7 Questions to Ask Before Starting a Business in 2014

If your New Year’s resolutions include quitting your job and starting a business, you’re not alone. What could be more fulfilling than calling the shots, setting your own hours, and making things happen?
However, going off on your own is no easy feat, and many would-be entrepreneurs quickly become unsettled by the hard work and uncertainty of the lifestyle.
 You can’t prepare yourself for every aspect of running your own business, but here are some key questions to ask yourself before taking the plunge.

1. How well do you work without a playbook?

Do you need constant guidance and motivation from others? How well do you manage your time if no one is looking over your shoulder or a boss doesn’t set a deadline?
Many people think that being the one in charge is going to make life so much easier, but that’s not always the case. It can be difficult to get started when there’s no clear indication of what you should be doing or where the starting line even is. Successful entrepreneurs are naturally independent, resourceful and don’t need someone to hold them accountable in order to be efficient and productive.

2. Are you an inventor or entrepreneur?

 

A lot of successful startups are hatched from an amazing idea. However, a great product idea or invention isn't necessarily enough to make a great business. Too many times, an "inventor" type stays focused on the product, the prototype, the patent, etc., ignoring the other aspects of developing a business. Just because you develop a great product doesn't mean that customers will instantly flock to you door. Entrepreneurs get that.
Of course, if you consider yourself more of an inventor than an entrepreneur, this doesn’t necessarily preclude you from starting your own business. But perhaps you should look for a partner with complementary entrepreneurial skills and interests to help take your idea to the next level.

3. Does your business idea offer value to customers?

Maybe you’ve heard the saying “Love what you do and the money will follow.” While this sounds nice in theory, it doesn’t always work that way in real life. There’s no doubt that passion is an important key to success, but in order to build a profitable business, you need to offer something that others are looking for.
After all, the market doesn’t care that you’re fulfilling your lifelong dream. People spend money on products or services that fill a need or desire. If there is no customer need, the business will fail.

4. What is different about your business?

Is your business idea similar to other businesses already out there, or do you have something unique to offer? How crowded is your target marketplace? These are important questions to think about, but bear in mind that the key to success doesn’t always hinge off finding a completely empty field (and good luck finding one!). Rather, it depends on how you define your company and its place in the market. Starbucks was hardly the first company to sell coffee, and they won’t be the last.
In short, you don’t always have to come up with a brand new idea. Take a look at your target industry and see where there’s a void to be filled. Figure out the best possible way to fill that need and run with it. You don’t always have to forge a new trail, but you have to give customers a compelling reason to choose you over the competition.

5. Are you willing to wear multiple hats?

 

When you’re an employee within a company, there’s someone to call if the printer stops working or you want to coordinate a trade show booth. This isn’t the case when you’re just starting out.
Launching a business typically involves wearing many hats and, sometimes, all the hats. You can be tech support one hour and a salesperson the next. Before setting off on your own, make sure you’ll be comfortable performing a variety of functions, including the less-than-glamorous ones.

6. Do you have the financial foundation to start right now?

If you need to know exactly when your next check will arrive, working for yourself is going to be extremely stressful. Small businesses, including freelancers, have ebbs and flows in their income. And when you’re launching a product-based startup, your business may not be profitable for at least three to five years.
It's important to be realistic about how you’ll support yourself and your business financially. In many cases, the best time to prepare for launching your own business is while you’re still working another job.

7. How do you handle rejection and disappointment?

When you’re deeply invested in what you do, it’s hard not to take each rejection personally. However, as an entrepreneur, you’re going to receive lots of bad news — maybe from an investor, lost sale or poor blog review. If you spend time dwelling on the rejection or feeling bitter, you’re not only wasting your time, you’re also not learning anything from the experience.

Final Thoughts

Asking yourself the tough questions ahead of time could mean the difference between success and failure. However, if one or two answers should give you pause, don’t let them scare you away from following your dreams altogether. It’s still more than possible to be a successful entrepreneur, but you may need to take some extra steps to address where you’re short.

 

US may release 'tiny portion' of $45 billion Iran assets

US Secre-tary of State John Kerry Thursday revealed for the first time that the United States
is offering to free up "a tiny portion" of some $45 billion in Iranian assets frozen in bank
accounts around the world. As he campaigns to sell skeptical US lawmakers a nascent deal
with Iran to rein in its suspect nuclear program, Kerry insisted "the core sanctions regime
does not really get eased."
"Ninety-five percent or more of the current sanctions will remain in place," the top US
diplomat told MSNBC in an interview, after talks failed to reach a deal in Geneva at the
weekend. Before the sanctions began to bite, Tehran was earning about $110 billion to $120
billion in annual revenue from oil sales, said Kerry, who is leading the push to rally Congress
behind efforts to strike a deal to halt Iran's uranium enrichment.
"That has been knocked down to about 40 to 45 billion now because of the sanctions and that
45 billion is frozen in banks around the world. They can't access it," Kerry insisted. "All we
are talking about doing is a tiny portion of that would be released because you have to do
something to make it worth while for them to say yes, we are going to lock our program
where it is today and actually roll it back."
Negotiators from Iran and the six world powers leading the talks - Britain, China, France,
Germany, Russia and the United States - are due to meet again on Thursday and Friday next
week in Geneva seeking to nail down a deal which has eluded them for a decade. After the
talks failed to reach an accord at the weekend, Kerry said the world powers were very close
and were just grappling over "four or five concepts."
He blamed Iran for walking away, saying that at that moment they "couldn't take" the offer
that was on the table and had to return to Tehran for consultations. Iranian Foreign Minister
Mohammed Javad Zarif, whose country has denied allegations it is seeking an atomic
weapon, has disputed Kerry's version of events.
Kerry urged Congress in closed-door talks Wednesday not to impose even more sanctions on
Iran, saying it would "break faith with those negotiations and actually stop them and break
them apart." And he told MSNBC that he had just spoken Thursday with Israeli Prime
Minister Benjamin Netanyahu, as he seeks to soothe Israeli anger over the emerging deal.

