Capital Market Reforms Push Boosted by ADB Loan

The Asian Development Bank (ADB), has agreed to lend $400m to support the Government of Pakistan's efforts for initiating second generation reforms to strengthen the capital markets. The financing will be available as a 'program' loan, with releases in two equal tranches triggered by successful completion of agreed actions. ADB for its part believes that the loan will help turn the domestic equity and bond markets into, as ADB puts it, a viable source of long term financing.

The other interesting part about this program loan relates to its aim of strengthening the Securities & Exchange Corporation (SECP), the somewhat beleaguered regulator of all things corporate in Pakistan. Dogged by accusations of either being utterly lame or incurably intrusive and still suffering from the severe credibility jolts in the wake of its alleged role in the March 2005 stock market crash that saw some Rs.780 billion wiped off the Karachi Stock Exchange, the SECP is still struggling to get back on its feet, so much so that it has been reported that SECP may be replaced by another body by the name of the Financial Services Commission of Pakistan (FSCP). The ADB loan hopes to help make the SECP, or FSCP as the case may be, more independent, accountable and transparent. Sounds good, but is this simply throwing money at the problem?

Perhaps the ADB, my former employer, recognizes that it may have bitten off more than it can chew on this program loan, not only because of its scope but also because of the two year time frame. Reforms don't happen overnight, especially in countries where political commitment is shaky, so two years is tight. In all fairness though, money does act as an incentive to reform, and Pakistan's financial sector reforms have been one of the bright points over the last 7-8 years, especially when it comes to that other regulator, the State Bank of Pakistan, so we may still live to see the day when the lending bears fruit. I just hope that the reforms run deeper than a change in name of the SECP (a regulator is a regulator by any other name) and that the money doesn't end up as a convenient jar to dip into for satiating Pakistan's current appetite/designs for huge infrastructure projects. Program loans provide flexbility in use of funds to Governments but the flipside is that unless sharply defined, a program loan intending to foster reforms, can easily end up bankrolling a stream of projects alone. Oh the woes of fungibility of money!

Pakistan Fuels Its Enthusiasm for 'Green' Transport

As reported in the local press, some 7000-8000 vehicles in Pakistan are switching to use of Compressed Natural Gas (CNG) every month, while another 3000 new, factory fitted CNG cars will roll out in coming months. At this rate, the number of CNG powered vehicles will top 1.4 million by the end of the current fiscal year, helping Pakistan zip past Brazil in the number two position, with only Argentina in the lead with over 1.65 million vehicles--and counting--as reported by the International Association of Natural Gas Vehicles (IANGV). These figures are corroborated by the recently released Economic Survey of Pakistan, which notes that the number of CNG vehicles has jumped from 280,000 in 2001 to the current high of nearly 1.4m. The survey also reveals that from a mere 62 filling stations in 1999, there are now over 1400 filling stations in Pakistan. The CNG Station Owners Association claims that investment in the sector exceeds Rs. 46 billion, while the Government places a Rs.60b tag on investment in the sector, leading to creating 60,000 new jobs. With 5,700 more provisional licenses issued by Pakistan's Oil & Gas Regulatory Authority (OGRA), the investment figures and impact on the economy is only headed one way: up.

CNG is widely considered to be a cleaner fuel than petrol and diesel and cheaper to boot. Hence its popularity in developing nations. In fact, the statistics gathered by IANGV make an interesting read: the USA has less than 150,000 CNG vehicles, as compared to 292,000 in Iran and 410,000 in Italy. With all the talk about reducing carbon emissions, hybrid vehicles and environment-friendly public transport, the developed world could take its cue from the developing world. Even in the public transport arena, the South Asian countries in particular are streets ahead, with metropolis like New Delhi--where the Delhi Transport Company runs the world's largest fleet of CNG buses--Karachi, Lahore and Dhaka already promoting and implementing policies that call for a switch to CNG powered public transport systems.

While CNG may not be the perfect green transport solution--in fact it's not 'green' in the strictest sense of the term--till such time as Hydrogen or electric vehicles become commercially available and affordable--and till such time as our developing world urban planning allows us to squeeze in more pedestrian space or cycle tracks, it may be the most practical and environment-friendly option. I am watching with keen interest though, developments in the Philippines, where the electric jeepney project has just hit the road and which may open up new avenues for green public transport systems everywhere.

