“There is no ideological difference between the PTI and the JI as far as the finance ministry is concerned,” Asad Umar, a senior vice president of the PTI, told The Express Tribune. “When it comes to matters relating to taxation, the PTI and JI see eye to eye.”

Umar, considered to be the party’s main leader on economic policy, confirmed reports that JI’s Sirajul Haq, elected to the K-P Assembly from Lower Dir, would be the provincial finance minister. It is not yet known who the PTI will be nominating to lead the education ministry, though the party leadership has made it clear that it will be one of their own.

The rumour that JI had been given three ministries – finance, education, and zakat – in exchange for joining the coalition with PTI caused a stir among the party’s supporters, who expressed their disappointment on social media. Particularly distressing to most PTI supporters was the fact that their party’s education plan was among the highlights of the policy agenda on the strength of which the PTI ran its election campaign.

Sources familiar with the PTI leadership’s deliberations suggested that the party’s top brass acknowledged those concerns and were keen to run the province’s education policy according to their own policy agenda. And even on the question of the finance ministry, the PTI appears to be taking measures to ensure that its economic platform gets implemented.

According to sources familiar with the matter, while Sirajul Haq will be the provincial finance minister, he will not be in charge of the planning and development department, which the PTI plans to keep for itself. The planning and development department in provincial governments is an absolutely critical one, since it is the starting point from which the implementation of all policy reforms must originate.

The K-P government consists of 30 departments, but under Article 130 (6) of the constitution, can only have a maximum of 15 cabinet members. Ministers, therefore, will be running more than one department. The education minister, for instance, will be in charge of two separate departments, that of higher education and elementary and secondary education.

Provincial finance ministers typically run three departments: finance, revenue, and planning and development. The PTI leadership appears to be comfortable letting its coalition partner run the finance and revenue departments, but wants to keep planning and development for itself.

After the 18th Amendment to the constitution, and the passage of the 7th National Finance Commission Award, provincial governments in Pakistan have been given far more autonomy than at any point in the country’s history. The PTI leadership views its government in K-P as an opportunity to compete on governance quality with its arch-rival, the Pakistan Muslim League-Nawaz. The provincial government in Peshawar is viewed by the PTI as a stepping stone for gaining the trust of a broader swathe of voters nationwide as competent managers of economic and social policy.

Sources familiar with the matter say that the PTI leadership plans to use “party resources” to help shape the provincial government’s policies, a reference to PTI’s embryonic policy think tank which has helped develop the party’s economic platform.

Yet in order to compete on policy, the PTI must first master coalition politics. It must keep its coalition partners satisfied while retaining the ability to shape the direction of the government’s policy agenda. The initial announcement – made by a JI spokesperson – that the PTI had given the crucial education ministry to a coalition partner represents a stumble, though one from which the party appears to have recovered, at least for now.

Published in The Express Tribune, May 17^th, 2013.

In order to answer that question, let us first examine what it means to say that valuations are going up and what has happened so far.

The price of stock is measured not just in how much you have to pay to buy one share, but also in certain ratios, particularly things like the price-to-earnings (PE) ratio, which determines the multiple over the previous years’ that investors are willing to pay for a given stock.

PE ratios tend to be higher for companies that the market expects rapid growth in. A case in point is Engro Foods, which trades at nearly 42 times its 2012 profits, largely because the market expects its profits to continue skyrocketing for the foreseeable future.

Conversely, investors may be willing to pay a lower multiple for a stock that is perceived to be higher risk, either because it faces regulatory risks, or because it is in an industry that is vulnerable to external shocks, or even because it does not trade much and therefore is more volatile.

The one risk that overpowers all others for Pakistani companies is “political risk”, a catchall phrase that is supposed to sum up the risks of doing business in Pakistan: everything from strikes and protests causing factories to burn down (Phillip Morris, 2007) to the government not honouring contracts signed by a previous administration (Engro Corporation, 2012). (Political risk does not include the cost of bad infrastructure, by the way. The assumption is that your area having bad roads and no electricity is not exactly something that can surprise you.)

Investors expect at least part of the “political risk” premium currently built into the prices of Pakistani stocks to disappear, should the transfer of power between two civilian, democratically elected governments be completed in a reasonably orderly fashion. Should that happen, Pakistani stock prices will go up even further than they already have. But how likely is that?