National Bank of Pakistan (NBP) has re-launched its Islamic Banking

National Bank of Pakistan (NBP) has re-launched its Islamic Banking with tagged
"Aitemaad" to extend Sharia financial service. Under the revamping programme of NBP
Islamic Banking division is being re-branded and aggressive marketing and awareness
campaign of its products and services has been planned. Sources in banking sector told
Business Recorder that the top NBP management is working aggressively to establish a
widespread network of Islamic banking services to scale up Islamic banking businesses and
services to cater the need of customers throughout the country.
NBP exists with its branches in rural and far-flung areas where no financial institutions and
domestic or foreign banks have established their presence. The well established branch
network will provide a support to the bank for the rapid growth of the Islamic Banking. The
bank has already been working aiming to provide banking services to masses without too
much of commercial interest.
NBP management has re-launched Islamic Banking after reviewing the whole industry
products and services and planned to launch that products/ services which could not be given
at the moment by the other industry players, sources said. The State Bank of Pakistan (SBP)
has already planned to promote Islamic Banking industry throughout the country and in
Ramazan this year a special media campaign was launched by the regulator, with other
industry stakeholders. Therefore, it's the right time for NBP to re-launch Sharia financing
services.
The NBP management is planning to expand its Islamic banking services through opening of
new branches in various cities and converting conventional banking branches into Islamic in
the cities where the bank's presence is much stronger, they informed.
Sources in the banking industry said that NBP is one of the strong banks through which
central bank could achieve its objective to promote Islamic banking through its wide network
of branches. NBP's management is keen to acquire maximum share in the developing Islamic
Banking Industry (IBI) in the country with all available support from different public and
private sector entities and with the government, they added. It may be mentioned here that
NBP, one of the largest bank, established its Islamic Banking Division late in 2006. It has
branches network of Islamic banking merely in eight major cities despite its branches
network has widened to 1,313 at present.

IMF cautious, not pessimistic on emerging economies

In its latest economic outlook report the IMF was cautious about the perspectives for emerging markets without sliding into pessimism over the impact of US monetary policy on growth.
"Medium-term prospects for emerging market economies are weaker," the IMF said on Tuesday in its semi-annual World Economic Outlook report.
Growth rates in emerging market and developing economies are now down some three percentage points from 2010 levels, mostly due to slowdowns in Brazil, China, and India, the IMF said.
"Projections for 2016 real GDP levels for Brazil, China, and India have been successively reduced by some 8 to 14 percent over the past two years," the organisation said.
The IMF also reduced China's 2013 growth forecast by 0.2 points to 7.6 percent and the 2014 forecast by 0.4 points to 7.3 percent.
India's 2013 growth forecast was cut sharply by 1.8 points to 3.8 percent and the 2014 forecast reduced by 1.1 points to 5.1 percent.
But despite the growth slowdown in the major emerging economies, often referred to as the BRICS, the fund noted that the medium-term forecast was still above that during the decade leading up to the Asian financial crisis in 1997-1998.
The emerging market "slowdowns are hardly unprecedented" said the IMF.
"For some of the BRICS, they are not even unusual," it added, pointing out that the current slowdown is milder than previous ones for China and Brazil, whose 2013 forecast was left unchanged at 2.5 percent and cut 0.7 points to 2.5 percent for 2014.
Closing out the BRICS, the IMF cut its forecast for the Russian economy this year by 1.0 point to 1.5 percent and by 0.3 points to 3.0 percent in 2014. South Africa's growth forecasts were left unchanged at 2.0 percent for 2013 and 2.9 percent in 2014.
Over the longer term, the IMF expects the " drop in growth rates to prove durable in only two economies: China and Russia" for the simple reason their current growth models have nearly run their course.
China's model based on extensive growth has led to overcapacity and diminishing returns, with demographic trends now turning against expansive policies.
The IMF said "without fundamental reform to rebalance the economy toward consumption and stimulate productivity growth through deregulation, growth is likely to slow considerably."
For its part, Russia has "exhausted" its growth model of rising oil prices and using up spare capacity.
Emerging markets 'better prepared' for tightening of US monetary policy:
The IMF was cautious but not alarmist about the impact of the US Federal Reserve's announced intention to begin reducing the amount of monetary stimulus it injects into the US economy from the current level of $85 billion a month.
The announcement wreaked havoc in emerging markets as investors pulled out funds in anticipation of higher US interest rates, hitting emerging world share prices and currency exchange rates.
The IMF reviewed historical data and found "no broad-based deterioration in global economic and financial health occurred at the onset of previous episodes of US monetary policy tightening since 1990."
Moreover, it noted that emerging markets have better policies in place today, with greater exchange rate flexibility and higher foreign exchange reserve buffers.
"They should, thus, be better prepared to weather a tightening in external financing," said the IMF.
AXA Investment Management economist Manolis Davradakis said that by the delaying the start of the so-called tapering of its stimulus the Fed was giving emerging markets "time to introduce structural reforms and address their financial needs" or at least announce such reforms.
Olivier Gayno at HSBC Global Asset Management France said that a tightening of US monetary policy will lead to "slower but more balanced growth" that is less dependent on financial inflows from developed to developing economies.
Furthermore, a slow tightening of US monetary policy is also good news for emerging economies as it is a sign of improvement of the US and global economy, he added.

