A PAKISTANI CA-INTERVIEW

 An Interview with Hanif Jakura

Recently, we organised a talk show and panel discussion on the global financial crisis. And out of four speakers, three were Memon and they were very prominent people. So I am trying to improve this by conducting seminars. I am in the process of organising a major career guidance programme’



Memon Professional Forum is a body of professionals from different disciplines — accountants, engineers and advocates etc. So, we try to disseminate current information of professional importance and along with that we also support upcoming students in their career choices. We used to provide the needy students scholarships, but in the last few years it was discontinued. Ever since I took over, I have been trying to mobilise it’ 



Razia Khan is the host of “17 Minutes”, a show on Business Plus TV



Muhammad Hanif Jakura is a Fellow Member of the Institute of Chartered Accountants of Pakistan (ICAP) and the Institute of Corporate Secretaries of Pakistan (ICSP). He is the Chief Executive Officer of CDC since 2002. He was appointed chief executive officer of National Clearing Company of Pakistan Limited (NCCPL) in January 2002 and served in that position until September 2005.



He actively participates in the Asia-Pacific Central Securities Depository Group (ACG) and served as its Cchairman for the year 2006-07. Previously, he has served as a member of Margin Financing Committee formed by Securities and Exchange Commission of Pakistan and of the Advisory Committee on Medium-term Plan/Strategy for Regulation and Development of Corporate and Financial (Non-banking) Sectors. He has also served as the chairman of the Committee to review Institutional Arrangement for Financial Stock Brokers and Stock Market Investors. He has been instrumental in the development of the Capital Market in Pakistan since joining CDC in 1994. He is currently the President of the Memon Professional Forum.



Central Depository Company of Pakistan Limited (CDC) was incorporated in 1993 and subsequently became operational in 1997 to manage and operate the Central Depository System (CDS). CDS is an electronic book entry system to record and transfer securities. Electronic book entry means that the securities do not physically change hands and the transfer from one client account to another takes place electronically. An IBM-led consortium along with the management of the company implemented CDS in Pakistan.



The aim of CDC is to operate 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 Pakistan and abroad.



RK: You joined the Company in the mid 90’s?

HJ: Yes, I joined in December 1994 to be exact.



RK: And you were in fact employee number one?

HJ: Yes, I was the first employee of this company.



RK: This was set up really to put the capital markets on the computer, computerise the whole system and make it more efficient. Is that right?

HJ: That’s right. Actually the purpose of this company is to dematerialise the paper-based capital market which was plagued with several inefficiencies and it was prone to various risks of forgeries and duplicate certificates, there were inefficiencies involved, for example people had to move shares physically, from one place to another. 



RK: Exactly, because the volume you’re dealing with, I am sure it was a huge undertaking.

HJ: Absolutely, it was huge. And in the early 90’s, in a single day, the volume of trading at the Karachi Stock Exchange was 8 million shares, and people had to close their business for almost a week to settle their positions. Now if you look at the change, last year the average volume was over 500 million and in some trading days it was even over a billion shares. This is the change that CDC has brought to the entire capital market.



RK: And I am sure this means everything is more transparent and more efficient than ever before?

HJ: Absolutely, it has become very transparent. People have to have the shares in their own accounts so there is clear ownership of the shares of the investors, plus there is efficiency at the level of the brokers. It is very efficient for the issuers, for example if some issuer announces a bonus, they don’t have to print the certificates, they just ask CDC and CDC credits the entire holding with the push of a button. 



RK: So basically inefficiencies have just been eliminated. 

HJ: Exactly, inefficiencies, chances of risks and forgeries have all been eliminated. And it has become very easy for banks to place the shares and lend money against those shares.



RK: Now, this was an IBM-based consortium that started this whole thing? 

HJ: Actually, CDC awarded a contract to IBM, and IBM formed a consortium of different professionals. One was Albert Dennis and he was the architect of this entire system. Then they had organised software developers of Canadian origin. We had lawyers, we had management consultants and several other consultants who worked day and night with the management of the CDC. So CDC awarded a contact to IBM, and then IBM developed the consortium that comprised of the depositor expert Albert, and there was also a local software company that customised the entire system. Of course, the management was there to implement this whole system. We implemented it in 3 years, which includes everything, development of the software, promulgation of new laws and regulations etc. We had great support from Securities and Exchange Commission of Pakistan, and that time it was the Corporate Law Authority, and everybody was involved in it. The provincial government was also involved and they reduced the duty for the transactions within CDC.