According to data provided by Lakson Investments, companies in the benchmark KSE-100 index currently trade at an average of 8.5 times their last year’s earnings. Just six months ago, that number was 6.74 times previous year’s earnings. Granted, more earnings numbers have come out since then, but that is a staggering revaluation upwards of Pakistani equities. Is there any more room left? The answer is, yes, though maybe not nearly as much as people think.

During the Musharraf administration, considered the heyday of Pakistani capital markets and a time when Pakistan was perceived to be relatively low political risk, the average PE ratio of the KSE-100 index was seen hovering between 9 and 10 times earnings. It seems a good bet that the market will return to that level, which is slightly higher than that of today.

It is entirely possible, however, that the market might push just slightly higher than that level, as the hunt for liquidity by foreign investors pushes more and more brokers to unlock untraded blocks of hitherto illiquid stocks from the dusty books of large state-owned institutional investors like provincial and federal pension funds, etc.

Many stocks that are currently considered “second tier” may start trading at higher multiples, which will likely create opportunity for value investors looking for good bargain stocks with strong earnings growth and reliable managements. The overall market PE ratio may not increase by a whole lot more, but that does not mean there still is not a whole lot of money to be made in this market.

Published in The Express Tribune, May 12^th, 2013.

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KARACHI: In a significant departure from previous policies, the State Bank of Pakistan has eased the rules that govern how and how much banks can lend to small and medium enterprises. The changes include a raise in maximum loan limits and a dramatic reduction in documentation requirements for small enterprises.

The announcement was made in typical State Bank fashion: quietly and through a discreet e-mail sent out to the media after regular business hours. But the revelation in that press release was a dramatic reversal of policy, and may well lead to a significant boom in lending to the SME sector and might even encourage banks to start lending to the informal sector.

The rules create two separate definitions for small enterprises and medium-sized enterprises and create different lending rules for each. They expand the lending limit – including the “clean” (uncollateralised) lending limit – as well as dramatically reducing documentation requirements for small enterprises.

“Banks’ exposure to SMEs have shown tilt towards large-size corporate and medium enterprises, thus neglecting the small enterprises in their banking business,” said Syed Samar Hasnain, the director of the State Bank’s SME financing department in the preface to the new rules. “We feel that a separate definition for Small Enterprises will not only help banks to align their business strategy with the small enterprise financing needs, but will also help SBP to monitor the flow of credit to this important sector more closely.”

Small enterprises are defined in the new rules as businesses that have less than Rs75 million in annual revenues and have less than 20 employees. These entities are allowed to borrow up to Rs15 million from the banking sector, and will for the first time be able to do so without providing audited financial statements. Instead, the banks are permitted to ask for a copy of financial statements signed by the entrepreneurs themselves.

The removal of documentation requirements – believed to be a first for the central bank – will allow businesses currently in the informal sector to begin accessing formal sector financing options, thereby enabling them to enter the formal sector.

The objectives of this policy are clear: economists have been saying for some time now that the informal sector of the Pakistani economy is a lot larger than they had previously thought and appears to be doing rather well. By allowing banks to lend to this sector, the SBP is allowing banks to profit from its growth.

In addition, banks have been growing desperate for avenues of lending that enable them to earn higher yields ever since the State Bank has decided to make it painful for them to lazily take in deposits and simply lend them out to the government. “Banks must fulfil their role as financial intermediaries in the economy” has become a mantra at the central bank.

The banking sector’s response thus far has been to start seeking avenues of lending in the SME sector. Virtually every top banking official who spoke to The Express Tribune over the past year has boasted of their bank’s plans to expand lending to the SME sector. By easing the rules, the State Bank appears to be helping them along.

The new rules also allow for banks to lend up to Rs5 million to companies without requiring them to post any collateral. The previous limit was Rs2 million. This new, higher limit will not include any borrowing that the owners of small businesses undertake in their personal capacity, further enhancing their ability to access bank financing.

Medium enterprises will be defined as companies that have annual revenues between Rs75 million and Rs400 million and between 21 and 250 employees for manufacturing businesses, and between 21 and 50 employees for service sector businesses.

Published in The Express Tribune, May 8^th, 2013.

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The PPP, being a clearly left-wing party, has outlined an approach that seems to put considerable faith in government institutions to solve the problem. The PML-N, with its clearly established right-wing credentials, seems more comfortable in letting the free market run its course. The PTI, on the other hand, is an interesting case: while most political analysts describe its political leaning as right-wing, its economic agenda has an unmistakable left-of-centre bent to it, though it appears to trust the free market more than the PPP.