Australia's Creation of 9,100 jobs.

Australia's unemployment rate eased to 5.6 percent in September, retreating from a four-year high with the creation of 9,100 jobs in a better-than-expected performance boosted by election-related work.
The seasonally-adjusted jobless rate receded from August's 5.8 percent -- a level not seen since the global financial crisis as Australia's mining-powered economy confronts a peak in resources investment due to slowing commodity prices.
Analysts had expected unemployment to hold steady at 5.8 percent but a fall in the participation rate -- usually interpreted as evidence of jobseekers giving up on looking for work -- and a surge in jobs related to the September 7 election meant the result exceeded expectations.
"The employment numbers last month and this month have been flattered somewhat by the election," said National Australia Bank economist David de Garis.
The Australian dollar bounced from 94.48 US cents to 94.69 US cents after the headline rate beat forecasts, but analysts said the underlying picture was muted and unlikely to drive any move in the record low 2.5 percent interest rate.
"The recent improvement in confidence and stabilisation in labour market conditions is welcome but is still only tentative evidence that economic activity is improving from below-trend rates rather than just stabilising," said economist Justin Fabo from ANZ.
Slowing growth in key export market China and plunging commodity prices have hit Australia's key mining sector, with the central bank warning a decade-long, Asia-driven resources investment boom has peaked.
Australia's new conservative government has vowed to "reboot" the mining sector by slashing corporate taxes, but they face a steep task given China's slowdown and additional commodities supply coming online.
Top mining firms have taken a major hit, with BHP's annual net profit slumping 29.5 percent to US$10.88 billion in the year to June and rival Rio Tinto down 71 percent for the first half at US$1.72 billion.

The Bank of England is expected to leave monetary policy unchanged

The Bank of England is expected to leave monetary policy unchanged on Thursday despite more signs of economic strength, as it sticks to its commitment to keep interest rates on hold while joblessness stays above target.

Most data over the past month has suggested that Britain's stalled recovery is finally getting back in gear, and on Tuesday the International Monetary Fund revised up its economic growth forecast to 1.4 percent this year and 1.9 percent for 2014.

Nonetheless, output remains well below pre-crisis levels, in contrast to other major economies, and the central bank believes the economy has plenty of scope to grow further without generating domestic inflation pressures.

Industrial output fell unexpectedly in August as factories cut production, data showed on Wednesday.

This helps explain why the Monetary Policy Committee pledged in August not to raise interest rates before the unemployment rate falls to 7 percent - something it forecasts will take three years - unless inflation threatens to get out of control.

"They should probably be firmly sat on hold this month, next month and for several months to come," said Alan Clarke, UK economist at Scotiabank.

Clarke, like most other private-sector economists, expects unemployment to fall more quickly than the BoE forecasts, and financial markets think a first rise in interest rates from their record-low 0.5 percent could come as soon as early 2015.

Unemployment currently stands at 7.7 percent, while consumer price inflation of 2.7 percent has exceeded the BoE's 2 percent target since December 2009 and is not forecast to be back on target until late 2015.

More economic stimulus in the form of asset prices now looks unlikely, as the two policymakers who backed it earlier this year, Paul Fisher and David Miles, have said they would prefer to keep it in reserve until the economy weakens.

The main immediate threat on the horizon is the risk that the United States government shutdown escalates into a default on US government debt, something which Fisher said could be extremely serious for markets and the economy.

Govt increases rate of returns on NSS from October 1, 2013

In response to considerable increase in the comparable Government securities for long, medium and short term, the Federal Government has increased the rates of returns on National Savings Schemes for the investment made from October 1,2013.

According to a statement issued by the CDNS here on Wednesday said that the instant revision is made in the backdrop of current market scenario and in accordance with the Government's policy to provide market based competitive rate of return to the investors of National Savings.

The new as well previous profit rates of NSS are as under:-

On Special Savings Certificates (R)/Account the profit rate has been increased from current 8.92 percent per annum (pa) to 10.75 % per annum .

Similarly on regular income certificates the profit rate has been increased from 9.48 % p.a to 11.22 % per annum.

The profit rates on Defence schemes has been increased from 10.36 percent p.a to 11.61 percent per annum.

Likewise on Pensioners Benefit Accounts the profit rates have been enhanced from 12.24 percent p.a to 13.44 % per annum.

Similarly on Behbood Saving Certificates, the profit rates have been enhanced from 12.24 % per annum to 13.44 percent per annum.

On Saving accounts, the profit rates have been increased from 6.00 percent per annum to 7.25 percent per annum.

On Short term saving certificates 3-month, the rate of return has been increased from 8.4 percent per annum to 8.85 % per annum.

