Budget Brief 2013

From the Holy Qur-n
In the Name of ALLAH, the Most Magnificent, the Most Merciful.
1.
2.
3.
4.
5.
6.
7.
8.
Have We not caused your bosom to be wide open for you?

And We removed from you your burden
That had (almost) broken your back,
And We raised high your name.
So, undoubtedly, along with the hardship there is ease.
Undoubtedly, along with the hardship there is ease.
So, when you are free (from collective services), toil hard (in worship),
And towards your Lord turn with eagerness.
Translation : Mufti Taqi Usmani
http://www.quranexplorer.com
Surah: 9 - Surah Ash-Sharh; verses 1 to 8
Our Vision
To be the Preference in Value Optimization for Business
Our Mission
To develop strategic leaders through imparting
quality education and training in Management
Accounting, to continually set and upgrade
professional standards and to conduct research
bringing value-addition to the economy.
Journal is also available on ICMAP Website : www.icmap.com.pk
Institute of
Cost and Management
Accountants of Pakistan
President and Chief Executive

Mr. Zia ul Mustafa, FCMA
Chairman: Executive, Education and Disciplinary Committees
CFO & Business Administrator
Expo Lahore (Pvt) Ltd.
Vice President
ICMAP
Estd. 1951
Mr. Ghulam Mustafa, FCMA

Chairman: Examinations and Technical Support & Practicing
Development Committees
Partner, Tariq Mustafa Ramzan & Company (TMRC)
Cost & Management Accountants
Honorary Secretary
Estd. 1951
ICMAP
National Council
2012-14
Mr. Abdul Wasey Khan, FCMA

Chairman: Students Affairs Committee
Manager - Internal Audit
Pakistan Telecommunication Company Ltd.
Honorary Treasurer
Mr. Shahzad Ahmad Awan, FCMA
Chairman: Research and Publications Committee
Chief Officer (Billing & Recovery)
Sui Northern Gas Pipelines Limited (SNGPL)
Members
Mr. Mohammad Ashraf Bawany, FCMA
Chairman: Quality Assurance and Ethics Committee
Deputy Managing Director
Linde Pakistan Ltd.
Mr. Sajjad Ahmad, FCMA

Chairman: Audit and Members Welfare & Coordination Committees
General Manager (Cost Accounts)
Pakistan Telecommunication Company Ltd.
Journal & Publications Committee

Chairman/Chief Editor
Mr. Jawed Mansha, FCMA

Chairman: Corporate Relations Committee
Mr. Shahzad Ahmad Awan, FCMA
Assistant Secretary & DGM Corporate Affairs

Pakistan International Airlines Corporation
Members
Mr. Abdul Khalil, FCMA

Chairman: Continuing Professional Development (CPD)
and Seminars/Conferences Committee
Mr. Mohammad Hanif, FCMA

Mr. Nazir Ahmed Shaheen, FCMA
Mr. Mohammad Iqbal Ghori, FCMA
Mr. Mohammed Amir Zaheer, FCMA
Mr. Ather Azim Khan, FCMA
Mr. Masood ul Hassan, FCMA
Mr. Aamer Ijaz Khan, ACMA
Mr. Saqib Masood, ACMA
Mr. Amjad Iqbal, ACMA
Mr. Furqan Mehmood, ACMA
Secretary
Email: ed@icmap.com.pk
URL: www.icmap.com.pk
General Manager Finance

Askari Aviation Pvt. Ltd. / Army Welfare Trust (AWT)
Members - Government Nominees

Mr. Mahmood Akhtar
Chief Cost Accounts Officer
Finance Division Ministry of Finance
Mr. Tahir Mahmood, FCMA

Commissioner (Co. Law Division & IT Dep. )
Securities and Exchange Commission of Pakistan
Mr. Muhammad Abdul Basir

Chairman: Public Sector Coordination Committee
Deputy Auditor General (APR&SD)

C/o Auditor General of Pakistan
Mr. Muhammad Haroon Rasheed

Executive Director, FRM
State Bank of Pakistan
Volume : 21.3 l May-June, 2012
Official Journal of Institute of Cost and Management Accountants of Pakistan

The only Professional Journal in Pakistan with a circulation of over 10,500 copies per issue
Inside
4
From the Desk of President and Chief Executive
CMA Canada and ICMA Pakistan to continue to collaborate

in advancing management accounting globally.
An Exclusive Interview
Ms. Joy Thomas, President and CEO

Certified Management Accountants (CMA) Canada
From the Desk of Chief Editor
Focus Section
Meritorious Articles
36
9
33
36
13
Pakistans Budget 2012-13

Brief Comments
By Tariq Mustafa Ramzan & Co.
Articles Section
Federal Budget 2012-13

A Critical Review
38
Enterprises Governance:
Best Practices in SAFA Region
By Prof. Dr. Khawaja Amjad Saeed, FCMA, FCA
36
44
Budget-Making Process: How to Improve It?

By Dr Muhammad Yaqub
Former Governor, State Bank of Pakistan
46
36
Islam and Accounting

By Muhammad Akhtar and Najeeb Zada
By Wasful Hassan Siddiqi, FCMA
36
19
Will Budget Address

People's Requirements?
By Dr. Zafar Altaf
36
21
23
36
Wheels of Change
By Chris Fuller and Martin Fahy
By Anjum Ibrahim
Update
Finance Bill 2012: Attempting to

Cripple Tax Justice System
51
Economic Indicators
52
Global Economic News
53
IFAC, IASB, IFRS & SECP News
By Huzaima Bukhari and Dr Ikramul Haq
26
Economic Survey 2011-12 Highlights
Disclaimer: Views expressed herein are authors own thoughts/viewpoint and do not represent ICMAP policy unless so stated.
Publication of paid advertising and new product/service information does not constitute an endorsement by the ICMAP.
Our Next Issue
Stabilizing Pakistan: Boosting its Private Sector

Research & Publications Committee would welcome articles on the above-mentioned topic before July 31, 2012 for Journals forthcoming issue.
Message
From the Desk of
President and Chief Executive

This was the first time in Pakistans history that a democratic government presented its fifth national budget during its
tenure. The federal budget 2012-13 is balanced keeping in view the ongoing situation and international aid stoppage.
Some steps that have drawn applause from different segments of the society are concrete arrangements for provision
of internship jobs to 100,000 youths and the raising of the ceiling of taxable income. Salaried persons have heaved a
sigh of relief after having come to know that they would be required to pay income tax only on income above Rs.
400,000 ceiling. This is quite a rational decision. Yet bigger decision is the raise in salaries of government servants who
belong to the category of people badly affected by inflation.
In the budget, there is a provision for honouring the honest, regular tax payers. And that was direly needed since the
regular tax payers were unhappy over equal treatment at par with tax evaders. The budget has now provided for a
Taxpayer Honour Card that would be given to dutiful tax payers who would be facilitated at different government
counters like Nadra, Passport office, Immigration and other such places.
In the agriculture sector, besides other beneficial-for-farmers' schemes, the government has now allocated Rs. 2
billion for Benazir tractor scheme.
And with the idea of reviving the sick industrial units in public sector, the government has allocated Rs. 209 billion as
sick units' subsidies whereas education too has got priority more than ever before as now the allocation is going to be
Rs. 47.87 billion.
This takes us to one conclusion that where there is popular will, there is relief. However, more funds will have to be
allocated to overcome the energy crisis in the country.
In the end, I wish all the readers a happy and prosperous fiscal year 2012-13.
Zia-ul-Mustafa,
FCMA
Management Accountant, May-June, 2012
Message
From the Desk of
Chief Editor
On behalf of the Research & Publications (R & P) Committee I am pleased to present the May-June Issue of the Management
Accountant Journal, which is specially focused on the Pakistan's Budget 2012-13, presented on 1st June 2012 by the Federal
Minister for Finance, Revenue, Economic Affairs, Statistics & Planning and Development.
At the very outset, I would like to convey my deep gratitude to Ms. Joy Thomas, President and CEO of Certified Management
Accountants (CMA), Canada for giving her exclusive interview for this issue of Journal. She has highlighted the dynamic role
played by CMA Canada over the last three decades in promoting the profession of management accounting globally. Giving a
message to the accounting community in Pakistan, she has called for individual and collective endeavour to uphold the highest
standards of the profession.
In the Focus Section, we have included five analytical write-ups on Federal Budget 2012-13, which provides brief
commentary, analytical and critical reviews on the budget and the Finance Bill 2012. The highlights of the Economic Survey
2011-12 have also been presented in this Section, which would give our readers a detailed overview of the economic
performance during last year in the areas of agriculture, manufacturing, trade, investment, capital markets, energy,
environment, social sectors etc.
A meritorious article by Chris Fuller and Martin Fahy titled Wheels of Change has been selected for this Issue, which
focuses on 'Finance and Accounting Outsourcing (FAO). They observe that market leaders are moving gradually toward a new
paradigm of FAO i.e. knowledge process outsourcing. The Articles' section also includes articles on Enterprises Governance
with particular reference to best practices in SAFA region and Islam and Accounting.
Dr. Muhammad Yaqub, former Governor State Bank of Pakistan has, in his article on Budget making process How to
improve it? has advised the government for taking stringent measures to overhaul the process of preparing and
implementing the budget to avoid hyperinflation and external debt default. I would like to thanks to our members and
professional writers who contributed their views and articles in our journal.
The Update section covers some useful economic indicators, global economic news and updates from international accounting
bodies and national regulatory organizations.
I hope that the readers will find this issue informative and a reference document on Budget 2012-13. The Research &
Publications Committee is especially thankful to the efforts of Mr. Mohammad Iqbal Ghori, FCMA, Member, R & P Committee
and Mrs. Ghazala Yunus, Editor, Management Accountant Journal whose contributions cannot be ignored. Our next topic of
the journal would primarily focus on Stabilizing Pakistan: Boosting its Private Sector. I will also appreciate feedback
and suggestions from the member's community to further improve R & P in all aspects.
Shahzad Ahmad Awan, FCMA
INTERVIEW SECTION
An exclusive interview with
Ms. Joy Thomas
President and CEO

Certified Management
Accountants (CMA) Canada
Please tell us something about yourself.
As President and CEO of CMA Canada I report directly to the
National board of directors. I provide strategic leadership,
direct and execute all activities of CMA Canada and manage
the organization on behalf of the Board. I have worked within
the CMA organization for several years initially as a provincial
CEO in two provinces before taking on my current position in
2009. I hold an MBA and a Chartered Director Designation
and was named a Fellow of the Society of Management
Accountants of Canada in 2005. I am very active outside of
CMA, and serve on several Boards, advisory committees
and task forces. I am married with two grown children and
one grandson.
In what ways is the Management Accountancy Profession

different today from two decades ago?
The field of management accounting has broadened
considerably in response to the increasing complexities of
the world we live in1. For example, there has been a
heightened awareness of the need for more sophisticated
management control frameworks, risk management and
governance in light of accounting scandals and the collapse
of the financial sector. As globally we have become more
socially responsible, environmental sustainability and
corporate responsibility have become embedded in our
organizational planning and reporting structures. The rate of
change and increasing uncertainty has prompted the need
for more flexible budgeting and scenario planning.
Organizational survival necessitates more and better internal
performance measures and cost management coupled with
more sophisticated performance management systems. In
short, the field of management accounting has grown
exponentially in the past twenty years and as a discipline will
continue to contribute deeply to the health and wealth of
organizations.
Do you think that investors' interests can be served

better by new-age costing-related disclosures in annual
reports?
Investors require information to assist them in understanding
the organization's opportunities and risks. Meaningful
disclosures in annual reports that provide increased
transparency on the operational and financial performance of
the organization should be encouraged. Management
accountants are leaders in providing both financial and nonfinancial information including sustainability indicators. In
this regard CMA Canada through its involvement in the
Accounting Bodies Network (ABN) supports the work of
International Integrated Reporting Committee (IIRC).
Some time ago the word Accountant had become a

shady word. What were the reasons? Has image of
Accountant improved?
I do not support the notion that Accountant had become
shady word. While it is true the accounting profession was
broadly tarnished by various accounting scandals, like any
profession there will always be members who do not conduct
themselves in accordance with the stringent requirements of
their code of ethics. And, as a profession we learn from those
experiences and we work within the regulatory environment
and through oversight structures to adopt new rules such as
1.
We can look back to the first shift in the management accounting profession with the Johnson and Kaplan's seminal book Relevance Lost in 1987. CMA Canada
took the book's message to heart, which was that management accounting had become subservient to financial accounting by only providing information to
support financial reporting such as the inventory valuation. As a result CMA Canada began to re-invent the profession first through the development of a new
certification process that integrated accounting with strategy and general management. In the 1990's we began to expand the scope of our research agenda
developing practical guidance for our members on the emerging topics at that time such as Activity Based Costing, Benchmarking, the Balanced Scorecard, and
Target Costing.
INTERVIEW SECTION
those for independence and increased transparency. The
mandate of the accounting profession remains clear and that
is to protect the public through rigorous entry standards, on
going professional development and a formal discipline
regime. Throughout the last decade, in spite of the failures of
some, accountants have continued to play a prominent role in
the success of organizations throughout the world.
In today's world, the profession of conventional

accounting and auditing has taken a back seat and
accountants increasingly contribute towards the
management of scarce resources like funds, land and
apply strategic decisions. This has opened up further
scope and tremendous opportunities for management
accountants? Do you endorse this viewpoint?
For the past three decades CMA Canada has been a
leader in ensuring that the voice of management
accounting is heard and recognized as a key
contributor to the diverse profession of
accounting. At the same time conventional
accounting, auditing and financial
reporting remain vitally important.
Financial reporting and auditing however
can be categorized as more externally
focused compared to management
accounting which might be viewed as
more internally and future focused. The
internal focus is also changing and we see
certain performance metrics becoming
increasingly prevalent in annual reports and
other regulatory disclosures. The field of
management accounting has broadened
considerably in response to the increased complexities
of our environment. Certainly there are tremendous growth
opportunities for management accountants to add value to
their organizations and to society as a whole whether it is in
the management of scare resources or in the development of
expansion strategies.
Globalization, free market economy and new

technological advances are influencing the accounting
profession immensely? What should be the role of
Management Accounting Professional Institutes in this
scenario?
In 2010, CMA Canada developed an emerging issue paper
2020 Vision: Forecasting the Future Role of the
Management Accountant, which identified the many ways in
which management accountants must continually adapt in a
volatile and global marketplace. The organizations that
certify management accountants have a critical role to play in
supporting their members from entry into the profession and

throughout their careers as they navigate through such an
uncertain landscape. This entails identifying and training on
the right set of competencies and offering relevant products
and services to members. Most importantly the
organizations must fulfill their overarching mandate to protect
the public interest by adopting rigorous standards for
membership and disciplinary regimes where standards are
not adhered to.
The role of management accountants in business has

changed and grown in recent years. What are the
potential areas where you think the management
accountants should step in to utilize their professional
skills and competencies?
In Canada, management accounting has broad appeal in its
diversity while remaining solidly grounded in the CMA
three pillars of strategy, management and
accounting. Management accountants should
always step in with their professional skills
and competencies in areas such as setting
the strategies that will lead to
organizational success, addressing
uncertainties through scenario planning,
implementing risk management and
governance structures, employing
evidence-based management
techniques that lead to effective decision
making and creating performance
management systems that support optimal
business strategies.
What steps CMA Canada has taken to promote

the profession in your Country and globally?
CMA Canada is a strong advocate for advancing the field of
management accounting and this is supported by the
ongoing work of its Research Foundation. CMA Canada also
has a sponsorship program for doctoral candidates in
management accounting and accredits leading university
programs that meet certain criteria including coverage of the
entry requirements to the CMA Program. In addition, CMA
Canada is an active supporter of the Canadian Academic
Accounting Association and sponsors excellence in the
public sector through its annual Comptrollership Awards.
Globally, CMA Canada maintains mutual recognition with
management accounting bodies in the UK and Australia and
is a member of the International Federation of Accountants
(IFAC) and actively contributes to promoting the mandate of
IFAC through staff participation in various committees, most
notably the Professional Accountants in Business (PAIB)
Committee.
INTERVIEW SECTION
So where to for a Management from here?

As mentioned earlier, CMA Canada developed and produced
a publication entitled 2020 Vision: Forecasting the Future
Role of the Management Accountant, which considers the
profession out to the year 2020. In this paper we outline three
drivers of change impacting the profession including: (i)
economic, environmental and geographical volatility; (ii)
technological advancements and breakthroughs; and (iii)
demographic shifts. These drivers result in three
organizational challenges with a need to: (i) more frequent
and effective identification and response to threats,
challenges and opportunities in an innovative and agile
manner; (ii) harvest actionable information from a growing
deluge of data, and delivering this information to decision
makers; and (iii) improve the valuation, management and
deployment of intangible assets. The three implications for
the management accounting profession due to the
challenges faced by organizations are a: (i) growing
leadership role in ongoing enterprise risk management
efforts; (ii) central role in developing more forward-looking,
accurate and innovative financial and performance
management capabilities; and (iii) growing role in bringing
greater management accounting rigor to the management of
human relations and structural capital.
Management accountants should continue to test the
boundaries of their knowledge, embrace organizational and
societal challenges and adapt accordingly.
Do you see a need for a representative body of

Management Accountancy Institutions of the world?
There may be a need for a representative body as a global
approach to issues in the context of our global environment is
always preferred. The opportunity to learn together and to
have a stronger united voice in dealing with the complexities
of the day and in the future is compelling. In some regards,
this is what the IFAC PAIB committee sets out to accomplish.
Keeping in view the role CMA Canada played in inception

of ICMA Pakistan, what role you expect both the
Institute's to play in future for the benefit of their
members and students?
CMA Canada and ICMA Pakistan should continue to
collaborate in advancing management accounting globally.
How your Institute is coping with the challenge of other

professional qualifications in Canada?
The CMA designation remains a very strong brand on its own
in Canada. However the three accounting bodies in Canada,
which together represent over 170,000 professional
accountants agreed that a merged profession would meet

several important objectives: to best serve the public interest;
to enhance the value of our collective members designation;
to contribute to the sustainability and prosperity of the
Canadian accounting profession; and govern the profession
in the most efficient and effective manner. In January 2012
CMA Canada, together with the CICA and CGA Canada laid
out the case for change in the 'Unification Framework'. While
CGA Canada has since decided not to continue with the
discussions on merging the profession, CMA Canada and
CICA are continuing the dialogue.
The underlying premise of unifying the profession in Canada
would be to create a world-class designation, CPA
(Chartered Professional Accountant), that would be
recognized as the pre-eminent, internationally recognized
Canadian accounting designation and business credential.
The designation would support both management
accounting and financial accounting and reporting.
CMA Canada continues to believe strongly that unification
will benefit Canadians, businesses, capital markets and
accounting professionals. Uniting the Canadian accounting
organizations through the creation of the Canadian CPA will
best protect the public by creating a common set of high
ethical and practice standards and strengthen the
profession's influence and value both at home and
internationally.
Anything you would like to share with our readers.

The unification of the accounting profession in Canada could
lead to similar ground breaking in other areas of the world.
We encourage your readers to monitor our progress in this
very significant undertaking. While there have been several
attempts historically to unify the accounting profession in
Canada, we have never come closer to where we are today.
There is much to be gained by combining resources to create
an organization that can promote all accounting disciplines
equally. The new CPA education program maintains a strong
focus in management accounting. Stay tuned.
What message you would like to give to the accounting

community in Pakistan?
Domestically and globally, as professional accountants in
business, we all have the individual and collective
responsibility to uphold the highest standards of the
profession and to share our knowledge where ever it is
neededn
The interview ended with a vote of thanks to Ms. Joy Thomas,
President and CEO; Certified Management Accountants
(CMA) Canada, a distinguished professional who spared her
valuable time and gave her candid views. Editor
FOCUS SECTION
Pakistans Budget 2012-13

Brief Comments
By Tariq Mustafa Ramzan & Co. (TMRC)

Economic Review
The federal budget 2012-13 was presented by the party in rule on
the eve of last year of its 5-year tenure, in a situation when the fiscal
health of the economy is not at satisfactory level to support such a
budget. The Law & Order situation in the country is still not
appreciable, which makes the sustainability and survival for
business community difficult. Domestically, economy was struck by
heavy rain and floods in Sindh and Baluchistan costing $ 3.7 billion.
Current account balance was affected due to sharp increase in oil
prices and import of 1.2 metric ton of fertilizer.
Energy plays a vital role in the economic development of any
country. It is considered as the mother of all the crises prevailing in
current scenario in developing countries like Pakistan. Energy
crises crammed up all the wheels of the economy. Industrialists and
other businesses are testing their destiny by shifting their
businesses units outside Pakistan in countries like Bangladesh,
United Arab Emirates, Canada and other countries, who offer them
attractive facilities and guaranteed power solutions.
The GDP growth for 2011-12 was projected at 4.2 percent on the
back of 3.4 percent growth in Agriculture, 2 percent growth in LSM
and 5 percent in Services sectors. However, the torrentialr rains in
Sindh province during August 2011 compelled the government to
revise its GDP growth target to 3.6 percent from 4.2 percent on the
basis of 2.5 percent growth in Agriculture, 1.5 percent in LSM, and
4.4 percent growth in services sector. The revised growth targets
have been marginally exceeded. The economy has shown
resilience. GDP growth for 2011-12 has been estimated 3.7 percent
based on nine month data as compared to 3.0 percent (revised) in
the previous fiscal year 2011
The agricultural sector recorded a growth of 3.1% as compared to
2.4% of previous year. The agricultural sector got damaged by the
heavy rains in triggered flood in the Sindh and Baluchistan
Provinces. According to the Damage & Needs Assessment (DNA)
report of Asian Development Bank (ADB) and World Bank, about
9.6 million people were affected in the provinces of Sindh &
Baluchistan as a result of these rains.
Commodity producing sector has comparatively performed better
in the outgoing fiscal year by projecting a growth rate 3.3 % against
1.5% during last year.
Per capita real income grew at 2.3 percent in 2011 -12 as compared
to 1.3 percent growth last year. In dollar terms, it increased from $
1258 in 2010-11 to $ 1372 in 2011-12
Real Investment has declined from 13.1 percent of GDP last year to
12.5 percent of GDP in 2011-12; fixed investment has declined to
10.9 percent of GDP in 2011-12 from 11.5 percent of GDP last year.
Similarly Private investment also contracted to 7.9 percent of GDP
in 2011-12 as compared to 8.6 percent of GDP last year. Public
investment as a percent of GDP is 3.0 percent in 2011-12 against
the 2.9 percent last year. National savings are 10.7 percent of GDP
in 2011-12 as compared to 13.2 percent last year.
Price stability remained the priority of the government. Inflation has
declined for the third consecutive year. CPI was 10.8 percent during
FOCUS SECTION
July-April, 2012 from a high of 25 percent in October 2008. It was in

single digit in December 2012. This has been achieved despite
sharp increase in international oil prices, effect of upward
adjustment in the administered prices of electricity and gas, supply
disruptions due to devastating floods of 2010 and heavy rains of
2011 and heavy bank borrowings. Food and non-food inflation
averaged 11.1 percent and 10.7 percent respectively against 18.8
percent and 10.8 percent in the same period of last year.
The transport and communication sector is a major contributor to
government revenues and important factor which helps in driving
the economy effectively but in current scenario due to hike in fuel
prices and lack of good infrastructure like roads, rails & airways, the
access to market remained very difficult which adversely affected
the reachability of domestically manufactured goods to foreign
markets. However, the strong performance of services sector
which grew at 4.0 percent, kept the overall growth in a reasonable
range. Although much below its potential and targets, the
performance signifies the enormous elasticity in the economy in
view of continuous problems over a decade. Thus we foresee a
great potential of recovery with tight fiscal controls, political stability
and improved governance.
The large Scale manufacturing (LSM) grew at 1.78% as compared

to the target of 2.0 % and 1.15% of last year.
The government is committed to a sustained poverty reduction
strategy in their election campaign in 2008 but the worst thing is that
Pakistan has to be included in those developing countries where
the poverty line is below the standards. We witnessed a decline in
population welfare growth rate in recent four years.
Pakistan continued to face challenges to achieve environmentally
sound development. This has become increasingly difficult to
achieve in the backdrop of back to back flooding and rains across
the country as well as other exogenous and endogenous factors.
The quality of the natural environment is not only an extremely
important issue from the point of view of individual survival but it has
also emerged as one of the principal human security issues in
Pakistan. The environmental challenges include climate change
impacts, loss of biological diversity, deforestation and degradation
of Air and Water quality.
Going forward, we hope the government should keep into serious
notice policy of macroeconomic stability, growth and creating jobs,
mobilizing domestic resources, incentivizing the private sector, and
strengthening the social safety nets.
BUDGET AT A GLANCE
Comparative Analysis with Previous Budget
Figures in Rs Millions
Resources
Revenue Receipts (NET)
Tax Revenue Receipts
Non-Tax Revenue Receipts
Capital Receipts
External Receipts
Public Accounts Receipts
Gross Federal Resources
Less: Provincial share in federal taxes
Net Federal Resources
Cash balance built up by provinces
Credit from banking sector
Total Resources
(ii) Expenditures
Current Expenditure
Development Expenditures (PSDP)
Other Development Expenditures
Estd. Operational shortfall in expenditure
Total Expenditures
Budget
Estimates
2011-12
Revised
Estimates
2011-12
Budget
Estimates
2012-13
%age
Increase
2,074,182
657,968
299,977
413,929
164,232
3,610,288
1,203,321
2,406,967
124,882
303,524
2,835,373
2,024,568
512,185
441,591
226,160
108,030
3,312,534
1,208,616
2,103,918
90,744
939,196
3,133,858
2,503,575
730,332
353,496
386,879
187,593
4,161,875
1,458,925
2,702,950
79,548
483,809
3,266,307
--17.84
(6.53)
14.22
15.28
21.24
12.30
(36.30)
59.40
15.20
2,383,416
354,872
97,085
-2,835,373
2,656,037
363,333
114,488
-3,133,858
2,675,248
446,539
144,520
-3,266,307
12.24
25.83
48.86
-15.20
(i)
10
FOCUS SECTION
Budget Highlights
World Customs Organizations (WCO) has made 5-yearly

changes in HS nomenclature for commodity classification
and has issued HS-2012 version. Pakistan Customs Tariff
classification structure is being aligned with the WCO
nomenclature.
Introduction of 12 Digit Subheadings in Customs Tariff to

fulfill the requirement of full automation of import
processing through the Customs computerized system
(WeBOC) and statistical purposes.
The Ministry of Textile Industry has recommended new

tariff headings for facilitation of the textile industry and to
update national tariff in accordance with international best
practices. These headings are accordingly being created
in Tariff.
In order to encourage import of hybrid electric vehicles

(HEVs) at affordable prices the rate of duty and taxes
presently applicable to HEVs and their batteries are being
reduced by 25%.
In order to simplify the tariff the composite rate of duty on

cinematographic film is being change to a simple specific
rate of Rs. 5 per meter.
SALES TAX AND FEDERAL EXCISE

o
Reducing higher sales tax rates of sales tax @ 22% and

19.5% to standard rate of 16%.
Reducing federal excise duty on cement from Rs. 500/

PMT to 400/- PMT.
Phasing out of federal excise duty regime by reducing the

number of goods liable to federal excise duty.
Exemption of federal excise duty on live stock insurance

and services of Assets Management Companies.
Grant of exemption to waste paper to enhance collection

as well as restrict inadmissible input tax adjustment in this
sector.
Revision in the upward limit of price tiers of cigarettes to

enhance the Federal Excise Duty on locally produced
Cigarettes.
Increase in the rate of sales tax on steel sector from Rs. 6/KWH to Rs. 8/- KWH pay tax on fixed tax regime.
Substitution of zero-rating with exemption on supplies

against international tenders.
Substitution of zero-rating with exemption on certain items

such as remeltable scrap and sprinkler.
Correction of classification and description of some items

is being made in the Tariff.
Shifting of cotton seed oil from exemption to zero-rating

regime.
Quasi judicial and administrative functions are being

separated at the Collectorates' level.
Enabling provision for introduction of the facility of eauction.
Incorporation of an explicit provision for condoning delays

in time-limits.
Provision of appeal in cases where the application for

refund has been declared.
o
o
o
Revise Federal Excise Duty on foreign travel and

simplification of collection procedure of FED on air travel
from Pakistan by excluding the charge of FED on air travel
to Pakistan.
CUSTOMS ACT
o
The maximum general tariff slab has been reduced from

35% to 30%. This will reduce the number of duty slabs from
8 to 7.
Definition of smuggling has been made more

comprehensive by including en route pilferage of transit
goods.
Customs duty on raw materials and components for

printing and stationery sector has been reduced.
Application of record keeping provisions on transport

operators (for transit goods) and on tracking companies.
Customs duty on 88 pharmaceutical raw materials and

other input goods has been further reduced from 10% to
5%.
Declaring attempts to make un-authorized access/ use or

interfere with the Customs computerized system an
offence.
Customs duty on self-copy papers and self-adhesive

papers has been reduced from 25% and 20% to 10%.
Three major Notifications (SRO 565, 567 and 575) provide

exemptions and concessions on import of plant and
machinery for setting up of industries and import of raw
materials for a large number of domestic industries. These
are being cleansed of anomalies and are being simplified.
Introduction of the punishment of imprisonment for a term

not exceeding five years, where rules or conditions of
transit are contravened.
Establishment of formations for better enforcement.
Removal of the punishment of whipping, in cases of

smuggling, possession or acquiring of smuggled goods
and armed intimidation of persons engaged in the
discharge of duty under the Customs Act.
In order to promote indigenous industry, some industrial

raw materials are being included in the concessionary
regime.
Customs duty on scrap of rubber / shredded tyres has been
reduced from 20% to 10% to encourage its use as a
substitute fuel for the cement industry.
INCOME TAX
o
The federal budget 2012-13 seeks to enhance basic

exemption limit from Rs.350,000/- to Rs.400,000/-.
The normal progressive slab rates are being introduced for
11
FOCUS SECTION
the Association of Persons (AOPs). The existing slabs are
proposed to be reduced to 5 from 6. Basic exemption upto
the income of Rs. 400,000 is also to be provided.
o
To recognize and incentivize compliant taxpayers, it is

proposed to introduce a Taxpayer Honour Card scheme for
all taxpayers who have filed tax returns and paid due taxes
for the last 5 fiscal years.
The holders of the card will be entitled to various privileges

and benefits. Minimum tax for retailers u/s 113A is
proposed to be reduced to 0.5% from 1% on gross
turnover.
Cash withdrawal exceeding Rs.25000 in a day is subject to

advance tax @ 0.2 %. The limit is being enhanced to
50,000/-
Capital Gain Tax (CGT) @ 10% and 5% is being levied on

the sale of property if it is disposed off within two years of its
acquisition.
The changes made through the Finance (Amendment)

