Hon’ Consul General

of RomaniaKarachi: Prominent businessman in the

textile industry and an active social

member for Sindh Nazria Pakistan Trust

Tariq Saud has been appointed honorary

Consul General of Romania in Karachi.

Saud has also been promoting education of

government schools and literacy for

inmates in Sindh since 11 years. He has

also served as All Textile Mills Association

(Sindh) Chairman. press release

PTCL remains dominant player in broadband segment

16-17 Business Pages (08-04-2013)_Layout 1 4/8/2013 6:28 AM Page 1

BUSINESSMonday, 8 April, 2013

02

B

The WAshingTon PosT

caItlIN Dewey

MOST Americans know thattheir iPhones, chopsticks andOlympic uniforms are “madein China,” but 94 percent ofAmericans cannot name even

one Chinese brand, according to a new sur-vey by international marketing firm hDTrade Services.

Go ahead, try it. It might be harder thanyou think. The 1,500 respondents in thehDTS survey could only come up with fivecompanies: Lenovo, Baidu, huawei, haierand Air China. (Respondents also offeredToyota, Sony and honda, but those are, ofcourse, Japanese.)

There’s a reason Americans recognizeJapanese brands better than Chinese ones:Both countries sell tons of stuff here, butChina often does it under other, non-Chi-nese names. Chinese companies looking tosell in the United States have long preferredto acquire preexisting American firms (withtheir established reputations, resources, in-frastructure and market share), rather thanrisk entering the market themselves.

“For Chinese management that maynot have a firm grasp of the nuances ofAmerican consumer preference … pursu-ing growth through acquisition is a logicaland commendable choice,” reasons hDTS.But it also means that Americans don’tknow how much Chinese stuff they’re con-suming, and therefore might not gain an ap-

preciation for Chinese goods in the waythat many have for Japanese or Germanproducts.

When you buy an IBM computer, forinstance, you’re actually buying it fromBeijing-based Lenovo, which acquired thecompany in 2005. Likewise, Chinese car-maker Geely bought Volvo from Ford in2010 — so your XC60 might have beenmade in Sweden, Belgium or Malaysia, butmany of the profits go back to Beijing.

Only a handful of Chinese products -such as Lenovo laptops and haier appli-ances, both of which featuredprominently at this year’s Consumerelectronics Show - are actually marketeddirectly to US consumers.

Chinese companies show few signs ofworking to reverse these trends. In 2012,Chinese buyers acquired or bought stakesin more U.S. companies than in any yearsince 2007, inking 46 deals worth $10 bil-lion in total, according to the Wall StreetJournal. Those deals included the $2.6 bil-lion buy-out of the AMC movie chain inMay and the acquisition of bankrupt bat-tery-maker A123 in December. A Univer-sity of Pennsylvania report called it a record“run at US companies.”

“We should get used to this type ofheadline,” management professor MauroGuillen concludes. “More and more Chi-nese firms, and firms from emergingeconomies in general, will engage in[mergers and acquisitions] in europe andthe US.”

China’s branding failure: only 6% of USconsumers can name one Chinese brand

Govt has released Rs 143.4b underPSDP so far

islAmABAD

app

The Planning Commission ofPakistan (PCP) has so far releasedRs 143.4 billion under itsPublic SectorDevelopmentProgramme (PSDP)against the totalallocations of Rs 233billion for the fiscalyear 2012-13. Out ofthe total, Rs 75.4billion have beenreleased for 347infrastructuredevelopment projectswhile Rs 63.3 billionfor 712 social sectorprojects werereleased up to April 5, according to the latest data of thePlanning Commission. Similarly, Rs 1.9 billion have beenreleased for 77 other projects and Rs 2.8 billion for earthquakeReconstruction and Rehabilitation Authority (eRRA).According to data, these releases have been made against 233PSDP allocations. The total size of the PSDP for the year2012-13 is Rs 360 billion, including Rs 100 billion foreign aidwhich is managed by economic Affairs Division and Rs 27billion special programmes, release of which are made byCabinet Division and Finance Division. According to break updetails, total cost of 347 infrastructure projects has beenestimated at Rs 232.3 billion, out of which Rs 211.1 billionhave been earmarked in the 2012-13 budget that include Rs85.6 billion as foreign aid. Likewise, the total cost of socialsector projects is Rs 554.4 billion, of which Rs 135.8 billionhave been allocated in the current PSDP with foreign aid of Rs8.4 billion. The cost of other projects has been estimated at Rs41.8 billion out of which Rs 3 billion have been earmarked inthe PSDP 2012-13, while Rs 10 billion have been earmarkedfor eRRA in the current development programme. ThePlanning Commission of Pakistan has been following a propermechanism for the release of funds. The commission releases20 percent of funds in first quarter (July-September), 20percent in the second quarter (October-December), 25 percentin third quarter (January-March) and 35 per cent in the fourthquarter (April-June).

islAmABAD

app

A delegation of Islamabad Cham-ber of Commerce & Industry(ICCI) visited National Cham-ber of Commerce and Indus-try of Malaysia (NCCIM),said a press release issuedon Sunday.