Similarly on Short term savings certificates 6-month, the rate of return has been enhanced from 8.50 % per annum to 8.95 % per annum and on Short term saving certificates 12-month, the rate of returns have been increased from 8.55 percent per annum to 9.00 percent per annum.

It is pertinent to mention that the press clipping appeared in various sections of media on 01-10-2013 in respect of enhancement in profit rates of National Savings Schemes was incorrect and the release was not issued by the Central Directorate of National Savings (CDNS).

129,213 reconditioned vehicles imported in last five years: MoCTI

In Pakistan a total of 129,213 reconditioned vehicles had been imported in the country during the last five years, Ministry of Commerce and Textile Industry (MoCTI) says.

The foreign exchange equalling to Rs 68,081.803 million had been incurred on the imports of the reconditioned vehicle in the last five years.

As many as 4,585 reconditioned buses, coaches and wagons incurring foreign exchange of Rs 4,915.944 million, 122,352 cars and jeeps incurring foreign exchange of Rs 60,721.73 million, 2,276 Trucks incurring foreign exchange of Rs 2,444.129 million had been imported in the country from July 2008 to June 2013.
As many as 360 buses, coaches and wagons incurring foreign exchange worth Rs 309.555 million, 4,551 cars and jeeps incurring foreign exchange of Rs 2,221.52 million, and 482 Trucks incurring foreign exchange of Rs 377.308 million have been imported in the country in FY 2008-09.
A total of 682 buses, coaches and wagons incurring foreign exchange of Rs 688.815 million 5,630 cars and jeeps valuing foreign exchange equivalent to Rs 3,095.52 million and 538 trucks valuing foreign exchange equaling to Rs 505.977 million have been imported in the country during the financial year 2009-10.
As many as 749 buses coaches and wagons valuing Rs 907.854 million, 10,761 cars and jeeps valuing Rs 5,441.19 million and 461 trucks valuing Rs 583.249 million have been imported in the country during the financial year 2010-11.
Yet other 1,469 buses, coaches and wagons valuing 1,529.36 million, 55,993 cars and jeeps valuing Rs 26,632.70 million and 360 trucks valuing Rs 453.757 million have been imported in the country during financial year 2011AFP
As many as 1,325 buses, coaches and wagons valuing Rs 1,480.36 million, 45,417 cars and jeeps valuing Rs 23,330.80 million and 435 trucks valuing Rs 523.838 million have been imported in the country in FY 2012-13.
The reconditioned vehicles were imported as Personal Baggage or on Transfer of Residence or as Gift.

The SBP has linked minimum deposit rate on PLS saving accounts with the interest rate corridor-floor (repo rate)

The State Bank of Pakistan’s decision to link the minimum profit rate on saving account with repo rate will impact some 25-30 percent deposits and an additional cost of some Rs 10 billion annually to the banking industry, according to an analysis report prepared by Topline Securities.

In a major development, the SBP on Friday has made profit rate on saving account variable so that depositors of savings account, constituting 37 percent of total deposits, could enjoy benefit of rising interest rates.

The SBP has linked minimum deposit rate on PLS saving accounts with the interest rate corridor-floor (Repo rate). Effective from October 1, 2013, banks are now liable to pay at least 50bps below SBP repo rate (which is 7 percent now) which will effectively increase minimum return on saving deposits by 50bps to 6.5 percent.

“In future, whenever policy rate (reverse repo rate) is adjusted, this minimum return on savings deposits will also increase or decrease in that direction, assuming corridor to remain same,” the Topline report said. This also restricts banks margin in rising interest rate environment, it added.

According to the report, the move is another attempt by the SBP to provide adequate compensation to depositors and control declining Pak rupee. However, from a different angle it seems that the SBP is piling pressure on banks to change their current focus from investing in risk-free government papers to high yield advances to jump-start private sector credit off-take.

 

“We estimate that out of the overall deposits in Pakistan of Rs7.2 trillion (US$68bn) around 37 percent (that are Rs2.7 trillion) are saving deposits,” said analyst at Topline Securities.

Within these saving deposits, around 70-80 percent are earning 6 percent minimum return on average balance. However, these ratios vary from bank to bank as large banks have higher proportion of savings deposits at minimum return while this ratio is little lower for smaller banks, he added.

“To calculate additional costs to the banks, we assume that 25-30 percent of their total deposits are expected to be impacted by 50bps increase in minimum deposit rate. This will cost an additional Rs9-11 billion a year to banks assuming deposit structure to remain same and banks will not pass on the impact to their borrowers,” Representative said.

SECP allows companies to issue bonus shares against the redemption reserve

The Securities and Exchange Commission of Pakistan (SECP) has allowed companies to utilize capital redemption reserve to issue fully paid bonus shares. The companies can, however, issue the said bonus shares subsequent to redemption of preference shares under Section 85 of the 1984 Companies Ordinance. A notification to this effect is being issued in this regard.

The aforesaid decision was taken in light of the practical difficulties faced by companies regarding utilization of the redemption reserve. Essentially, Section 85 of the ordinance provides for redemption of preference shares by a company and lays down certain provisions for such redemption.

These provisions include the creation of a redemption reserve fund by transferring from profits, a sum equal to amount applied in redeeming of the preference shares. The amount in respect of such reserve, however, keeps on appearing in the financial statement of the company after complete redemption of preference shares. The subject ordinance is silent about the subsequent treatment of such reserve.