Ordinance, 2012 relating to capital gain tax on securities
and shares are being incorporated into the statute through
the Finance Bill 2012.
Previously, stock exchanges were deducting taxes in

respect of margin financing (Badla). Currently the same
function is being performed by NCCPL. It is proposed to
make corresponding change in the Income Tax Ordinance,
2001 whereby NCCPL shall collect and deposit the tax on
behalf of the taxpayers.
To promote investment in securities and insurance sectors,

the limit of investment eligible for tax credit is being
enhanced from 15% to 20% of the taxable income.
The existing limit of investment of Rs. 500,000 in securities

or insurance premium is also being increased to Rs.
1,000,000/- . The retention period of securities is also
being reduced from three to two years.
12
To provide relief to the employees availing small amounts

of loans from their employer, the loan upto Rs. 500,000/- is
proposed to be exempt from income tax whereas the
benchmark interest rate for loans above this limit shall be
fixed at 10% instead of the progressively increasing
benchmark rate which has reached 13%.
To encourage a competitive market for retirement
schemes, it is proposed that accumulated balance of
provident fund transferred to approved pension fund
should be separately marked by the Pension Fund
Manager and any withdrawal representing this marked
balance should be exempt from tax and be treated as if that
is withdrawn from provident fund and hence tax free.
Income of retirement/pension funds is exempt from tax if
90% of the profit is distributed as dividend. Any payment
from a provident fund is exempt from tax in the hands of
recipient. Existing practice of obtaining yearly exemption
certificate is cumbersome and time consuming for the
entities and refunds for any tax suffered against the
exempt income is proposed to be changed and the said

funds be granted exemption from deduction of withholding
tax.
o
It is proposed that profit on intra-group debt be exempted

from withholding tax. However, the income from profit on
debt will remain taxable.
To provide relief to the pensioners, amounts received as

monthly installment from an income payment plan invested
for a period of ten years out of the accumulated balances
into a pension fund, annuity or individual pension accounts
as specified in the Voluntary Pension System Rules, 2005
is proposed to be exempt from tax.
The income of the Workers Profit Participation Fund

(WPPF) is exempt under the Companies Profit (Workers
Participation) Act 1968. However Income Tax Ordinance
does not recognize this exemption. In order to streamline
and to remove the lacuna, it is proposed that the exemption
to WPPF be granted in the Income Tax Ordinance 2001.
Person making a payment of insurance premium or reinsurance premium to a non-resident person is required to
deduct tax from the gross amount paid. It is proposed to
exempt withholding tax from payment to P.E. of a Nonresident.
It has been observed that the banks invest in capital market

and in return dividend received by the banks is taxed @
10%. In order to eliminate the tax arbitrage it is proposed
that dividend received by banks from money market funds
and income funds are to be taxed progressively over a
period of two years. For tax year 2013 @ 25% and for tax
year 2014 and onwards @ 35%.
In order to incentivize the taxpayers opting out of PTR a

lower rate of tax is being offered to commercial importers,
exporters and suppliers if they opt out of the PTR.
To ensure documentation of the economy and to bring

traders/distributors on tax roll, it is proposed that the
manufacturers shall be made withholding agents to collect
1% tax against the sales made to traders & distributors.
However, the tax so collected shall be adjustable against
their income.
The tax rates for passengers as well as goods transport

vehicles are proposed to be increased.
The value of vehicles is proposed to be enhanced from Rs

1.5 (m) to Rs 2.5 (m) for the purpose of depreciation
allowance.
The rate of initial depreciation on new buildings is 50%

which results in converting the accounting income to tax
loss. The rate of initial depreciation is being reduced to
25%.
The exemption granted to profit and gains to the Venture

Capital Company and Venture Capital Fund till 2014 is
proposed to be extended for 10 years i.e. upto 2024.
Extracted from Pakistan Budget 2012-13 Brief Comments (Tariq Mustafa

Ramzan & Co. (TMRC), Cost & Management Accountants
FOCUS SECTION
Federal Budget, 2012-13

By Wasful Hassan Siddiqi
A Critical Review
B.COM., LL.B, FPFA, FITM, FICS, FCMA
Economic Performance Review, 2011-12

Emerging Financial Crisis
Minuscule tax revenues, mismanagement and overgenerous
subsidies means Pakistan is heading for a new financial crisis.
The present government exacerbated the country's economic
woes by its profligacy and reinstating employees in public sector
enterprises (PSEs) en masses with back benefits, doling out
managerial and executive positions in government-run enterprises
on cronyism and political patronage instead of merit. The size of the
federal cabinet is huge to say the least. After the Eighteenth
Amendment with elimination of the 'Concurrent List' and devolution
of the provincial subjects to provinces, it was expected that the size
of the federal government and the federal cabinet would shrink but
to the contrary it expanded.
Economic Survey 2011-12

The economic survey 2011-12 reveals that the government has
missed major economic targets for the current fiscal year
with growth target revised downward to 3.7 percent
from 4.2 percent and fiscal deficit going upto 5
percent in the first 10 months of the current
fiscal year against annual target of 4 percent
estimated in the budget.
The finance minister described the
country's economic health as not in good
position because growing energy deficit
has been hurting growth and exports. The
minister admitted that the economic team
has failed to perform satisfactory especially
in the area of energy sector.
Average per capita expenditure for the richest
class in urban areas was more than four than a half
time more than the poor, while in rural areas these
averages were more than three and half times higher than the
poor.
The survey 2011-12 gives the revised 2010-11 growth rate of 3
percent and for 2009-10 of 3.1 percent. These figures when
contrasted with those released in Economic Survey of a year ago
(2010-11) reveal disturbing discrepancies wherein the provisional
growth rate for 2010-11 is given as 2.4 percent (instead of 3
percent) and for 2009-10 3.8 percent. One can conclude from these
discrepancies that provisional estimates are over-estimated to
present a favourable current picture or in other words the 3.7
percent Economic Survey; inexplicably final growth rate date of
2009-10 (two years ago), is also not synchronized between the two
surveys. However the growth rate in 2008-09, a particularly poor
performance year, was 1.7 percent in the two surveys.
Uniform criterion is not applied for comparison at times budget
estimates for the outgoing fiscal year have been used, while at
others revised estimates have been use. This has rendered the
economic survey as the document

of cheat and deceit.
The economic survey has failed to
give a true picture of the economy at the end of fiscal, 2012.

The finance minister unveiled 2012-13 federal budget of Rs.2.960
trillion with a deficit of Rs.1.185 trillion, 50 percent of total envisaged
federal board of revenue tax collections, fuelling concerns that
reliance on domestic borrowing would continue that would result in
inflation and restrain growth.
With a deficit of Rs 1.185 trillion, this budget for the fiscal year 201213 is the fifth and final of the present term of the Pakistan People's
Party's government, which made certain adjustments and used
fiscal jugglery to make the financial plan appear benign and propeople for strengthening its electoral position ahead of the fastnearing general elections.
Meanwhile, the government has proposed to impose two
percent capital value tax (CVT) on immovable
properties in Islamabad Capital territory (ICT), as
this tax is already imposed in the provinces and
this move could increases the prices of
immovable properties in the city. Similarly, in
another move, the government has
proposed to levy Capital Gain Tax (CGT)
on the sales of property in the country if it is
disposed of within two years of its
acquisition. This will act as a curb for
investors who are wither speculating of
holding real estate for trading purpose.
The budget admitted government's inability to
tax the rich although tax-to-GDP ratio has steadily
declined while public dept (now twice its size as on
June 2008) as proportion of the GDP has consistently
risen. Consequently, burden of debt servicing now accounts for a
much higher share of the tax revenue.
Pakistan is controlled and ruled by a privileged group having its own
vested interests. The privileged group consists of: civil and military
establishment, higher judiciary, landed aristocracy and its cronies,
industrialist-turned politicians, religious and spiritual leaders,
media tycoons and their powerful employees, and unscrupulous
businessmen.
A budget is essentially an accounting exercise reflecting the
expenditure and revenue generating priorities of the government.
The budget is not made for public welfare; but to collect more and
more revenue every year from the hapless public which is already
heavily taxed. Reliance is placed on indirect taxes such as sales
tax, FED and customs duties so that a vast majority of the
population majority of which belong to lower income group is taxed.
The affluent clause having higher income does not feel the pinch of
taxes.
13
FOCUS SECTION
Despite the slogan of Roti, Kapra aur Makan, the present
government has not done anything good for its people in its four and
half year tenure but has placed a long term liability on the nation by
seeking life time security, perks and benefits to the president, prime
minister and its other elites even after their exit from the power.
Public Reaction on the Budget

Majority of the parliamentarians, mainly belonging to the opposition
parties, dubbed the budget as old wine in new bottle and
expressed their disappointment, as according to them the finance
bill would fall short of the expectation of public at large because it
had nothing offer to a common man.
Salient Features
Income Tax
l 20 percent adhoc relief allowance in salaries and 20 percent
increase in pension of government employees and
pensioners.
l Basic Income Tax threshold for taxable income raised to Rs
400,000/- for salaried, business individuals and AOPs.
l Minimum gross turnover tax reduced to 0.5 percent from one
percent of gross turnover.
l Advance tax @ 0.2 percent on cash withdrawal raised to Rs
50,000/- from Rs 25,000/-.
l CGT on sale of property if disposed within two years.
l Profit on intra-group debt exempted from withholding tax.
l Tax arbitrage enjoyed by banks on money market funds
closed. To be taxed at 25 percent for tax year 2013 and at
normal rate of 35 percent in 2014.
l All manufacturers made withholding agents to collect one
percent advance tax.
l FED reduced from Rs 500 to Rs 400 per MT on cement.
l Excise duty on cigarettes raised.
l Sales tax on steel sector enhanced from Rs 6 to Rs 8 per
kilowatt hour.
l FED on air travel on economy and economy plus class
reduced. On Business and First Class raised.
l Sales Tax on tea imports slashed to 5 percent from 16 percent.
Sales Tax and Federal Excise Duty Measures

Objectives
l
l
l
l
l
Reduction in the higher rates of Sales Tax from 22% and

19.5% to 16%.
Reduction in Federal Excise Duty on cement from Rs. 500/
PMT to Rs. 400/ PMT
Elimination of excise duty on 10 items with the objective to
further phasing out of Federal Excise regime.
Streamlining the sales tax regime by substituting zero-rating
on certain items with a view to stop illegal refunds.
Enhancing tax incidence on cigarettes by revising upward
price tiers.
Relief Measures
(a) Removing aberrations in rates of sales tax @ 22% and 19.5%
to standard rate of 16% through rescinding of SRO
644(I)/2007 dated 27-06-2007 vide SRO 594(I)/2012, dated
01.06.2012, effective from the 02.06.2012.
14
(b) Reducing federal excise duty on cement from Rs. 500/ PMT to
400/ PMT enforced through amendment in Table-I of First
Schedule to the Federal Excise Act, 2005, effective from the
01.07.2012.
(c) Phasing out of federal excise duty regime by reducing the
number of goods liable to federal excise duty enforced
through amendment in Table-I of First Schedule to the Federal
Excise Act, 2005, effective from the 02.06.2012.
(d) Exemption of federal excise duty on live stock insurance
enforced through amendment in Table-II of Third Schedule to
the Federal Excise Act, 2005, effective from the 01.07.2012.
(e) Retrospective exemption of federal excise duty on services
rendered by Asset Management Companies enforced
through amendment in Table-II of Third Schedule to the
Federal Excise Act, 2005, effective from the 01.07.2012.
(f) Grant of exemption to waste paper to enhance collection as
well as restrict inadmissible input tax adjustment in this sector.
Revenue Measures
(a) Revision in the upward limit of price tiers of cigarettes to
enhance the Federal Excise Duty on locally produced
Cigarettes enforced through amendment in Table-I of First
Schedule to the Federal Excise Act, 2005, effective from the
02.06.2012.
(b) Increase in the rate of sales tax on steel sector from Rs. 6/Kwh to Rs. Rs. 8/- Kwh enforced through amendment Sales
Tax Special Procedures Rules, 2007.
(c) Substitution of zero-rating with exemption on supplies against
international tender enforced through Finance Act, 2012 vide
deletion of Supplies against International Tender from Fifth
Schedule and addition in Sixth Schedule of the Sales Tax Act,
1990, effective from the 02.06.2012.
(d) Substitution of zero-rating with exemption on certain items
such as remeltable scrap and sprinkler.
Simplification/Measures
(a) Shifting of cotton seed oil from exemption to zero-rating
regime enforced through amendment in Schedules to the
Sales Tax Act, 1990.
(b) Revise Federal Excise Duty on foreign travel enforced
through amendment in Table-I of First Schedule to the Federal
Excise Act, 2005, effective from the 01.07.2012.
(c) Harmonize section 11 and 36 of the Sales Tax Act, 1990
enforced through amendment in Sales Tax Act, 1990, effective
from the 01.07.2012.
(d) Alignment of PCT Headings in various schedules to the Sales
Tax Act, 1990, with the HS-2012 version of Pakistan Customs
Tariff.
(e) Updation of the restriction related to prices of cigarettes in the
First Schedule to the Federal Excise Act, 2005.
(f) Simplification of collection procedure of FED on air travel from
Pakistan by excluding the charge of FED on air travel to
Pakistan.
Customs Budgetary Measures 2012-13

Objectives:
l
l
Relief to general public.

Encouraging growth and investment.
FOCUS SECTION
l
l
l
Providing incentives for local industry.

Reducing cost of doing business.
Better regulation and enforcement.
Relief Measures:
a)
b)
c)
d)
The maximum general tariff slab has been reduced from 35%
to 30%. This will reduce the number of duty slabs from 8 to 7.
Customs duty on raw materials and components for printing
and stationery sector has been reduced.
Customs duty on 88 pharmaceutical raw materials and other
input goods has been further reduced from 10% to 5%.
Customs duty on self-copy papers and self-adhesive papers
has been reduced from 25% and 20% to 10%.
Incentives for Local Industry:

(a) Three major Notifications (SRO 565, 567 and 575) provide
exemptions and concessions on import of plant and
machinery for setting up of industries and import of raw
materials for a large number of domestic industries. These are
being cleansed of anomalies and are being simplified.
(b) In order to promote indigenous industry, some industrial raw
materials are being included in the concessionary regime.
(c) Customs duty on scrap of rubber / shredded tyres has been
reduced from 20% to 10% to encourage its use as a substitute
fuel for the cement industry.
Tariff Measures:
(a) WCO has made 5-yearly changes in HS nomenclature for
commodity classification and has issued HS-2012 version.
Pakistan Customs Tariff classification structure is being
aligned with the WCO nomenclature.
(b) Introduction of 12 Digit Subheadings in Customs Tariff to fulfill
the requirement of full automation of import processing
through the Customs computerized system (WeBOC) and
statistical purposes.
(c) The Ministry of Textile Industry has recommended new tariff
headings for facilitation of the textile industry and to update
national tariff in accordance with international best practices.
These headings are accordingly being created in Tariff.
(d) In order to encourage import of hybrid electric vehicles (HEVs)
at affordable prices the rate of duty and taxes presently
applicable to HEVs and their batteries are being reduced by
25%.
(e) In order to simplify the tariff the composite rate of duty on
cinematographic film is being change to a simple specific rate
of Rs. 5 per meter.
(f) Correction of classification and description of some items is
being made in the Tariff.
Legislative Measure:
(a) Quasi judicial and administrative functions are being
separated at the Collectorates' level.
(b) Enabling provision for introduction of the facility of e-auction.
(c) Incorporation of an explicit provision for condoning delays in
time-limits
(d) Provision of appeal in cases where the application for refund
has been declared.
(e) Definition of smuggling has been made more comprehensive
by including en route pilferage of transit goods.

Application of record keeping provisions on transport
operators (for transit goods) and on tracking companies.
(g) Declaring attempts to make un-authorized access/ use or
interfere with the Customs computerized system an offence.
(h) Introduction of the punishment of imprisonment for a term not
exceeding five years, where rules or conditions of transit are
contravened.
(i) Establishment of formations for better enforcement.
(j) Removal of the punishment of whipping, in cases of
smuggling, possession or acquiring of smuggled goods and
armed intimidation of persons engaged in the discharge of
duty under the Customs Act.
(f)
Significant Amendments in Income Tax Law

Capital Gain on Disposal
Section 37(1A)
of Immovable Property
Tax at 5 to 10% on capital gain on disposal of immovable property
held upto two years.
Capital Gain on Listed Securities
Section 37A,
100B & 233AA
Eighth Schedule for taxation of capital gain on listed securities
introduced.
Collection and Deposit
Finance Bill, 2012
Capital Gain Tax from
(Presidential Ordinance,
Investors by NCPL
dt. Apr 24, 2012)
NCCPL authorized to collect and deposit tax from investors on
account of capital gain.
No Questions asked for
Finance Bill, 2012 (Presidential
Ordinance, dt. Apr 24, 2012)
Investment in Stock Exchanges
No questions asked about nature and source of investment in stock
exchanges if certain conditions fulfilled.
Tax Rate on Capital
Finance Bill, 2012
(Presidential Ordinance,
Gain Frozen
dt. Apr 24, 2012)
Tax rate on capital gain frozen upto tax year 2014.
Limits for Allowing Tax Credits on Account
Section 62
of Investment in Shares and Life Insurance
Limits for allowing tax credits on account of investment in shares
and life insurance premium enhanced. The holding period of
shares reduced to twenty four months.
Concessional Employer Loan
Section 13(7)
Free or Concessional employer loan upto Rs. 500,000/- not to
attract notional taxation of benefit.
Bench Mark Rate Concessional Loan
Section 13(14)
Bench mark rate for calculating benefit on free or concessional loan
to employees fixed at 10%.
Minimum Tax
Section 113
Tax credit under Section 65B, 65D and 65E allowable against
minimum tax and final tax.
Investment made for BMR
Section 65(B)
Investment made for BMR during July 2011 to June 2016 allowed
tax credit at the rate of 20% and shall be available for adjustment
upto five years.
15
FOCUS SECTION
Tax Credit for Newly Established
Section 65(D)
Industrial Undertaking
Tax credit under Section 65D for newly established industrial
undertaking set up with 100% equity allowable against minimum
tax and final tax.
Corporate Dairy Farming
Section 65(D) & 65(E)
also Eligible to Tax Credit
Undertakings engaged in corporate dairy farming also eligible to tax
credit under Section 65D and 65E.
Total Income Harmonized
Section 9, 10 & 53
Scope of total income harmonized to include exempt income within
its ambit. However, exempt income continues not to be a part of
taxable income.
Set Off and Carry Forward Losses
Section 59(A)
The redundant provisions of Section 59A of the Ordinance relating
to set off and carry forward losses by members of a professional
firm are suggested to be deleted.
Cash Withdrawal from Banks
Section 231(A)
Monetary threshold of cash withdrawal from banks enhanced from
PKR 25,000 to PKR 50,000.
Delayed Refund
Section 39
Compensation for delayed refund allowable at the rate of 15%.
Declared to be taxable as income. from other sources.
Default Surcharge
Section 205(1), (1A) (1B) & (3)
Rate of default surcharge fixed at 18%.
Waiver from Default Surcharge
Section 205
Waiver from default surcharge if tax demand is paid after the appeal
is decided by the Commissioner (Appeals) and no second appeal is
preferred.
Dividends Received by Banks
Rule 6 of
from Money Market Funds
Seventh Schedule
Dividends received by banks from money market funds and income
funds taxed at the rate of 25% in tax year 2013 and at the rate of
35% in subsequent years.
Tax Payer Honour Card
Section 181(B)
Tax payer honour card for individual tax payers introduced.
Pakistan Source Income
Section 101(6)
Remittance of after tax profit by a branch of a foreign company now
defined to be Pakistan source I
Revision of Return not Permitted
Section 114
Revision of return not permitted if income is revised downwards.
Original or Revised Assessment
Section 121
Original or revised assessment has no legal consequence for best
judgment assessment.
Grant a Stay of Demand by
Section 128
Commissioner (Appeals)
Commissioner (Appeals) can now grant a stay of demand for a
maximum period of 30 days.
Grant a Stay of Demand by ATIR
Section 131
ATIR can now grant a stay of demand for a maximum period of 180
days.
16
Tax Due under a Provisional Assessment

Section 137
Tax due under a provisional assessment may be paid prior to the
expiry of 60 days.
Tax Rates
First Schedule
Tax Rates for Association of Persons and
Non-salaried Individuals
[Clauses (1) and (1B) of Division I of Part I of First Schedule]
S.No. Taxable Income
1. Where taxable income does not exceed
Rs 400,000
2. Where the taxable income exceeds
Rs 400,000 but does not exceed Rs 750,000
Rs 750,000 but does not exceed
Rs 1,500,000
Rs 1,500,000 but does not exceed
Rs 2,500,000
Rs 2,500,000
Rate of tax
0%
10% of the amount
exceeding Rs 400,000
Rs 35,000 + 15% of the
amount exceeding
Rs 750,000
Rs 147,500 + 20% of the
amount exceeding
Rs 1,500,000
Rs 347,500 + 25% of the
amount exceeding
Rs 2,500,000
The aforesaid rates, henceforth, would be applicable to both

individuals [taxable income other than salary, FTR and fixed tax
regime] and AOPs. Consequently, the Bill also proposes to delete
the single rate of 25 per cent on taxable income currently applicable
to AOPs. The significant changes, apart from variation in rates, are:
Basic exemption is proposed to be increased from Rs 350,000
per annum to Rs 400,000 per annum; and
Henceforth, the tax liability would be determined on
progressive basis as against the currently applicable basis
whereby tax is levied at a flat rate.
Tax Rates for Salaried Individuals

[Clause (1A) of Division I of Part I of the First Schedule]
S.No. Taxable Income
1. Where the taxable income does
not exceed Rs 400,000
Rs 750,000
Rs 1,500,000
Rs 2,000,000
Rs 2,500,000
Rs 2,500,000
Rate of tax
0%
5% of the amount
exceeding Rs 400,000
Rs 17,500 + 10% of
the amount exceeding
Rs 750,000
Rs 95,000 + 15% of the
amount exceeding
Rs 1,500,000
Rs 175,000 + 17.5% of
the amount exceeding
Rs 2,000,000
Rs 420,000 + 20% of the
amount exceeding
Rs 2,500,000
The significant changes, apart from variation in rates, are:

The basic exemption is proposed to be increased from Rs
350,000 per annum to Rs 400,000 per annum;
There would only be five slabs as against seventeen slabs
currently provided for;
The tax liability would be determined on progressive basis as
against on the basis of flat rate under the currently applicable
provisions;
FOCUS SECTION
The highest rate of 20 per cent would apply on income

exceeding Rs 2,500,000 per annum, whereas, this rate
currently applies to income exceeding Rs 4,550,000 per
annum.
Although the provisions of 'marginal relief' would continue to apply
on individuals deriving income from salary, however, because of the
progressive slab rates, the same should not have any significant
impact.
Tax on Retailers and Minimum Tax in other Cases

[Division IA of Part I of the First Schedule]
In case of individual and AOP operating as retailer tax liability is
determined under FTR at the rate of 0.50 per cent as against of last
year.
Tax on Motor Vehicles

[Divisions III and VII of Part IV of First Schedule]
Types of vehicle
Goods transport vehicle
Passenger transport vehicle
with seating capacity
of 20 persons or more
Old rate
Re 1 per kilogram
of laden weight
Rs 100 per seat
per annum
New rate
Rs 5 per kilogram
of laden weight
Rs 500 per seat
per annum
No change has been proposed in any other category or basis of

taxation.
The Bill also proposes to increase advance tax for Rs 16,875 to Rs
25,000 collectable by motor vehicle registration authority of Excise
and Taxation Department at the time of registration of new locally
manufactured motor vehicle. This continues to remain advance tax
adjustable against any other tax liability.
Second Schedule
Part I Exemptions from Total Income
Monthly Installment from Income Payment Plan
[Clause (23B) of Part I of Second Schedule]
A new clause is proposed to be inserted in Part I of the Second
Schedule exempting the monthly installments to be received from
an income payment plan, provided the investment, in respect
whereof installments are received, (i) is made for a minimum period
of ten years; and (ii) have been made out of accumulated balance
maintained with either of the following:
(a) individual pension accounts with a pension fund manager; or
(b) an approved annuity plan or another individual pension
account of eligible person; or
(c) the survivors pension account maintained with any other
pension fund manager as specified in the Voluntary Pension
System Rules 2005
Venture Capital Fund is available till June 30, 2014. This exemption
is proposed to be extended till June 30, 2024 in the Bill.
Part II Reduction of Tax Rates

[Clause (9A) of Part II of Second Schedule]
The provisions of law prescribed a reduced rate of 3 per cent
adjustable withholding tax on import of raw material by industrial
undertakings for their own use. The Bill proposes to link the
applicability of reduced rate with the availability of a certificate from
the Commissioner Inland Revenue. It appears that a provision for
the availability of an exemption certificate was intended to be
introduced. The present proposal, however, does not incorporate
the same.
Part IV Exemption from Specific Provisions

[Clauses (11B) and (11C) of Part IV of Second Schedule]
Inter-corporate dividend within the group companies, entitled to
group taxation under section 59AA or section 59B is currently
exempt from levy of tax, however, the recipient undergoes
withholding tax leviable on dividend. The Bill proposes to grant
exemption from collection of withholding tax on such receipt.
The Bill also proposes to grant exemption from collection of
withholding tax of intercorporate profit on debt within the group
companies entitled to group taxation under section 59AA or section
59B.
Third Schedule
Part II Initial Allowance
Currently all 'eligible depreciable assets' are entitled to 50 per cent
initial allowance, computable as a percentage of cost of such asset.
Initial allowance is admissible in the year in which the asset is used
by the person for the purposes of business for the first time in the tax
year in which commercial production is commenced, whichever is
later.
The Bill proposes to reduce the rate to 25 per cent in the case of
buildings.
Fifth Schedule
Taxation of Oil Exploration and Production Companies
[Sub-Rule 4A to Rule 4 of Part I of the Fifth Schedule]
Through insertion of clause 23C, any withdrawal of accumulated

balance from an approved pension fund, that represents the
transfer of such balance from an approved provident fund to the
said approved pension fund, is proposed to be exempt.
An amendment has been proposed in the Fifth Schedule to the

Ordinance that deals with taxation of persons who have entered
into a concession agreement for production and exploration of
petroleum with the President of Pakistan.
In the Bill, an amendment has been proposed whereby a person,
required to pay tax at the rate prescribed under any of the
concession agreement, has been provided an option to pay tax at
the rate of forty per cent of profit and gains, net of royalty, for tax
year 2012 and onward.
This option has however been made subject to the condition that
such person shall withdraw pending appeals, references and
petitions before the appellate forum on this matter and the amount
of such tax liability for earlier years is paid by June 30, 2012.
This option is available only for one time and shall be irrevocable.
Profits and Gains of Certain Funds

[Clause (101) of Part I of Second Schedule]
[Rule 6 of Seventh Schedule]
Currently, the exemption to profits and gains of Venture Capital

Company, Registered Venture Capital Fund and Private Equity and
Under the currently applicable provisions of law the tax liability of a

banking company is computed as under:
Withdrawal from Approved Pension Fund

[Clause (23C) of Part I of Second Schedule]
Seventh Schedule
17
FOCUS SECTION
Source of Income
Rate of Tax
Dividend received from its asset
management company
20%
Dividend and capital gains on sale of
shares of listed companies
10%
All other income including gain from
disposal of shares of listed companies
within one year of acquisition
35%
The Bill proposes to prescribe higher rate of tax on dividend
received from Money Market Funds and Income Funds. The rates,
as proposed, are:
Tax year 2013
25%
Tax year 2014 and onwards
35%
The amendment aims at eliminating the tax arbitrage that was
available to banking companies between income earned on funds
used by it as advances and other assets or invested in units of a
Money Market Fund or Income Fund. Distribution from such funds
is taxable as dividend income in the hands of banking company.
Further, the proposed amendment would also put to rest the dispute
raised by tax authorities in the case of certain banking companies
where it was being argued that such income was already taxable at
corporate rate of tax. The inclusion of these amendments implies
that previously this amount attracted 10 per cent tax rate applicable
to dividend.
The Eighth Schedule

Rules for the computation of capital gains on listed securities
The main characteristics of this proposed Schedule is as under:
l By virtue Insertion of section 100B of the Ordinance, certain
persons or classes of persons are now liable to capital gains
tax in the manner and mode provided under the newly
inserted Eighth Schedule to the Ordinance.
l Newly inserted section 100B provides the list of following
persons or the class of persons that are not affected by the
new regime:
(a) a mutual fund;
(b) a banking company, a non-banking finance company,
and an insurance company;
(c) a modaraba;
(d) a foreign institutional investor being a person
registered with NCCPL as a foreign institutional investor;
and
(e) any other person or class of persons notified by the
Board.
l The National Clearing Company of Pakistan (NCCPL) is
declared as a tax collecting agent for carrying out collection of
capital gain tax on disposal of listed securities on behalf of the
taxpayers.
l The NCCPL shall issue an annual certificate to the taxpayer
on the prescribed form in respect of capital gain subject to tax
under this Schedule for a financial year.
l Every taxpayer shall file the certificate along with the return of
income and such certificate shall be conclusive evidence in
respect of the income under this Schedule.
l In respect of tax year 2012 for the period commencing from
April 24, 2012 till June 30, 2012, the certificate issued by
18
NCCPL shall be the basis of capital gains and tax thereon for
that period.
The amount collected by NCCPL shall be deposited in a
separate bank account with National Bank of Pakistan and the
said amount shall be paid to the Board alongwith interest
accrued thereon, on yearly basis, by July 31 next following the
financial year in which the amount was collected.
NCCPL to furnish to the Board within 30 days of the end of
each quarter, statement of capital gain and tax exempted
therein in that quarter.
Investors falling under the ambit of the Eighth Schedule shall
be exempt from the payment of quarterly advance tax and
filing of quarterly statements.
A person who does not intend to opt for the determination and
payment of tax as laid down in the Eighth Schedule shall be
required to file an irrevocable option to NCCPL after obtaining
prior approval from the Commissioner in the manner
prescribed.
Enquires as to the nature and sources of amount invested
shall not be made, provided that amount remains invested in
the share of a public company for a period of 120 days and tax
on capital gains, if any, has duly been discharged in the
manner laid down under this Schedule.
No enquiries as to the nature and source of amount invested
shall be made for any investment made in the listed securities
prior to the introduction of Eighth Schedule subject to the
condition that the amounts remain invested for a period of 45
days upto June 30, 2012 in the manner as may be prescribed.
Capital Value Tax

Rationalization of Rates of Collection of CVT
Category of Property
Rate of CVT
o Residential immovable property (other than flats)
situated in urban area, measuring at least one kanal or
500 square yards whichever is less.
(i) Where the value of
immovable property is recorded
(ii) Where the value of immovable
property is not recorded
(iii) Where the immovable property
is a constructed property
2% of the recorded value

or Rs.100 per square yard of
the landed area whichever is higher
Rs.100 per square yard
of the landed area
Rs.10 per square feet of the
constructed area in addition to
the value worked out above
o Commercial immovable property of any size

(i) Where the value of immovable
property is recorded
(ii) Where the value of immovable
(iii) Where the immovable property
is a constructed property
2% of the recorded value or

