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.