It was in order to tease out these ideological differences that The Express Tribune deliberately structured its analysis of the economic manifestos in an ideologically neutral manner. Our efforts seem to have succeeded: both the PML-N and the PTI score exactly the same mark on four of the six criteria used to grade their energy plans. Yet those grades are the results of very different plans.

On ensuring full collection of bills, incentivising investment in cheaper sources of electricity, improving efficiency of existing power plants, and deregulation of energy prices, both PML-N and PTI score the same. But the PTI’s plan utilises more government intervention than the PML-N’s.

For instance, the PTI plans to bolster the authority of the independent boards of directors at the state-owned power distribution companies by giving them the power to hire and fire the management, leaving these companies publicly owned but run a little more like private companies.

“The problem at the electricity distribution stage is mostly a political one, so it makes sense to keep these companies in the government’s control, which can navigate that terrain better,” said Asad Umar, the PTI’s economic wunderkind, in an interview with The Express Tribune.

This arrangement is meant to help improve the collection of bills, which is also partially a solution to incentivising more investment in the power sector. (Better bill collection is the single best way of eliminating circular debt, the demise of which is likely to spur much more investment in energy in Pakistan.) The PML-N’s solution is to privatise the power distribution companies.

Where the PML-N and the PTI converge is the privatisation of the state-owned power generation companies. “The problem in power generation is mostly technical, which the private sector is most capable of solving,” said Umar.

While it is perilous to make such predictions, we believe that both the PTI and the PML-N’s approach – properly implemented – have an almost equal chance of success, at least in the short to medium term.

For its part, the PPP appears to continue to have faith in the power of the state, outlining plans for the government to improve the power generation and distribution companies it owns, but not identifying any part of the energy chain it wishes to privatise. And unlike the PTI and PML-N, the PPP appears to be in no mood to deregulate energy prices in Pakistan. We would have a more charitable view of these policies, had they not demonstrated themselves to be a colossal failure over the past five years. The MQM hardly has much of an energy plan beyond stating that natural gas should be directed to power plants above all other needs. And the ANP does not even bother to present an energy plan at all.

Published in The Express Tribune, May 6^th, 2013.

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In our analysis of reducing regulatory hurdles, The Express Tribune looked at trade with India as a category separate from trade with other countries, because we believe that Pakistan’s economic prosperity and future is dependent very heavily on more liberal economic ties with its eastern neighbour, more so than any other country.

Virtually every manifesto examined by The Express Tribune did not directly mention trade liberalisation with India alone as an important political goal. Trade with India was almost invariably mentioned in the broader context of pursuing regional trade agreements.

And the advocacy of free trade, or lack thereof, is where the ideological leanings of Pakistan’s right-wing parties are revealed as being more properly described as pro-business, not pro-free market. Even the PML-N and PTI, both of which exhibit considerable libertarian tendencies with respect to privatisation and deregulation, are not completely convinced that free trade is a good thing.

Even the PML-N, which has the most favourable view of free trade, does not disavow many protectionist policies. And the PTI and PPP are even more openly protectionist in their stances. The MQM and ANP, for their part, do not offer enough detail in their manifestos for any judgement to be made about their stance on free trade.

In addition to trade, we also look at three other measures that reduce regulatory hurdles within the economy and increase intra-Pakistan trade: incentivising and facilitating business registration, making it easier to get licences and permits, and computerising land records.

Each of these three measures would allow businesses to enter the formal economy and the last one in particular (reliable land records) would help far more entrepreneurs gain access to credit which they could use to finance their trade and other commercial activity.

The only parties that offered an explicit pledge to create reliable, computerised land records are all those that rely primarily on urban voters for victory: the PTI, the PML-N and the MQM. All three made that pledge in the context of agricultural land. The PPP hinted that it wants such records to exist, but made no formal promises.

The PPP has also made registration of companies easier during its tenure in office, and indicated in its manifesto that it wants to continue that process. The PTI and PML-N also say they want to reduce the amount of red-tape that entrepreneurs have to go through in order to start and run their businesses.

The PML-N wants to reduce the corporate tax rate, but none of the parties clarifies how it intends to eliminate the perverse incentives in the current tax code, which place a greater burden of taxation on the companies that comply with the most stringent standards of disclosure. In effect, the tax code discourages formalisation of the economy, but none of the parties appears to have a plan to fix that problem.