Pakistan bans advertising of spurious drugs: Are the advertising and media industries ready to swallow the bitter pill?

The Government of Pakistan has finally woken up to its responsibility to enforce a ban on advertising of spurious drugs. The Ministries of Health and Information have teamed up to take action in this respect and have announced their plans to tackle this public menace by involving the representative bodies of the media, including the All Pakistan Newspapers Society (APNS), Council of Pakistan Newspapers Editors (CPNE), Pakistan Broadcasters Association (PBA), Pakistan Advertising Association and Pakistan Electronic Media Regulatory Authority (PEMRA). In early 2006, the Supreme Court of Pakistan had taken suo moto notice of spurious drugs as a public interest issue, but as ever, the government's tardy response to an obvious problem epitomises its apathy towards public health hazards. But while we can all chuckle and indulge (yet again) in Government-bashing, what about the role the media has played--or not played in relation to this public menace? Clearly rubbishing the APNS Code of Ethics, the PTV Code of Advertising Standards and Practice, the PEMRA Ordinance and virtually any related legislation or self-regulatory mechanism that exists, the print and electronic media as well as the advertising agencies have shown scant respect for their responsibility to society. Whether its in the form of advertorials in the electronic media or print ads, advertising of spurious drugs is ubiquitous. As a former advertising man, I am at pain to see that the slide towards irresponsible corporate behaviour has been as swift and steep as it has. However, I do hope that the media and advertising industries in Pakistan can atone for its sins by working with stakeholders, including the government, to raise awareness about spurious drugs and the risks they pose. In a country where majority of the public turns to an unregulated health service market and where functional health literacy is very poor, spurious drugs pose a serious threat. I will soon be working with Marketing Association of Pakistan, Pakistan Advertising Association and the International Advertising Association (Pakistan Chapter) to run an advocacy campaign on Responsible Advertising, but I suspect that the best way to stop the spurious drug makers in their tracks--not publishing/running their ads--may prove too bitter a pill to swallow for a number of my colleagues.

Should CSR be mandatory?

Indonesia has passed a law that makes CSR a legal obligation for almost all companies outside the financial industry. This news follows on from an earlier news item that appeared on the CSR Asia website, reporting the opposition of Indonesian businessmen, including the Chambers of Commerce, on the Government move. These two items represent the classic dilemmas confronting CSR: is it or is it not, the business of government to deal in CSR? Can CSR be enforced or is it?

Indeed, one of the criticisms that the Global Compact has faced relates to its voluntary nature. The argument goes that such voluntary platforms lack teeth and hence are not sustainable. The counter argument is that businesses cannot be forced into doing things that it does not want to. Merit on both sides of the argument, but on balance, the voluntary Global Compact initiative has not done too badly in its brief existence.

While I believe that legislation is not the solution, because enforcement capacity especially in the developing countries is weak and also because the usually adversarial business-government relationship results in even well-intentioned government-led initiatives being condemned to death ab-initio, I do believe governments can play a role in ensuring that CSR is ingrained in business activity. This is best achieved by offering the right incentives--fiscal included--and designing policies that encourage businesses to mainstream CSR policies and practices into their core work; tying-in CSR-related capacity building support to businesses can expedite the process. Passing another set of legislation will likely add to the mountain of legal and quasi-legal commitments and conventions that already exist and which remain unimplemented. Rather than go for the typical, paternalistic option of slipping on the legal glove, governments can get in touch with their feminine side and approach the issue from a gentler, kinder perspective: in tandem with civil society organisations, advocate for more responsible business practices. Easier said than done, but the preferred solution. As I mentioned in an earlier post, the Pakistan Ministry of Commerce has started a project to support export-focused businesses in obtaining SA 8000 certification. This follows from one of my recommendations for promotion of CSR in Pakistan (see GC Strategic Framework) and provides an example of how a Government can aid the business community in moving forward on CSR.

Bottomline: CSR should be mandatory not because the government says so, but because businesses realise the value in pursuing it.

Social Enterpreneurship, Anyone?

One of the more interesting recent debates within the CSR context, is whether CSR has any relevance for the poor. In comparison with the 'Bottom of the Pyramid' approach championed by C.K Pralahad, which focuses on the plight of the poor and proposes that entrepreneurship can be used to extricate large groups from poverty, the whole CSR agenda and the Global Compact, have been criticised as being the rich man's club. Although the Global Compact strives to shed this tag, by encouraging SMEs to join it, the negative perception lingers.