After detailed deliberations by the Enforcement Department, including the study of different international jurisdictions and associated provisions, the SECP has allowed this treatment. The subsequent treatment of the capital redemption reserve fund is expressly defined in the corporate laws of international jurisdictions such as the 1956 Indian Companies Act, the 2005 Companies Act of the UK and the 1991 Companies Ordinance of Hong Kong, but the 1984 Companies Ordinance is silent about such treatment. The new treatment will allow the companies to utilize the reserve and increase the capital base of the companies.

CPI-based monthly inflation down by 0.29pc in September

The country's Consumer Price Index (CPI) based inflation rate for the month of September 2013 decreased by 0.29 percent over the previous month (August 2013).

On year-on-year basis, the inflation during September 2013 increased by 7.39 percent as compared to the same month of last year, said Arif Mehmood Cheema, Director General, Pakistan Bureau of Statistics (PBS), while addressing a press briefing here on Monday.

The Wholesale Price Index (WPI) and Sensitive Prices Index (SPI) in September 2013 increased by 0.71 percent and 0.07 percent when compared to August 2013.

On month-on-month basis, the food items that witnessed increase in the prices during September 2013 over August 2013 included eggs (13.2 percent), fresh vegetables (4.79 percent), potatoes (4.53 percent), bakery and confectionery (2.98 percent), wheat (2.93 percent), wheat flour (2.* percent), readymade food (2.48 percent), wheat products (2.37 percent), milk powder (2.03 percent), and gur (1.69 percent).

The food items that witnessed decrease in the prices during September 2013 over August 2013 included chicken (24.5 percent), tomatoes (23.6 percent), onions (15.63 percent), fresh fruits (15.48 percent), pulse gram (3.2 percent), gram whole (2.29 percent), pulse moong (1.22 percent), gram flour (1.19 percent), beverages (0.8 percent), spices (0.72 percent), sugar (0.33 percent) and vegetable ghee (0.12 percent).

The non-food items that witnessed increase during the month included water supply (3.02 percent), motor fuel (2.93 percent), kerosene oil (2.92 percent), doctor clinic fee (2.52 percent), personal equipments (2.42 percent), firewood whole (1.9 percent) and transport services (1.71 percent).

On year on year basis the food items that witnessed increase in their prices during September, 2013 over same month of last year included tomatoes (29.36 percent), onions (26.13 percent), tea (25.97 percent), wheat (24.31 percent), wheat flour (23.56 percent), gur (23.16 percent), wheat products (17.68 percent), potatoes (14.95 percent), cigarettes (14.58 percent), cereals (12.79 percent), chicken (12.56 percent), beans (12.42 percent) and rice (12.3 percent).

The food items that witnessed decrease during the period under review included pulse gram (31.06 percent), gram flour (26.91 percent), gram whole (22.62 percent), spices (19.19 percent), fresh fruits (7.08 percent), vegetable ghee (5.03 percent), pulse mash (3.44 percent), cooking oil (2.22 percent) and mustard oil (1.71 percent).

The non food items which increased in September 2013 as compared to September 2012 included postal services (25.93 percent), footwear (18.56 percent), woolen readymade garments (18.05 percent), text books (15.92 percent), cotton cloth (15.72 percent), tailoring (15.46 percent), dopatta (14.28 percent), cosmetics (14.16 percent) and cleaning and laundry (13.76 percent).

During the month of September 2013 over September 2012, the trimmed core inflation has been observed as 7.6 percent while it was 10.4 percent during September 2012 over September 2011.

On the other hand, the non-food and non-energy core inflation has been observed as 8.7 percent, while it was 10.4 percent during September 2012 over September 2011.

State Bank of Pakistan (SBP) would keep the Policy Rate unchanged

It is increasingly clear that State Bank of Pakistan (SBP) would keep the Policy Rate unchanged in its most eagerly awaited Monetary Policy Statement to be announced on September 13, 2013. With the revelation of Memorandum on Economic and Financial Policies (MEFP) by Ministry of Finance, the state of predicament over the future course of Monetary Policy has ended, at least in the short run.
The Executive Board of the International Monetary Fund (IMF), on September 04, 2013, approved a 3-year arrangement under the Extended Fund Facility (EFF) for Pakistan in an amount equivalent to USD 6.64bn or 425% of Pakistan’s quota to support the country’s economic reform program to promote inclusive growth. In this regard, MEFP as agreed with IMF provides substantial insight into the course of actions to be pursued by SBP over the program term.
From Policy Rate perspective, following excerpts from MEFP surprised markets and economic pundits which envisages continuation of ‘accommodative monetary policy stance’ in the first year of EFF despite projected rebound in inflation.
“Inflation reduction will not be a primary focus of the first year of the program so as to mitigate the impact of the envisaged fiscal contraction.”
“The negative impact on economic activity will be ameliorated by structural reforms to boost growth and a somewhat more accommodative monetary policy stance early in the program than would normally be required given the inflation outlook.”
“To ease some of fiscal adjustment effects, the program initially envisages a moderate monetary policy, with policy tightening in years two and three, as exchange rate pressure eases, to bring inflation down to the 6-7 percent range. To reduce inflation, monetary accommodation of fiscal deficits will be scaled back considerably and policy rates will be set prudently to ensure positive real interest rates.”
“Monetary policy will likely be tightened in later years to help bring inflation down to the 6-7 percent range by the end of the program period.”
“Beginning in 2014/15, monetary policy will aim to reduce inflation while continuing to rebuild foreign exchange reserves.”