Published in The Express Tribune, May 6^th, 2013.

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For the sake of the economy, therefore, it is vital that the next administration improve the ability of the state to govern the country. To this end, we have identified five criteria that we believe can significantly improve the government’s efficiency: devolving real autonomy to local governments, reducing the overlap between federal and provincial ministries, better data collection, breaking the Civil Service of Pakistan’s monopoly on government positions, and reducing the amount of time it takes to decide court cases.

Devolution of authority to local governments is vital. After all, a lot more roads are likely to be in good shape if the approval for their repair work does not have to come all the way from Islamabad. In delivering the services that affect the everyday lives of ordinary citizens, local governments – elected and properly empowered – are a highly effective tool.

All political parties pay lip service to this idea, but only the PTI and MQM present ideas on exactly how to implement them. And in our analysis, we found the PTI’s programme to be somewhat stronger, since the MQM’s plan left questions of revenue sources almost completely unanswered.But it is not just the local level that needs empowerment: the provinces have yet to take control of the authorities devolved to them by Islamabad under the 18th Amendment to the Constitution. There is considerable overlap between the federal and provincial ministries.

On this score, the ANP and MQM are both explicit about their desire to abolish many federal ministries and have most government work done at the provincial and local levels. The MQM and ANP’s strength on this criterion is unsurprising: as mostly local parties they have incentive to reduce the power of the federal government.

Even at the federal level, however, many reforms are often either thwarted or badly implemented owing to the poor human capital quality in the civil service (translation: bureaucrats are incompetent). The most competent segments of the government are organisations like the State Bank of Pakistan and the Securities and Exchanges Commission of Pakistan, which have staff that does not come from the CSP. Breaking the CSP monopoly on institutions like the Federal Board of Revenue and the finance ministry might help improve their efficiency.

The PPP makes some tentative proposals that might accomplish this, but the PML-N is more explicit in its desire to outsource many government functions to private corporations. No other party has anything to say on the matter.

Government officials, CSP or otherwise, however, need good data on the basis of which to make decisions, which makes the much-delayed census vitally important. But only the PML-N and PTI are in favour of conducting the census. The PPP, MQM and ANP do not even mention it in their manifestos at all.

And lastly, the government needs to get better at providing effective and cheap dispute resolution mechanisms through the court system. On this front, the PML-N provides a remarkably detailed plan, though the PPP and PTI are not too far behind. All three want to introduce innovations that reduce the average time it takes to process a case, increase the number of courts and judges and encourage out-of-court settlements.

Published in The Express Tribune, May 6^th, 2013.

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In our analysis, we have come up with five criteria for judging the depth of a party’s plan to restore fiscal balance. Of these five, two relate to expenses – eliminating untargeted subsidies and ending the bailouts of state-owned companies – and three relate to raising revenues: eliminating exemptions on sales taxes, ending the presumptive tax regime, and credibly cracking down on tax evasion.

This set of criteria is deliberately tilted towards the revenue side because we believe that Pakistan does not really have an expenditure problem. Total government expenses as a percentage of the total size of the economy hover around the 16% mark, by no means an extravagant figure. Hence, while there is much wasteful spending that needs to be cut out, the bulk of the problem lies in the fact that not enough Pakistanis pay their taxes.

And it is this revenue side that is most disappointing. Every single party manifesto examined by The Express Tribune had the exact same target: total government revenues should hit 15% of the gross domestic product. But while every party appears to believe this, hardly any of them offer any specifics on how they would achieve this target.

On this score, the record of the PML-N leaves a lot to be described. They were initially awarded some points for suggesting methods of cracking down on tax evasion, but their manifesto includes proposals for so many new tax exemptions that we felt compelled to deduct points for that, leaving the PML-N with a net score of zero in each of the three revenue-related criteria for achieving fiscal balance.

The PTI offers perhaps the boldest and most difficult reform: making the Federal Board of Revenue an independent organisation, a proposal that is likely to result in much resistance from the civil service. It did not specify where it would raise taxes, however. The most detailed revenue-raising plans, ironically, came from the one national party that has no section on fiscal affairs in its manifesto: the PPP.

The former ruling party proposed utilising the database of potential tax evaders it constructed towards the close of its time in office to begin cracking down on tax evaders. It also proposed eliminating the distortionary exemptions in the sales tax code, though it did not name any specific ones and one several occasions failed to push through such reforms while it was most recently in office.