Rs.100 per square yard of
the landed area whichever is higher
Rs.100 per square yard of
the landed area
constructed area in addition to the
value worked out above
o Residential flats
(i) Where the value of immovable
of property is recorded
(ii) Where the value of immovable of
2% of the recorded value or

covered area whichever is higher
Rs. 100 per square feet
of the covered area
About the Author: Mr. Wasful Hassan Siddiqi, B.COM., L.LB., FITM, FICS,
FPFA, FCMA is a practicing Cost and Management Accountant. He is also the
author of books on tax laws, corporate affairs and cost accounting.
FOCUS SECTION
Will Budget Address

People's Requirements?
By Dr Zafar Altaf
The strategy that is to

be followed is what the
Keynesians have so well
articulated and
implemented in the
past. When Keynes was
looking for full
employment through
public sector
interventions he was
also suggesting that
later on was excellently
utilised by
governments and that
was the multiplier
effect. What this
essentially did was to
start interventions and
that would over a
period of time snowball
into an intervention
that was fed on its own
resources.
he budget timing does not allow for

many innovative actions. The budget
in modern times requires to be
understood in a different light than what
was done historically. The IT revolution
and the speed of information as well as
the awareness in the general public
makes for a paradigm shift in thinking of
the choices that make for a budget that is
acceptable. There will always be a
resource gap in what is urgently required
by the country.
However, the strategy that is to be
followed is what the Keynesians have so
well articulated and implemented in the
past. When Keynes was looking for full
employment through public sector
interventions he was also suggesting that
later on was excellently utilised by
governments and that was the multiplier
effect. What this essentially did was to
start interventions and that would over a
period of time snowball into an
intervention that was fed on its own
resources.
What then are the challenges? Are the
challenges what the WB and the ADB or
the UN system suggest or should we
have our own way of looking and doing
things? One of the major reasons for the
international options not to work is that
one shoe does not fit everyone. Take the
case of recession and banking crisis in
the Eurozone and we see that the best of
them are today the worst of them. Why?
The question comes but the answers are
not available to the most developed
nations. Every one is pontificating.
concerned. Pakistan's dilemma is

different and more basic.
Knowledge or non-knowledge applied to
the serving of the people will take things
into a pretty mess. I have been saying this
for a long time that there is a disconnect
between the people and the
policymakers in Islamabad. Budget time
is about numbers but one has to go
beyond numbers if one were to handle
the situation. Numbers do not feel as
humans do.
In any case the attention to numbers has
any meaning only when it is understood
that the implementers have knowledge
that is not superficial and that they are the
capable managers that this country has
produced. The sorry state of the federal
government these days is that every one
is trying to save his or her skin as they
have forgotten the idea of self
censorship. When the system is in chaos
this is what happens. The nature of things
cannot be held in harmony. The budget is
an instrument of harmony and not of
dissonance.
So were the choices that were present
before us as a country? Individuals do not
matter. They never did when it comes to
working the national economy. The
budget is a national document and
therefore sacrosanct. It is holy in that
sense of the word. Since it has that tinge it
must reflect as far as possible the wishes
and aspirations of the people. No matter
how well-endowed the country and how
developed if it leans on one side the
Activity and TV shows abound and

everyday the leading TV channels of the
world have the latest on the working of the
financial markets. Nothing seems to be
going anywhere. With CEOs messing up
everything and greed the only option the
surprising part is that the nations of the
world seem to be in a quandary so far as
the ethics of the policymakers are
19
FOCUS SECTION
So is money essential? No it may be necessary but it is not
essential. The essentials are the intangibles of the country's
policymakers. Will humility trump pride, will arrogance be taken
over by tenacity and will the budget give that resilience to the
system that is required if we are to live as free country? Can we
build a people's culture in what is essentially an impersonal
system? Do numbers speak, do they have emotions and do they
create the right emotions? While working at Karachi it was my
responsibility to improve the slum areas and to create a new
system for the people of Lalapul and for those that are now
residing in Orangi Township.
budget will go haywire and will never be evenly held. Is it
constructed in such a manner that the majority of the people will
be looked after? Does it have the right balanced? Is it reflective
of the requirements-urgent requirements of the nation? What is
more important - food security or national security carried out by
the National security council chaired by the PM?
Is the stomach more urgent or the defending the borders? The
policymaker has some intangible rules that it must follow. One of
the most important is to have humility above all else. You will ask
of me that is very funny way to play the numbers game. That is
first upfront as the humility factor enables one to have listening
ears. The din is so much that the chances are that the powerful
elite will take away much more than what they require.
Their greed is phenomenal. I have seen them in the corridors of
FBR lobbying away. I have seen them threaten the righteous
policymakers and make life miserable for them. Will the budget
look after the ones that were excluded form the benefits of the
country? Will they look for interventions in PATA/FATA, NW and
SW or will they be considered as usual in the periphery and
therefore not important. If one has listening ears then ground
realities are easy to understand. The issue now with the babu
formation of the budget is that it will be totally pedantic and there
will be no new options in it.
Unemployment, deficit and inflation will all creep in and the
options will never be there. We have in Pakistan people (starting
with the Shaukat Aziz) and now most of the expatriates that
have expounded wisdom to the effect that the Agriculture sector
is no longer to be considered as a productive sector. Why do
they say this?
They say it on the basis of western brainwashed ideas that the
contribution to GDP is about 21%. What do these numbers
mean? Nothing. Statistics is not to be acceptable on two countsfirst that these are not collected correctly and there is always a
question-mark but the bigger situation is that even on facts they
are found wanting. Majority of our population is in the rural areas
and to this day they have been holding our fort so far as food
security is concerned.
Do you have any idea who your best players are and who are
mere stragglers? Can you convert failures into winners? Can
you have the vision of making little things become larger than life
and in short can you use a grain of sand to change the course of
a river? There are things in this world that one can do without the
use of stinking money. The aid money stinks and I will have more
to say about it and how it has polluted and perverted our
thinking.
So will we have for our strategy a conscious realisation of what
is required to be done? Or will we meander into meaningless
things and meet the lust of the rich? I think that we need to work
through our requirements and to take the slush money out and
to hold all those dealing with public funds accountable. How will
it look if I were to say that we need three new definitions defining who so as to see the vision; defining what to know the
vision; and defining when so as to keep faith with ourselves and
our people?
Shall we put people first and not what we can amass for
ourselves? Remember unintentional mistakes are correctable
but intentional mistakes are not and sooner or later we will pay
for it. Decision-making requires a large heart and a feeling that
has almost become alien to us in Pakistan and in Islamabad.
One life lost in the ego actions of this country is a life lost and the
opportunity cost is horrendous.
Why go after unearned US dollars? Tighten our belts. Why not?
Why are you making new roads that are for the rich and not
needed? The cost of 'Musharraf road' was well guess. He has
not got to live where this road was built. One is not surprised. It
was made with blood money. The lesson for the policymakers is
for next year. Go into this much earlier and seek to redress the
issues.
Remember that urban economics is sham economics. We have

seen the USA, France, Spain, Germany and Greece lose out on
urbanisation and the fact that the banking system was echoing
what we had been saying for a long time that money in
abundance always means the holder is a person of easy virtue.
Those that sell themselves are the billionaires. The hard
working people in this country are barely holding their body and
soul together.
20
FOCUS SECTION

By Anjum Ibrahim
There are serious

concerns with
respect to the
reliability of the data
itself - presented in
the Economic Survey,
unveiled a day before
the budget, as well as
in the budget. The
Economic Survey's
provisional budget
deficit of 4.3 percent
for the current year,
revised upward to 7.4
percent in the budget
documents reflects a
major inconsistency
in the two
documents.
budget is essentially an accounting

exercise reflecting the expenditure
and revenue generating priorities of a
government. Hence data needs to not
only be realistic but must consistent in
documents as well as in the budget
speech. The question arises whether the
budget 2012-13 data was realistic and/or
consistent?
The 2012-13 budget is the third one
presented by Federal Finance Minister Dr
Hafeez Sheikh and a review of the
previous two years' budgetary claims and
adherence to those claims by the end of
the year reveals wide divergence. In the
budget 2010-11, a budget passed by
parliament, Dr Sheikh committed to a
fiscal deficit of 4 percent of Gross
Domestic Product (GDP). By the end of
the year the deficit recorded was 6.6
percent of GDP. In the current year's
budget he committed to a deficit of 4
percent of GDP, which parliament
passed, and by the end of the year the
deficit was 7.4 percent. And in the
forthcoming fiscal year he has committed
to a deficit of 4.7 percent and few are
convinced that the country would be third
time lucky.
This is not to challenge the government's
right to make adjustments given that
unexpected external and internal events
can and do impact on budgets and
Pakistan did experience massive floods
in 2010-11 and 2011-12. However current
expenditure exceeded budgeted targets
not due to higher allocation for flood
victims or for repair of the destroyed
infrastructure or indeed on the war on
terror but on excess subsidies under the
head inter-disco tariff differential - in
excess of 250 billion rupees in 2010-11
and 297 billion rupees in 2011-12 from
what was budgeted.
The statistics cited above, are released
by the government however there are
serious concerns with respect to the

reliability of the data itself - presented in
the Economic Survey, unveiled a day
before the budget, as well as in the
budget. The Economic Survey's
provisional budget deficit of 4.3 percent
for the current year, revised upward to 7.4
percent in the budget documents reflects
a major inconsistency in the two
documents.
Analysts however challenge even the 7.4
percent figure in the budget document for
three reasons:
(i) the unlikelihood of achieving a tax
revenue target of 1952 billion rupees this
year unless, of course, the Federal Board
of Revenue indulges in its usual practice
of compelling large tax payers to pay the
July-September tax before 30 June - a
practice that is currently under
investigation by the Federal Tax
Ombudsman. This exercise may well
account for the 2011-12 budgeted
income tax revenue of 718.6 billion
rupees that the budget document claims
netted the government 730 billion rupees
in the current year; (ii) 800 million dollars
from auction of 3 G licenses, and (iii) 800
million dollars from Etisalat.
The last two items would, without doubt,
not be included in tax revenue but under
non-tax revenue. The budget documents
21
FOCUS SECTION
claim that non tax revenue for the current fiscal year had a
shortfall of 145.8 billion rupees from what was budgeted - 512
billion rupees was achieved while 657.9 was budgeted for the
year. The Miscellaneous receipts that were not part and parcel
of the non-tax revenue receipts but generated substantial
amounts are as follows:
(i) windfall levy against crude oil generated 5.1 billion rupees in
the current year and is targeted to achieve 5.3 billion rupees in
the forthcoming fiscal year, (ii) gas infrastructure development
cess generated 8 billion rupees in the current year and is
forecast to generate 30 billion rupees in the forthcoming fiscal
year portending a massive increase in gas rates in 2012-13, and
gas development surcharge would also net the government an
additional 5.5 billion rupees in the forthcoming fiscal year
compared to the ongoing year; and (iii)petroleum levy on LPG
generated 400 million rupees in the current year and would be
more than doubled to generate one billion rupees in the
forthcoming fiscal year. These constitute min-budgets or
revenue sources not identified in the 2011-12 budget, however,
their inclusion in this year's budget led to a nation-wide strike call
by CNG stations.
And significantly profits from Pakistan Telecommunication
Authority (PTA) was budgeted to generate 75 billion rupees in
the current year through auction of 3 G which did not take place
as noted in the budget 2012-13 documents. However the
budget forecasts revenue of 79 billion rupees in 2012-13 from
PTA, assuming that the auction would take place next year.
Defence services were targeted to generate 118.7 billion rupees
in the budget 2011-12 but managed to generate only 45 billion
rupees. The reported US agreement to release 1.2 billion
rupees under the Coalition Support Fund may be credited by
next year which may account for a total of 150 billion rupees
from this source in 2012-13.
fiscal year (compared to the revised figures; this is considered

highly unlikely given the fact that exemptions were not removed
and neither were the rich farmers brought under the income tax
net though documents suggest that the Finance Minister has
informed the cabinet that he would remove a number of
exemptions next year. Petroleum levy is expected to generate
125 billion rupees next year while it did not generate more than
69 billion rupees this year though 120 billion rupees was
budgeted. The reason: strong resistance by the public against
the price rise. Given that it is an election year it is doubtful if the
government can collect the levy as budgeted.
The budget 2012-13 noted 386 billion rupees (4.1 billion dollars)
inflows from foreign resources. Again this appears unrealistic
given that the amount includes 74.4 billion from privatisation
proceeds (a policy not likely to pay dividends given the current
state of the economy) and 46.5 billion rupees from Eurobonds
that did not materialise this year too for reasons to do not only
with our own domestic macroeconomic issues but also the
ongoing global recession.
With respect to expenditure priorities the Finance Minister
emphasised that current expenditure would be kept at the same
level as in the current year and that federal development outlay
would be 360 billion rupees out of which 80 billion rupees would
be allocated to corporations (Wapda and National Highway
Authority). Past performance in this regard may well lead to the
conclusion that this commitment is not likely to be kept
especially given the 120 billion rupees earmarked for inter-disco
tariff differential in 2012-13 - an amount that most likely will be
doubled at least.
The Finance Minister insisted that the federal public sector
development programme (PSDP) for this year, 300 billion
rupees, was fully implemented though by May 18 this year the
Planning Commission gave the total releases under PSDP as
166 billion rupees and few are convinced that the government
has the resources to release the remaining 134 billion rupees by
the end of the year.
In short any adherence to the priorities identified in the budget
documents is not likely and it is little wonder that the budget is
now being seen as a document divorced from reality.
And finally the government has budgeted 178.7 billion rupees

as non tax revenue from property and enterprise and given the
fact that it generated only 93 billion rupees out of a total
budgeted 197.5 billion rupees for the current year this figure too
appears to be over stated. Thus the ability of the government to
generate non-tax revenue of 730 billion rupees next year,
greater than the revised estimates by 188 billion rupees for the
current year, is far from guaranteed.
Tax revenue too appears to be overstated in the budget. Income
tax is budgeted to rise by 184 billion rupees in the forthcoming
22
FOCUS SECTION
Finance Bill 2012: Attempting to

Cripple Tax Justice System
By Huzaima Bukhari and Dr Ikramul Haq
n the Finance Bill 2012, a number of

changes have been proposed that can
cripple the already ineffective tax justice
system-amendments if approved by
Parliament would render office of
Commissioner of Appeals ineffectual and
that of Appellate Tribunal Inland Revenue
(ATIR) a 'camp office' of the Federal
Board of Revenue (FBR).
In developing economies
like Pakistan, one of the
biggest problems is
reluctance of ordinary
people to file tax returns
and thus submit
themselves to scrutiny of
their affairs by the tax
administration. However,
once a taxpayer has faith
in the effectiveness of
legal remedies against an
unjust tax levy or unjust
action of the taxation
authorities, he is more
likely to be truthful and
honest to the taxation
authorities, and to
accept a reasonable levy
of tax.
These amendments are aimed at

obtaining confirmation of arbitrary and
unreasonable orders passed with the aim
to meet budgetary targets. Karachi and
Lahore tax bars have already agitated
against the proposed amendments by
writing letters to the Minister of Law
seeking his interference in the matter to
ensure independence of the tax appellate
i
forums. The Finance Bill 2012 has
proposed the following amendments that
could be extremely detrimental for
dispensation of justice to taxpayers:
a)
b)
The Commissioner of Appeals has

been allowed to give stay only for
one month. There is no mandatory
provision to pass the order within the
same period. Thus after one month,
the Department will force recovery
through coercive measures. The
higher Courts time and again have
held that a taxpayer should not be
forced to pay any demand contested
by him unless his appeal is decided
by an independent forumii i.e. ATIR.
The Department is flouting these
verdicts and forcing recovery by
attaching accounts of taxpayers
even during pendency of appeals.
Recently, they have showed utter
disrespect towards ATIR and in
some other cases, even orders of
restraint passed by High Courts.
At present in the ATIR, Account
Members, coming from FBR, are
officers in Grade 21 (Chief
Commissioners) or Commissioners
in Grade 20 with 5 years' of
experience. The Finance Bill 2012

proposes to reduce this condition to
3 years' experience. This means
induction of junior commissioners
who could be influenced by FBR in
the hope of better postings on their
return to parent department.
c)
The Chairman of ATIR is elevated

from the Judicial Members, usually
the senior most. At present, the
Accountant Member can become
Chairman but only if extraordinary
circumstances exist. The Finance
Bill wants to relax this condition,
which would pave the way for total
control on ATIR by the FBR. The
above changes, if implemented,
would further destroy the already
ailing 4-tier tax justice system [see
'Need for National Tax Court',
Business Recorder, May 6-7, 2011].
This system already consumes so
much time for final settlement that
the very purpose of seeking remedy
becomes meaningless-justice
delayed is justice denied aptly
applies to the existing tax appellate
system.
In developing economies like Pakistan,

one of the biggest problems is reluctance
of ordinary people to file tax returns and
thus submit themselves to scrutiny of their
affairs by the tax administration. However,
once a taxpayer has faith in the
effectiveness of legal remedies against
an unjust tax levy or unjust action of the
taxation authorities, he is more likely to be
truthful and honest to the taxation
authorities, and to accept a reasonable
levy of tax. The degree of taxpayer
satisfaction does therefore go up which, in
turn, is a sine qua non for better voluntary
compliance resulting in greater resource
mobilisation. While on the surface, a tax
judiciary inherently deals with the
involuntary collections enforced by a tax
administration, an efficient tax judiciary
actually creates conducive atmosphere
23
FOCUS SECTION
for better voluntary compliance by the taxpayer aiming at
greater resource mobilization for the State. A tax administration
which disposes of appeals promptly and speedily reaches a fair
and final settlement can itself be classified as a tax incentive.
To a tax collector, an efficient tax judiciary ensures that demands
arising out of legitimate tax assessments, which can stand
scrutiny of law, are not unnecessarily locked up in litigation. As
long as there is pending litigation in relation to a particular tax
levy, there is a natural, and quite understandable, desire on the
part of the taxpayer not to pay the pending disputed amount. An
efficient tax judiciary resolves disputes quickly, quashes
demands which are not legally sustainable, and thus
segregates serious tax demands from frivolous tax demands,
while also giving finality to legitimate tax demands. This in turn
ensures that the taxpayer cannot resort to dilatory tactics for
paying these genuine and legitimate tax demands which have
received judicial approval. An efficient tax judiciary thus helps
removing impediments from collection of tax demands by the
State, which, once again, results in greater resource
mobilization.
iii
An effective tax judiciary does not only settle tax disputes

between the citizen and the State, but it also lays down guiding
principles on the basis of which future disputes with materially
identical facts, are easily resolved. This way, an effective tax
judiciary also contributes to smooth functioning of the tax
iv
machinery. The setting up of the Tribunal in 1941 brought about
a paradigm shift in the grievance redressal system. The scheme
of things in the Tribunal envisaged complete functional
independence of the institution, a high degree of legal and
technical expertise of the Members manning the benches, user
friendly, simpler and informal procedures, and inexpensive and
quick justice delivery. Over the decades, the vTribunal has been
strengthened with changes made to cope with the increasing
burden of cases and growing complexity of disputes.
The powers of the ATIR are exercised by the benches [section
130 of the Income Tax Ordinance, 2001]. Cases in which
amount of tax or penalty does not exceed Rs one million can be
heard by a single member bench, either by a Judicial Member or
an Accountant Member. Majority of the cases are heard by
division, or regular, benches which must consist of one Judicial
Member and one Accountant Member. There is no ceiling on
amount of tax involved or income assessed in the cases to be
heard by such division or regular benches. Special benches, of
three or more Members, of which at least one Member must be a
Judicial Member and one Member must be an Accountant
Member, are formed on issues on which either division benches
have expressed conflicting views or on issues which are of
considerable importance. It is thus ensured that the decision of
each of the regular or larger bench has the benefit of inputs from
both a Judicial Member and Accountant Member.
The qualification for appointment as Judicial Member is the
same as that for the appointment of a High Court judge, and only
well experienced and competent people from the legal
profession and judiciary are selected.
24
Prior to amendment in 2007, the Accountant Member must have

been an officer of Grade 21. In 2007, Commissioner in Grade 20
having appellate experience of five years was also included. In
2010, the condition of working as Commissioner Appeal was
removed. And now the Finance Bill 2012 proposes reduction
from 5 to 3 years. Amendments made in 2007, 2010 and those
proposed in Finance Bill 2012 are highly undesirable. The
officer from FBR having little experience or no experience of
appellate work should never be permitted to be part of ATIR.
In India, accountant members are selected from amongst senior
officers of Indian Revenue Service and from amongst chartered
accountants having at least 10 years of practice in taxation.
Thus, every bench has the unique advantage of examining
issues from the point of view of a trained legal expert as also
from the perspective of a mature revenue person or CA, who
has knowledge and understanding of real life tax and business
realities. Normally, one of the Members in the bench is
sufficiently a senior person with reasonable exposure to the
varied situations dealt with in the cases. While, on the factual
aspects, a decision of the Tribunal is final, on substantive
questions of law, jurisdiction of the High Court can be invoked.
Interference by the High Court and the Supreme Court,
however, is more of an exception than the rule.
The proposal through Finance Bill 2012 to lower the service
period requirement of Commissioner to be Member of the
Tribunal to three years [section 130(4)(b)] needs to be
reconsidered. Junior Commissioners who may have never even
worked as Commissioners of Appeal would lack skills to work as
Accountant members. The technical quality of work and
understanding of matters required at the Tribunal level would be
highly compromised by appointment of such Commissioners.
Amendment proposed in section 130(5) that is deleting the
words "and except in special circumstances", is to facilitate an
Accountant Member to become the Chairman of ATIR. This is
against the principle of independence of judiciary. A person
having lien with FBR (an executive authority) cannot perform
the functions of Chairman as it would be in utter violation of Para
5 of the National Judicial Policy 2009 which says:
"All special courts/tribunals under the administrative control of
Executive must be placed under the control and supervision of
the Judiciary, their appointments/postings should be made on
the recommendation of the Chief Justices of concerned High
Court" [Page 12]
Thus the original position of law that only a judicial member can
be Chairman of the Tribunal must be maintained. In fact, the
ATIR should be freed from the control of Ministry of law and
should be placed under the judiciary [Bill for this was prepared
by us; see 'Need for National Tax Court', Business Recorder,
May 6-7, 2011].
To make the ATIR a truly independent and effective judicial
forum, it is imperative to provide for recruitment of Chartered
Accountants (CAs) and Cost and Management Accountants
(CMAs), having tax experience of at least ten years, as
Accountant Members through Federal Public Service
FOCUS SECTION
Commission (FPSC). As far as officers from FBR are
concerned, the rank should be Chief Commissioner or
Commissioner with five years of experience, having served at
least two years as Commissioner of Appeals. They should also
be inducted for good in Tribunal through FPSC with no lien to go
back to FBR. This is necessary to make Tribunal an
independent appellate body. Ideally, for recruiting Accountant
Members, there should be an independent 'All Pakistan Tax
Appellate Service' in which officers from FBR and tax
professionals (FCAs and FCMAs) should be selected by FPSC
through a transparent procedure, advertising the posts widely
on national level.
ii
End-Notes
i
The following is the text of letter sent by Lahore and Karachi tax bars:
"We are writing this letter to seek your urgent intervention and bring to
your kind notice proposed amendment introduced vide Finance Bill
2012 in respect of Appellate Tribunal Inland Revenue (ATIR), As you
are aware, ATIR is the final appellate forum provided under the
provisions of Income Tax Ordinance 2001 and Sales Tax Act, 1990,
especially on facts. ATIR consists of judicial members and
accountant members.
a) There has been an age old tradition since introduction of
Income Tax Act, 1922 that the Chairman of the ATIR has always
been a judicial member, and this was ensured through
provision of law in the Income Tax Ordinance, 2001.
b) In the present Income Tax Ordinance 2001, section 130(5)
provided that the Chairman of the Tribunal shall be a judicial
member except in special circumstances an Accountant
member may be considered for this post. In the Finance Bill
2012, an attempt is being made to remove this requirement,
thus paving the way for any Accountant Member being an
officer serving either in Grade 20 or 21 [Inland Revenue
Department of Federal Board of Revenue] to become a
Chairman. Our Bar members have serious reservations on this
proposed amendment as we strongly feel the ATIR being a
judicial forum should be Chaired only by a senior Judicial
member. We request your urgent intervention in this matter.
c) As per section 130(3) of Income Tax Ordinance 2001, the
prescribed qualification to be a judicial Member of ATIR is that
the person should have exercised powers of District Judge and
is qualified to be a Judge of High Court OR has been an
Advocate of High Court and is qualified to be Judge of High
Court.
Whereas as per section 130 (3) of Income Tax Ordinance 2001
the prescribed qualification s for an Accountant Member of
ATIR was that the person shall be an officer of Inland Revenue
equivalent to the rank of Regional Commissioner OR a
Commissioner Inland Revenue or Commissioner Inland
Revenue (Appeals) with at least FIVE years' experience as
Commissioner.
This requirement of Commissioner having at least FIVE
YEARS experience is now vide proposed amendment in law
through Finance Bill 2012 being reduced to a Commissioner
having at least THREE years' experience. This Bar has serious
reservations on this proposed change of lowering the
experience requirement of Commissioner to THREE years and
we seek your urgent intervention in the matter. We feel with
ATIR being the final tax forum on facts, a Commissioner with at
least FIVE Years of experience should be appointed as
Accountant Member.
In order to have an impartial and judicious Appellate Tribunal,
iii
iii
we also may add that test of Seniority as held by the Hon'ble

Supreme Court in Al Jehad's case may also be put as condition
precedent. We, therefore, earnestly request you to kindly
intervene in the matter and use your good office to have both
the proposed amendments in section 130(5) and 130(3) of
Income Tax Ordinance 2001 withdrawn from Finance Bill 2012.
We request you to ensure the independence of this judicial
forum of ATIR".
It is trite law that taxpayers cannot be forced to pay a disputed tax
demand unless the matter is decided by an independent forum that in
case of income tax, sales tax, federal excise duty is Appellate
Tribunal Inland Revenue. The following cases are authority on this:
i)
Sunrise Bottling Co (Pvt) Ltd v Federation of Pakistan etc
(2006) 94 TAX 140 (H.C. Lah.)
ii) Punjab Provincial Co-operative Bank Ltd, Lahore v DCIT 2002
PTD 2799
iii) Riaz Bottlers (Pvt) Ltd v CIT (2008) 98 TAX 295 (H.C. Lah.)
iv) PTCL 2010 CL 460
In the Sub-continent, income tax was introduced by the British
colonial rulers in the year 1860, but for its first eight decades of
existence, grievance redressal mechanisms left much to be desired.
There was no separation of administrative and appellate functions,
and the very Assistant Commissioners and Commissioners, under
whose supervision and guidance, tax assessments were done by the
Income Tax Officer, were the first and second appellate authority
against the order of the Income Tax Officer. There was thus a clear
clash of interest between the administrative and appellate functions
of the tax authorities. A Commissioner, on one hand, had revenue
targets to achieve, and while deciding appeals of the taxpayers, who
perceived their tax assessments to be unjust and unfair, application
of the taxpayer, refer the points of law for the opinion of the High
Court. If the Commissioner so declined to state the case at the
request of the taxpayer, the taxpayer could approach the High Court
and seek a writ of "mandamus" requiring the Commissioner to state
the case. This system of grievance redressal of the taxpayer was not
very user friendly, there was no independent adjudication by anyone
outside the tax administration on the question of facts, and the costs
involved in the legal process, ie before High Courts, were very high.
This system was perceived to be oppressive and undemocratic.
There was so much resentment against this system that the
Government had to give in to the public pressure and, by Income Tax
(Amendment) Act, 1939, bring about two important reforms-first, that
judicial and administrative functions of the tax authorities were
separated; and-second, an independent body, the Income Tax
Appellate Tribunal was created to hear appeals against orders of the
first appellate authority on all questions of facts and law. That is how
that Income Tax Appellate Tribunal was set up in the Sub-continent in
1941.
The setting-up of the Tribunal in 1941 was welcomed by the public at
large. The then Leader of Opposition in the Legislative Assembly, Mr
Bhulabhai J. Desai, welcomed the proposal by stating on the floor of
the Assembly as follows: "with the intervention of such a Tribunal, a
substantial step has been gained from the point of view of the
taxpayer, that so far as any injustice will be done to him either by
misapplication of law or by a wrong finding of facts by the official
hierarchy, he will have now redress from an independent body with
sufficient legal and accountancy qualifications....."
Incidentally, the Income Tax Tribunal was the first Tribunal set up in
the Sub-continent, and it was this successful experiment which
resulted in setting up of many more Tribunals.
About the Author: The writers, tax lawyers and partners in