RK: So basically it was to everyone’s benefit and something that needed to be done?

HJ: It was needed because, as I said before, it improved the efficiency, transparency and volume of shares could not have increased if CDC was not there. So it was the need of the hour and the good thing about this company was that everybody was involved and everybody supported this project, and it was implemented very efficiently. We took one security initially, although we had pressure from the government to take more security but we started off with one, and we wanted to be sure that the system was perfectly alright. So initially we took one security, then after a fortnight we took five and then after another fortnight we announced all securities to be eligible for CDC. But actually the system took off when two major securities were brought into the system; they were PTCL and Hub Power. They were the highly traded companies and once they were brought into the system, every broker started to take it seriously and got onboard. 



RK: You also worked at the National Clearing House for a while. Tell us about that.

HJ: The CDC developed the National Clearing and Settlement System. I was nominated by the company to help implement this National Clearing and Settlement System and then I was made CEO there in late 2001, and then I joined CDC again in March 2002 as CEO and I was looking after both the companies until 2005. 



RK: Was it quite challenging to be involved in both?

HJ: It was quite challenging, but the experience of CDC and implementing CDC from scratch helped us a lot. We developed the system and then we developed the National Clearing and Settlement System again. We developed the rules, regulations and procedures, everything from scratch for the new system. The challenge that we had for the National Clearing System was that our banking was not online. So it was very difficult and it was nearly impossible because the banking system was not online, so what we did was that we brought all the clearing banks that were in the Stock Exchange premises onto our network, and the settlement of the cash was done simultaneously with the shares. Of course CDC was there, so the system was linked to CDC, the transfer of the shares was very easy but the main problem was with the cash, and we brought everything onto our system and eventually this issue was resolved. So this was challenging but at the same time very interesting as well.



RK: And mutually beneficial as well, I am sure.

HJ: Absolutely, it was beneficial for the entire capital market.



RK: Now I know that you are implementing good governance in your company. Please talk about that.

HJ: We implemented the corporate governance from the very beginning. We had independent directors, we had a very strong and independent audit function, and we had an audit committee of the board, which regularly had meetings. But in 2002, I believe, the SECP implemented the Code of Corporate Governance, and there were a couple of minor things, which we had to adjust and we adjusted those, and we complied with the code of corporate governance as implemented by the Securities and Exchange Commission of Pakistan.



RK: You are also President of the Memon Professional Forum. What sort of work are you involved in at that organisation?

HJ: Memon Professional Forum is a body of professionals from different disciplines – Accountants, Engineers and Advocates etc. We try to disseminate current information of professional importance and along with that we also support upcoming students in their career choices. We call it Career Guidance for the Students. We used to provide the needy students scholarships, but in the last few years it was discontinued. Ever since I took over, I have been trying to mobilise it.



RK: Is that something you are keen to explore further?

HJ: Absolutely, I would like to restart this but I want to be very sure that they are efficiently utilised and all the needy students who want or deserve the scholarships are provided with this facility. So we are working on it, but my aim is to improve the divisibility of this important organisation amongst our members.



RK: So how do you hope to achieve that?

HJ: We are organising programmes of national importance. Recently, we organised a talk show and panel discussion on global financial crisis. And out of four speakers, three were Memon and they were very prominent people. So I am trying to improve this by doing seminars. I am in the process of organising a very big career guidance programme, and shortly we will be announcing this programme. It will be held in February for the students of grade 9th and 10th. This will not be restricted to only the Memon community; anybody can come and get the benefit of this career guidance program. We are also planning to have other shows, for example we are planning to have a seminar on cyber crime next month so that people should understand what it is all about and what are the issues that companies can face.



RK: Since you are now network-based and Internet-based, there is that risk now, moving away from the paper-based inefficiencies to web crimes.

HJ: Yes. We are trying to involve agencies like FIA, banks and Association of Software Developers, so I think it will be a very useful seminar.



RK: You mentioned the global economic crisis. I don’t think we can have a conversation today without discussing it. What do you see as our way out of this climate of insecurity and rapid inflation?

HJ: We have to put together our thoughts. We have to sit and discuss what went wrong with our economic issues. The problem that we are facing is not directly related to the economic crisis. It is more of our own making. We don’t plan ourselves and we don’t sit and discuss our plans. We need to start planning on a long-term basis. If we come together to discuss and address the issues, people at large can benefit from it. 



RK: Thank you so much for your insight. It has been a pleasure talking to you.

HJ: Thank you. *