The capital market provides the people with the investment opportunities and the companies to raise funds for expansion and development for further investments. Though the government has an important role to play in shaping the legal, institutional and business environment but major responsibility rests with the corporate sector to achieve a higher level of corporate governance. The high standards of corporate integrity and excellence are of key importance for the development of any capital market.
Under the Stock Exchanges Demutualization and Integration Act 2012, the integration of three exchanges has already been carried out and the merger of the three stock exchanges of Lahore, Karachi and Islamabad has resulted in the formation of Pakistan Stock Exchange (PSX). The merger of Karachi Stock Exchange (KSE), Islamabad Stock Exchange (ISE) and Lahore Stock Exchange (LSE) is expected to prove beneficial for the growth and development of the country’s stock market. It would help strategically focus Pakistan’s developing capital market including expanding the investor base. This will also enhance governance and transparency of the capital market. The coordination would also be a buffer against regional market fluctuations. The Securities and Exchange Commission of Pakistan (SECP) needs to set up a branch of PSX in Quetta and Gwadar districts of Balochistan for better facilitating the capital investors of the province.
The services of Central Depository Company of Pakistan Limited (CDC) may be sought for the development of capital markets in Balochistan. The CDC was incorporated in 1993 to manage and operate the Central Depository System (CDS) which was implemented by an IBM led consortium along with the management of the CDC in the country. The CDC operates as a central securities depository on behalf of the financial services industry so as to contribute to the country’s ability to support an effective capital market system which will attract institutional and retail level investors from the country and abroad. CDC is committed to provide secured and dependable services to the capital and financial markets in an efficient and cost-effective manner comparable to best international practices.
Corporatization is an integral tool for the demutualization. The government should take all possible steps to develop corporate sector in the province. Appropriate mechanisms need to be developed for the protection of both broker and investor in order to promote share buying habit and channel savings into the financial markets in Balochistan. There is a need to focus on achieving the highest standards of corporate governance, transparency and professionalism in order to strengthen investors’ confidence. The companies need to be encouraged to raise capital through fresh equity offerings, which will serve to deepen the market and develop the retail investor base.
The SECP must set up a branch of PSX in Gwadar in Balochistan. A stock exchange in Gwadar will have a greater scope for development of capital market than any place in other provinces.
Pakistani government has already declared Gwadar port a free trade zone for the next 23 years. A huge development process is underway in and around Gwadar to convert it into a new Dubai, Hong Kong or Singapore in the subcontinent.
Prime Minister Nawaz Sharif already said that Gwadar port would be developed on the pattern of Hong Kong, which is a model as to where the financial successes of Asia are headed. Being the builder, operator and financer of Gwadar port and also being the biggest investor in the port city, China can play the role of a major driver of growth in Gwadar as it did in Hong Kong. Having a free market economy, Hong Kong is highly dependent on international trade. China’s share is over 35 percent in international trade.
Strategically located Gwadar port can be converted into a regional hub of international trade. By virtue of its geography, Gwadar has greater potential, wider scope and brighter prospects to emerge as center of trade and commerce serving at least 20 countries in the Asian region. China is deeply interested to pour huge investments in Gwadar, which is located at the mouth of the Gulf and close to the Strait of Hormuz.
Gwadar port is essential part of $47billion China Pakistan Economic Corridor (CPEC), which involves construction of highways, railways and energy pipelines connecting western China with Pakistan and the Persian Gulf. The two countries signed 51 deals worth billions of dollars mostly relating to the CPEC project. No doubt, a huge investment in infrastructure sector promises a brilliant economic future for the development of the province. After construction of the proposed rail, road and pipeline projects between China and Pakistan, Gwadar port will handle most of the oil tankers to China. In the present age of globalization, Gwadar has greater scope and tremendous potential to emerge as distribution and logistics hub in the region.
International investors are eyeing Gwadar as emerging investment centre on the confluence of South, West and Central Asia. After the completion of mega seaport project, a PSX branch in Gwadar would have a greater scope as a platform of choice in the region. It would provide its members a range of equities, bonds, funds and index products. As a branch of PSX, Gwadar Stock exchange would facilitate the brokers and traders to trade their companies’ stocks and securities. The securities may include the companies’ shares, bonds and unit trusts. The proposed bourse would provide the financial instruments and facilities to the stock traders for the issue and redemption of securities. It would provide the companies a primary market for listing or at least for recordkeeping. It can become a vibrant part of national or global market for securities. It would provide an opportunity for the investors to invest in South Asia, Western China, Central Asia and the Middle East.
A financial free zone needs to be established in Gwadar port city first and the proposed bourse should be established in the financial free zone. The entire operations of the stock exchange with all other financial activities could be regulated by constituting a Gwadar Financial Services Authority. There are expectations that multi-national companies from across the world would transact their trade at Gwadar and provide the country much-needed foreign exchange.