Market reaction 

Approval of three year program by IMF executives and accompanied set of economic policy measures has changed the dynamics of both equity and money market for the time being.

The Equity bourse has reacted positively to the anticipated continuation in the accommodative monetary policy stance. The KSE-100 index has rebounded almost 6.11% since the IMF loan approval.

Lately, bond yields have been soaring as market increasingly believed preemptive stance by SBP amid sharp falling of real returns. Following emergence of MEFP containing outlook on interest rates, 1-year and 3-year PIB yields have eased by 20bps and 17bps respectively. However, the impact on 10-year PIB yield remains muted as the MEFP clearly envisages policy tightening in second and third year of IMF program. Inflation and Monetary Policy Outlook As frequently predicted, inflationary expectations in the economy are gaining momentum mainly on the back of fiscal consolidation and weakening exchange rate. Government officials have also realized that recent trend of suppressed inflationary phase is gradually coming to an end which is depicted by following excerpts from MEFP.
“Headline inflation has recently declined sharply, but it is expected to rebound.”
“Inflation will initially increase, due in part to some weakening of the rupee as reserves are rebuilt.”
“To address declining reserves and a projected rebound in inflation, the SBP will adjust monetary and exchange rate policies.”
The SBP has pursued an accommodative monetary policy to stimulate the economy, in view of sustained weak private investment and declining headline inflation. Over the past two years, the SBP has reduced the policy rate by a cumulative 500bps to 9%.
Proposed series of economic measures to be under-taken over the term of IMF program aims to bring fiscal discipline in the economy at the cost of growth. IMF projects GDP growth of 2.5% during FY14 which is substantially lower than government’s estimation of 4.4%.
To alleviate growth prospects of the economy, we anticipate central bank to adopt accommodative stance on monetary policy front in its decision on September 13, 2013. However, we do not rule out marginal interest rate hikes over the next few policies as real interest rate is anticipated to enter negative zone by the end of current calendar year.

Economic Powerhouse

Chancellor Angela Merkel has been thrust into leading Europe back from the financial brink, but Germany remains reluctant to take on global clout to match its economic prowess.
Beyond crisis efforts to save the euro, Europe's top economy and export powerhouse remains unable or unwilling to pull its weight on major international crises, analysts say.
Its foreign policy is still defined by "caution, pragmatism, a reluctance to strike out new paths", said Constanze Stelzenmueller of the German Marshall Fund of the United States.
Josef Joffe, writing in influential weekly Die Zeit, summed up German engagement abroad in a commentary headlined "Nothing but words", charging that "Germany follows the crises in the world according to the motto 'hurt no-one, least of all oneself'".
Germany, shamed by its World War II aggression, stepped lightly on the world stage for decades after, refusing to send troops abroad and avoiding muscular diplomacy.
It has since joined interventions in Kosovo and Afghanistan, where it has the third-biggest foreign contingent. But it disappointed NATO allies again in 2011 by refusing to back the Libya campaign, abstaining alongside Russia and China.
Merkel's erstwhile political mentor, ex-chancellor Helmut Kohl who oversaw German reunification, at the time complained that Germany lacked "a compass" in foreign policy and was "no longer a reliable force, internally or externally".
Merkel's former defence minister Karl-Theodor zu Guttenberg recently criticised Germany's "culture of reluctance" in foreign and security matters in a joint New York Times editorial.
Leaders across Germany's political spectrum still believed the nation's economic might helped compensate for its failure to pull its weight in NATO and elsewhere, wrote zu Guttenberg, who resigned in 2011 over a plagiarism scandal.
He also argued that "'chequebook diplomacy' by the biggest European Union member is not a viable substitute for contributing military assets to the joint defence of our common values and interests".
The new flare-up in the Syrian crisis -- just weeks before Germany's September 22 elections -- again put Merkel on the spot, as she seeks to reassure allies that Germany is a reliable partner without spooking a history-scarred and mostly anti-war electorate.
Berlin ruled out joining any US-led military strike but stressed the need for a united international response to an alleged chemical attack by the Damascus regime.
Spiegel Online said Merkel "has to dispense her views on an American attack in such a way that they are seen as criticism in Germany and support in the United States.
"It's a method Merkel has, to a certain degree, perfected."
Although Merkel conspicuously refrained from joining the United States and other allies among the G20 in urging a "strong" response on Syria last week, a day later Germany said it had signed on after EU foreign ministers forged a united position that also backed a strong reaction but stopped short of endorsing military action.
Germany has recently contributed to Western military efforts. Some 400 soldiers operate Patriot air defence batteries to protect NATO member Turkey from any conflict spillover from Syria, and Germany also took part in an EU-led training mission in Mali.
But Berlin is also usually quick to point to its legal restrictions in taking part in deployments abroad, which require a parliamentary mandate that can impede its ability to act quickly.
Hans Kundnani, of the European Council on Foreign Relations, said the Bundeswehr armed forces were also limited by their equipment.
"In essence, it's a choice, I think," he told AFP.
"I think in some ways a lot of people have, kind of, given up on Germany on these issues anyway."
While it has stayed on the sidelines of military conflicts, Germany as Europe's dominant economy was thrown into the thick of the eurozone crisis, where its power has sparked an ambiguous response from neighbours.
When Berlin became the go-to capital, it was at once criticised for imposing diktats on Europe and failing to provide leadership.
Merkel's "tough love" of loans in return for painful reforms drew fire especially in Greece, Spain and Portugal.
At home her centre-left election rival Peer Steinbrueck has called for a "Marshall Plan II" so Germany can repay some of the post-World War II solidarity it was shown.
Germany's real foreign policy priority has been to promote commercial and trade interests, said one Western diplomat, who asked not to be named.
"Priority goes to the economy," he said, highlighting Merkel's multiple trips to China and even resource-rich Mongolia.
Germany has widened its arms exports under Merkel, especially to the Gulf countries including Saudi Arabia, where, for decades, Berlin declined to sell heavy weapons because of human rights concerns and fears for Israel's security.
Kundnani also said Germany had stopped being "apologetic" over its security stance and instead feels its own approach is better than its "way too trigger-happy" allies with their higher defence spending.
"There is a growing sense among German officials, I think, that the nuclear deterrent that Britain and France have is a complete waste of money."