Huzaima and Ikram (Tax and Pakistan), are Adjunct
Professors at Lahore University of Management Sciences
(LUMS)
25
FOCUS SECTION
Economic Survey
2011-12
Growth and Stabilization
Real GDP growth for 2011-12 has been estimated at 3.7 percent as
compared to 3.0 percent in the previous fiscal year 2011.
The commodity producing sector has performed much better in
outgoing fiscal year as compared to last year; its growth rate is 3.28
percent against 1.47 percent last year.
Agriculture registered the growth of 3.13 percent against 2.38
percent last year.
Major Crops registered an accelerating growth of 3.18 percent
compared to a negative growth of 0.23 percent last year. The major
crops including Cotton, Sugarcane and Rice witnessed growth in
production of 18.6 percent, 4.9 percent and 27.7 percent
respectively. However, Wheat registered a negative growth of 6.7
percent mainly due to 2.6 percent decline in area under cultivation,
sowing was also delayed because of late receding rain water in lower
Sindh which resulted in a decline in both the acreage as well as the
yields.
Minor Crops growth declined by 1.26 percent, due to rains affect in
Sindh resulted in destruction of minor crops.
Livestock witnessed a marginally higher growth of 4.04 percent
against the growth of 3.97 percent last year.
Fisheries sector witnessed a growth of 1.78 percent against the
growth of 1.94 percent last year.
Forestry recorded growth at 0.95 percent as compared to the
contraction of 0.40 percent last year.
Industrial sector contains 25.4 percent of GDP having sub sectors:
manufacturing, construction, mining & quarrying and electricity and
gas distribution.
Manufacturing Sector registered growth at 3.56 percent compared to
the growth of 3.06 percent last year.
Small scale manufacturing maintained its growth of last year at 7.51
percent and slaughtering growth is estimated at 4.46 percent against
4.38 percent last year.
Large Scale Manufacturing has also witnessed a slight improvement.
It has shown a growth 1.05 percent in July-March 2011-12 as against
0.98 percent last year.
Construction Sector has shown 6.46 percent growth as compared to
negative growth of 7.09 percent in last year.
Mining and Quarrying sector recorded positive growth of 4.38
percent during the year 2011-12 against the negative growth of 1.28
percent last year.
Electricity and gas distribution witnessed a growth of -1.62 percent
against the growth of -7.25 percent last year.
The Services sector has registered a growth rate of 4.02 percent in
2011-12 against the growth of 4.45 percent in the last year. This
performance is dominated by Finance and Insurance at 6.53 percent,
Social and Community Services 6.77 percent and Wholesale and
Retail Trade 3.58 percent. The contribution of transport, storage and
communication is estimated at 1.25 percent.
Private consumption expenditure has increased to 75 percent of
GDP; whereas public consumption expenditures is 13 percent of
GDP. Total consumption has reached 88.35 percent of GDP in fiscal
year 2011-12 as compared to 83 percent in the last fiscal year.
26
Hig
h
ligh
ts
Real private consumption grew at 11.6 percent in 2011-12 as

compared to 3.7 percent last year. Whereas, real government
consumption grew at 8.2 percent in 2011-12 as compared to 5.2
percent last year.
Per capita real income grew at 2.33 percent in 2011-12 as compared
to 1.33 percent growth in last year. In dollar term it increased from $
1258 to $ 1372 in 2011-12.
Total investment has declined from 13.1 percent of GDP to 12.5
percent of GDP in 2011-12 as compared to last year.
Fixed investment has declined to 10.9 percent of GDP in 2011-12
from 11.5 percent of GDP as compared to last year.
Private investment witnessed a contraction of 7.9 percent of GDP in
2011-12 as compared to 8.6 percent of GDP last year.
Public investment as a percent of GDP increased to 3.0 percent in
2011-12 against the 2.9 percent last year.
National Savings are 10.7 percent of GDP in 2011-12 as compared to
13.2 percent in 2010-11.
Foreign Direct Investment in Pakistan stood at $ 666.8 million during
July-April 2011-12 as against $ 1292.9 million last year.
Worker's Remittances has increased to $ 10,876.99 million in JulyApril of 2011-12, as against $ 9,046.61 million in the comparable
period of last year, posted a positive growth of 20.23 percent.
Agriculture
The agriculture growth this year stood at 3.1 percent as compared to
2.4 percent during 2010-11.
Cotton production has increased to 13,595 thousand bales in 201112 from 11,460 thousand bales in 2010-11 showing an increase of
18.6 percent.
Wheat production has decreased to 23,517 thousand tons in 2011-12
from 25,214 thousand tons in 2010-11 showing a decrease of 6.7
percent.
Rice production has increased to 6,160 thousand tons in 2011-12
from 4,823 thousand tons in 2010-11 showing an increase of 27.7
percent.
Sugarcane production has increased by 4.9 percent to 58.0 million
tons in 2011-12 from 55.3 million tons last year.
Gram production has decreased to 291 thousand tons in 2011-12,
from 496 thousand tons in 2010-11 showing a decrease of 41.3
percent.
Maize production has increased to 4,271 thousand tons in 2011-12
from 3,707 thousand tons in 2010-11, showing an increase of 15.2
percent.
In minor crops, the production of mung and potatoes increased by
22.0 percent and 17.5 percent, respectively. However, the production
of chillies, onion and masoor decreased by 78.3 percent, 15.4
percent and 12.8 percent, respectively.
Agriculture credit disbursement of Rs. 197.4 billion during July-March
2011-12 is higher by 17.0 percent, as compared to Rs. 168.7 billion
over the same period last year.
The total availability of urea during Rabi 2011-12 was 3,526 thousand
tonnes comprising of domestic production 2,160 thousand tonnes
and imported supplies of 1,202 thousand tonnes. The total offtake
was 2,710 thousand tonnes, leaving a stock of 800 thousand tonnes
FOCUS SECTION
for next season. Likewise the total estimated availability of urea
during Kharif 2012 will be around 3487 thousand tonnes comprising
800 thousand tonnes of opening stock, 2280 thousand tonnes of
domestic production and 407 thousand tonnes of imported supplies.
The total offtake is estimated around 3200 thousand tonnes during
Kharif 2012 leaving a stock around 287 thousand tonnes.
The Rabi 2011-12 started with 224 thousand tonnes of DAP as
opening stock. The total availability of DAP was 758 thousand tonnes
including 271 thousand tonnes of imported supplies and 263
thousand tonnes of domestic production. The offtake of DAP during
Rabi 2011-12 was about 572 thousand tonnes leaving behind 177
thousand tonnes of opening stock for Kharif 2012.Likewise
estimated DAP availability during Kharif 2012 will be around 838
thousand tonnes comprising 177 thousand tonnes of opening stock,
361 thousand tonnes of domestic production and 300 thousand
tonnes of imported supplies. The estimated demand is around 620
thousand tonnes during Kharif 2012, which reflects comfortable
situation.
Large Scale Manufacturing

During the first nine months of the current fiscal year 2011-12, Large
Scale Manufacturing (LSM) posted a growth of 1.05 percent as
compared to growth of 0.98 percent during the same period last year.
The groups wise showing increase included: Pharmaceutical (10.9
percent), Paper and Board (8.4 percent), Wood Product (7.4
percent), Food Beverages and Tobacco (6.5 percent), Nonmetallic
mineral Products (2.9 percent), Leather Product (1.8 percent) and
Textile (0.8 percent).
Items wise contribution in Large Scale Manufacturing indicates
growth in Generating Sets (143.9 percent), Blankets (109.9 percent),
Electric Transformer (31.2 percent), Heavy Machinery & equipments
(21.0 percent), Sugarcane Machine (19.2 percent), Sugar (15.3
percent), Liquids/Syrups (14.1 percent), Tea blended (13.3 percent),
Tablets (10.7 percent), Jeeps & Cars (8.8 percent), Footwear (6.2
percent), LPG (3.4 percent), Cement (2.9 percent) and Sugar (15.3
percent).
Automotive Industry such as Buses, Cars, LCVs and two/three
wheelers managed significant growth at 23 percent, 9.1 percent, 5.7
percent and 3.1 percent respectively as compared to 24.7 percent,
16.4 percent, 23.3 percent and 12.6 percent during the same period
last year.
Mining and quarrying sector 4.4 percent in 2011-12 as against -1.3
percent last year. The main contribution to this modest performance
came from Chromite, Flourite, Bauxite, Chalk and Natural gas which
posted a positive growth of 591.5 percent, 111.3 percent, 82.2
percent, 82.2 percent and 4.0 percent respectively during the current
financial year.
Fiscal Development
Fiscal deficit is recorded at 5.0 percent during July-March 2011-12 as
compared to 5.5 percent last year.
The government is focused on prudent expenditure management
and better resource mobilization to create fiscal space for providing
support to growth. Additional efforts are being made to manage the
fiscal deficit within the acceptable level through austerity measures
and reforms in public sector enterprises.
The government has also announced various tax policy measures
through Presidential Ordinance to generate additional revenues.
Through a combination of Presidential Ordinance and withdrawal of
SRO base exemptions, amendments have been made in the Sales
Tax Act 1990, Income Tax Ordinance 2001 and Federal Excise Act
2005.
The following tax measures have been taken through these
amendments:i. Levy of 15 percent surcharge on income and advance taxes
ii. Increase the rate of special excise duty from 1 percent to 2.5
percent, however Special excise duty was abolished in 2011-12.
iii. Withdrawal of special regime of assessable price for levy of GST
at 8 percent on actual value of sugar.
iv. Removal of SRO based exemptions from fertilizer, pesticides,
tractor and elimination of zero rating from plants, machinery and
equipment.
v. Restriction of zero rating to registered person for export of
textile, leather, carpets, sports goods and surgical goods.
vi. The withdrawal of exemptions and the left over amount of 15
percent flood relief surcharge contributed an additional amount
of around Rs 50 billion during July-March, 2011-12.
Tax collection by the FBR was targeted at Rs 1952.3 billion for fiscal
year 2011-12. Revenue collections of FBR stood at Rs 1426.0 billion
during July-April 2011-12, thereby reflecting 24.0 percent growth
over Rs 1149.8 billion collected during the corresponding period last
year. Among the four federal taxes, the highest growth 33.7 percent
has been recorded in sales tax receipts, followed by customs 17.7
percent, and direct tax 22.6 percent. It does not include Rs. 19 billion
collected by Sindh province on GST on Services.
For July-April, 2012, direct taxes have been a major source of FBR
tax revenue collection, contributing 37.0 percent of total receipts. Net
collection was estimated at Rs. 528.9 billion.
Indirect taxes grew by 24.9 percent during July-April, 2012 and
accounted for 62.9 percent of the total FBR tax revenue. Net
collection was estimated at Rs.897.2 billion.
Total expenditure of Rs. 3721.2 billion was estimated for the full year,
comprising of Rs. 2976.3 billion of current expenditure (80% of total),
and Rs. 744.9 billion of development expenditure and net lending (20
% of total).
During July-March, 2011-12 total expenditures amounted to Rs
2641.9 billion against Rs 2262.6 billion in the same period last year.
Current expenditures stood at Rs 2154.1 billion and development
expenditures and net lending recorded at Rs 428 billion during JulyMarch, 2011-12.
Total revenues reached to Rs 1747.0 billion during July-March, 201112 against Rs 1495.3 billion in the same period of last year. Within
Revenues tax revenues stood at Rs 1379.2 billion including Rs.
1,321.5 billion of Federal and Rs 57.6 billion of provinces, and non tax
revenues remained at Rs. 367.9 billion during the same period of
fiscal year 2011-12.
Money and Credit

SBP lowered the discount rate by cumulative 200 bps points to 12
percent during first half of fiscal year 2011-12, to assist in boosting
the private sector credit and investment.
Broad Money (M2) witnessed an expansion of 9.09 percent during
July-11th May, 2011-12 as compared to 11.47 percent during the
same period in 2010-11.
Net Domestic Assets (NDA) during July-11thMay, 2012 stood at Rs
880.9 billion against Rs 481.6 billion during the same period last year,
reflecting an increase of 14.89 percent over the last year.
On the other hand Net Foreign Assets (NFA) of the banking system
during the period under review declined to Rs 272.2 billion as
compared to an increase of Rs 181.1 billion in the same period of
2010-11.
The credit to private sector witnessed a net increase of Rs. 234.8
billion during July 2011-11thMay, 2012 as compared to Rs 107.8
billion in the same period last year.
The weighted average lending rate (including zero mark-up) on
outstanding loans stood at 12.80 percent while the weighted average
deposit rate (including zero mark-up) stood at 6.98 percent in March
2012.
27
FOCUS SECTION
Government borrowing from the banking system for budgetary
support and commodity operations stood at Rs 1,003.3 billion during
July-11thMay, 2011-12 as compared to Rs. 506.5 billion in the
comparable period of the last year. Government has borrowed
Rs.442.3 billion from the State Bank of Pakistan, while Rs 642.1
billion borrowed from the scheduled banks.
During July 2011-11th May, 2012 loans for commodity finance
registered a net retirement of Rs 81.6 billion against the retirement of
Rs 101.1 billion in the same period of fiscal year 2010-11. The
retirement was primarily concentrated in the second quarter of fiscal
year 2011-12 as the government released Rs 78 billion to
procurement agencies for the settlement of accumulated subsidies.
During July 2011-11thMay, 2012 credit to public sector enterprises
registered a sharp decline from Rs 10.6 billion in 2010-11 to Rs 142.6
billion.
Capital Markets
The Pakistan Stock Markets remained range bound during first half
with predominately declining trend (9.2 percent). However, the KSE 100 index resumed momentum during the 3rd and 4th quarters of the
FY 12.
The robust performance of Pakistani stock markets during 2nd half of
2011-12 was due to certain encouraging measures like considerable
reduction in discount rate by the central bank during later period of
the first half of CFY and increase in foreign exchange reserves.
Further, the market sentiment was boosted by the promulgation of
the Capital Gain Tax Ordinance.
Under the CGT Ordinance the National Clearing Company of
Pakistan Limited (NCCPL) has been appointed as an intermediary
entity to compute, determine, collect and deposit the CGT on listed
securities. In addition, no question relating to the source/nature of
money will be asked by the tax authorities if the money remain
invested in the stock market for a period of 45 days (till June 30, 2012)
and 120 days (till June 30, 2014) before and after the promulgation of
CGT Ordinance.
The investment by foreign investors in the capital markets during the
period from July, 2011 to March, 2012 depicted a net outflow of US$
176.303 million. This reflects that present bullish sentiments in the
equity markets are due to restoration of the confidence of the local
investors.
The Pakistani Stock markets performed well during the current fiscal
year as compared with the other world indices. This was mainly due
to the steps taken by the current government to boost the confidence
of the equity market investors which includes reforms in the Capital
gains tax, etc.
The Stock Exchanges (Corporatization, Demutualization and
Integration) Act, 2012, was promulgated with the signing of the bill by
the President of Pakistan on May 7, 2012. The demutualization bill
was approved on March 27, 2012, in a joint session of the Parliament.
The demutualization law provides a framework for the
corporatization, demutualization and integration of the stock
exchanges. The law requires the stock exchanges to be
demutualized within 119 days of its promulgation in line with predefined timelines specified for completion of various milestones
involved in the demutualization exercise.
The government conducted seven auctions of Pakistan Investment
Bonds (PIBs) during 2011-12 (Jul-Mar) raising Rs. 159.246 billion.
During the period July - March, 2012 a total of six debt securities were
issued through private placement including two Sukuk Issues of
Rs.108.393 billion by Pakistan Domestic Sukuk Company Limited.
In one of the major moves towards the development of a vibrant debt
market in Pakistan, the Securities and Exchange Commission of
Pakistan has recently approved notification of the Debt Securities
Trustee Regulations (DST Regulations). The main objective of the
DST Regulations is to protect the interests of debenture holders.
28
Inflation
The inflation rate as measured by the changes in Consumer Price
Index (CPI) stood at 10.8 percent during (July-April) during current
fiscal year 2011-12, against 13.8 percent in the comparable period of
last year.
The food inflation on average basis is estimated at 11.1 percent and
non-food 10.7 percent, against 18.8 percent and 10.8 percent in the
corresponding period of last year.
The rise in non-food inflation has resulted from the upward
adjustment in energy, gas, electricity and fuel prices.
Core inflation is estimated at 10.4 percent during July-April 2011-12.
The Wholesale Price Index (WPI) during July-April, 2011-12 on
annual average basis has recorded at 11.2 percent against 21.0
percent last year.
The Sensitive Price Indicator (SPI) recorded at 8.5 percent during
July-April, 2011-12 against 18.1 percent of last year.
The increase in overall inflation has driven by rise in world commodity
and fuel prices, disruption in domestic supply chain by the floods.
However, inflation has been contained during current fiscal year as
compared to last year due to tight monetary policy, better supply
management and regular monitoring of prices and supply chain by
the Cabinet and National Price Monitoring Committee.
Trade and Payments

In absolute terms, exports have increased from $20460 million in
July-April 2010-11 to $ 20474 million in the period thereby witnessing
a growth of 0.1 percent during the first ten months (July-April) of the
fiscal year 2011-12.
Imports during the first ten months (July-April) of the fiscal year 201112 increased by 14.5 percent compared with the same period of last
year, reaching to $33.15 billion.
Worker's Remittances reached to $ 10877 million during July-April
2011-12 as against $ 9046 million in the comparable period of last
year, depicting an increase of 20.2 percent.
Current Account Deficit stood to $ 3394 million in July-April 2011-12.
Services account deficit reached to $ 2,347 million during July-April
2011-12 as compared to $ 1,225 million during the same period last
year.
Financial Account surplus during July-April 2011-12 stood at $ 1200
million as compared to $ 690 million in corresponding period last
year.
Exchange rate of Pak Rupee depreciated by 3.4 percent during JulyApril 2011-12.
Foreign Exchange Reserves stood at $ 16.5 billion at the end of April,
2012. Of which, reserves held with the State Bank of Pakistan stood
at $ 12.04 billion and by banks $ 4.45 billion.
Public Debt
During first nine months of current fiscal year (2011-12), total public
debt registered an increase of Rs.1,315 billion and stood at
Rs.12,024 billion.
Public debt as a percent of GDP stood at 58.2 percent by end-March
2012 as compared to 55.5 percent of GDP during the same period
last year.
The bulk of the increase in public debt in the first nine months of 201112 has been recorded under domestic debt that accounted for 91
percent of the total increase.
The total domestic debt is posted at Rs 7,206.9 billion at the endMarch 2012; representing an increase of Rs.1,190.5 billion in the first
nine months of the current fiscal year.
The domestic debt grew by 19.8 percent in first nine months of
current fiscal year. The focus on deficit financing through internal
sources owing to lower external receipts has been the major cause.
As at the end of March 2012, servicing of the public debt stood at
Rs.719 billion against the budget amount of Rs.1034.2 billion.
FOCUS SECTION
Domestic debt comprises permanent debt, floating debt and
unfunded debt having shares of 21.6 percent, 54.5 percent and 23.9
percent respectively in total domestic debt.
Pakistan External Debt and Liabilities (EDL) stock was recorded at
$60.3 billion as of March 2012. During July-March 2012, $179 million
was added to the EDL stock.
As a percentage of GDP in dollar terms, the EDL was down by 200
basis points in July-March, 2012 compared to fiscal year 2010-11
(28.5 percent) and approximately to 26.5 percent.
Education
According to the Pakistan Social and Living Standard Measurement
(PSLM) Survey 2010-11 and last PSLM 2008-09, the literacy rate for
the population (10 years and above) is 58 percent during 2010-11, as
compared to 57 percent in 2008-09 . Literacy remains much higher in
urban areas than in rural areas and much higher for men than for
women. Province wise data suggest that Punjab leads with 60
percent literacy followed by Sindh with 59 percent, Khyber
Pakhtunkhwa with 50 percent and Balochistan with 41 percent.
The Gross Enrolment Rates (GER) at the primary level excluding
katchi (prep) for the age group 5-9 years at National level during
2010-11 increased slightly to 92 percent from 91 percent in 2008-09.
Amongst the provinces, Punjab shows a marginal increase from 97
percent in 2008-09 to 98 percent in 2010-11. Sindh remained stable
with 84 percent, Khyber Pakhtunkhwa improved from 87 percent to
89 percent and Balochistan declined slightly from 75 percent to 74
percent in 2010-11
The Net primary level enrolment rates at the National/Provincial
(excluding katchi abadies) level for the age group 5-9 years. The
NER at the National level during 2010-11 slightly decreased to 56
percent from 57 percent in 2008-09. Punjab shows a decrease from
62 percent in 2008-09 to 61 percent in 2010-11. Sindh also shows
decrease from 54 percent to 53 percent in 2010-2011, Khyber
Pakhtunkhwa witnessed a decrease from 52 percent to 51 percent
and Balochistan improved from 44 percent in 2008-9 to 47 percent in
2010-11
The overall number of enrolments during 2010-11 were 39900.3
thousands as compared to 38202.0 thousands during the same
period last year. This shows an increase of 4.4 percent. It is estimated
to increase to 41596.5 thousands during 2011-12. The number of
institutes stood at 227.8 thousand during 2010-11 as compared to
228.4 thousand during the same period 2009-10. However, the
number is estimated to increase to 228.3 thousand during 2011-12.
The number of teachers during 2010-11 were 1409.4 thousand as
compared to 1386.1 thousand during the same period 2009-10
showing an increase of 1.7 percent. This number is estimated to
increase further to 1445.0 thousand during the year 2011-12.
A total of 134,118 youth received vocational and technical training
under the President's Funni Maharat Programme and Prime
Minister's Hunermand Pakistan Programme.
HEC is also playing its role in running different scholarship
programmes to enhance the academic qualification at various levels
on merit basis in line with requirement. During the period 2008-12 a
number of 3996 scholarships were awarded under different
programmes,3572 scholars proceeded to avail these programmes
on merit basis and a number of 1650 scholars completed their
studies.
Health and Nutrition

At present, there are 972 hospitals, 4,842 dispensaries, 5,374 basic
health units and 909 maternity and child health centres in Pakistan.
With availability of 149,201 doctors, 10,958 dentists, 76,244 nurses
and 108,137 hospital beds in the country during 2011-12 compared
to 144,901 doctors, 10,508 dentists, 73,244 nurses and 104,137
hospital beds last year, the population and health facilities ratio
worked out 1,206 persons per doctors, 16,426 persons per dentist
and 1,665 persons per hospital bed.
During 2011-12, 30 basic health units and 7 rural health centres have
been constructed, while 15 rural health centres and 35 basic health
units have been upgraded.
4,300 doctors, 450 dentists, 3,000 nurses and 4,500 paramedics
have completed their academic courses and 4,000 new beds have
been added in the hospitals.
9,500 Lady Health Workers (LHWs) have been trained and deployed
mostly in the rural areas. Moreover, some 7 million children have
been immunized and 20 million packets of ORS has been distributed.
In addition to ongoing various health programmes such as cancer
treatment, AIDS prevention, Malaria Control Programme, this year
special focus was given by Federal as well as Provincial Government
to Dengu Epidemic Control Programme.
The total outlay of health sector is budgeted Rs.55.1 billion which
included Rs.26.2 billion for development and Rs. 28.9 billion for
current expenditure which is equivalent to 0.27 percent of GDP
during 2011-12 as compared to 0.23 percent in 2010-11.
Population, Labour Force and Employment

Population of Pakistan is estimated 180.71 million during the year
2011-12. Population Growth Rate is 2.03 percent in 2011-12 while it
was 2.05 percent in 2010-11
Urban population has increased to 67.55 million from 65.3 million in
2010-11 while rural population has increased to 113.16 million from
111.82 million in 2010-11
Total Fertility Rate (TFR) reported 3.4 children per women in 2011-12
as compared to 3.5 in 2010-11.
Contraceptive Prevalence Rate has decreased from 30 percent to 27
percent in 2011.
Life Expectancy rate has increased from 65.8 years to 66.1 years for
female and 63.9 years to 64.3 years for male in 2011-12
Crude Birth Rate has improved from 27.5 per thousand to 27.2 per
thousand and Crude Death Rate has decreased from 7.3 per
thousand to 7.20 per thousand in 2011-12.
Infant Mortality Rate decreased to 69.0 per thousand in 2011-12 from
70.5 per thousand in 2010-11.
The total labour force has increased from 56.33 million in 2009-10 to
57.24 million in 2010-11.
The minimum wage of labour has been increased to Rs. 8,000 from
Rs. 7,000 as announced by the Prime Minister of Pakistan on 1st
May, 2012.
The total number of people employed during 2010-11 was 53.84
million, 0.63 million more than the preceding year.
Total unemployment rate has increased from 5.6 percent in 2009-10
to 6.0 percent in 2010-11.
The number of unemployed people increased from 1.94 million to 2.1
million in Punjab, in Sindh from 0.57 million to 0.70 million in 2010-11.
In KPK the situation is different the unemployed people decreased
from 0.55 million to 0.53 million and in Baluchistan unemployed
people also increased from 0.06 million to 0.07 million in 201011.The unemployment rate is high in Punjab as compared to other
provinces while in KPK unemployment decreased.
Agriculture sector is the largest provider of employment to 45 percent
of total labour force. The employment share by manufacturing sector
has increased from 13.2 percent in 2009-10 to 13.7 percent in 201011. The share of wholesale and retail trade has decreased from16.3
percent to 16.2 percent while, the share of community/social and
personal service sector decreased from 11.2 percent to10.8 percent
in 2010-11.
29
FOCUS SECTION
Informal sector employs 73.8 percent of total labour force in 201011as compared to 73.3 percent in 2009-10.The employment ratio in
rural informal sector is (76.5 percent) is higher as compared to that in
the urban sector (71.2 percent) in 2010-11.
The Government of Pakistan is making sincere efforts to boost
overseas employment. The number of emigrant was 0.36 million in
2010 which has increased to 0.45 million in 2011 which include 0.20
million unskilled, 0.17 million skilled, 0.073 million semi skilled,
0.0030 million highly skilled and 0.0069 million highly qualified
workers.
Transport and Communications

The roads in Pakistan carry over 96 percent of inland freight and 92
percent of passenger traffic and undoubtedly the backbone of
Pakistan's economy.
Pakistan's current road network is about 260,000 km which caters
services to eleven million vehicles of all type.
NHA road network is around 12,000 km, which is merely 4 percent of
the overall road network but takes 80 percent of Pakistan's
commercial traffic.
NHA has completed 12 projects of flyovers, bridges, interchanges
and road up gradation during the last one year at a cost of Rs 19.6
billion.
At present, 46 development projects having length of 2,985 km are
ongoing at a cost Rs 245 billion in different sections/packages. These
projects include construction of roads, river bridges, tunnels,
flyovers, interchanges.
During the current financial year, NHA has launched/ awarded 16
new development projects covering a length of above 500 km
inclusive construction of a number of bridges, flyovers and
interchanges costing Rs. 70,951 million. NHA is simultaneously
constructing 12 Bridges across the rivers. These are; on river
Chenab 4, on rivers Sutlej 2, on river Swan 1 and 5 on river Indus.
Heavy rains and floods severely damaged the Transport and
Communication system during last two years
Preliminary estimates indicate that road network approximately
8,385 km and 190 km railway lines were damaged including bridges
and allied structures.
The telecommunication infrastructure includes damages to cellular
sites, exchange centres, equipment, power system and supporting
civil works is amounting to $1.9 million.
Ministry of Railways has also adopted a Track Access Policy for
private sector participation to operate freight and passenger trains on
Pakistan Railways infrastructure.
Ministry of Railways has created a Real Estate Development and
Marketing Company as subsidiary of Ministry of Railways.
Six factories including Locomotive Factory Risalpur, Carriage
Factory Islamabad, and four Concrete Sleeper Factories in Kohat,
Khanewal, Sukkur and Kotri, are being corporatized for eventual
privatization subject to approval of the government.
Cabinet Committee of Restructuring has approved a restructuring
framework for Pakistan Railways.
During the last financial year, 16 kms of track was rehabilitated on
Pakistan Railways network besides doubling more than 15 kms of
track.
Renovation of Khudian Khas, Usmanwala, Raiwind and Kanganpur
railway stations was carried out at a cost of Rs. 24.0 million to
improve facilities for the passengers.
52 new design passenger coaches were imported from China at a
cost of Rs. 4.1 billion. Remaining 150 passenger coaches will be
manufactured at Pakistan Railway Carriage Factory Islamabad by
June 30, 2013. In addition, 22 passenger coaches have been
30
rehabilitated at Pakistan Railway Carriage Factory Islamabad during

last year.
A new dry port was set up at Prem Nagar near Raiwind industrial
area, Lahore through Public Private Partnership at a cost of Rs.
494.0 million.
Pakistan International Airlines Corporation earned increased
revenue amounting to Rs. 116.02 billion in year 2011 as compared to
107.0 billion last year. A purchase agreement of five Boeings 777 has
been signed.
Two new destinations have been introduced during the year 2011:
Karachi Madina and Quetta Zahedan
Three new routes were introduced during the year 2011: Peshawar Kuala Lumpur, SialkotRiyadh and SialkotDammam.
Karachi Port Trust handled cargo 27.8 million tones during the first 9
months of the current fiscal year.
The consolidated revenues of PNSC group during July-March 201112 were Rs. 6,640 million as compared to Rs. 6772 million last year.
The Corporation intends to acquire four vessels through commercial
loan / joint venture-basis. Acquisition of two vessels is in process,
while two more vessels will be acquired in next financial year.
Total cargo handled on Gawadar port up till now is 4.1 million tones
while Gwadar Port earned total revenue since its start of operation
amounting to Rs. 53.4 million.
Port Qasim Authority handled a cargo volume 19.7 million tones
during July-March 2011-12.
The volume of import cargo during July-March 2011-12 stood at 14.7
million tones, and exports handled 4.9 million tones during JulyMarch 2011-12.
Ministry of Communications has prepared a draft National Transport
Policy which covers all modes of transport sectors i.e. (i) Roads, (ii)
Railways, (iii) Ports & Shipping and (iv) Aviation. This policy also
includes the National Transport Corridor Improvement Program
(NTCIP). This programme has been launched in the country to
revamp the whole transport sector including ports, roads, railway,
aviation etc. and provides a frame work to develop and improve the
North South corridor.
Teledensity of the country has increased by 68.3percent in April
2012, showing 6.7percent growth as compared to the previous year.
Mobile penetration rose 64.9percent in 2011-12 against 60.4percent
in 2010-11 which shows an improvement of 4.3 percentage points in
total teledensity.
Due to mobile substitution, Fixed Local Loop teledensity has been
declining over the years and it stands now at 1.93 percent compared
to 2.1 percent last year showing a decrease of 0.17 percent.
Total mobile subscribers reached 118.3 million by the end of March
2012 as compared to 108.9 million last year.
Subscribers of Local Loop (FLL + WLL) reached at 5.93 million, out of
which 3.10 million belong to FLL and 2.83 million belong to WLL.
Broadband subscribers reached 1.9 million at the end of February
2012.
Revenues of the telecom sector during the 2011-12, standing at Rs.
363 billion compared to the last year 344.2 billion show an increase of
5.4 percent.
In 2011, telecom sector invested US$ 495.8 million with cellular
mobile sector being the major contributor.
In 2011, telecom sector attracted over US$ 79 million Foreign Direct
Investment (FDI) in the country which is about 5 percent of the total
FDI landed in Pakistan in 2011. Auction of 3G licenses is expected
which will bring more FDI in the country.
The Pakistan Telecommunication Authority and the State Bank of
Pakistan have signed a Memorandum of Understanding (MoU) both
FOCUS SECTION
the institutions have shown their interest and commitment in

stimulating mobile banking services in the country.
There has been a cumulative investment of approximately US $ 2.5
billion in the electronic media industry in Pakistan. New jobs to more
than 200,000 people of diversified skills and qualifications have been
provided. In addition, over seven million people have been
accommodated through indirect employment. With the current
growth rate of more than seven percent per annum, it is estimated
that the cumulative investment in the electronic media industry will
reach above $ 3.0 billion by the end of the current financial year.
PBC External Services, broadcast programmes for 08 hrs daily in 11
foreign languages covering Afghanistan, Iran, China, India,
Bangladesh, Nepal and Sri Lanka.
Central Production Units (CPU) produce music, drama, features,
documentaries and programmes for special occasions. CPU has
over 2 million minutes recording in its archives which are being
digitized.
PBC News is putting on air 117 News bulletins daily. These include
National, Regional, External and Local News bulletins besides
resume of National Assembly and Senate. PBC news launched
broadcast FATA News, special news bulletins from PBC Hyderabad
on rain/ flood situation and ongoing rescue and relief activities in
Urdu and Sindhi languages.
Pakistan Post provides services through a network of 12,035 (1,797
urban and 10,238 rural) post offices across the country.
Money Orders of Benazir Income Support Programme amounting to
Rs.16,642.0 million have been paid within prescribed period of time.
55 Small and Smart Express Centres have been set up in the urban
areas.
During the period July-March 2011-12 an amount of Rs. 160,266.9
million has been collected through National Savings Schemes and
earned commission amounting to Rs. 801.3 million during this
period.
Energy
Primary energy supply during current year is 64.52 million TOE
compared to 63.09 million TOE last year thus showing an increase of
2.3 percent. The availability of energy per capita in 2011 remained
0.372 Tone Oil Equivalent TOE compared to 0.371 Tone Oil
Equivalent (TOE) in 2010 posting a positive growth rate of 0.16
percent.
The average crude oil production during July-March 2011-12
remained 66032 barrels per day as against 65997 barrels per day
during the corresponding period of last year, showing an increase of
0.05 percent.
The industrial sector had shown positive growth of 24.2 percent in the
consumption of petroleum products during July-March 2011-12
when compared with last year.
Transport sector surprisingly showed a relative small growth of 3.5
percent in the consumption of petroleum products as consumption of
petroleum product in transport sector remained 6,832.9 million tones
during July-March 2011-12 compared to 6,599.1 million tones during
corresponding period last year.
The consumption of petroleum products in the power sector was
8,139 million tones compared to 8,814 million tones last year which
hampered the growth in this sector, thus posting negative growth of
5.2 percent in this sector.
The gas sector supply increased by 4.9 percent in July-March 201112 as the average production of natural gas was 4236.06 million
cubic feet per day (mmcfd) during this period while it was 4,050.83
million cubic feet per day (mmcfd) in corresponding period last year.
Natural gas in the form of CNG posted a positive growth 10.8 percent
The contribution of Hydel in electricity generation increased to 33.6

percent in 2010-11. Water and Power Development Authority
(WAPDA) remained the main contributor to electricity generation with
48.7 percent coming from this source. Karachi Electricity Supply
Corporation (KESC), Pakistan Atomic Energy Commission (PAEC),
Kot Addu Power Company (KAPCO) and the Hub Power Company
(HUBCO) have 8.3, 3.6, 6.2 and 9.1 percent, respectively.
Independent Power Producers (IPPs) have contributed almost 25
percent.
WAPDA is executing, on priority basis, the projects such as 969 MWNeelum Jhelum, 1410 MW-Tarbela 4th Extension, 7100 MW-Bunji,
4320 MW-Dasu, 740-MW Munda Dam and most mentionable 4500
MW-Diamer Bhasha Dam projects, to cope with the increasing
demand of power.
Almost 96 percent work on the main dam at Mangla, spillway and
allied facilities had been completed and resettlement work is in
progress. Likewise 99.7 percent work on Satpara and 72.1 percent
on Gomal Zam dam has been completed.
Pakistan is one of the beneficiaries of Tetra-partner power import
project under the head of Central Asia-South Asia (CASA-1000)
electricity trade.
The household sector consumed 44 percent of the total electricity
generated followed by industrial (26 percent), government (12.3
percent), agriculture (10.4 percent) and commercial (6.8 percent)
The major users of coal are the cement sector and brick kilns; about
60 percent of total coal is consumed by cement while 39 percent is
consumed by the brick kiln industry during current year as compared
to 62 percent consumption of coal in cement industry and 37 percent
in brick kiln industry last year.
Alternative Sources of Energy