I have for some time been advocating that the CSR and Bottom of Pyramid agenda can and should, converge. That was the central theme of the paper I presented at the launch of the Unleashing Entrepreneurship report in Pakistan in late 2005. At that time, there was a great enthusiasm for the report and its recommendations, which is a highly recommended read by the way, for it is an excellent amalgam of what I term as pragmology--the happy marriage of ideology, practicality and practice. The Pakistan launch of the report was a high-profile affair, with Dr. Ishrat Husain, the-then Governor of Pakistan's central bank presiding and Dr. Hafeez Pasha, Assistant Secretary General of the UN flying in. Dr. Husain's speech was--as always--perceptive and highlighted the potential in promoting entrepreneurship as a poverty reduction instrument. I roped in the Federation of Pakistan Chambers of Commerce and Industry (FPCCI)and the Small & Medium Entreprises Authority (SMEDA), to enter into a tripartite partnership with UNDP to encourage social entrepreneurship, targeting the rural areas. Although we managed to take the first step--publish an Urdu version of the report--other plans, including launching a pilot project for creating an e-marketplace for women, have not yet materialised.

By any standard, social entrepreneurship has not yet taken root in Pakistan. While organisations, notably Kashf Foundation and Acumen Fund, have promoted it, social entrepreneurship continues to hover near the periphery of policy and practice. Often confused with SMEs or not-for-profit endeavours, the very notion of being able to meet social needs through for-profit business models, seems alien to many. Oddly enough, there is a role for the Government in creating enabling environments for social entrepreneurship, but there is little evidence of the Government facilitating entrepreneurship. This is a theme that I intend to explore --and report on through this blog--when I speak at the Asian Forum for CSR conference in September 2007.

However, I am glad to report that young Pakistani entrepreneurs continue to explore opportunities for social entrepreneurship. The latest to join the party is Pani Ghar , which is a for-profit private sector initiative to resolve a public problem-access to clean drinking water in low income urban areas. Led by Ali Salman, whom I've known for nearly a decade now and who has never been short of ideas or initiative, Pani Ghar presents the perfect example of how for-profit business models can help meet the MDGs. Needless to say, the path to set up such ventures is strewn with all manner of obstacles, as Ali has found out.

Watch this space as we explore the trials and travails of existing and would-be social entrepreneurs in Pakistan.

It all began with....

For those not in the know, the Global Compact (GC) is a UN initiative for enhancing the role of business in helping achieve the MDGs, championed by the erstwhile UN Secretary General Kofi Anaan and endorsed--so it appears at this early stage--by his successor. Each country was to establish its own GC network consisting of businesses, civil society and government, to address the 10 GC Principles relating to Human Rights, Labor, Environment and Anti-corruption. See www.unglobalcompact.org for details.

I was approached by UNDP in 2003 to help devise a strategy for Pakistan. As one can imagine, nothing in Pakistan works along neat, linear lines and this was no different. First up, a massive 40 plus National Steering Board that had the Commerce Minister as the Patron in Chief, choc a bloc with civil servants of various ilk and not enough of coporate representation. The strategy I developed, which you can see in the Papers link on this blog, called for an institutional arrangement for the GC Pakistan network, with the corporate world in the driving seat. I'm happy to report that we got everyone to agree on this, with a proposal to establish a GC Pakistan Foundation as a not-for-profit company, an idea which even the GC Head Quarters picked up as they established their own GC Foundation. I'm also happy to share that a number of proposals in that strategic framework have been implemented, including completion of a CSR Study (see Papers section), endorsement of the Pakistan Environmental Reporting Awards and the initiation of a program for SA8000 certification for export firms in Pakistan.

More on what has happened and what hasn't, later.

Papers, Reports, Articles Anyone?

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Welcome

Corporate Pakistan is alive and kicking! Or is it? Is the corporate sector an island unto itself or is it part of the larger community we call Pakistan? Has business played its part in achieving the MDGs or is this whole business of business as a social actor all hogwash? Can Pakistan move beyond corporate philanthropy and enter into the realms of corporate responsibility? Will we move away from using CSR as a Annual Report accessory and start mainstreaming it as a policy tool? Is the corporate sector accountable and how is the regulator handling its responsibilities in this respect?

These are some of the questions to which we need answers. Collective wisdom--in the form of your views, posts, suggestions--is needed, so fire away!