However, China became one of the world's top three investors for the first time last year as its foreign investment soared to a new record, the government said Monday.
The Asian giant's overseas direct investment rose 17.6 percent last year from 2011 to $87.8 billion, according to a statement jointly released by the Ministry of Commerce, the National Bureau of Statistics and the State Administration of Foreign Exchange.
Globally, outbound direct investment fell 17 percent, it said, and the contrasting developments made China one of the world's top three investors, said the statement.
Last year's increase represented an acceleration from 8.5 percent in 2011, when the global economic recovery was weak in the face of continuing financial turmoil in Europe and the United States.
Beijing has been encouraging Chinese companies to "go international" as the country's economy steams ahead, with its appetite expanding for both resources and global market share.
The government has set goals of increasing overseas direct investment at an average annual rate of 17 percent through 2015 to $150 billion.
By the end of 2012, China's total outstanding overseas direct investment stood at $531.9 billion, the 13th highest in the world, said the statement.
The figure was small compared with developed countries as "China's outbound direct investment took off rather late", the statement said, noting that US overseas investments were 10 times larger and Britain's more than three times the size.
"The sectors (China) has invested in are broad and comprehensive, although (the value) is rather concentrated in some industries," it said.
The top destination for overseas Chinese investment last year was Hong Kong, while the US rose to second place with $4.05 billion invested, surging 123.5 percent from 2011.
By end of of 2012, Chinese companies employed 1.49 million staff overseas, about half of whom foreign citizens, the report added.

Asian Development Bank and Turkey assures investment in energy sector

ANKARA: Turkish Minister for Energy and Natural Resources Taner in a meeting here with Ambassador of Pakistan Muhammad Haroon Shaukat assured full support of his government for initiating various development and investment projects in the energy sector.  

The meeting took place in the backdrop of the forthcoming Turkey visit of the Prime Minister of Pakistan.

Haroon Shaukat recalled the recent successful “Pakistan Energy Forum” which the Pakistan Embassy organized in Istanbul. Senior officials from Pakistan briefed the leading Turkish energy sector executives about the huge energy market in Pakistan and the incentives offered by Pakistan to investors.

Haroon informed that Pakistan Energy Forum was instrumental in sensitizing the Turkish investors about various projects in hydel, coal, and renewable energy sectors. 

Pakistan and the Asian Development Bank (ADB) on Monday signed an agreement to invest $245 million on improving the country's power distribution systems.

Secretary Economic Affairs Division (EAD) Nargis Sethi and ADB's Country Director for Pakistan Dr. Werner E. Liepach signed the loan agreement.

"The investment will help upgrade Pakistan's aging power distribution infrastructure allowing power generated to reach the consumers," said Werner Leapach, while speaking on the occasion.

"These power projects to be completed by June 2016 will augment the network and improve performance of the power distribution system, which is critical to increase the overall energy efficiency and to bridge the widening energy gap in Pakistan," he added.

The loan is meant for Tranche-3 of the Power Distribution Enhancement Investment Program under the Multi-tranche Financing Facility (MFF).

The MFF was approved in 2008 to invest $810 million ($800 million OCR and $10 million ADF) in priority areas to improve distribution systems and help Pakistan meet its pressing energy needs.

The program aims to rehabilitate, augment and expand power distribution systems and remove system bottlenecks.

"Success of the project depends on effective and timely implementation; therefore, we will continue to focus on timely completion of the power distribution enhancement projects," said Nargis Sethi.

She urged the agencies and distribution companies involved to make sure that the targets are achieved within the implementation time frame.

Senior Project Officer (Energy) at ADB's Pakistan office, Adnan Tareen said the project would add 1,881 megavolt-amperes (MVA) of transformer capacity, 791 kilometers (km) of new transmission lines and up-gradation of 399 km of the existing transmission lines, which would bring stability in the distribution network.

The first tranche of $252 million ($242 million OCR and $10 million ADF) and second tranche of $242 million were released on January 13, 2009 and 28 January 2011, respectively.

Under the existing four MFFs, the ADB is investing $2.9 billion in Pakistan's power sector over a ten year period (2008-2017).