On the matter of ending the Rs400 billion annual bailouts of state-owned companies, the ideological divide amongst the parties was once again in play. The pro-business PML-N’s solution was to introduce professional management structures in these companies in preparation for privatisation. The PTI, meanwhile, wanted to create an independent holding company that would oversee government investments and would be managed outside the influence of government officials or elected representatives. The PPP also wants to retain government ownership of these companies.

On matters relating to the government’s money, the political manifestos of the ANP and MQM were not entirely silent, but included no major substantive proposals.

Published in The Express Tribune, May 6^th, 2013.

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Our aim in this special report is to examine how much each political party has thought about the economy. We recognise that parties rarely fulfil all the promises they make in manifestos, or even come close. But the documents are nonetheless useful and deserve to be examined: they reflect whether or not the parties even have an understanding of the challenges they face, should they be entrusted by the voters with the responsibility of actually governing the nation.

Our focus on the economy has meant that this special report focuses not on the entirety of the manifestos, but only on their sections most closely related to the economy. Hence, for example, we omit sections on civil rights, education, and health. Each of these things has an indirect impact on the economy, particularly education, but there are other considerations to each that are not strictly economic.

We have adopted a methodology inspired in part by an analysis of manifestos done by the Pakistan Business Council, a think-tank/lobbying group. But the criteria we have used are somewhat different from those used by the PBC. Like the PBC, we emphasise energy above most other segments, believing that no government will be able to fulfil any part of its agenda unless it first confronts the now-chronic energy crisis.

Broadly speaking, we have identified four categories that we believe are most important: energy, fiscal responsibility, reducing regulatory hurdles (which includes global trade), and improving government efficiency. Within each, we have graded each party on five or six separate criteria, with each grade representing the level of detail and specificity that a party is willing to offer on any given criterion.

Our methodology is, of course, subjective and therefore open to debate and dispute on any given criterion we chose to utilise (or others that we chose not to use). Nonetheless, while the individual bits of our analysis may be debatable, our overall conclusion seems to be on par with most other analysts: the Pakistan Tehreek-e-Insaf (PTI) and Pakistan Muslim League-Nawaz (PML-N) pay the most attention to the economy, with the Pakistan Peoples Party a distant third and the other parties so far behind as to not even merit mention.

In our grading, the PTI comes out slightly ahead. But lest the Insafians get ahead of themselves, we would like to introduce a caveat: the difference with the PML-N is so minor that neither can claim definitive superiority over the other, unless the debate acquires a distinct ideological bent.

Our analysis focused only on the three major national parties and two of the most important regional ones: the Awami National Party (ANP) and the Muttahida Qaumi Movement (MQM). It is perhaps unfair to compare the regional parties to national ones, but both of these parties are particularly keen to cast themselves as national-parties-in-waiting, and so we felt comfortable including them.

The analysis, however, does not present either in a favourable light. Both ANP and MQM got bad grades on the economic segments of their manifestos. Perhaps they should pay a little more attention to their homework.

Published in The Express Tribune, May 6^th, 2013.

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For the Pakistani television business to live, most of the news channels must die.

The problem is a simple one: according to Dawn’s advertising Aurora magazine, during 2012, Pakistani television stations earned about Rs21.6b in revenue that has to be split not just among the 25 news channels, but also the 23 entertainment channels, 14 regional channels, seven music channels, three religious channels, three food channels, and the dozens of other assorted channels.

Against 25 news channels that broadcast 24 hours a day in Pakistan, the US, the largest media market in the world, has just three mainstream channels, and three business channels. For Pakistan to have quadruple the number of news channels as the US makes no sense.

Advertisers are not going to start spending more money just because there are more channels. TV networks get a slice of that pie, depending on how many viewers they reach. The pie is growing, but the more channels there are, the more slices there have to be.

The less revenue a channel has, and the more fiercely it needs to compete for eyeballs to get the next advertising rupee, the less likely it is to invest in high-quality content.

It takes a lot more than a ditzy host and a camera crew to do a show that explains to people why, for example, the country has an energy crisis and why their lights are going out. You need an intelligent host who could be making millions elsewhere, and you need this person to be paired with a large team of analysts and reporters dedicated to just this show in order to be able to pull off a high quality production that raises the level of public debate while keeping viewers engaged.

The problem with doing such a show is that the ditzy host and camera crew come cheap. They will attract as many viewers as that international-banker-turned-anchor with his expensive analyst staff, and probably faster. So instead of a high-minded debate on possible solutions to the energy crisis, we get Maya Khan hounding young people in parks.