National Grid Code for wind power projects has been amended. Grid
Integration Plan 2010 -2015 for wind power projects is developed by
AEDB to support National Transmission and Dispatch Company
(NTDC).
Productive Use of Renewable Energy (PURE) Project is being
implemented to install 103 hydro power plants in Khyber
Pakhtunkhwa (KPK) and Gilgit Baltistan (GB), with the total cost of
US$ 19.5 million.
AEDB has initiated a program with the assistance of Deutsche
Gesellschaft fr Internationale Zusammenarbeit (GIZ) to assist the
provinces to solicit private investments in small hydro sector; under
this program pre-feasibility study for 25 hydro sites in AJK, Sindh,
Punjab and KPK with the cumulative capacity of 284.14MW has been
completed. Public sector Hydro power projects are initiated in ( a )
KPK (worth U$ 150.99 Million, of 17.0MW, 36.6MW and 2.6 MW), (b)
Punjab (worth U$ 138.74 Million, of 5.38MW, 4.04MW, 2.82MW, 4.16
MW and 7.64MW) and (c) Gilgit Baltistan (worth U$ 71.12 Million, of
26MW and 4MW.
AEDB has issued a LoI to set up a 12MW Biomass to Energy power
project in Sindh, based exclusively on Biogas / Agricultural Waste.
The project is jointly sponsored by investors from US and local
entrepreneurs, the SSJD Bio Energy. Another LoI has been issued to
M/s Lumen Energia Pvt Ltd. to set up a 12MW power plant at Jhang
based on agricultural waste like cotton stalk, rice husk, sugarcane
trash, biogas, wheat chaff and other crops as multi-fuel sources
Three thousand Solar Home Systems have been installed in 49
villages of district Tharparkar, Sindh. Another 51 villages in Sindh and
300 villages in Balochistan have been approved for electrification
using solar energy and will be implemented.
Social Safety Nets

Sanitation situation at household level has registered an
31
FOCUS SECTION
improvement, in terms of 66 percent of population using flush toilets

compared to 63 percent in 2008-09.
Benazir Income Support Programme launched by the government
with the primary objective of providing immediate relief to poor. It has
made remarkable progress by providing much needed relief to over 4
million recipients including Internally Displaced Persons, flood
affectees and bomb blast victims all over Pakistan.
Rs 122 billion up to March, 2012 have been disbursed to its
beneficiaries. BISP has an allocation of Rs 50.00 billion for the fiscal
year 2011-12.
BISP recipients are expected to be increased to 7 million once the ongoing processing of data collection during the nation-wide poverty
scorecard targeting survey is completed.
BISP has launched a number of programms of society safety
including (i) Payment to Recipients, (ii) Graduation Initiatives, (iii)
Waseela-e-Haq, (iv) Waseela-e-Rozgar, (v) Waseela-e-Sehat and
(vi) Waseela-e-Taleem.
Pakistan Poverty Alleviation Fund is dedicated for micro credit,
enterprise development, community based infrastructure and energy
projects, livelihood enhancement and protection, social mobilization,
and capacity building. The overall disbursements for core operations
during the period of July- December 2012 are Rs. 8,490 million.
Pakistan Bait-ul-Mal is making a significant contribution in poverty
reduction by providing assistance to destitute, Widows, Orphans,
and other needy. Rs. 1777.5 million has been utilised upto February
2012 on various schemes.
Zakat funds have been utilized for assistance to the needy, indigent,
poor, orphans, widows, handicapped and disabled. Up to March,
2012 Rs. 7800.268 million have been distributed in bulk amongst the
provinces.
Peoples Works programme (PWP) I & II are providing electricity, gas,
farm to market roads and other services to the rural poor. PWP-I & II
incurred expenditures of Rs. 5.0 billion and Rs 21.3 billion during
2010-11 respectively where as Rs 2.2 billion expenditure have been
incurred between July-December 2011-12 on PWP-I and Rs 2.9
billion expenditures on PWP-II.
Employees Old Age Benefits Institution provided benefits to the old
age workers through Old Age Pension, Invalidity Pension, Survivors
Pension and Old Age Grants and Rs. 7961.2 million has been utilized
during July- March 2011-12.
Workers Welfare Fund utilised Rs. 2539 millions during July-March
2011-12 for housing facilities and Marriage Grant, Death Grant and
Scholarships etc. for the industrial workers.
Government has also taken various micro-finance initiatives in
collaboration with all stakeholders to generate employment
opportunities and to eliminate poverty.
Environment
A number of projects have been funded by the government to deal
with increasing environmental degradation. In addition, there are
number of projects funded by the donors in which the government is a
partner. These are being currently implemented to improve overall
environment in the country.
Climate change is an area that has become increasingly important in
recent years. In this regard, the National Climate Change Policy
2011 provides a framework for addressing the issues that Pakistan
faces or will face in future due to the changing climate. The goal of
the policy is to ensure that climate change is mainstreamed in the
economically and socially vulnerable sectors of the economy and to
steer Pakistan towards climate resilient development.
Urban air pollution remains one of the most significant environmental
problems, facing the cities. A substantial body of research
32
demonstrates that high concentrations of suspended particulate

matter adversely affect human health; prolong a wide range of
respiratory diseases and increased the probability of heart ailments.
The higher concentration of suspended particulate matter (SPM) in
the air is a major issue in Pakistan. The main sources of SPM are
vehicular emission, industrial emissions, burning of Solid waste,
pollens, brick kilns and natural dust. Motorcycles and rickshaws, due
to their two stroke (2-strokes) engines, are the most inefficient in
burning fuel and contribute most to emissions.
The situation of access to drinking water is quite impressive in
Pakistan. According to Pakistan Bureau of Statistics report (PBS)
Pakistan Social and Living Standards Measurement (PSLM) Survey
2010-11, access to drinking water to urban and rural population of
Pakistan is 94 and 84 percent, with an average of 87 percent in 2011.
In Pakistan sanitation facilities are improving. However, much
improvement is needed for rural areas sanitation facilities. According
to PSLM Survey 2007-08,the garbage collection facilities to the
population is only 14 percent done through municipalities, 7 percent
through privately managed and remaining 79 percent have no
system.
According to a report released by the WHO/UNICEF Joint Monitoring
Program (JMP) 2012, 92 percent people had gained access to
drinking water in Pakistan by 2010 while this ratio was 85 percent and
89 percent in 1990 and 2000 respectively. The MDG target is to
achieve the ratio of 93 percent by 2015. Moreover, 48 percent people
have been using improved sanitation by 2010 while this ratio was 27
percent and 37 percent in 1990 and 2000 respectively. The MDG
target for access to sanitation is 90 percent by 2015.
Damage and Need Assessment Report jointly prepared by the Asian
Development Bank and the World Bank regarding floods 2011, it has
been pointed out that in addition to causing loss of life, displacement
of millions, and huge losses to the economy, the floods in 2011 have
also resulted in environmental damages, heightened environmental
health risks and affected forests, wetlands and other natural
systems.
The Environmental damage caused by floods has been estimated at
Rs. 2762.7 million (US $ 31.8 million) and Environmental
recovery/reconstruction needs has been estimated at Rs. 2873.6
million (US $ 33.02 million).
Flood Impact Assessment

Severe monsoon rains triggered floods in Southern Pakistan at an
unprecedented scale, both in terms of volume and intensity,
engulfing all 23 districts of Sindh Province and adjoining areas of
northern Balochistan Province.
Approximately, 9.6 million people were affected in Sindh and
Balochistan as a result of the floods; 520 people died and more than
1180 people were injured.
According to World Bank and Asian Development Bank report,
27,000 sq.Km area damaged in Sindh province out of the total 27,370
sq. Km.
The flood caused total or partial damages to an estimated 998,376
housing units in Sindh and Balochistan.
The highest damage occurred in the agriculture, livestock and
fisheries sector, has been estimated at Rs.160 billion (US$ 1.84
billion).
The total damage caused by 2011 floods has been estimated [direct
damage and indirect losses] amounting to Rs.324.5 billion (US$ 3.7
billion).
The total cost of recovery and reconstruction needs has been
estimated at Rs.239 billion (US$ 2.7 billion).
Source: www.finance.gov.pk
MERITORIOUS ARTICLE
Wheels of Change
Finance and accounting outsourcing has already had a major impact on finance
business partnering and analytics, but as we broaden our understanding of the
issues, FAO itself is growing more complex. CIMA's Martin Fahy and Chris Fuller
look at how market leaders are ushering in a second wave of FAO, and gradually
moving towards a new paradigm: knowledge process outsourcing
By Chris Fuller and Martin Fahy

This is one of the Articles of Merit, judged as such under Professional Accountants in Business - Articles
of Merit Programme 2008, for distinguished contributions to Management Accounting, established by
the Professional Accountants in Business Committee (PAIB), (under its former name of FMAC) of IFAC.
Offshore
Nearshore
Onshore
t is now 15 years since BP in Aberdeen signed the first finance

agreements or were in the process of moving to FAO. This
and accounting outsourcing (FAO) deal with what was then
research, along with previous work, provides the basis for
Andersen Consulting (now Accenture). Since then, FAO has grown
examining the role FAO has played in facilitating finance
to become an established part of the finance transformation
transformation and its emerging position in support of effective
landscape and an increasingly widely adopted component of
business partnering.
finance restructuring in large multinational organisations. In the last
From captive shared service centres to
12 months, Unilever, Cadbury Schweppes, Lindt, Diageo, GSK
transactional FAO
and other large multinational firms have all embarked on FAO
projects.
Finance functions are faced with the dual challenge of meeting an
increasing compliance burden and reducing finance costs to the
To date, FAO has been viewed as a mechanism to reduce finance
world-class benchmark of less than 0.75% of revenues. While
transaction processing costs by moving structured operational
single instance enterprise resource planning, single global
tasks, such as accounts payable and other lower-skill activities, to
processes and captive shared service centres have played an
lower-cost offshore locations.
important
role in achieving these conflicting objectives, CFOs are
While the move towards FAO has been driven by labour arbitrage
increasingly looking to a small number of global finance and
around low skilled processes such as purchase to pay, order to
accounting outsourcing vendors to provide a quicker route to the
cash and fixed assets, our research suggests that FAO is rapidly
necessary efficiencies and associated cost savings.
moving up the finance value chain, and leading firms are now
The earliest attempts at reducing finance costs consisted of captive
moving beyond traditional FAO towards knowledge process
finance and accounting (F&A) delivery centres, where firms
outsourcing (KPO).
established regional and or global service delivery centres, which
Under this approach firms are leveraging the substantial pools of
they operated themselves (see Figure 1).
highly educated business graduates in countries such as India,
Typically, these centres focused on purchase to pay, finance and
Malaysia, Central Eastern Europe and China to move value-added
accounting, travel and expenses, and general ledger processing.
finance business partnering type activities to lower-cost and,
crucially, more effective locations.
This is a significant departure from the
Captive
Non-Captive
buy-side market perception that only
structured operational transaction
Accenture for Thomas Cook and Microsoft
processing can be moved to FAO
Most shared service Centres
IBM for Roadchef
delivery centres. The growing
e.g.. 3M, Eaton, RBS, Nestle, Michelin (UK)
Capgemini for Blue Scope Steel
confidence in vendor domain expertise
goes some way to exhausting the
arguments of those who believe that FAO
Accenture for Radia (Prague)
is a passing fad. The experience of a
Genpact for GSK (Bratislava)
Diageo, Allied Signal, Phillips
small group of leading firms suggests
Typically CEE
Capgemini for Dairy farm
that firms will out source higher-level
HP for P & G (Barcelona)
analytical and finance business
partnering roles to FAO delivery centres
Accenture for Unilever (India)
in near- and offshore locations. During
Reuters (India)
WNS for Aviva/CGNUA (Sri Lanka)
2006 we conducted structured interviews
and Caltex (Manila)
Genpact for CS (Chennai)
with FAO analysts, business process
outsourcing (BPO) vendors and 25
Shared services space
BPO Space
senior finance professionals from large
organisations that have entered FAO Figure 1: The finance transaction processing landscape
33
MERITORIOUS ARTICLE
Specific Company/Unit
Generic/Cross-Company
Leverage Potential
Within a relatively short period of time, large multinationals began

shared services for the quick wins provided by FAO providers. The
to look to (non-captive) vendors such as Accenture, IBM, Genpact,
move directly to FAO was driven by a number of considerations,
Capgemini and WNS to take responsibility for the core F&A
including:
transaction activities. These vendors quickly established a global
the lack of resources and focus for taking internal
network of multi-shore delivery centres in cities from Chennai to
improvement to the next level of performance
Krakow to Dalian.
competitive pressures driving overall margins down,
The adoption of FAO was motivated by wider finance
particularly when faced with the threat of private equity
transformation objectives, which, according to outsourcing
investors
advisory company Equaterra, included:
a lack of capital to renew or extend enterprise resource
guaranteed operational cost savings through economies of
planning (ERP) and other technology investments
scale and scope and access to low-cost global labour, with
wider organisational changes in the form of mergers and
savings typically stated at 20-40% on a seven to ten-year
acquisitions, divestitures, contraction and growth
basis
the need to focus on value-added business partner activities
improved quality of service delivery
in the face of increasing regulatory pressures.
improved cash flow/working capital savings
In assessing their suitability for outsourcing, firms divided F&A
avoidance of the capital expenditure required to make
processes and activities into the following categories (see Figure 2):
individual, company process-based
improvements and technology
upgrades
How Process Contribute Value
accelerated transformation to best
Management involvement
in class service delivery through
knowledge transfer
Standardisation/efficiency/defined service
access to service providers'
intellectual capital, best practices
STRATEGIC
and competencies
SITE
accelerated ongoing improvement
Financial analysis
Inventory accounting
improved performance
Financial
planning
Cost/plant accounting
management and measurement of
Management
reporting
services with increased visibility
Sales/marketing accounting
and clarity across companies
Budgeting/forecasting
Project accounting
Credit policy
increased controls and
accountability, and process and
cost structure adaptability to
CONSULTATIVE
TRANSACTIONAL
changing business conditions
Accounts payable
enhanced ability to focus on core
Tax
Travel and entertainment
businesses and processes.
Internal audit
Fixed assets accounting
Accepted wisdom suggested that firms
Risk management
Accounts receivable/collection
should move sequentially from a
Treasury management
General and inter company accounting
geographically distributed finance
Consolidations
Cash application
External and statutory reporting
operation into shared services and
Banking and cash management
Regulatory reporting
selective FAO. By 2005, a number of
Billing
firms were willing to trade the savings
captured from the intermediate step into
Figure 2: F & A processes and their suitability for outsourcing under first-wave FAO.
34
MERITORIOUS ARTICLE
pure transactional, first-level
customer service and issue-resolution
processes that can be leveraged
across the company, offering the best
opportunity for outsourcing
processes that involve higher-level
issue resolution and escalation are
fringe candidates for outsourcing and
often depend on the degree of
standardisation and systemisation
governance, policy-setting and highend strategy and planning processes
(rarely outsourced).
From transactional FAO to

value-added analytics
Three years ago
Today's market
Immature BPO market,

limited choice of service providers
Maturing market, increased

service provider choice
Sole source or ad hoc contracting
Rigorous competitive selection
Discount off baseline pricing
Move to unit/volume pricing
Detail of delivery determined
Greater service delivery model
post-contract
definition up front
With the march towards FAO gaining
momentum, it is important to address the
question of how much of the finance
function we can conceivably out source.
Service providers looking to acquire
Service providers trying to fill existing
processing capability
capacity and facilities
While the vast majority of FAO deals to date
have focused on low-skilled processes,
more innovative firms are embracing
outsourcing across a much wider range of
Little/no ongoing relationship
Development of sophisticated
finance activities and processes. Our
management capability in clients
governance and RM organizations
research indicates that a small number of
leading firms have already moved beyond
the transactional focus to higher-level
Providers offering ill defined reliant
Increased standard offerings available
analytics and activities traditionally viewed
on as is client processes (custom)
(sem-custom)
as too strategic or complex to out source.
Our investigations show that successful
experience of FAO has encouraged firms to
Figure 3: Growing maturity of the FAO market.
extend the scope of FAO contracts into the
KPO space and include F&A processes or
shortcomings in data and systems delivery can be overcome using
activities which have traditionally fallen under the business
labour cost arbitrage.
partnering heading. We are now seeing the transfer of
2. KPO is initially targeting structured institutionalised
management accounting activities such as variance analysis,
analytics and reporting.
costing and other reporting to non-captive FAO delivery centres.
In
cases
where the analysis to be carried out is highly specifiable,
While KPO remains the exception rather than the rule, the
firms are willing to transfer the production of this analysis and
experience with FAO in the past suggests that the trend towards
reporting to BPO/KPO providers. Examples of this type of work
outsourcing more value-added finance and accounting activities is
include costing, inventory accounting, pro forma scorecard
likely to become mainstream within five years. The key features of
production, cost budgets and other forms of traditional
this second wave of FAO are as follows:
management accounting. The burden of extracting information
1. Data cleansing/data scrubbing in support of
from ERP applications, using data marts and business
warehouses, is transferred to BPO teams who have in-depth
analytics is often the starting point for KPO.
knowledge of the technology and data architectures. The data to
Many organisations find themselves data rich but information-poor.
desktop
reporting process is then enabled using web-based portal
Our study supports the notion that the single biggest constraint on
reporting.
improved financial analysis is the lack of clean reliable data.
Multiple enterprise resource planning instances and poor data

capture have led to a situation where much of the effort in business
partnering by finance staff is directed not at analysis but in manually
extracting and scrubbing data from underlying operational
systems. Discussions with finance professionals indicate that in
future they will look to outsource this cleansing to BPO providers
who have already taken over the transactional activities associated
with the data. Using this model, self-service access to clean data for
financial analysts and others in the business units will be met by
teams from BPO providers who will prepare data cubes and decks
which the business units can then analyse. With this approach,
3. KPO is driving harmonisation of

management accounting and business
analytics.
As firms seek to exploit the service of BPO/KPO providers, there is
a strong economic argument for the global harmonisation of
management accounting and reporting/analysis processes. Fixed
price, volume-based charging for these services encourages firms
to stop, simplify and standardise much of their reporting and
management accounting activities.
35
MERITORIOUS ARTICLE
4.
KPO providers bring the discipline of process

improvement to the business partnering space.
Just as they have used Six Sigma and process redesign to achieve
breakthroughs in process improvement, BPO/KPO providers are
now applying these techniques to the analytics space. This is
leading to an industrialisation of many extraction, classification,
filtering and reporting activities that make up business partnering.
In time, we are likely to see world-class business partnering
processes being embedded in the emerging corporate
performance management and business intelligence technologies.
5. KPO is unlikely to deliver context specific

analytics close to the market.
While BPO/KPO providers will have a cost and size advantage in
the areas outlined, it is unlikely that this will extend to contextspecific and unstructured ad hoc analytics associated with
optimizing and configuring the business model. In the case of
analytics to support brand and marketing effectiveness, strategy
and product introduction, the highly context-ualised nature of the
knowledge needed to support these decisions will erode any labour
arbitrage. As global firms have discovered in the war for talent,
world-class business analysts come with a world-class price tag,
regardless of where they originated.
Key challenges for CFOs

CFOs will need to take proactive steps to ensure that their
organisation can capitalise on the emerging second wave of FAO.
They will also need to ensure that they have the capability to put in
place agreements that go beyond the traditional transactional
scope that has defined FAO to date. The specific challenges which
CFOs need to address in building that capability include:
developing a knowledge and understanding of the role of FAO

in the emerging regional and global finance architectures
which firms are seeking to put in place
understanding which finance processes are appropriate for

second-wave FAO and which activities will need to remain
embedded in the business
having a comprehensive understanding of the different

offerings available from FAO vendors and the value
proposition under which these vendors operate
having the sourcing, contracting and negotiating skills to put in

place collaborative agreements that are sustainable and
flexible for both the firm and the vendor
devising effective risk management approaches to ensure

that FAO does not undermine the firm's compliance,
performance and corporate social responsibility obligations
developing governance and relationship management

frameworks, including service level agreements, key
performance indicators and performance management
incentives, that drive value for both the firm and the vendor
focusing on creating viable long-term relationships with the

vendor that reduce adversarial behaviour and encourage
sharing of information and efficiency gains
working with specialist outsourcing and legal advisers who

understand the intricate details of outsourcing contracts,
statements of work, due diligence and the other elements
needed to put in place a working agreement.
36
FAO trend set to continue

It is clear that second-wave FAO will continue the trend towards
smaller business unit finance teams as more business partnering
activities are outsourced to FAO providers. While the majority of
firms will move slowly towards FAO for finance transaction
processing, leading firms will leap ahead to exploit the extensive
educational talent available from offshore delivery centres.
As labour arbitrage on transaction processing is eliminated, FAO
providers will, through the deployment of technology and process
improvement, seek to divert the increasingly expensive labour
resources to higher valued-added analytical work. In doing so,
finance will follow the established KPO model of other professions.
In the long term, culture and the other barriers to effective
outsourcing of analytical tasks will be overcome and firms will seek
to source finance business partnering from a network of global
delivery centres.
The changing face of FAO

Cost savings continue to be the main motive for global
sourcing strategies. Quality and flexibility are increasingly
important drivers.
Simple labour arbitrage is no longer sufficient to sustain
outsourcing. There has been a move towards skills,
capabilities and availability of resources.
Experience on both the buy and sell side is now allowing for
greater sophistication and clarity of sourcing decisions and
contract management.
Decision-making and understanding and managing the
operational risk of outsourcing and offshoring, are beginning
to reach maturity, allowing firms to trade off the expense of
outsourcing and offshoring against the superior skills and
lower costs available offshore and from third parties.
Core and non-core processes are being componentised.
Financial services firms are beginning to use
componentisation to simplify complex business processes
the act of deconstructing complexity allows activities to be
performed by individuals with specialist skills.
Componentising a process minimizes investment in
knowledge transfer and training, and lends itself to multiple
sourcing options.
Lean manufacturing concepts are being adopted to identify
efficiencies.
The process of componentisation is enabling firms to adopt
a global services sourcing model, establishing competencybased centres optimizing cost, quality and skills offered by
selected geographies.
Market commodification is forcing firms to evaluate their
operational models, leading to a shift away from productfocused towards process focused strategies.
Supplier experience has grown with the marketplace,
allowing suppliers to produce better offerings. The result is
lowered risk to buyers and suppliers adding more value
through new tools and technology.
It is interesting to note that Sarbanes-Oxley concerns are no
longer an issue. In 2002 companies were worried about
sending work offshore and meeting the reporting
requirements of the Sarbanes-Oxley Act. Company
executives, who faced jail-time if they could not certify their
financial results, were not eager to outsource these functions.
MERITORIOUS ARTICLE
Many US companies took a waiting brief towards FAO. By

the end of 2004 the marketplace had resolved these issues,
with outsourcing now viewed as offering the potential to
improve control and reporting, making it easier to comply with
the requirements of Section 404 and other provisions.
The variety of sourcing options available to companies
today is in stark contrast to the scope of contracts negotiated
ten years ago; experience gained by both buy and sell sides is
now allowing for greater sophistication and clarity of sourcing
decisions and contract management.
WNS & AVIVA: second-wave FAO in action

Aviva is the world's fifth largest insurance group and the largest
insurance services provider in the UK. It has premium income and
investment sales of 36 billion and 332 billion of assets under
management, a presence in more than 25 countries and 35 million
customers.
Aviva has embraced outsourcing and offshoring as a means of
addressing the competitive pressures it faces. By the end of 2007 it
will have offshored 7,800 roles across five locations. As part of its
global BPO capability, it has established, in partnership with WNS,
an offshoring centre in Colombo, Sri Lanka for its F&A activities.
This centre was established in 2003 and will be managed by WNS
until July 2007 when the staff and operation are due to be
transferred back to Aviva.
The operation began as a traditional first-wave FAO centre with a
focus on transaction processing. Early on, management acted to
bring more value-added, analytical activities into the centre. By
2005 100 staff were supporting management accounting, planning
and forecasting, project analysis and related activities; by 2006 this
had extended to the preparation of full statutory accounts and
business partnering across the group.
Outsourcing: glossary of terms

Business process outsourcing (BPO)
BPO can be seen as a process in which a company delegates some
of its in-house operations or processes to a third party.
Business warehouse
A business warehouse is a packaged, comprehensive business
intelligence product centred on a data warehouse. Like most data
warehouses, a business warehouse is a combination of databases
and database management tools that are used to support
management decision-making.
Component business modelling (CBM)

CBM simplifies the way firms look at their operations; it allows
executives to escape the process rut and helps them get at the real
sources of value that drive their firms. Viewing business activities
as autonomously managed components helps decision-makers to
cut through the historical boundaries that build up along
organisational, product, channel, customer, geographical and
informational lines.
Data cubes
A data cube is a multidimensional representation of data which
provides fast retrieval and drill down facilities.
Data marts
A data mart is a repository of data gathered from operational data
and other sources that is designed to serve a particular community
of knowledge workers. The emphasis of a data mart is on meeting
the specific demands of a particular group of knowledge users in
terms of analysis, content, presentation and ease of use.
Domain expertise
Domain expertise is knowledge and experience that has been
acquired through a thorough track record that comes to represent
the core competencies of the organisation.
Enterprise resource planning (ERP)

ERP attempts to integrate all data and processes of an organisation
into a unified system. A typical ERP system will use multiple
components of computer software and hardware to achieve the
integration. A key ingredient of most ERP systems is the use of a
unified database to store data for the various system modules.
Finance and accounting outsourcing (FAO)

Many companies are now choosing to outsource elements of their
finance and accounting processes to third-party vendors. The basic
premise is that by outsourcing these operations companies will
achieve cost savings and be able to focus more on their core
competencies.
Knowledge process outsourcing (KPO)

KPO is a form of outsourcing that sits at a higher level on the
intellectual value chain than BPO. KPO involves processes that
demand advanced information research, analytical, interpretation
and technical skills, as well as some judgment and decisionmaking.
Lean manufacturing
Lean manufacturing is a management philosophy focusing on
reduction of wastes with attention focused on transportation,
inventory, motion, waiting time, over production, over processing
and defective product. By eliminating waste, quality is improved
and production time and costs are reduced.
Market commodification
Commodification is a process that transforms the market for a
unique, branded product into a market based on undifferentiated
price competition.
Sarbanes-Oxley section 404

Section 404 requires that companies subject to the reporting
requirements of the Securities Exchange Act of 1934, other than
registered investment companies, include in their annual reports a
report of management on the company's internal control over
financial reporting.
Web-based portal reporting

Web-based reporting tools enable enterprise-wide reporting,
information delivery, analysis and decision-making. Some
applications support distribution of reports within departments,
across enterprises and may also be integrated within web-based
applications to deliver back-end core reporting information and
front-end information analysisn
Chris Fuller is a Member of CIMA's International Development team, based in
London. This role involves research and analysis of trends in the finance
transformation, shared services and BPO/FAO sectors. His most recent work
involved a major study of the challenges facing CFOs in the Asia Pacific region.
Martin Fahy was Director of Development for CIMA Asia Pacific. He is a Fellow
of the Institute of Chartered Accountants in Ireland and holds a PhD in Business
Information Systems from University College Cork, Ireland. He is a recognised
thought leader in the areas of shared service/BPO and finance transformation.
He has written extensively on the areas of shared service, ERP systems and
emerging issues in finance. His most recent books include Beyond
Governance, ERP: Levering the Benefits (a joint venture with CIMA and PWC),
Strategic Enterprise Management Systems and Shared Services: an executive
briefing (co-authored with Andrew Kris).
37
ARTICLE SECTION
Enterprises Governance:
Best Practices in SAFA Region
By Prof. Dr. Khawaja Amjad Saeed, FCMA, FCA
SAFA
South Asian Federation of Accountants is a regional apex body of
SAARC with its specialized role as Professional Body in the area of
Accounting, Finance, Economy and related subjects. At present,
statutory recognition has been given to some Chartered /
Management Accountants Bodies in five countries namely;
Bangladesh, India, Nepal, Pakistan and Sri Lanka. It is expected
that in future Maldives, Bhutan and Afghanistan will also develop
their statutory Professional Accounting Bodies and consequently,
the scope of SAFA will be enlarged.
Constituents
This paper has been divided into the following parts:
Part
I
II
III
IV
V
Focus
Concept of Enterprise Governance.
Brief Historical Background.
Best Practices on Corporate Governance of South Asian
Countries: A Comparative Analysis.
SAFA Countries Focus.
Charter for Enterprise Governance: Suggested Strategic
Initiatives.
Part-I: Concept of Enterprise Governance

Good Governance is the crying need at various levels including
global, regional, macro, micro and enterprises. The role of
Professional Accountants in general ought to focus on socioeconomic development of the country but in particular they must
concentrate on Enterprise Governance which is popularly known
as Corporate Governance. Therefore, wherever the term
Corporate Government is used, it may be taken
to mean Enterprise Governance.
This paper looks at Enterprise Governance with its
Best Practices to be operationalized in SAFA
Region with strategic dimension.
Concept of Enterprise Governance

Several definitions are available in respect of
Enterprise Governance. However, we have
included the definition by OECD which is quoted
below:
Corporate Governance Comprehends that
structure of relationship and corresponding
responsibilities among a core group consisting of:
38
Shareholders
Board Members
Corporate Managers
designed to best poster the competitive performance required to

achieve the corporation's primary objective.
Part-II:Brief Historical Background

It may be of significant interest to refresh ones memories by having
a brief historical rundown in respect of rise of Enterprise
Governance in the world. SAFA region had a great influence from
United Kingdom in the past. Tt is pertinent to mention that some
developments which have served as a background and a source of
motivation for developing Enterprise Governance in SAFA region
are briefly summed up here. In this respect, in the early 1990's
Cadbury Committee was set up in UK and they presented their
report in the following four areas:
1.
2.
3.
4.
Board of Directors (BOD).