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration. Established in 1966, it is owned by 67 members -- 48 from the region.

Yamaha in Pakistan

Yamaha Motor Co. will build a motorcycle plant in Pakistan with the aim of starting production in 2015, in an attempt to expand its business in an untapped emerging market, company President Hiroyuki Yanagi said Friday in an interview with Kyodo News.
Yamaha will first invest 1.3 billion yen in the Pakistani plant before increasing the amount to a total of 10 billion yen by 2020 to raise its production capacity to 400,000 units a year.
"Motorcycles sold now in Pakistan are mainly Chinese-made, but they are very old," Yanagi said. "We'd like to stimulate the market by introducing new models."
Yamaha has set its initial production target at 40,000 units per year.
The motorcycle market in Pakistan is expected to double to 3 million units in 2020 from the 2013 level of 1.5 million, according to the Japanese manufacturer.
The contract with DYL (Dawood Yamaha Ltd.) has come to an end. DYL will use engine of YAMAHA but will not display logo/monogram of Yamaha anywhere on the motorcycle. They will sell under their own brand names.

 According to ARY News on 11-09-2013:

Karachi : The Board of Investment Chairman, Muhammad Zubair on Tuesday said Japanese company Yamaha would invest $ 150 million to establish a motorcyle manufacturing plant in Karachi. ARY Nerws reported.

This would help boost the foreign direct investment and technology transfer in the country, the Board of Investment (BoI) Chairman said while addressing a press conference here.
 

He said the company had applied in 2009 for establishing its  plant in Pakistan, but it was not given permission by the last regime despite persistent efforts.

He said a delegation of Yamaha approached Federal Finance Minister Muhammad Ishaq Dar and apprised him of the situation.

The minister took up the matter at a meeting of the Economic Coordination Committee (ECC) of the Cabinet, which after detailed deliberations and expediting the process, allowed the company to  set up the plant.

He said the government during the first three months in office, had formulated a motorcycle policy by taking all the stakeholdesr on board and offered incentives to both local and foreign companies for introducing the latest technologies to attract foreign direct investment and development of the local industry.

The BoI Chairman said the local motor cycle manufacturing industry  would have to introduce the modern technology to get benefit from the new policy.

He said that Yamaha would start production by December 2014 as it would invest US$ 150 million during next five years and initially it would produce 25 percent motorcycles here, with 15 percent increase in capacity each year.

Muhammad Zubair said that;

The decision of Yamaha to establish its plant in Pakistan will encourage other famous brand to invest in different sectors of the economy as the country offers more lucrative business opportunities as compared to the regional countries.

He said that FDI was recorded at 23 percent of GDP in 2007 which came down to 13 percent of the GDP showing a decline of US$ 20-24 million during the tenure of last government.

Besides, he said that government was negotiating with the laptop manufacturers to establish their plants in Pakistan to fulfill its domestic requirements as demand and use of the laptops were increasing day by day.

The government is determined for the revival of nation economy by improving the investment climate, attracting FDI and encouraging local investors and famous brands, he added.

He further said that government has taken several steps and announced short medium and long term solution to overcome the energy crisis to promote and develop the local industry.

 

Yamaha to invest $150m for setting up plant in Karachi: BoI Chairman

BoI Chairman Muhammad Zubair yesterday said Japanese company Yamaha would invest $ 150 million to establish a motorcyle manufacturing plant in Karachi.

This would help boost the foreign direct investment and technology transfer in the country, the Board of Investment (BoI) Chairman said while addressing a press conference here. He said the company had applied in 2009 for establishing its plant in Pakistan, but it was not given permission by the last regime despite persistent efforts. He said a delegation of Yamaha approached Federal Finance Minister  Muhammad Ishaq Dar and apprised him of the situation. The minister took up the matter at a meeting of the Economic Coordination Committee (ECC) of the Cabinet, which after detailed deliberations and expediting the process, allowed the company to set up the plant.–APP

 

Board of Investment Chairman Muhammad Zubair on Tuesday announced that the government has granted permission to Yamaha Company to establish motorcycle plant in Karachi and the company would invest $150 million during the next 5 years but would start operations in December 2014.
He, while praising the performance of current regime, said that the last government of Pakistan People’s Party did not issue license to Yamaha that was  applied in 2009 but under the new government, BoI in just 3 months made it possible. This would help boost the foreign direct investment and technology transfer in the country, he said.
He said in a media briefing that Ishaq Dar took up the matter in Economic Coordination Committee of the Cabinet that after detailed deliberations and expediting the process, allowed the company to setup the plant. Yamaha at the initial stages would produce 25 percent motorcycles in Pakistan that will be increased with the passage of time.
Muhammad Zubair said that the government had formulated a motorcycle policy just in 3 months while taking all the stakeholders on board. He said that government has offered incentives to local and foreign companies for introducing latest technologies.
All steps are being taken to attract foreign direct investment and development of local industry. But local industry would have to introduce modern technology to be the beneficiary of new policy formed by the government, he added.
Muhammad Zubair said that decision of Yamaha to establish its plant in Pakistan will encourage other famous brands to invest in different sectors of the economy as the country offers more lucrative business opportunities as compared to the regional countries.
He also said that government was also negotiating with laptop manufacturers to establish their plants in Pakistan. He mentioned that Foreign Direct Investment fell significantly during the tenure of previous government.