Now imagine this scenario: instead of 25 there were only three channels chasing after the Rs9.5 billion in advertising that gets spent on news channels. So even the smallest news channel would probably be pulling in at least around Rs2 billion in revenue (which is currently what the highest rated news channel makes).

There would be a lot more money to go around at the channels, and a lot less paranoia about the ratings. Who knows? They might even give a job to a LUMS professor who wants to do a show about public policy matters.

Now imagine if we had such a show in the early Musharraf years when he started promoting the use of natural gas. Maybe, just maybe, instead of the economically illiterate “commerce” reporters in Islamabad, the government would have had a well-credentialed expert asking them the right questions — do we have enough gas to sustain our energy needs, can we find other cheap sources of energy — and we may have avoided the disastrous policies that led to the electricity and gas shortages we have now.

But we did not get that. Instead, we had Zaid Hamid musing about Jewish conspiracies, Talat Hussain spending a whole hour trying to deny that the 2008 Mumbai attacks were done by Pakistanis and Hamid Mir promoting the water car. Let us hope, for the sake of our republic, that the advertisers come to their senses and stop patronising more than three or four news channels and let the rest just die off, starved of revenue and withering on the vine of economic infeasibility.

Published in The Express Tribune, Sunday Magazine, May 5^th, 2013.

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The announcement came on the same day that the global consumer giant announced that it would be increasing its stake in its Indian subsidiary, Hindustan Unilever, from 52.5% to 75% at a price that would offer shareholders a premium to the market. Unlike its plans to delist its Pakistan subsidiary, it does not appear that Unilever will be delisting its Indian subsidiary.

The delisting of the Pakistani subsidiary, meanwhile, will go ahead despite stiff opposition from minority shareholders who wanted the company to remain listed on the Karachi Stock Exchange. Those shareholders, however, appear to have accepted the delisting as a fait accompli: no more than 5% of the total votes cast on Tuesday at the shareholders meeting in Karachi were against the delisting, according to sources familiar with the matter. By some accounts, most of the dissenting shareholders appear to have abstained from voting.

KASB Securities, an investment bank, has been appointed manager for the transaction valued at just over $500 million. Unilever will be paying its minority shareholders Rs15,000 per share, a 55% premium over its original offer of Rs9,700 per share.

The offering will remain valid from May 3 to July 1, inclusive, following which Unilever Pakistan will stand automatically delisted from all three stock exchanges in the country. Any shareholder who declines to sell will then become the shareholder in an unlisted company, a powerful motivator for virtually all minority shareholders to sell, including those opposed to the delisting.

The delisting of Unilever Pakistan has called into question the protections for minority shareholders in such situations: under the current rules, Unilever was not required to even directly negotiate a price with them. The minority stakeholders were essentially forced to accept whatever price the management of the Karachi Stock Exchange announced.

Some foreign investors – such as New York-based hedge fund Acacia Partners – have said that they may reduce their investments in Pakistan in the future should the current rules remain in place. Acacia has $4 billion in assets under management, about $75 million of which is invested in Pakistan.

The simultaneous announcement of the share buyback in India, meanwhile, has triggered renewed speculation among some investors on Karachi’s McLeod Road that the delisting is an attempt by Unilever to minimise its tax liabilities in Pakistan by charging royalty fees: the charge that it levies on all of its global subsidiaries in exchange for providing technical expertise from its global headquarters.

That charge transfers money back to the global parent, while showing up as an expense in subsidiary’s accounts, and hence not subject to taxation. The money transferred would then appear as revenues in the Netherlands-based global parent, where the corporate tax rate is 25%, lower than the 35% in Pakistan, allowing the company to save on its overall tax bill. Unilever faced an enormous shareholder backlash when it raised the royalty fee it charges its Indian and Indonesian subsidiaries. No such plans have been announced for Pakistan yet.

According to reports published in the Financial Times, the Indian government is set to announce that those increases in royalty fees will in the future require approval of at least three-quarters of all minority shareholders. Having fewer minority shareholders should help reduce any problems Unilever might have in imposing such changes in the future.

Indian law appears to make delisting a company very difficult, requiring a supermajority of the minority shareholders to agree to a delisting price. And no sponsor of a listed company is allowed to own more than a 75% stake in a company.

Published in The Express Tribune, May 1^st, 2013.

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