Non-Executive Directors.
Executive Directors.
Reporting & Controls.
Further in 1995, Hamphel Committee was set up in United

Kingdom and their report was released in January 1998 with its
scope extending to seven areas mentioned below:
1.
2.
3.
4.
5.
6.
7.
Principles of Corporate Governance.

Application of Principles.
The Future.
Directors.
Directors Remuneration.
Shareholders and the AGM.
Recommendations
Hong Kong has also been ranked by the World Bank as the top
scorer through World Governance Index. It may be stated that it
scored 99% in Regulation, 92% in Corruption and 90,5% in Rule of
Table No. 1:
Hong Kong: Strengthening Enterprise Governance
Compliance
Matters to be identified
Board
Same family members not to have more than 50%
CFO
Mandatory for appointment
AGM
Attendance record was made mandatory
Board Meeting
Frequency of four Compulsory every year, six

preferred.
Auditors Other Fees
Separate disclosure
Annual Report
Separate Disclosure on: Corporate Governance
Audit Committee
Be established with Defined Functions
Interim Report
Be released. Scope: Balance Sheet, Income

Statement and Cash Flow Statement
10 Auditors
To Review No. 9 above

ARTICLE SECTION
Law giving it the top position as per No. 1 in Block-A in the above
Index. In this respect, Various working groups work in Hong Kong
and the Accountancy Professionals made significant contributions
for strengthening the frontiers of Enterprise Governance. The
following Table summarizes the position:
Part III: Best Practices on Corporate Governance of

South Asian Countries: A Comparative Analysis
respective regulatory agencies. This spirit needs to be kept up and

accelerated so that improvement is ensured in Enterprise
Governance as an on-going process to maintain the spirit of
Kaizan.
However, with due acknowledgement to the foregoing work, a brief
review, based on downloaded material from internet, is presented
now relating to five SAFA Countries.
60%
50%
40%
30%
20%
No response
Shareholders
Management
Remuneration
Committee
0%
Report on
Corporate
Governance
10%
Board procedures
SAFA member Accounting Professional Institutes have

done an excellent work in the past in collaboration with
70%
Shareholders
Grievance
Committee
Part-IV: SAFA Countries Focus
80%
Audit Committee
There is a need to review the foregoing document,

update and develop it to share the experiences of
Enterprise Governance in SAFA region. It is suggested
that SAFA may commission this study and with its
available resources, finalize it so that a broad framework
for Enterprise Governance is developed for the
guidance of stakeholders.
90%
Board of
Directors
Countries selected for the above assignment included

Bangladesh, India, Pakistan and Sri Lanka.
Percentage of companies to which applicable
Bangladesh
The above project was conceived by SAFA in its 54th Assembly
Meeting held on July 17, 2004 at Kathmandu, Nepal. Pakistan was
Readers are suggested to study working paper series No. 2
assigned the duty of completing this assignment in collaboration
entitled: State of Corporate Governance in Bangladesh released
with eight bodies from SAFA region. The objective was to identify
by Centre of Research and Training of East-West University,
areas that needed further improvement and develop The Best
Dhaka in September 2007. An excellent analysis has been carried
Practices that should be followed in SAFA region by Public Interest
out in this research study with focus on Corporate Governance
Entities (PIE). Based on work, the assignment was completed and
Best Practices and Guidelines relating to public limited companies
approved in the 58th Assembly Meeting of SAFA held in New Delhi,
(financial and non-financial institutions) and State Owned
India on September 03, 2005. This document is available on the net
Enterprises (SOEs).
and was released by the President of Institute of Chartered
India
Accountants of Pakistan on January 10, 2007. This document has
two parts. The first one is a descriptive review in dealing with ten
An excellent paper entitled: Corporate Governance in India:
topics namely; Board of Directors, Oversight and Management of
Evolution and Challenges, released by College of Management,
the Company, Orientation and Training of Directors, Performance
Georgia Tech, Atlanta, USA contains informative and useful
and Evaluation of the Company, Remuneration Committee,
material. It is interesting to note that besides, the excellent work of
Nominating Committee, Audit Committee, Disclosure of Interest of
Institute of Chartered Accountants of India, several committees
Directors and Executives holding company's shares, Annual
have done remarkable work. These recommendations are by CII
Report and Relationship with the shareholders. The second part
Code Recommendation (1997), Birla Committee (SEBI)
presents a Comparative Analysis of the Corporate Governance
Recommendation (2000), and Narian Murthi Committee (SEBI)
framework in South Asian countries with specific focus on topics
Recommendation (2003). These are available in tabulated shape
such as Composition of Board, Number of Independent Directors,
alongwith Figure1 and are reproduced in Table-2
who is to be an Independent Director, Chairman / Lead Directors,
Nepal
Role of Chairman, Qualification and eligibility to act as Director,
Tenure of BOD and Election of Directors, Appointment of Election
Available information in respect of Nepal is contained in paper
of BOD, Powers, Functions and Responsibilities of BOD,
entitled: Challenges of Governance in South Asia, presented in
Evaluation of Non-Executive Directors, Evaluation of BOD as a
an International Conference during December 15-16, 2008 in
whole, Evaluation of CEO, Training of BOD, Committees of BOD,
Kathmandu.
eligibility to act as a Committee Member, Code of Conduct, Meeting
Banks and Financial Institution Act, 2063 focuses on conflict of
of BOD, Matters to be placed before BOD, Disclosure of Interest by
interest
and transparency alongwith competent key personnel
Director, CEO and Executives holding Company's shares,
qualifications.
NRB Directive No. 6 contains Code of Conduct for
disclosures of interest by Auditors holding company's shares,
Directors
and
some
aspects relating to Audit Committee.
Composition of Audit Committee, Meeting of Audit Committee,
Companies Act, 2063 deals with the conflict of interest and
Quorum of Audit Committee Meeting, Powers of Audit Committee,
transparency, directors, audit and shareholders protection.
Internal Audit, CFO and CS and CIA, Appointment and
qualifications of External Auditors, Directors' Report,
Figure 1: Compliance with Clause 49 of Listing Agreement,
Statement of Corporate Governance, Certification of
(Sep 30, 2002, BSE companies)
External Auditors reporting framework, postal ballot,
100%
constructive use of AGM, and major transactions.
Areas of compliance
Source: Narayana Murthy Committee report, SEBI
39
ARTICLE SECTION
Table 2: Recommendations of various committees on Corporate Governance in India

CII Code recommendations (1997)
Birla Committee (SEBI) recommendations (2000)
a) No need for German style two-tiered board

b) For a listed company with turnover exceeding Rs.
100 crores, if the Chairman is also the MD, at least
half of the board should be Independent directors,
else at least 30% .
c) No single person should hold directorships in
more than 10 listed companies.
d) Non-executive directors should be competent and
active and have clearly defined responsibilities like
in the Audit Committee.
e) Directors should be paid a commission not
exceeding 1% (3%) of net profits for a company
with(out) an MD over and above sitting fees. Stock
options may be considered too.
f) Attendance record of directors should be made
explicit at the time of re-appointment. Those with
less than 50% attendance should not be
re-appointed.
g) Key information that must be presented to the
board is listed in the code.
h) Audit Committee : Listed companies with
turnover over Rs. 100 crores or paid-up capital of
Rs. 20 crores should have an audit committee of at
least three members, all non-executive, competent
and willing to work more than other non-executive
directors, with clear terms of reference and access
to all financial information in the company and
should periodically interact with statutory auditors
and internal auditors and assist the board in
corporate accounting and reporting.
i) Reduction in number of nominee directors. Fis
should withdraw nominee directors from companies
with individual FI shareholding below 5% or total FI
holding below 10%.
a) At least 50% non-executive members

b) For a company with an executive Chairman, at least
half of the board should be independent directors, else
at least one-third.
c) Non-executive Chairman should have an office and be
paid for job related expenses .
d) Maximum of 10 directorships and 5 chairmanships per
person.
e) Audit Committee: A board must have a qualified and
independent audit committee, of minimum 3 members, all
non-executive, majority and chair independent with at
least one having financial and accounting knowledge. Its
chairman should attend AGM to answer shareholder
queries. The committee should confer with key
executives as necessary and the company secretary
should be he secretary of the committee. The
committee should meet at least thrice a year one
before finalization of annual accounts and one
necessarily every six months with the quorum being the
higher of two members or one-third of members with at
least two independent directors. It should have access to
information from any employee and can investigate any
matter within its TOR, can seek outside legal/professional
service as well as secure attendance of outside experts
in meetings. It should act as the bridge between the
board, statutory auditors and internal auditors with
far-ranging powers and responsibilities.
f) Remuneration Committee: The remuneration
committee should decide remuneration packages for
executive directors. It should have at least 3 directors, all
non-executive and be chaired by an independent director.
g) The board should decide on the remuneration of nonexecutive directors and all remuneration information
should be disclosed in annual report
h) At least 4 board meetings a year with a maximum gap
of 4 months between any 2 meetings. Minimum
information available to boards stipulated.
a) Companies should inform their shareholders

about the high and low monthly averages of their
share prices and about share, performance and
prospects of major business segments (exceeding
10% of turnover).
b) Consolidation of group accounts should be
optional and subject to FIs and IT departments
assessment norms. If a company consolidates, no
need to annex subsidiary accounts but the definition
of group should include parent and subsidiaries.
c) Stock exchanges should require compliance
certificate from CEOs and CFOs on company
accounts
d) For companies with paid-up capital exceeding
Rs. 20 crore, disclosure norms for domestic issues
should be same as those for GDR issues.
a) Companies should provide consolidated accounts for

subsidiaries where they have majority shareholding.
b) Disclosure list pertaining to related party transactions
provided by committee till ICAIs norm is established.
c) A mandatory Management Discussion & Analysis
segment of annual report that includes discussion of
industry structure and development, opportunities,
threats, outlook, risks etc. as well as financial and
operational performance and managerial developments
in HR/IR front.
d) Management should inform board of all potential
conflict of interest situations.
e) On (re)appointment of directors, shareholders must be
informed of their resume, expertise, and names of
companies where they are directors.
Creditors Rights
a) FIs should rewrite loan covenants eliminating
nominee directors except in case of serious and
systematic debt default or provision of insufficient
information.
b) In case of multiple credit ratings, they should all
be reported in a format showing relative position of
the company
c) Same disclosure norms for foreign and domestic
creditors.
d) Companies defaulting on fixed deposits should
not be permitted to accept further deposits and
make inter-corporate loans or investments or
declare dividends until the default is made good.
Shareholders Rights
a) Quarterly results, presentation to analysts etc. should
be communicated to investors, possibly over the Internet.
b) Half-yearly financial results and significant events
reports be mailed to shareholders
c) A board committee headed by a non-executive director
look into shareholder complaints/grievances
d) Company should delegate share transfer power to an
officer/committee/registrar/share transfer agents. The
delegated authority should attend to share transfer
formalities at least once in a fortnight.
Narayana Murthy committee (SEBI)

recommendations (2003)
Board of Directors
a) Training of board members suggested.
b) There shall be no nominee directors. All directors to be
elected by shareholders with same responsibilities and
account abilities.
c) Non-executive director compensation to be fixed by board
and ratified by shareholders and reported. Stock options
should be vested at least a year after their retirement.
Independent directors should be treated the same way as
non-executive directors.
d) The board should be informed every quarter of business
risk and risk management strategies.
e) Audit Committee : Should comprise entirely of financially
literate non-executive members with at least one member
having accounting or related financial management expertise.
It should review a mandatory list of documents including
information relating to subsidiary companies. Whistle
blowers should have direct access to it and all employees be
informed of such policy (and this should be affirmed annually
by management). All related party transactions must be
approved by audit committee. The committee should be
responsible for the appointment, removal and remuneration of
chief internal auditor.
f) Boards of subsidiaries should follow similar composition
rules as that of parent and should have at least one
independent director s of the parent company.
g) The Board report of a parent company should have access
to minutes of board meeting in subsidiaries and should affirm
reviewing its affairs.
h) Performance evaluation of non-executive directors by all
his fellow Board members should inform a re -appointment
decision.
i) While independent and non-executive directors should
enjoy some protection from civil and criminal litigation, they
may be held responsible of the legal compliance in the
companys affairs.
j) Code of conduct for Board members and senior
management and annual affirmation of compliance to it.
Disclosure and Transparency

a) Management should explain and justify any deviation from
accounting standards in financial statements.
b) Companies should move towards a regime of unqualified
financial statements.
c) Management should provide a clear description, followed
by auditors comments, of each material contingent liability
and its risks.
d) CEO/CFO certification of knowledge, veracity and
comprehensiveness of financial statements and directors
reports and affirmation of maintaining proper internal control
as well as appropriate disclosure to auditors and audit
committee.
e) Security analysts must disclose the relationship of their
employers with the client company as well as their actual or
intended shareholding in the client company.
Other issues
Special Disclosure for IPOs
a) Companies making Initial Public Offering (IPO) should
inform the Audit Committee of category-wise uses of funds
every quarter. It should get non-pre-specified uses approved
by auditors on an annual basis. The audit committee should
advise the Board for action in this matter.
Independent directors defined separately within each code. The Narayana Murthy committees definition is stricter.
40
ARTICLE SECTION
Table No. 3
Comparison of 2002 and 2012 Codes
S.No
Issue
Code 2002
Code 2012
1.
Independent Director
Encouraged a minimum of one independent director on

the board of a listed company.
One independent director is mandatory while preference is

for 1/3rd of the total members of the board to be
independent directors.
2.
Criteria for assessment of independence
Very scanty criteria provided
Criteria has been substantially expanded
3.
Executive Directors
Number of Executive Directors not to be more than 75% of

elected directors including CEO
Maximum number of Executive Directors cannot be more

than 1/3rd of elected directors including CEO.
4.
Number of directorships
A director can be on the board of no more than 10 listed

companies at any one time.
A director can be on the board of 7 listed companies at

the most at any one time. However, the limit does not
include directorship in listed subsidiaries of a listed holding
company.
5.
Board evaluation
6.
Office of Chairman and CEO
The Chairman of a listed company shall preferably be

elected form among the non-executive directors of the
listed company.
The Chairman and CEO shall not be the same person,

unless specifically provided in any other law.
The Chairman shall be elected from amongst the nonexecutive directors of the listed company.
7.
Training of the Board of Directors
It is mandatory for directors of listed companies to attain

certification. Initially, the PICG was to provide the training
but later it was opened to other institutions, provided they
met the criteria specified by the SECP.
It will be mandatory for directors of listed companies to

attain certification under any director training program
(DTP) offered by any institution (local or foreign), which
meets the criteria specified by the SECP. The criteria are
available at the websites of the stock exchanges and the
SECP.
8.
Appointment and removal and qualification

criteria for Chief Financial Officer (CFO)
and Company Secretary (CS)
Appointment, remuneration and terms and conditions of

employment of CFO and CS determined by CEO and
approved by Board. The same mechanism followed for
removal.
The appointment, remuneration and terms and conditions

of employment of the CFO, CS and the Head of Internal
Audit (IA) of listed companies shall be determined by the
Board. The removal will also be by the Board for CS and
CFO.
9.
The Head of Internal Audit (IA)
Within two years of the implementation of the Code 2012,

the Board has to put in place a mechanism for
undertaking annual evaluation of the performance of the
Board.
Qualification introduced for Head of IA. The removal of

Head of IA is with the approval of the Board only upon
Source: http://www.secp.gov.pk/corporatelaws/pdf/Code-CorporateGovernance-2012 pp 41-42
Pakistan
The first Code of Corporate Governance was issued in 2002 and
the latest one has been released on April 10, 2012 by Securities
and Exchange Commission of Pakistan, Islamabad. This is
applicable to Listed Companies in Pakistan. Comparative salient
features of both are given in Table -3
deals with institutional investors, shareholders voting, evaluation of

governance disclosures, and other investors, investing / divesting
the decision and shareholders voting. The Code is supported with
the schedules shown in table -4.
Table-4: Schedules Attached to

Best Practices on Corporate Governance
Currently the following documents are enclosed with the Annual

Audited Financial Statements in Pakistan relating to listed
companies on Stock Exchanges.
Schedule Particulars
A:
Terms of Reference for Nomination Committees.
1.
Statement of Compliance duly signed by the President / Chief

Executive Officer.
B:
Board Performance Evaluation Check-List.
2.
Statement of Internal Control duly signed by Chief

Compliance Officer, Chief Financial Officer and Chief Internal
Auditor.
C:
Terms of Reference for Remuneration

Committees.
D:
Provision on the determination of Performance

related Remuneration.
E:
Matters for consideration when making Going

Concern Assumption.
F:
Summary of Disclosures.
G:
Code of Business Conduct and Ethics.
H:
Declaration of Independence.
3.
Review Report addressed to the Members, Statement of

Compliance with the best practices of Code of Corporate
Governance duly signed by external auditor.
Sri Lanka
The Institute of Chartered Accountants of Sri Lanka and the
Securities and Exchange Commission of Sri Lanka jointly issued
Code of Best Practices on Corporate Governance on July 01,
2008. This code has two sections.
Section-1 is entitled: The Company and deals with the directors,
directors' remuneration, relationship with shareholders and
accountability and audit. Section-2 deals with shareholders and
Part-V: Charter For Enterprise Governance:

Suggested Strategic Initiatives
There is a need to develop a Charter for Enterprise Governance for
SAFA countries. All stakeholders may work together with a
41
ARTICLE SECTION
Table - 5: The Seven Principles of Public Life
Selflessness:
Holders of public office should take decisions solely in terms of the public interest. They should not do so in order
to gain financial or other material benefits for themselves, their family, or their friends.
Integrity:
In carrying out public business, including making public appointments, awarding contracts, or recommending
individuals for reward and benefits, holders of public office should make choice on merit.
Objectivity:
Holders of public office should not place themselves under any financial or other obligation to outside
individuals or organizations that might influence them in the performance of their official duties.
Accountability:
Holders of public office are accountable for their decisions and Actions to the public and must submit
themselves to whatever scrutiny is appropriate to their office.
Openess:
Holders of public office should be as open as possible about all the decisions and actions that they take. They
should give reasons for their decisions and restrict information only when the wider public interest clearly
demands.
Honesty:
Holders of public office have a duty to declare any private interests Relating to their public duties and to take
steps to resolve any Conflicts arising in a way that protects the public interest.
Leadership:
Holders of public office should promote and support these Principles by leadership and example.
Source:First Report of Committee of Standards in Public Life ( May 1995 ), published in UK.
synergistic approach. From strategic angle, some thoughts for

developing the above suggested Charter are as under:
2. Principles of Public Life for Enterprise

Corporate Governance for SAFA
1. Code of Corporate Governance as an Integral

Part of Company Law
Chief Executives / Chief Financial Officers and others holding high

management level positions are suggested to follow the seven
principles of public life as suggested in the first report of Committee
of Standards in Public Life and published in UK in May 1995 and
are tabulated in Table-5.
It is suggested that instead of issuing Codes of Corporate

Governance by Regulatory Authorities or by Professional
Institutes, it is suggested that specific provisions should be
included in the Company Laws of respective SAFA countries. This
thought is shared by some countries including Bangladesh.
However, its implementation is through the Parliaments of various
countries for which the SAFA Member Professional Institutes and
relevant Regulatory Bodies e.g. Securities and Exchange
Commission, or Securities Exchange Board etc. may kindly initiate
the process to pave the way for implementation of the above
suggested course of action. The scope of application should
extend itself to a comprehensive perspective including Corporate
Sector, Financial Sector or other sectors where Joint Stock
Companies are operating.
It is generally believed that scope in some countries extend to only
listed companies. The recent example is that of Code of Corporate
Governance 2012, released in Pakistan is applicable only to all
listed companies which as on April 17, 2012 numbered around 600
with market capitalization of US$ 39 billion.
Standardized format regarding Secretarial Compliance Survey
and Statement of Compliance that the Code of Corporate
Governance may be followed through the SAFA countries may be
developed. In this respect, the most recently released formats
included in the Code of Corporate Governance, 2012 are as under:
Appendix A: Secretarial Compliance Survey
Appendix B: Statement of Compliance with the Code of
Corporate Governance.
These are attached now for the benefit of readers.
Any modification to suit specific requirement of any SAFA country
be made in it.
42
3) World Bank's Contribution

Overall Corporate Governance Index was first released by the
World Bank and was published in DAWN, Lahore on January 10,
2009. It ranked countries out of a maximum of 100. Germany
scored 90.8% at the top. Selected ranking of some SAFA countries
was as under:
Table - 6: Overall Corporate Governance Index

S. No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Country
Germany
United States
Singapore
Hong Kong
Malaysia
India
South Korea
Thailand
Philippines
Indonesia
Vietnam
China
Pakistan
Bangladesh
CGI (out of 100)

90.8
89.8
80.9
69.2
66.7
55.4
55.4
49.7
48.9
44.7
38.1
35.3
34.3
24.3
Source: Extracted from the Dawn, Lahore, January 10, 2009.
ARTICLE SECTION
Country
1. India
55.4
2. Pakistan
31.3
3. Bangladesh
24.3
Table No: 6 presents position of 14 ranked countries.

Further, the World Bank also released World
Governance Index. Four blocks were made. Block-A
had four top countries namely; Hong Kong,
Singapore, Germany and United States. The first
position was held by Hong Kong. Block-B: consisted
of six countries in which Sri Lanka ranked No. 5 in the
above block. Block-C: Included five countries in which
India obtained rank No. 1. Block-D: Included four
countries with Pakistan scored rank No. 1. Three
indicators were used for developing the above index
namely; Regulations, Corruption and Rule of Law.
Table No:7 shows overall position.
It is suggested that taking into consideration the
foregoing indicators, SAFA countries may develop
their own index with parameters to be used uniformly
on all the SAFA countries so that we may have an
opportunity to benchmark themselves with the best in
the world. For this, committed hard work will have to
be reflected by the Professional Accounting Institutes
and all other stakeholders in SAFA region of SAFA.
4) Research In SAFA Region
Table - 7: World Governance Index

Country
Block A
Hong Kong
Singapore
Germany
United States
Bock B
Taiwan
South Korea
Malaysia
Thailand
Sri Lanka
Philippines
Block C
India
China
Vietnam
Cambodia
Papu New Guinea
Block D
Pakistan
Bangladesh
Laos
Myanmar
Corruption
%
92.3
96.1
93.2
91.3
Rule of Law
%
90.5
95.2
94.3
91.9
79.6
78.6
67.0
56.3
51.5
50.5
70.0
68.1
62.3
44.0
57.5
22.2
70.5
74.8
65.2
52.9
55.7
33.8
46.1
45.6
43.7
35.9
30.1
47.3
30.9
27.1
28.0
9.2
56.2
42.4
27.1
38.6
21.0
28.6
20.9
15.0
1.5
21.3
9.7
13.0
1.4
19.5
24.8
17.1
5.2
Source: Extracted from the Dawn, Lahore, January 10, 2009
SAFA countries have gained some experience in the

application of Code of Corporate Governance. It is
high time that they may also initiate research work by highlighting
the beneficial impact of the application of Best Enterprise
Governance Practices in respective countries to inspire others to
follow the same. Each country may commission a research and the
SAFA Assembly / Executive Board may finalize this document for
the guidance and benefit of respective professional accounting
institutes, regulatory bodies and various governments in the
region. In this respect, it may be interesting to note that
International Finance Corporation (IFC), Securities and Exchange
Commission of Pakistan (SECP), and Pakistan Institute of
Corporate Governance (PICG) have commissioned a survey in
Pakistan. The hope is to provide a baseline for future Corporate
Governance requirements and initiatives under IFCs Pakistan
Corporate Governance Project.
5) Implementation
It has generally been seen that excellent work is carried out while
developing various Codes of Corporate Governance. The crying
need is to ensure the implementation which requires total
commitment by all the stakeholders namely; Management of
Corporates, Regulatory Bodies, Shareholders, Stock Exchanges,
Society, Governments etc. and an all encompassing campaign
ought to be carried out to reflect the spirit of various Codes of
Corporate Governance in practical action with beneficially
demonstrated results. This will help indoctrinating the spirit of
translating various Codes of Corporate Governance of respective
SAFA countries into real life situation with consequential benefits
by all the stakeholders.
Regulation
%
99.0
95.5
92.7
90.8
Selected Bibliography
A: Reports on Corporate Governance
1. Cadbury, A : ( 1992 ), Report of the Committee on the Finance Aspects of Corporate Governance, Cadbury
Report, C.R. London: Gee. G Publishing, London.
2. Hampel, R. ( 1998 ), The Final Report of the Committee on Corporate Governance, Hampel Report, London:
Gee Publishing.
B: SAFA Countries Focus
1: Bangladesh
Articles
1. Ahmed Mamtazuddin, Yusuf, M. A. ( 2005 ), Corporate Governance: Bangladesh Prospects, The Cost and
Management Accountants, Vol. 33, No. 6, November December 2005, [ pp. 18-26 ].
2. Ahmed, Muzaffar ( 2003 ), Seminar Paper on: Corporate Governance: Bangladesh Financial Sector:
Bangladesh China Friendship Conference Centre, Dhaka.
3. Chowdhury, A. M. ( 2004 ), Corporate Governance: An Industry Prospects, the Bangladesh Accountant, Dhaka,
[ October December ].
4. Haque, Dr. A. K. Enamul, Jalil, Mohammed Behroz, Naz, Farha, ( 2007 ), State of Corporate Governance in
Bangladesh: Analysis of Public Limited Companies Financial, Non-Financial Institution and State Owned
Enterprises, working paper Series No. 2, Published by Centre for Research for Training, Dhaka (Bangladesh).
2: India
1. Chakrabarti, Rajesh: Corporate Governance in India - Evolution and Challenges , [ pp. 1 30, Downloaded from
Internet. Reference: http://unpan1.un.org/intradoc/groups/public/documents/APCITY/UNPAN023826.pdf
3: Nepal
1. Thapa, Rajan Vikram, ( 2008 ), Corporate Governance: Need and significance in Napalese Banking System,
Paper presented in International Conference: Challenges of Governance in South Asia, Kathmandu (Nepal) Downloaded from Internet: Reference: www.pactu.edu.np/...../CorporateGovernance-need-and-significance
4: Pakistan
Survey & Reports
1. Hyder, Nasim ( 2007 ), Best Practices on: Corporate Governance in South Asia Asia Countries: Comparative
Analysis of Corporate Governance Framework in South Asian Countries, Published by Institute of Chartered
Accountants of Pakistan, Karachi.
2. A Survey of Corporate Governance Practices In Pakistan (2007), commissioned by IFc and conducted by
ACCA, PICG, SECP.
3. Saeed, Khawaja Amjad, Corporate Governance, Management Accountant: Nov Dec. 2010, Karachi, pp. 30
34.
5: Sri Lanka
1. The Institute of Chartered Accountants of Sri Lanka ( 2003 ) Code of Best Practices on Corporate Governance,
Colombo: ( N.D. ) Reference: http://archive.cmb.ac.lk/research/bitstream/70130/1620/1/5.pdf
2. Senaratne's, Gunaratne, P.S.M. Corporate Governance Development in Sri Lanka: Prospects and Problems, [
pp. 79-89 ] , Article downloaded through Internet.
About the Author: Prof Dr. Khawaja Amjad Saeed is Professor Emeritus, Founder Principal, (2003 todate) Hailey College of
Banking & Finance, University of the Punjab, Lahore Pakistan, Member Governing Council, International Federation of
Accountants (IFAC) (1997-2000), President, South Asian Federation of Accountants (SAFA) (1997), President, Institute of Cost
and Management Accountants of Pakistan (1997-2000), President, Association of Management Development Institutions of
South Asia (AMDISA) (1993-96), Pro Vice-Chancellor University of the Punjab, Lahore (1994-1996), Founder Director, Institute
of Business Administration (IBA), University of the Punjab, Lahore (1973-1996) and Senior Faculty Member, Hailey College of
Commerce, University of the Punjab, Lahore (1965-73). Earlier he had eight years corporate life experience (1958-65).
43
ARTICLE SECTION
Budget-Making
Process:
The budget estimates
for a fiscal year are
prepared exclusively
by the Ministry of
Finance (MoF); those
are hurriedly approved
by the cabinet in a
brief session and
presented to the
National Assembly
(NA) along with a
budget speech by the
finance minister. The
NA undertakes no
verification of the
authenticity of
statistical and other
information.
44
How to Improve It?