ICCI President ZafarBakhtawari invited theNCCIM President to attendASeAN Capital ChambersConference in Islamabad whichwould be organised by ICCI withthe aim to promote mutually benefi-cial relation between Pakistan andASeAN member states. The ICCI Presidentsaid that Pakistan produces good quality and afford-able agricultural product like rice, wheat and man-goes that have a great demand in Malaysian markets.

he stressed that there is a dire need to increaseexport of Pakistani products to

Malaysia which would alsoimprove bilateral trade re-

lations between the twocountries. he said

Pakistan has a freetrade agreement(FTA) with threecountries that areMalaysia, Chinaand Sri Lanka.Malaysia is the

first Muslim coun-try that has signed an

FTA with Pakistanwhich also reflects the

importance of Malaysia forPakistan, he said.

he expressed the hope that Malaysiawould also help Pakistan in becoming a full-dia-logue partner in the ASeAN regional bloc.

Bakhtawari called on the Malaysian businesscommunity to take advantage of the vast Pakistanimarket and explore investment opportunities inagriculture, construction, livestock and dairy, en-ergy, education, IT and the halal industry sectors.

Speaking on the occasion, NCCI of MalaysiaPresident Ali Al-Atas said business community ofPakistan should establish a base in Malaysia forattaining maximum trade benefits in ASeANcountries that would not only help boost trade ac-tivities but also prove beneficial for introducingPakistani products in ASeAN countries.

he asked the Pakistani business communityto actively participate in international conven-tions scheduled to be held in Malaysia in theforthcoming months and also urged Pakistanibusinessmen to be more participative in terms ofbusiness activities in Malaysia to compete withother competitive markets.

he also accepted the invitation ofBakhtawari to attend ASeAN Capital ChambersConference in Islamabad.

Pakistan seeks increased trade withMalaysia in agriculture sector

rome

app/aFp

Italy is bidding to close the gap with its com-petitors in wine exports to China, said organ-isers of a major wine fair that opened onSunday with a Chinese commerce ministrydelegation in attendance.

The Vinitaly fair in Verona in northernItaly is “a connecting bridge between Ital-ian wine producers and the Asian market,which is close to becoming the biggest con-sumer of wine in the world,” organiserssaid in a statement.

Italy is only fifth among countries ex-porting wine to China with a market share of6.2 percent and “it needs to close the gap”,the statement said.

Italian wine sales to China amounted to102.4 million euros ($132.3 million) in 2012

and China is to become the world’s top con-sumer in 2015, it said.

Organisers of the fair said major Chi-nese online wine distributors would be tak-ing part in the Verona event, which wrapsup on Wednesday.

The fair has also partnered with the hongKong International Wine &

Spirits Fair which takes place in Novem-ber and is Asia’s biggest wine event.

The Verona fair brings together 4,200 ex-hibitors from 23 countries and buyers from110 countries.

“Italy is the world’s biggest wine ex-porter. Forty percent of the revenue for thewine industry is generated by exports, com-pared to a european average of 18 percent,”said ettore Riello, head of Veronafiere.

The Vinitaly fair is considered thebiggest industry event in the world.

Luxembourg readyto revise banksecrecy: minister

Berlin

ageNcIes

Luxembourg is prepared to lift the lid slightly on itscontroversial bank secrecy in an effort to help curbtax evasion by foreign depositors, its financeminister said on Sunday. Following intensecriticism by eurozone partners of Luxembourg’sinsular banking practices, Luc Frieden toldGermany’s Frankfurter Allgemeine Sonntagszeitungit would now consider moves toward greatertransparency. “We want to strengthen cooperationwith foreign tax authorities,” he said. “Theinternational trend is going toward an automaticexchange of bank deposit information. We no longerstrictly oppose that.” he cited interest payments toforeign clients as an example of data that could begiven to home countries as a matter of course.“Luxembourg does not rely on clients who want tosave on their taxes.”

Italy bids to close gap inwine exports to China

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