By Dr Muhammad Yaqub
Former Governor, State Bank of Pakistan
here is almost universal recognition

that budget mismanagement is the
mother of all economic ills in the country.
It is responsible for excessive money
creation and inflation, lowering the
national saving rate, crowding out the
private sector in the matter of credit
availability, throwing the government in
an internal and external debt trap, and
adding pressure on the exchange rate
and the balance of payment.
Proper budget management should be
the top priority of the government and an
important aspect of it is the reformation of
the process of budget making and its
monitoring. At present, the major flaw in
the federal budget making process is that
it is a show run exclusively by the Ministry
of Finance (MoF) with no checks and
balances and no accountability
mechanism in place. The Planning
Commission of Pakistan (PCP), the
Federal Board of Revenue (FBR), the
Economic Affairs Division (EAD) and the
State Bank of Pakistan (SBP) are there to
assist but not to contribute as equal
partners under the present situation. In
one way or the other, all of them have
become subordinate departments of the
MoF.
The budget estimates for a fiscal year are
prepared exclusively by the Ministry of
Finance (MoF); those are hurriedly
approved by the cabinet in a brief session
and presented to the National Assembly
(NA) along with a budget speech by the
finance minister. The NA undertakes no
verification of the authenticity of statistical
and other information.
Once the budget is passed by the NA, its
implementation by the MoF takes a
different route. Large-scale deviations
begin to take place from the very
beginning and continue throughout the
year without any accountability and
without the knowledge and approval of
the NA. All those deviations and
violations are then included in the budget
documents for the next year for implicit
post facto information and approval of the

NA.
Another major flaw is that the public
sector enterprises (PSEs) are excluded
from the budget although they are run like
government departments. These
corporations end up with huge losses
each year that are covered by
government guaranteed bank loans.
Their deficit is in reality a part of the
budget for all practical purposes but is
kept out of the budget estimates. The
initial logic for their separation from the
budget was that those were commercial
organisations and were to be run in the
same way as private sector corporations.
But in reality those are being managed as
attached departments of ministries
incurring losses and should be included
in the budget.
The provincial budget-making process is
equally flawed. Provinces make very little
tax effort and depend on their share in the
pool of federal taxes under the NFC
Award. The provinces have no
mechanism either to cut expenditure or
raise resources on their own if there is a
shortfall in their revenue receipts from the
federal government, and they end up with
unpaid bills to the private sector or buildup of debtor balances with the banking
system.
What happens to the budget subsequent
to its approval is illustrated briefly with
reference to the consolidated budget
statistics for FY11. The actual outcome of
the consolidated budget for FY11 shows
that the budget outcome had no
resemblance with the budget estimates
of revenue, expenditure and financing of
the deficit. All the deviations were one
directional and could be anticipated
because of unrealistic assumptions used
in the original estimates to make the
budget look good.
Revenue was originally overestimated
and expenditure was understated. There
was a shortfall of 25 percent in domestic
ARTICLE SECTION
revenue compared with the budget estimates and of 42 percent in
external financing. At the same time, there was overshooting of
current expenditure by 15 percent and reduction of 30 percent in
development expenditure resulting in an overall expenditure that
was 6 percent higher than the budget estimates. These
deviations in revenue and expenditure increased the overall
budget deficit by 74 percent. The additional gap was filled by bank
borrowing which was 369 percent higher than the budget
estimates. Its consequences for monetary policy were that 63
percent of money supply (M2) was generated by the government
sector, making the monetary policy subservient to fiscal needs.
The same will be the outcome of an analysis for any other recent
budget year.
As regard PSEs, they incurred huge losses during the year that
were ultimately taken over by the government by issuing special
treasury bills of close to Rs 400 billion. It is quite clear that the
budget presented to the legislature and approved in the
beginning of the FY is usually for window-dressing purposes. The
actual budget moves on a different path from the very beginning
of the fiscal year.
If the government is to take seriously its deteriorating budgetary
situation, not only does it need to restructure the taxation system
to broaden its base, document the economy and improve tax
collection, it also needs to totally revise the budget-making
process to impart some integrity to fiscal statistics, introduce
some checks and balances on the MoF, and put in place a
monitoring and accountability mechanism to ensure that budget
estimates are worked out responsibly and the actual outcome is
not vastly different from the original estimates.
The following changes are recommended in the preparation,
approval, implementation, monitoring and surveillance of the
budgetary developments to produce better fiscal results:
Preparation of the budget estimates should be a multiagency task and those agencies should be working as
partners on equal footing and not as subordinate agencies
of the MoF. The SBP, the FBR, the PCP and the EAD should
be freed from the control of the MoF. They should provide
estimates of their respective areas to the MoF objectively
and professionally for the preparation of the budget
estimates without the MOF having a veto power over their
estimates. he SBP should provide estimates of the scope of
government borrowing from the banking system that is
consistent with the agreed targets of growth rate, inflation
and balance of payments, the FBR should provide best
estimates of revenue collection from the existing tax system
with every improvement in tax administration that it can
effect and the PCP and the EAD should give their best
estimates of external budgetary support. Based on the
expenditure levels determined by the MoF and the PCP, the
residual budget gap should be worked out that to be filled
through additional domestic real revenue mobilisation effort
and additional budgetary support from abroad. The main
focus of the MoF should be additional taxation and
additional external resource mobilisation to fill the gap. To
the extent additional taxation and additional foreign
budgetary support cannot be mobilised to fill the budget gap,
expenditure needs to be reduced rather than indulge in
inflationary financing of the residual gap. This is the only way

to put the budget under certain discipline.
The present practice of overestimating revenue from the
existing system, understating expenditure and making
minimum tax effort to ultimately end up with reliance on more
domestic bank borrowing must be replaced by an objective
preparation of the budget. It is possible only, if the control of
the MoF on other relevant agencies and departments is
broken and they participate in preparing estimates on an
equal footing.
The cabinet should devote more time to the scrutiny of the
budget than at present and review it from all angles to make
sure that it is consistent with the national economic
objectives set by the government at the highest level before
its onwards transmission to the NA.
These estimates should be subject to scrutiny by a budget
office of professional staff set up by the parliament under its
The cabinet should devote more time to the

scrutiny of the budget than at present and review
it from all angles to make sure that it is
consistent with the national economic objectives
set by the government at the highest level before
its onwards transmission to the NA.
own control to provide its objective professional evaluation
of the budget estimates to the NA. Similarly, revenue
estimates from new tax proposals should be scrutinised and
authenticated by the budget committee of the NA before
their approval.
The MoF should bring to the parliament any deviations in its
estimates of revenue and expenditure beyond a certain level
on a quarterly basis with specific measures to ensure that
budget borrowing does not exceed the already approved
limit.
The provinces should adopt a similar procedure.
The PSEs should be either privatised or run on a commercial
basis through their major restructuring, failing which their
budgets should be integrated with the regular budget.
The final budget accounts of the previous year should be
subject to scrutiny by the Auditor General and/or the budget
office of the parliament and major deviation from the
approved estimates should be reported to the competent
authorities with the expectation that those who made
original estimates are held accountable for major
unexplained deviations.
Failure to introduce such stringent measures to overhaul the
process of preparation and implementation of the budget will
ultimately take the country to a stage of hyperinflation and
external debt default with dire economic, social, political and
foreign policy consequencesn
45
ARTICLE SECTION
Islam and Accounting

By Muhammad Akhtar (FCMA, APA, SAS, MS Finance, PGD) and
Najeeb Zada (MA Islamic Studies, MA English, MA Arabic)
Muhammad Akhtar, FCMA
Abstract:
a good contribution to it (Napier, 2007).
The current study is a part of the growing literature on Islamic

accounting. The study has been carried out to explore the
prevailing trends in Islamic accounting research. It traces down the
accounting practices in the very early days of Islam, especially at
the time of the Holy Prophet (P.B.U.H.) by looking into the original
sources. Islam definitely encourages trade and business, gives a
unique status to the business community and stresses the other
business related activities, including accounting. The current study
asserts that Islam encouraged and promoted counting from the
start and made it an integral part of a Muslim's life. It, later on,
helped in understanding and applying the relatively complex
accounting related issues. There was a steady
development in accounting practices as the
Islamic state progressed financially. The
introduction of Zakat, the fundamental
source of state income in the initial days of
Islam, played a vital role in this regard.
The complex ratio of Zakat on different
items creates a unique and deep
relationship between Zakat and
accounting. Being an essential part of
any Muslim society or Shariah based
business; Zakat will always serve as a
bridge between Islam and accounting.
Napier further documents that scholarly English literature on

Islamic accounting dates back to 1981, with the work of Abdul Majid
(2009). This study by Majid could well be the foundation stone for
the the efforts put by those coming next. Nevertheless, Hameed,
(2000) argues that there is a lack of empirical research in Islamic
accounting and the standard of the present literature is not up to the
mark. There is a lack of references to the original sources as well as
a tendency to look into Islamic accounting from a Western
perspective. However, we do have scholars among the Muslims
who have changed the trends by producing valuable additions to
the existing body of knowledge about Islamic accounting. The
current study is also an effort to bridge this gape.
Key Words: Islamic Accounting, Sharia,

Zakat, Baitul Maal, Deewan, Counting
Their emphasis on accounting history is

really remarkable. Kantakji, for example,
describes his objectives in one of his articles by
focusing on recorrecting the accounting history
and doing justice to the Muslims and Arabs by "showing
their contribution to the science of accounting. He asserts that
instead of starting accounting history from the Italian Lucas
Bashilio, one should not forget Muslim celebrities of this field such
as: Al-Kalkashandi, Al-Nowayri, Al-Gazali, Abu-Ja'afar AlDemashki, Al-Marodi, and Al-Khuwarizmi.
Literature Review:
Napier, 2007 is of the opinion that Western historians
have mostly overlooked the development of accounting in Islamic
world. Till very recently, there were few historical studies in English
language that focused on the accounting history in Muslim
countries (Napier, 2009). Napier further documents that the small
amount of literature available on the issue was based on secondary
sources. However, there has been a growing interest about this
topic in the recent years. One basic reason for the interest and
growth of Islamic literature on accounting has been the
development of Islamic financial institutions (David, Diva &
Paiusan, 2010). This has been further enhanced by well funded
institutions focusing on spreading Islamic knowledge like
International Islamic University of Malaysia (IIUM). The efforts put
by Muslims in Islamization of knowledge also had a profound
influence in this regard (Hameed, 2000). The Muslim scholars and
researchers graduated from Western universities have also made
46
The development of scholarly literature on

Islamic accounting has been asserted by
Napier (2009). Napier documents that the
gap identified above has been filled by
those researchers who have access to
primary archive material and secondary
sources in local languages scripts.
Their efforts have strongly contributed
in the Islamic Accounting literature.
The prominent names include: Omar
Abdullah Zaid, Prof. Kamal Attia and
Dr. Sameer Kantakji.
Throwing light on the nature of Islamic accounting, Kantakji argues

that Islamic Sharia has had the priority in inventing financial
systems never used before. Likewise, Islam is equally responsible
for implementing accounting practices in Muslim's lives. These
statements show that a growing body of literature is available on the
Islamic Accounting which is a source of inspiration for the current
study. The study will improve understanding and knowledge about
Islamic accounting and will be a source of inspiration for all of those
in the field of Accounting and Finance.
The literature available on Islamic accounting has tried to deal with
ARTICLE SECTION
Livestock, Construction Accounting, Agricultural Accounting,
Warehouse Accounting, Currency Accounting, Sheep Grazing
Accounting and Treasury Accounting
However, Napier, in 2007 has noted that Omar has been unclear
in his chronology of events and speculative in his claim of Islamic
accounting's influence on Italian accounting.
The second approach towards the study of Islamic accounting is
pragmatic, or empirical inductive that focuses on what is (Sartini,
2003). It examines the current Western accounting practices in the
light of the teachings of Islam. This approach is in accordance with
the Islamic Judicial principle of Ibaha (Permissibility). This is the
pattern followed by Accounting and Auditing Organization for
Islamic Financial Institutions (AAOIFI) in establishing its well known
standards for Islamic audit and accounting. However, Hameed,
(2000) disagrees with this approach because it will still be
insufficient to develop an accounting system which will lead to
behavior consistent with Islamic norms.
some very basic concepts. Even the definition of Islamic

accounting has been a point of debate for the researchers. Napier
(2007) suggests that this term can be defined in three different
senses; religious, which would mean the accounting principles
given by Islam as a religion; spatial, which stands for accounting
practices at specific geographical locations; and temporal, which
means accounting principles and practices at specific periods of
time. David et al (2010) also explain the term in religious and
geographical terms. Therefore, it can mean the rules derived from
Sharia about accounting procedures or it can stand for accounting
practices in the countries where Islam has been the dominant
religion. The geographical interpretation, however, leads to some
problems, because it is difficult to find commonality between
accounting of Al Andulus, Cairo and India in the 9th, 11th, and 17th
century respectively. (Napier, 2007)
Theoretical Framework for Islamic Accounting:

Developing a theoretical framework for Islamic accounting has also
been a major concern for majority of the researchers. They have
adopted two major approaches. The first is deductive approach
according to which principles and objectives for accounting are
derived from the principles of Islam (Napier, 2007). It is also called
constructive or normative approach (Sartini, 2003), which focuses
on what ought to be. This method looks into the sources of Sharia
in order to find out the basis of accounting from its study. According
to Napier, 2007 this approach has been followed by most of writers
of this field including Omar Abdullah Zaid. Zaid (2000) has noted
down the basic qualities that a Muslim accountant, known as alkateb was supposed to have in the Middle Ages. He has noted
down as many as ten qualities for a Muslim accountant. These
qualities included: Islamic identity, Manhood, Citizenship,
Adulthood, Equitability, Eloquence, Wisdom, Knowledge of
Shariah Islamia, Integrity and Competence
In another attempt, Zaid in 2004 has tried to trace the early
accounting records in the Islamic history. He mentions as many as
seven accounting systems that were developed by the early Islamic
states. The early seven accounting systems include: Accounting for
In order to overcome the weaknesses of these two approaches,

further alternatives have been suggested. For example, Hameed
(2000) has prescribed a hybrid approach. This is actually an effort
to bridge the gap between the two earlier approaches. Sartini,
(2003) is still not satisfied with these approaches, and argues that
these approaches do not cater human behavior which is a
fundamental part of accounting. Therefore, she introduces a fourth
Strategic Work Plan Approach for the Islamization of accounting.
In fact, it is only a small aspect of the broader concept of
Islamization of knowledge taken from Faruqi, 1989.
In their attempt to summarize the existing literature on Islamic
accounting, David et al (2010) have categorized this literature into
five types;
o
o
o
o
o
The history of accounting developments in early Islamic

societies,
Understanding Islamic accounting practices and objectives,
The differences between Islamic and conventional
accounting,
Special issues in Islamic accounting standards and practices,
and
Trends in Islamic accounting research.
Trade and Business in early days of Islam:

Accounting is primarily related to economic activities like trade and
business. In order to have a good picture of the relationship
between Islam and accounting, it is important to know the status of
these activities in Islam. Perhaps no other religion has put so much
emphasis on trade as has been done by Islam. Commerce and
merchants have always enjoyed a high status in the Muslim
societies. The Prophet himself undertook journeys of trade towards
Syria before prophet hood. Many prominent figures among his
companions such as Usman bin Affan, Abdur Rahman bin Aoaf
were well known for their prosperity. Furthermore, there are in
hundreds if not in thousands statements in both Quran and Sunnah
which deal with:
o
Trade and business
o
o
o
Kinds of business transaction

Prohibitions relating to trade matters
Reward of spending money on needy and deserving humans
47
ARTICLE SECTION
In fact wealth has been referred as a blessing and gift of Allah
in both Quran and Sunnah which shows the importance of
wealth generating activities, like trade and business in Islam.
We can divide the life of the Prophet (P.B.U.H.) and,
consequently, the Islamic traditions into two major parts; the
first twelve years when the Prophet Muhammad (P.B.U.H.)
was in Makkah and the second phase of ten years when he
migrated to Madina. In the former, we clearly see that the
emphasis is on beliefs, especially Tauheed (the oneness of
Allah). The Quranic verses of this period mainly deal with the
first three pillars of Islam, such as:
o
Table 1
The Ratio of Zakat on Camels
S.
No
Number of Camels
owned by a Muslim
Kind Payable
As Zakat
Age of the
Payable
Total Number
Payable
1 to 4
NA
NA
NA
5 to 9
Sheep
1 Year
10 to 14
Sheep
1 Year
15 to 19
Sheep
1 Year
20 to 24
Sheep
1 Year
25 to 35
Camel
1+ Years
The belief in Allah,
36 to45
Camel
2 +Years
The belief in Messengers
46 to 60
Camel
3 +Years
Belief in the Day of Judgment.
61 to 75
Camel
4+ Years
10
76 to 90
Camel
2 +Years
11
91 to 120
Camel
3 +Years
12
120 to 129
Camel
3+Years
13
130 to 139
Camel
2+ Year
3+ Years
2
1
14
140 to 149
Camel
3+ Year
2+ Years
2
1
Since it was a time of great hardships for the Muslims, they

could hardly indulge themselves into any other activity,
except making efforts for their survival. The second phase
starts after the migration of the Muslims to Madina. It was the
first time for the Muslim to start a free economic, political and
social life. It is during this period that we find the details of the
Islamic economic system, including writing down the
business transactions, the prohibition of interest and different
kinds of other transactions. Nevertheless, Islam let those
practices go on which were not against its basic rulings like
Mudaraba, Ijara, and Salam etc.
But one must be aware of the fact that business practices of
those days were different from the present scenario of the
business world. Commenting on the nature of the market of
that period, Mansoori (2011, p: 41) argued that, the market of
Madina in the days of Prophet (P.B.U.H.) was different from
the present days' market. It was so limited that it could not
ensure regular supplies at a given time. Perhaps this is why
"Salam" advance payment but deferred supply of good was
allowed by Islam to make sure that people did not fall in
unnecessary hardships. Likewise, it is a well known fact that
barter system was commonly practiced in Islamic state. The
use of currency, made of gold and silver was also there and it
was also encouraged by Islam to use currency as a medium
of exchange. It means the exchange of one commodity with
other commodity was a well known type of transactions in that
era. Due to the existence of barter system, we have the
famous tradition of the Prophet (P.B.U.H.) dealing with certain
aspects of such a transaction; for example making it
compulsory that the commodities exchanged must be equal
in weight and hand to hand if they are homogeneous. This
tradition has been mentioned in many prominent books of
ahadith including Sahih Muslim. Keeping these facts in
mind, it should not be a surprise if huge business transactions
and corporate businesses were not found at that age,
although business on individual and small partnership level
did exist. During this period, the main source of expenditure
was the wealth of those Muslims who were wealthy and
helped other Muslims. For instance, it was Usman bin Affan
who bought a well from a Jew in Madina and made it Waqf for
all the Muslims.
48
15
150 to 159
Camel
3+ Year
16
160 to 169
Camel
2+ Year
17
170 to 179
Camel
2+ Years
3 +Years
3
1
18
180 to 189
Camel
2+Years
3+Years
2
2
19
190 to 199
Camel
2+Years
3+Years
2
3
20
200 to 209
Camel
2+Years OR
3+ Years
5
4
21
210 to 219
Camel
2+Years
3+ Years
4
1
22
220 to 229
Camel
2+ Years
3+ Years
3
2
23
230 to 239
Camel
3+ Years
2+ Years
3
2
24
240 to 249
Camel
2+Years OR
3+ Years
2+ Years
6 OR
4
1
25
250 to 259
Camel
3+Years OR
2+ Years
3+ Years
5 OR
5
1
26
260 to 269
Camel
2+Years
3+Years
4
2
27
270 to 279
Camel
3+Years
2+Years
3
3
28
280 to 289
Camel
2+ Years OR
3+Years
2+Years
7 OR
4
2
29
290 to 299
Camel
2+Years
3+Years OR
3+Years
2+Years
6
1 OR
5
1
30
300
Camel
3+ Years OR
2+Years
3+Years
6
5
2
Source: Kitab ul Amwal, Abu Obaid Al Qasim bin Salam (1989)
ARTICLE SECTION
The Concern of Islam for Counting; The Basis of
Accounting:
Counting is deeply embedded in Islamic commands. It was made
an integral part of the Muslims' life from the start and was a part of
their worshipping, as stated by Kantankji, (2009). There are
numerous examples in Quran which support this claim. For
instance, Quran orders the believers in its longest ayat to record
their business transaction which involves debt. Similarly, it stresses
the importance of the days of pilgrimage and fasting: which must be
remembered to perform these two. Quran has mentioned the
different periods of "Iddat" for the females who are divorced or
whose husbands have died, described the days of breastfeeding for
mothers and the duration of pregnancy as well as their own periods
etc. Thus Islam has made obligatory, even for females to be well
versed in counting and keeping record of the days for different
purposes. Quran also mentions as how inheritance is to be
distributed among different heirs of the deceased in very detail.
What these examples show is that Islam, from the very beginning,
has special concern for counting and keeping record of different
items. Both counting and recording either by memory or writing
process have been inserted into a male and female Muslim's life as
an integral part of worship.
Announcement of Zakat and Jihad and their

Impact on the Economical Life of Muslim:
One year after migration, the Muslims were allowed to fight Jihad
against those who posed challenges to their existence. This also
opened the ways for them to get prosperous because wars against
enemies resulted in large amount of wealth (Ghaneemat) for them.
The order of Zakat was also an important reason for their economic
stability. In fact these were the two major sources of income for the
new born Islamic state of Madina. This is why there is detailed
description of these two in Quran as how these should be spent or
distributed which indicates the special concern of Islam for these
two sources of income. As for Zakat, there are eight categories to
which it could be allocated:
o
o
o
o
The Needy
The Collectors of Zakat
The Slaves
Those Who are in the way of Allah
o
o
o
o
The Poor
Moallafat ul Quloob
Those in Debt
The Travelers
Just like Zakat, those who were allocated spoils of war (or
Ghaneemat) are also mentioned in Quran in detail. In fact one Sura
of the Holy Quran (Al Anfaal) has been named for this kind of
income.
Zakat and Accounting:

Zakat is the third pillar of Islam which has been mentioned in Quran
as many as eighty two times, either directly or indirectly. Apart from
certain other aspects of Zakat, poverty alleviation and
decentralization of wealth have been the most obvious one.
According to Adnan and Abu Bakar, 2009 the discussion about the
relationship between Zakat and accounting has been spreading
widely among the academicians these days.
Zakat has its own specific details which have been elaborated in
different sources of Shariah. We have already seen how Quran
elaborates the people who should be given a share from Zakat.
Similarly, other source of Shariah elaborates the conditions for the

owners, certain conditions in the wealth itself. Apart from gold,
silver, and cash Zakat is applicable on different kinds of animals too,
including camels which had a great importance for the Arabs of that
time. Out of the many details about the Zakat of camels, it will be
suffice to mention only one Hadith which deals with the ratio of
Zakat on camels. This lengthy Hadith has been mentioned by the
great Islamic scholar, Imam Abu Obaid, in his famous book "Kitab ul
Amwal" (1989, p: 456 to 458). Instead of the original lengthy Arabic
text, the detail mentioned in the Hadith is presented here in a
diagrammatic form as Table-1.
From the above mentioned table is clear that the detail mentioned in
the Hadith is sophisticated by nature, which any devoted Muslim
was and is supposed to follow if he/she owns the number of camels
mentioned here. In fact these practical aspects of Islam and the
Muslims' life show deep relationship between Islam and
accounting. Perhaps a diagram for the Islamic law of inheritance, as
mentioned in Quran, would be equally interesting and would further
justify our claim about this relationship. These aspects are mostly
ignored in the recent research on Islamic Accounting literature.
The Process of Collecting Zakat:

In order to collect Zakat, the Prophet (P.B.U.H) had appointed
"Aamils" (collectors) who performed all the duties relating to their
job. Ibn e Timiya defines an Aamil as a person who collects Zakat,
records it down and safeguards it (from being misused or wasted)
and the like. According to him, The Prophet and the Caliphs would
ensure accountability of these employees themselves. As an
evidence of his statement, Ibn e Timiya mentions a Hadith
(recorded by Bukhari and Muslim both). The Hadith states that once
a collector of Zakat (Aamil) returned from his duty. He presented
whatever he had collected in two parts, saying: This is what I have
collected as Zakat, while this (other part) has been gifted to me. The
Prophet was not pleased with this statement and expressed his
disapproval by saying that why don't the collectors receive gifts
when they are sitting back at their homes? It was an explicit
principle for the collectors of Zakat not to receive anything from the
owners as gift because it would be tantamount to taking bribery. It
also shows how accountability of these collectors was strictly
observed. Ibn e Timiya also observes that the Prophet (P.B.U.H)
and his Caliphs (RAA) would themselves stand for the
accountability of their collectors.
The collectors were also ordered to observe justice while collecting
Zakat on different kinds of animals; i.e. neither to take the best of
49
ARTICLE SECTION
their animals nor the worst. On the other hand, the owners were
also prohibited to hide facts about their wealth and to perform this
religious duty by paying Zakat (Al Qasim, p: 453, 466). It was to
ensure that justice is done to both the wealthy or rich who paid
Zakat and the poor ones who received it. The collectors of Zakat
would be paid from the collected amount because they were state
employees and belonged to one of those eight categories to whom
Zakat can be paid.
How did the Distribution of Zakat take place?

The duty of the distribution was performed by the Prophet himself,
but according to the principles laid down through "Wahi" or
revelation. There are enough details of how the distribution took
place during his time. For instance, one of the traditions tells that he
would not leave anything to the next day; which means everything
would be distributed on the same day. Once in his life, the Holy
Prophet forgot to distribute a few coins and they were left at home.
On remembering these, the Holy Prophet was much upset and he
was only relieved when he had distributed them. It is stated in
another tradition that during the last days of the Prophet's life, eight
lakh "dirhams" (a coin made of silver) were brought from Bahrain
which he distributed in one session (Al Jibri, 1989, p: 11). This is
why there was no such thing as Bait ul Maal during his time.
Furthermore, the income collected as Zakat is not always in cash
form but can be in commodity form like camels, crops etc
(Muhammad, 1988, p: 181), which had to be distributed as soon as
possible because these may be very expensive if kept for a longer
period. In addition to this, majority of the Muslims were not
economically strong. The deserving Muslims dominated the rich
and wealthy. So they had to be provided with basic necessities of
life through revenue generated from different sources at that time.
The process of collecting and distributing income continued in this
way during the initial stages of the Islamic state. There were
absolutely no or very fewer changes in the above mentioned
distribution system, during the period of the first caliph, Abu Bakkar
Siddique (RAA). However, the situation changed when the era of
second caliph, Umar bin Khattab (RAA), started. There was vast
expansion in the boundaries of the Islamic state during this era. As a
result, there was a need to bring the essential changes in this
process. Therefore, Umar bin Khattab (RAA) was the first who
ordered for proper record keeping of the income. It was the time
when "Bait ul Maal" was established for the first time in Muslim
history. He was also the one who took the initiative to establish
"Deewans" or registers. These contained the record of the Muslims
of that time whose names were written down in it in different
categories. Each of these categories was allocated its appropriate
share from the income generated through different sources. In this
regard, Ibn e Timiya concludes that there was no recording
procedure for the income received during the era of the Prophet or
Abu Bakkar. Everything was distributed by them one by one. But
when the era of Umar started, wealth was increased, the number of
the people grew up and the boundaries of the state also spread.
Therefore, Umar ordered for organizing and recording everything
(Ibn e Timiya, p: 58).
Conclusion:
There are many important points to remember in what has been
discussed so far. These can be summarized as follows:
50
o
o
o
o
o
o
Accounting has a special link with Islam

Counting, which is the basis for accounting, is an integral part
of every Muslim's life, both for male and female
The relationship between Islam and accounting is evident
from Zakat
In the early days of Islam, economy was rather simple. Income
generation and expenditure was not complex as it had a
limited scale
Barter system was in vogue and the commodity market was
very small
The Holy Prophet would appoint people to collect income
through Zakat etc. He would be responsible for the distribution
of the income. He has also ensured the accountability of those
involved in this process
Therefore, it is right to state that Islam focuses on
accountability to Allah and society, It was and is more
important then mere keeping record of financial matters
During the era of Umar, there were fundamental changes in
this process. In his Era first time, Bait ul Maal was established
due to an immense increase in state income. Income and
expenses reorganization and recording started during his
period.
References:
Adnan, M. A., & Bakar, N. B. (2009). Accounting Treatment for
Corporate Zakat; A Critical Review. International Journal of Islamic and
Middle Eastern Finance. Vol. 2.
Dima, S., David, D. & Paiusan, L. (2010). Specific features of Islamic
accounting and cultural paradigm.
Hameed, S. (2000). The need for fundamental research in Islamic
accounting.
Jibri, A, M. M. (1989). Isaiat ud Dawaween wan Nuqood ul Arabia,
Maktaba e Wahba, Cairo.
Kantakji, S. Islamic Accountancy Fiqh. www.kantakji.org
Mansoori, T. M. (2011) Islamic law of contracts and business
transactions, Shariah Academy, Islamic International University,
Islamabad
Muhammad, Q. I. (1988). Al Siyasa Al Maliya Lir Rasool, Al Haiat ul
Misriya al A'am.
Napier, C. (2007). Other cultures, other accountings? Islamic
accounting from past to present.
Napier, C. (2009). Defining Islamic accounting: current issues, past
roots.
Salam, A. U. Q. (1989). Kitab ul Amwal. Dar u Shurooq, Bairoot.
Sartini. Islamization of Accounting.
"THE DEVELOPMENT OF THE CONCEPTUAL FRAMEWORK FOR
ACCOUNTING FOR ISLAMIC BANKING".
Timiya, A. B. A. H ( ). Al Siyasa Al Shareiya fi Islahi Ra'ee War Raeeya,
Dar u Aalam al Fawaid.
Zaid, O. A. (2000). The Appointment Qualifications of Muslim
Accountants in the Middle Ages. Accounting Education, Vol. 9, No. 4,
pp. 329-342.
Zaid, O. A. (2004). Accounting Systems and Recording Procedures in
the Early Islamic State. Accounting Historians Journal, Vol. 31, No. 2
(December), pp. 149-170.
About the Author: Muhammad Akhtar (FCMA, APA, SAS, MS
Finance, PGD) is In charge Industrial Liaison, Riphah School of
leadership, Riphah International University, Sector I-14 Islamabad,
Pakistan and Mr. Najeeb Zada, MA Islamic Studies, MA English, MA
Arabic is Lecturer, Department of Islamic Theology, Islamia College
University, Peshawar, Pakistan.
ECONOMIC INDICATORS
Economic Indicators
Average Yearly KSE 100 Index
Years
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Dec-2008
Dec-2009
Aug-2010
Dec 13, 2011
May 24, 2012
Average Structure of Interest Rates (%)
Index
1,520.73
1,366.43
1,770.11
3,402.47
5,279.18
7,450.12
9,989.11
13,772.46
6,487.52
9,342.00
10,438.66
11,388.43
13,936.92
Source: 1. www.sbp.org.pk/departments/stats/Kse_Monthly.pdf
2. KSE
Months/Years
Rate
19 Sep 2000
07 Jan 2001
23 Jan 2002
11 Apr 2005
22 Jul 2006
01 Aug 2007
30 Jul 2008
17 Aug 2009
12.0
14.0
9.0
9.0
9.5
10.0
13.0
13.0
02 Aug 2010
13.0
Apr 2011
Apr 13, 2012 till date
Demand
13,007
Supply
14,336
Gap
1,329
2004
13,831
15,046
1,215
2005
15,642
15,082
-560
2006
15,483
15,072
-411
2007
16,548
15,091
-1,457
2008
17,689
15,055
-2,634
2009
19,080
15,055
-4,025
14.0
2010
20,584
15,055
-5,529
12.0
2011
22,765*
15,055** -7,710
Years
2003
* NEPRAs State of Industry Report 2011

** Installed Capacity: 23,412 MW
Estimated by: PPIB
Source: SBP
Average Inflation Rate in Pakistan (%)
Energy in Pakistan (MW)
Pakistan's Foreign Exchange

Reserves (US$ bn)
Average Petroleum Price Per Barrel in $

Years
2003
2004
2005
2006
2007
2008
2009
2010
June 20, 2011
Jan 10, 2012
May 04, 2012
Period
SPI
CPI
WPI
Years
2003-2004
6.83
4.57
7.91
2004-2005
11.55
9.28
6.75
2005-2006
7.02
7.92
10.10
2006-2007
10.82
7.77
6.94
2007-2008
11.01
8.67
12.64
2008-2009
24.75
21.55
19.69
2009-2010
13.17
11.64
12.16
07 April, 2011
16.83
13.16
25.41
2003
2004
2005
2006
2007
2008
2009
2010
2011
9.80
10.95
10.37
11.34
14.04
8.32
10.13
16.42
16.77
6.80
10.10
8.70
May 24, 2012
16.31
Jan 2012
Source: www.nation.com.pk, www.dailytimes.com
Various Sources
Reserves
Prices
28.10
36.05
50.64
61.08
69.08
94.45
41.83
95.30
91.14
101.99
116.22
Various Sources
Foreign Investment inflows in Pakistan ($ Million)

Year
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12 (Jul-May)
Total
Greenfield
Investment
357.00
622.00
750.00
1,161.00
1,981.00
4,873.20
5,276.60
3,719.90
2,150.80
1,573.6
756.4
23,221.5
Privatisation
Proceeds
128.00
176.00
199.00
363.00
1,540.00
266.40
133.20
0.00
0.00
0.00
0.00
2,805.60
Total FDI
485.00
798.00
949.00
1,524.00
3,521.00
5,139.60
5,409.80
3,719.90
2,150.80
1,739.40
721.4
26,157.4
Private Portfolio
Investment
-10.00
22.00
-28.00
153.00
351.00
1,820.00
19.30
-510.30
587.90
344.5
(36.6)
2,689.8
Source: Board of Investment Pakistan (www.pakboil.gov.pk)
51
GLOBAL ECONOMIC BRIEFS

over the 0.25% US Treasury notes due May 2015.
ADB Prices $1.25 Billion

3-Year Global Bond
he Asian Development Bank (ADB) returned to the US

dollar bond market with the pricing of a $1.25 billion 3-year
global benchmark bond issue.
The proceeds of the Bank's third global bond issue of the year
will form part of the bank's ordinary capital resources and will be
used in its non-concessional operations, said ADB statement.
The bonds, which carry a coupon rate of 0.50% per annum
payable semiannually and a maturity date of 17 August 2015,
were priced at 99.666% to yield 0.605%, or 19.55 basis points
he International Monetary Fund (IMF) has projected gross

domestic product (GDP) growth of 2.7 percent for the year
2012 for oil importing countries of the Middle East, North Africa,
Pakistan and Afghanistan (Menap).
According to information available on the website of the IMF,
Masood Ahmed, Director, Middle East and Central Asia
Department of IMF in International Economic Bulletin noted that
floods in Pakistan had played a role in the country's downturn.
The oil importing countries mentioned in the report include
Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania,
Morocco, Pakistan, Syria, and Tunisia.
For the region's oil-importing countries, maintaining
macroeconomic stability in the current environment will be
challenging. Corrective measures are needed to lessen
vulnerabilities, and some steps can be taken quickly.
China Key Money Rate Falls to

13-Month Low on Ample Liquidity
hina's key money rate fell 20 basis points to a 13-month low

as liquidity conditions remained ample and offset a net
drain of funds via open market operations.
The People's Bank of China (PBOC) drained 30 billion yuan

($4.74 billion) via 91-day repurchase agreements, taking the
total net drain of funds to 78 billion yuan. A dealer at a Chinese
commercial bank in Shanghai said big banks had plenty of cash
hina's urban fixed asset investments rose 20.2 percent in

the first four months of 2012 compared with a year earlier,
the government said.
Fixed asset investments in the cities are a key gauge of the
Chinese government's infrastructure spending, which has
increased rapidly in recent years as Beijing has sought to
cushion the impact of the global downturn.
52
The issue achieved wide primary distribution with about 52% of

the bonds placed in Asia, 22% in Europe, Middle East and
Africa, and 26% in the Americas. By investor type, around 63%
were bought by central banks and official institutions, 20% by
fund managers, and 17% by banks and others. The transaction
was lead-managed by Credit Suisse, Deutsche Bank, HSBC,
and Nomura. A syndicate group was also formed consisting of
Bank of America Merrill Lynch, BNP Paribas, Citigroup, Daiwa,
Goldman Sachs, JP Morgan, Morgan Stanley, RBC Capital
Markets, and UBS.
ADB, which carries a AAA credit rating, plans to raise around
$14 billion from the capital markets in 2012. In 2011, it raised
just over $14 billion from a combination of global benchmark
issues, opportunistic issues in a variety of global currencies,
and private placements.
IMF Projects 2.7 Percent GDP Growth

for Oil Importing Countries
Governments must control spending on untargeted subsidies,
which predominantly benefit the wealthy, and begin putting in
place more effective social safety nets to protect the poor.
Central banks need to maintain external stability, which may
require greater exchange rate flexibility. Ensuring adequate
financing is also a key priority. The oil importers' external
financing needs are an estimated 50 billion dollars in 2012.
Given that capital markets will not meet all of that demand it will
be important to scale up the international response, the report
concludes.
on hand and were lending to smaller institutions. Overall, we
are not lacking money," he said.
Signs of further slowdown in the Chinese economy have led to
expectations that the authorities will maintain easy money
conditions to encourage lending and support growth. Data
show that the HSBC Flash Purchasing Managers Index, the
earliest indicator of China's industrial activity, shrank further in
May, underscoring worries of a sharper slowdown than first
thought. The benchmark weighted-average seven-day bond
repurchase rate slumped 20.71 basis points to 2.2308 percent,
its lowest point since April 2011. The 14-day money rate rose
slightly to 2.7823 percent at midday, while the overnight rate
inched up 4.32 bps to 1.8944 percent.
Fixed Asset Investment

up 20.2% in Jan, Apr: China
UPDATE
International Federation
of Accountants
IFAC Small and Medium Practices Forum
FAC's sixth annual SMP Forum gathered over 200 delegates

from 40 professional accountancy organizations in 36
countries to learn, debate, and collaborate on the opportunities
and challenges facing SMPs and their SME clients. The event
was co-hosted with the Institute of Certified Public Accountants
of Singapore, and sponsored by the Association of Chartered
Certified Accountants, CECCAR, Certified General Accountants
Association of Canada, Consiglio Nazionale dei Dottori
Commercialisti e degli Esperti Contabili, CPA Australia, Hong
Kong Institute of Certified Public Accountants, and Institute of
Chartered Accountants in England and Wales.
Delegates from IFAC member bodies, along with
representatives from the regulatory community, leading regional
business associations, and international standard setters,
discussed topics including shaping regulations and standards
and how SMPs can capitalize on emerging opportunities in an
ever-changing marketplace. Many speakers noted that
SMEsand the SMPs that serve themare the backbone of
economic stability and that growth of this sector is a key part of
the solution to the global economic recession; thus, world
leaders need to recognize that the small business sector is a
public interest issue.
Public Policy & Regulation Update
uring the first quarter of 2012, IFAC continued to speak out

on behalf of the accountancy profession, and laid the
groundwork for further input and collaboration.
IFAC, through its Public Policy & Regulation (PP&R)
department, issued two policy position papers one new, and one
an update of a previously-released paper:
Policy Position Paper 4, Public Sector Financial Management
Transparency and Accountability: The Use of International
Public Sector Accounting Standards, was issued in conjunction
with the IFAC Sovereign Debt Seminar, which brought together
key government, public sector, and accountancy professionals
from all over the world to promote the need for enhanced public
sector financial reporting. This timely paper sets out IFAC's view
that governments around the world must provide clear and
comprehensive information regarding the financial
consequences of economic, political, and social decisions, in
order to protect the public as well as investors in government
bonds.
The revised Policy Position Paper 2, A Single Set of Auditing
Standards: Audits Of Small- and Medium-Sized Entities,
reaffirms IFAC's view that a single set of auditing standards that
can be applied to all audits is in the public interestand is also very
timely given the increased focus on the use of International
Standards on Auditing (ISAs) for audits of small- and mediumManagement Accountant, May-June, 2012
sized entities following the release of the European

Commission (EC)'s proposed audit legislation in late 2011.
Originally issued in 2008, the paper has been revised to reflect
the Clarified ISAs, as well as other recent standards, tools, and
guidance relevant to small and medium practitioners.
In March, IFAC hosted a meeting of the Private Sector
Taskforce (PSTF), which is coordinated by IFAC and is
comprised of nine international private sector organizations of
professions and industries that are subject to regulation and
operate within the financial sector. The taskforce submitted an
update letter to the April meeting of G-20 Deputies and Finance
Ministers, reinforcing previous recommendations and the need
for enhanced public sector financial management.
IFAC also submitted its own letter to the April meeting of G-20
Deputies and Finance Ministers, focused on the need for
enhanced public sector financial management, transparency,
and accountability.
As 2012 progresses, the PP&R department has also continued
to monitor the EC's proposed audit legislation. IFAC will also be
responding to the Eurostat consultation on the suitability of the
International Public Sector Accounting Standards for the
Member States, and the recently-released consultation by the
Monitoring Group. We encourage all stakeholders to submit
comments to these consultations.
IFAC Releases Annual Report; Includes

Activities of SMP Committee
FAC recently released its 2011 Annual Report, which includes

IFAC's service delivery report, financial statements, a joint
message from IFAC President Gran Tidstrm and Chief
Executive Officer Ian Ball, as well a report from Public Interest
Oversight Board Chair Eddy Wymeersch. The report includes
contributions by the SMP Committee to IFAC's four service
delivery areas: standards and guidance, support for adoption
and implementation, quality and development, and
representation.
Implementation Companion Manual and

Orientation Slides Now Available
FAC has released the first edition of a Companion Manual to

accompany the Guide to Quality Control for Small-and
Medium-Sized Practices, 3e (QC Guide) and the Guide to Using
International Standards on Auditing in the Audits of Small- and
Medium-Sized Entities, 3e (ISA Guide), both of which illustrate
how international standards may be applied proportionately
and efficiently in an SMP environment.
The Companion Manual explains how member bodies and
other professional accountancy organizations can make the
best use of the Guides.
Revised IFAC Policy Position Paper Supports

Single Set of Auditing Standards for All Audits,
Including SMEs
FAC recently released a revision of Policy Position Paper 2, A

Single Set of Auditing Standards: Audits of Small and
Medium-Sized Entities, first issued in 2008. The paper, which
53
UPDATE
the SMP Committee helped revise, reinforces IFAC's support for
a single set of high-quality auditing standards for all entities,
whether small or large, simple or complex. The main revisions to
the position paper include updated references to the Clarified
International Standards on Auditing (ISAs); other standards that
the IAASB has issued and that are relevant to small and medium
practitioners; and tools and guidance made available to

practitioners by IFAC and the IAASB. The paper also highlights
the IAASB's commitment to designing standards that can be
applied in a manner proportionate to the size and complexity of
an entity and addressing the needs of SMEs and SMPs.
International Public Sector

Accounting Standards Board
objective from 2010 through 2012, and is of fundamental

importance to the future of global public sector standard setting for
at least the next 10 to 15 years.
IPSASB
IPSASB Releases Conceptual Framework on

Financial Reporting
s part of its project to develop a conceptual framework for the

general purpose financial reporting of public sector entities,
the International Public Sector Accounting Standards
Board (IPSASB) released for comment a
consultation paper in January.
The Consultation Paper, Conceptual

Framework for General Purpose
Financial Reporting by Public Sector
Entities: Presentation in General
Purpose Financial Reports (CFCP4), explores concepts applicable to
the presentation of information in the
general purpose financial reports of
public sector entities. It is not limited to
the financial statements.
The Consultation Paper describes what is
meant by presentation of information, and
explains that presentation covers both display
and disclosure. It reviews an approach to the
presentation of information that involves presentation objectives
based on user needs and the application of the qualitative
characteristics to presentation decisions. The paper also presents
three presentation concepts: select information that meets user
needs, satisfies the cost-benefit test, and is sufficiently timely;
locate information in a way that meets user needs; and organize
information to make important relationships clear and to support
comparability.
The Conceptual Framework is the IPSASB's key strategic
IAASB Accelerates Work to Enhance Auditor Reporting
n today's global business environment, with increasingly

complex financial reporting requirements, users of audited
financial statements are calling for additional, and more pertinent,
information for their decision making. As a result, the International
Auditing and Assurance Standards Board (IAASB) has committed
to move rapidly over the next two years on a top-priority project to
enhance the communicative value and relevance of auditor
reporting. The scope and focus of the project is based on the
results of a 2011 Consultation Paper, Enhancing the Value of
Auditor Reporting: Exploring Options for Change, which received
more than 80 responses from a wide range of stakeholders. The
project will include the revision of International Standard on
Auditing (ISA) 700, Forming an Opinion and Reporting on Financial
Statements, and, as appropriate, consequential changes to related
54
IPSASB Issues Exposure Draft 47 Financial

Statement Discussion and Analysis
he IPSASB recently published Exposure Draft (ED) 47,

Financial Statement Discussion and Analysisa proposed new
standard. ED 47 proposes minimum required content while still
providing sufficient flexibility for entities to prepare and publish
financial statement discussion and analysis that best
portrays their specific circumstances.
Due to the close link between financial statement
discussion and analysis and an entity's
financial statements, ED 47 proposes that:
l
the guidance be issued as an
International Public Sector Accounting
Standard (IPSAS) with the same authority
as IPSASs concerning accrual-based
financial statements;
l
financial statement discussion and
analysis be prepared and presented in
conjunction with an entity's financial
statements; and
lthe qualitative characteristics governing

preparation of financial statements be applied to financial
statement discussion and analysis.
ED 47 includes implementation guidance and an illustrative
example that show how an entity might prepare its financial
statement discussion and analysis to comply with the proposed
requirements.
To access the ED and the At-a-Glance document, which provides a
summary of the ED, or to submit a comment, please visit the
IPSASB website at www.ipsasb.org.
International Auditing and Assurance

Standards Board (IAASB)
ISAs, such as ISA 260, Communication with Those Charged with
Governance. Early engagement with global stakeholders on key
issues will be critical to the success of this project. Accordingly, the
IAASB is currently developing a progressive consultation
document on key elements of a new auditor's report. Areas of
attention include: auditor commentary in relation to the entity and
its financial statements, and the audit itself; communications about
going concern and the auditor's work on other information in
documents accompanying audited financial statements; plain
language descriptions of the nature and scope of an audit; and the
UPDATE
concept of a building blocks approach designed to indicate
required content while allowing flexibility for different national
reporting regimes and entities of different types and sizes.
Consultation plans also include roundtables later in 2012, and
other outreach and communications activities. For more
information and to monitor developments on this project, visit the
Auditor Reporting Project page on www.iaasb.org.
Revised IAASB Standards Enhance the Use of

Internal Audit; Address Needs of SMEs
n March, the IAASB released ISA 610 (Revised),

Using the Work of Internal Auditors, which deals
with the external auditor's responsibilities if
using the work of an internal audit function to
obtain audit evidence. The revised standard
provides a robust framework for evaluating
and using the work of an entity's internal audit
function. It defines the conditions that are
necessary for the external auditor to be able to
use the work of internal auditors, including
ensuring that the internal audit function's work is
adequate for the audit and preventing over- or
undue use of such work. Related changes have also
been made to ISA 315 (Revised), Identifying and Assessing
the Risks of Material Misstatement through Understanding the
Entity and Its Environment, to explain how the internal audit
function and its findings can usefully inform the external auditor's
risk assessments. Both revised ISAs (610 and 315) are effective for
audits of financial statements for periods ending on or after
December 15, 2013. In revising ISA 610, the IAASB also agreed on
requirements and guidance that specify the conditions and
Securities and Exchange

Commission of Pakistan
SECP Approves Regulatory Requirements for
Exchange Traded Funds
he SECP has prescribed detailed requirements for launching

Index Tracking Exchange Traded Funds by the Asset
Management Companies in Pakistan. Earlier, the SECP had
approved regulations governing listing and trading of exchange
traded funds (ETFs) on the Karachi Stock Exchange. The SECP
circular has stipulates the regulatory requirements for the
authorization of ETFs, including investment restrictions, issuance
and redemption of creation units, pricing and dealing, additional
disclosure requirements, role of the authorized participants, and
fees and expenses.
ETF is a hybrid between an open-end and closed-end mutual fund.
It continuously issues shares which trade on a stock exchange and
unlike a traditional open-end collective investment scheme (CIS),
the ETF does not sell or redeem its individual shares (ETF shares)
to and from retail investors at the net asset value. Instead, certain
financial institutions known as authorized participant (AP) purchase
and redeem ETF shares directly from the ETF in creation units.
The ETFs provide investors with a number of benefits including
trading flexibility, portfolio diversification, lower expense ratio and
transparency. The ETFs are among the fastest growing investment
products which due to a growing demand are being customized to
establish responsibilities of the external auditor if using internal

auditors to provide direct assistance during the audit. While the
IAASB has concluded its deliberations on the requirements
addressing direct assistance, it intends to incorporate such
material in ISA 610 (Revised) only after the International Ethics
Standards Board for Accountants (IESBA) concludes its
deliberations on its February 2012 Exposure Draft of proposed
changes to the definition of engagement team in the Code of
Ethics for Professional Accountants (the Code). The IESBA
Exposure Draft proposes to resolve a perceived
inconsistency between the ISAs and the IESBA Code
regarding the ability of external auditors to use
internal auditors to provide direct assistance.
Recognizing the important role practitioners
play in providing accounting and financial
reporting expertise to entities, particularly
smaller entities, the IAASB recently released
International Standard on Related Services
(ISRS) 4410 (Revised), Compilation
Engagements, which clarifies the practitioner's
role and responsibilities in a compilation
engagement and matters that need to be considered
when accepting such engagements, and emphasizes
the importance of quality control. It also expands the traditional
compilation engagement report to highlight the key features of a
compilation engagement. The revised standard is effective for
compilation engagement reports dated on or after July 1, 2013. For
more information on these and other projects, see the IAASB's
project pages on www.iaasb.org.
cover specific arrays of regions, sectors, stocks, commodities,

bonds, futures and other asset classes.
It is anticipated that innovation in investment products such as
ETFs will help widen investors' choice and create new business
opportunities for financial services providers like fund managers
and brokers. In the longer term, the ETFs are expected to facilitate
the development of capital market in Pakistan, particularly the
mutual fund industry.
SECP Gives Nod to CSR Guidelines
n principle, the SECP has granted approval for introducing

corporate social responsibility (CSR) guidelines for public
companies. The guidelines shall be a significant step towards
streamlining reporting requirements and corporate accountability
of the CSR activities by public companies. The guidelines shall be
notified as 'Corporate Social Responsibility Voluntary Guidelines,
2012' after consultation with external stakeholders and general
public. The draft guidelines have been placed on website of SECP
for public comments. Further, the guidelines have been circulated
among prominent public companies engaged in the CSR activities,
all stock exchanges, Pakistan Centre for Philanthropy, Pakistan
Poverty Alleviation Fund, Institute of Cost and Management
Accountants and Institute of Chartered Accountants of Pakistan.
Although businesses have been involved in corporate philanthropy,
lately leading companies in Pakistan have started integrating CSR
into their strategic business goals and taking active part in
implementing social and community development strategies. A
range of tangible opportunities have been created in rural areas,
particularly, through responsible businesses seeking difference in
the lives of ordinary people through CSR initiatives and
55
UPDATE
programmes. While most businesses give charity and make
donations for noble causes, the reporting and accounting
mechanism for stakeholders is still vague. In 2009, the SECP
issued the Companies (Corporate Social Responsibility) General
Order, applicable to all public companies. According to the said
order, every company is required to provide descriptive as well as
monetary disclosures of the CSR activities undertaken during each
financial year in the directors' report to the shareholders annexed to
the annual audited accounts. The companies, however, were at
liberty to choose the content and format of CSR report, if issued,
generating a strong perception that most reports are public relation
tools adopted by large companies and not a form of accountability.
Stakeholders, therefore, were facing difficulty to assess the
positioning of company regarding CSR priority areas, evaluate the
utilization of resources and their implementation effects.
Keeping in view global learning and local market practices, a set of
guidelines have been developed by the SECP to encourage
adoption of voluntary measures ensuring transparency and
corporate accountability in implementing the CSR activities. The
guidelines shall be applicable to all public companies and are
expected to be take effect from July 1, 2012.
Through the said guidelines, the SECP has exerted upon two
aspects, i.e., the governance practices and independent
assurance. Thus as a primary step, the policy related to the CSR
activities are expected to be prominently disclosed by companies
on appropriate medium of communication for stakeholders.
Thereafter, assurance from an independent external party is
required for verification of reported activities. Nevertheless,
companies shall continue to enjoy the liberty of
developing/implementing CSR projects as per their aspirations,
however, board of directors are expected to play a proactive role in
formulating CSR policy. The implementation strategy so adopted is
required to be embedded in policy and strategic framework of the
companies duly disclosed to all stakeholders. The adoption of
these guidelines will be a significant step towards strengthening the
policy and implementation pyramid within reporting companies.
Moreover, the proposed the CSR framework shall create favorable
environment for sustainable growth, responsible business behavior
and corporate accountability. The Draft Corporate Social
Responsibility Guidelines, 2012, are placed on the SECP website.
For facilitation of stakeholders, comments sent on email address
csr.guidelines@secp.gov.pk are also acknowledged.
SECP Signs MOU with Moroccan Counterpart
he Securities and Exchange Commission of Pakistan (SECP)

and its Moroccan counterpart, Conseil Deontologique des
Valeurs Mobilieres (CDVM), have signed an MOU, paving the way

for enhanced cooperation and information sharing between them.
On the sidelines of the annual meeting of the International
Organization of Securities Commissions (IOSCO) in Beijing,
Muhammad Ali, the SECP chairman, and Hassan Boulaknadal, the
CDVM DG, signed the agreement, says a statement issued by the
Commission.
Ther agreement reiterates the two regulators' commitment to work
together in ensuring that securities and commodities markets in the
two countries are fair, transparent, efficient and regulated to world
standards. Both the SECP and CDVM are signatory to the IOSCO
multilateral MOU, the international standard for information sharing
between the securities regulators and this bilateral MOU would
supplement the cooperation extended under the umbrella of
multilateral MOU. The MOU has been inked in the backdrop of
evolving globally integrated financial markets, necessitating for
regulatory agencies of capital markets to develop cooperative
linkages to ensure information sharing for enforcement of securities
laws and facilitate detection and combat cross-border violations.
The SECP is promoting cooperation with other regulatory
authorities of the capital market at the bilateral, regional and
international levels. The SECP has already signed MOUs with the
regulatory agencies of India, the Maldives, Australia, Bhutan, Sri
Lanka, Iran, China, Turkey and Oman. It outlines a framework for
cooperation and information sharing in areas of mutual interest.
The scope of document also includes assistance in actions against
insider dealings, market manipulation and other fraudulent
practices in securities dealings, enforcement of relevant laws, rules
and regulations, monitoring the markets for their compliance with
laws and regulations, promoting high standards of fair dealing in
their conduct or business, and technical assistance among the two
regulatory bodies.
The Chairman SECP said that it is a significant milestone in the
development of the capital markets of two brotherly countries which
cements an already excellent level of co-operation between the two
independent agencies. Each regulator will be able to rely on the
MOU to ensure compliance with applicable legislation and to
collaborate in regulating inter-jurisdictional dealings as well as
share technical know-how and joint training in enhancing the
credibility of financial markets and protect investor rights. The MOU
aims at minimizing the risk that is usually associated with financial
market transactions and will also help prevent fraud, money
laundering, market manipulation and other prohibited practices in
the securities markets of both countries.
Research & Publications

Editor/Publisher
Correspondence Address
Mrs. Ghazala Yunus
ICMAP Head Office, ST-18/C,

ICMAP Avenue, Block-6,
Gulshan-e-Iqbal,
Karachi-75300.
Tel: 021-99243900
Fax: 021-99243342
Email: ed@icmap.com.pk
URL: www.icmap.com.pk
Email: ghazala.yunus@icmap.com.pk
Research & Publications Section

Mr. Shahid Anwar
Deputy Director Research
Email: shahid.anwar@icmap.com.pk
Circulation
Mrs. Naila Khan
Deputy Director Library & Circulation
Email: rp@icmap.com.pk
56
ICMAP Budget Proposals

Booklet 2012-13
The Research and Publications Committee took a pro-active step in publishing the ICMAP Budget Proposals Booklet 2012-13. This booklet was
sent to all the decision makers, including the Parliamentarians, Federal Ministers, Federal Secretaries, Presidents of Chambers of Commerce &
Industry, Chairmen of Trade and Industry Associations and other Stakeholders. The Federal Ministry for Finance, Revenue, Economic Affairs,
Statistics & Planning and Development and other stake-holders have not only acknowledged the efforts of ICMA Pakistan in bringing out these
proposals but also made good use of it. The ICMAP Budget Proposals have been extensively covered in the leading newspapers of the country.
Extract of some of the newspapers and web-links are placed below:
Commercial Agreement between Discos, CPPA Proposed
ICMAP for Broadening Tax Base, Reduction in Rate

Tuesday, May 08, 2012
KARACHI: The Institute of Cost and
Management Accountants of Pakistan
(ICMAP) has proposed broadening the
tax base and called for a reduction in the
tax rate in its budget 2012/13 proposals.
The rate of income tax for the corporate
and non-corporate sectors should be
reduced by five percent and the present
statutory limit of exemption under the
income tax law be increased from

Rs100,000, it added. The measures will
not only promote investment in Pakistan,
but also encourage companies and
investors to further broaden their
business as their returns will increase,
which will ultimately benefit the economy
to be competitive with its neighbours, it
suggested.
... Contd.
http://www.thenews.com.pk/Todays-News-3-107044-ICMAP-for-broadening-tax-base-reduction-in-rate
Budget proposals 2012-13: ICMAP calls for broadening

tax base, reducing rate
Javed Mirza l Thursday, May 17, 2012

KARACHI: The Institute of Cost and Management Accountants of Pakistan
(ICMAP) has proposed that there should be a commercial arrangement
between distribution companies (Discos) and Central Power Purchasing
Agency (CPPA) while Discos should provide guarantee or letter of credit
(LC) to the CPPA for power supply.
In its budget proposals, ICMAP noted that there was no commercial
transaction between Discos and the CPPA which was creating financing
crunch and swelling circular debt. Criticising the existing subsidy system, the
Institute favoured targeted subsidy for life line consumers only. ... Contd.
http://www.thenews.com.pk/Todays-News-3-108611-Commercial-agreement-betweenDiscos-CPPA-proposed
Need for introducing zero-based budgeting

approach stressed
MAY 07, 2012 l IQBAL MIRZA

The Institute of Cost and Management Accountants of Pakistan (ICMAP) has
proposed broadening of tax base and called for a reduction in tax rate in its budget
2012-13 proposals.
President Ziaul Mustafa and Chairman of ICMAP's Research and Publications
Committee Shahzad Ahmad Awan wrote the foreword to the proposals.
The proposals have been divided as follows: Manufacturing sector: energy and
power, textile, cement, oil and gas, petroleum, pharmaceutical, leather, and sugar.
... Contd.
http://www.brecorder.com/business-a-economy/189/1186658/
MAY 04, 2012 l IQBAL MIRZA

There is a need to introduce a 'zero-based budgeting' approach, which requires
justification for every expenditure incurred, according to a proposal for
government-ICMAP partnership focusing on 'cost efficiency for economic
stability' drawn-up by the Institute of Cost and Management Accountants of
Pakistan (ICMAP).
The management accountants, the proposal said, could play a significant role in
supplementing the government's efforts for achieving economic stability and
cost efficiency, better utilisation of public funds and resources, reviving sick and
inefficient organisations, checking rising inflation and unfair business practices.
... Contd.
http://www.brecorder.com/business-a-economy/189/1185702/
ICMAP proposes broadening of tax base, reduction in rate

Staff Reporter: KarachiThe Institute of
Cost and Management Accountants of
Pakistan (ICMAP) has proposed
broadening of tax base and called for a
reduction in tax rate in its budget 201213 proposals.
Consolidated industry-wise summary
and details of the proposals have been
submitted to the Ministry of Finance
and the Federal Board of Revenue with

a request that ICMAP would welcome
an opportunity for further interaction
with the Ministry and FBR for further
deliberations and clarifications of the
proposals.
The sum up of the budget proposals is
as follows: cost efficiency for economic
stability, friendly tax system, IT-enabled
http://epaper.pakobserver.net/201205/09/business-1.php
government departments,
corporatisation of public sector
organisations, development of two
mega cities in Sindh and Punjab,
effective role of NFC to distribute funds
to the provinces, and provincial/ local
autonomy.
President Zia ul Mustafa and Chairman
of ICMAP's Research and Publications
Committee Shahzad Ahmad Awan

wrote the foreword to the proposals.
The proposals have been divided as
follows: Manufacturing sector: energy
and power, textile, cement, oil and gas,
petroleum, pharmaceutical, leather,
and sugar.
The ICMAP has highlighted existing
scenario, issues and proposals in each
sector.
... Contd.

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From the Holy Qur-n

In the Name of ALLAH, the Most Magnificent, the Most Merciful.

Have We not caused your bosom to be wide open for you?

Surah: 9 - Surah Ash-Sharh; verses 1 to 8

President and Chief Executive

Mr. Ghulam Mustafa, FCMA

Mr. Abdul Wasey Khan, FCMA

Mr. Sajjad Ahmad, FCMA

Journal & Publications Committee

Mr. Jawed Mansha, FCMA

Mr. Shahzad Ahmad Awan, FCMA

Assistant Secretary & DGM Corporate Affairs

Mr. Abdul Khalil, FCMA

Mr. Mohammad Hanif, FCMA

General Manager Finance

Members - Government Nominees

Mr. Tahir Mahmood, FCMA

Mr. Muhammad Abdul Basir

Deputy Auditor General (APR&SD)

Mr. Muhammad Haroon Rasheed

Volume : 21.3 l May-June, 2012

Official Journal of Institute of Cost and Management Accountants of Pakistan

From the Desk of President and Chief Executive

CMA Canada and ICMA Pakistan to continue to collaborate

Ms. Joy Thomas, President and CEO

From the Desk of Chief Editor

Pakistans Budget 2012-13

Federal Budget 2012-13

Budget-Making Process: How to Improve It?

Islam and Accounting

By Wasful Hassan Siddiqi, FCMA

Will Budget Address

Federal Budget 2012-13

Finance Bill 2012: Attempting to

Global Economic News

IFAC, IASB, IFRS & SECP News

By Huzaima Bukhari and Dr Ikramul Haq

Economic Survey 2011-12 Highlights

Our Next Issue

Stabilizing Pakistan: Boosting its Private Sector

From the Desk of

President and Chief Executive

Management Accountant, May-June, 2012

From the Desk of

Shahzad Ahmad Awan, FCMA

Management Accountant, May-June, 2012

An exclusive interview with

Ms. Joy Thomas

President and CEO

In what ways is the Management Accountancy Profession

Do you think that investors' interests can be served

Some time ago the word Accountant had become a

Management Accountant, May-June, 2012

In today's world, the profession of conventional

Globalization, free market economy and new

supporting their members from entry into the profession and

The role of management accountants in business has

What steps CMA Canada has taken to promote

So where to for a Management from here?

Do you see a need for a representative body of

Keeping in view the role CMA Canada played in inception

How your Institute is coping with the challenge of other

accountants agreed that a merged profession would meet

Anything you would like to share with our readers.