PwC report sheds light on challenges faced by banks in Pakistan

Morning! This Thursday marks International Moon Day, giving us the perfect excuse to snap some moon pics. Let's not forget that the moon is Earth's original social influencer. It's been influencing tides, werewolf stories, and romantic moments for centuries.

In this week’s edition:

🛍️ Consumerism 🤝 Americans (feat. Prime day)

🏛️ Banking blues

💬 A chatbot that knows all ‘rights’ and wrongs

👩‍💻 Freelance freedom in the works

- The Itla Squad 💼

Business

Global 🌎️

Name a better duo than consumerism and Americans, we’ll wait

Online spending during Amazon's highly anticipated Prime Day event reached an impressive $12.7 billion, according to data from Adobe Analytics. This marked the "single largest sales day in company history" for Amazon. While this marks a solid 6.1% year-over-year growth, it fell slightly short of the initial 9% forecast.

Top Categories: Turns out, we’re all basic. Home goods, fashion, and beauty stole the spotlight with discounts on electronics, apparel, and toys, averaging 8% to 14% off listed prices.

BNPL Takes Center Stage: Shoppers embraced BNPL, with 6.5% of orders—totaling $927M—using this flexible payment method. With inflation and economic uncertainty, BNPL helps manage cash flow.

But.. Prime Day's sales fell short of the 9% forecasted growth, despite a 6.1% year-over-year increase. Rival retailers' competing sales events and better deals attracted customers away from Amazon. Early promotions by competitors further impacted Prime Day's sales.

Beyond a Single Day: Prime Day's impact extends beyond sales, setting the tone for a competitive holiday season. Retailers will optimize strategies based on Prime Day insights, offering discounts and savings opportunities beyond traditional events like Black Friday.

TLDR: Amazon's Prime Day set a new record with $12.7 billion in online spending, but fell slightly short of the forecasted growth. Home goods, fashion, and beauty were the top categories with significant discounts. Shoppers embraced Buy Now Pay Later options to manage cash flow. Rival retailers' sales events and better deals diverted spending from Amazon.

What else is new in news

✶The FDA disputes the WHO's claim that aspartame may cause cancer, citing flawed studies. FDA says aspartame is safe when “under the approved conditions”.

Local 🇵🇰

PwC report unveils banking blues

PwC, a global accounting and consulting firm, has released a report highlighting the tough compliance requirements faced by banks in Pakistan. They have to keep up with constantly changing tax laws, foreign exchange regulations, and directives from the central bank. This puts a lot of pressure on them and leads to high costs.

The tax maze: The tax system for banks is complicated.

• While the standard corporate tax rate is 29%, banks have to deal with additional taxes like the super tax. Initially, it was 4%, but it has increased to 10% for certain income levels.

• As a result, banks are now paying an effective tax rate of 49% and sometimes even more.

• On top of that, their income from government securities is taxed separately at higher rates, adding to their tax burden.

Big picture:

• The report shows reduced risks of money laundering and terrorism financing in 2022 compared to 2019. However, fraud cases have increased, likely due to economic downturns and natural disasters

• Detecting links to Russia is a challenge for Pakistani banks due to their close ties with China. Identifying entities connected to Russia requires careful scrutiny of customer types and specific jurisdictions.

TLDR: PwC's report highlights the compliance challenges for banks in Pakistan due to complex tax laws and changing regulations. Banks face higher tax rates, leading to an effective rate of 49% or more. The report also notes a decline in money laundering and terrorism financing risks but an increase in fraud cases. Identifying entities linked to Russia poses difficulties due to strong China-Russia trade ties.

News Flash

✶ According to Morocco's energy ministry, Shell, a major energy company, has entered into a new agreement to provide Morocco with six billion cubic meters of liquefied natural gas (LNG) over a span of 12 years.

Tech

Global 🌎️

The AI model that knows all ‘rights’ and wrongs

Anthropic, the brainchild of former OpenAI geniuses, introduces their latest AI model, Claude 2. This time, they're shaking things up with Constitutional AI.

Did we really mean to write constitutional? Yep. Constitutional AI refers to an approach where an AI model operates based on a predefined set of principles, similar to a constitution. Claude 2’s principles were inspired by the Universal Declaration of Human Rights.

What’s up with Claude 2:

• Claude 2 outshines its predecessor, Claude 1.3, in multiple areas. It excels in exams, coding, and math problem-solving, showcasing its improved abilities.

• It achieves higher scores in multiple-choice exams and programming tests, demonstrating its enhanced performance. Its advanced capabilities are evident in assessments such as bar exams and medical licensing exams.

• It excels with a large context window, analyzing extensive text for better response accuracy and understanding. Its 100,000 token context window surpasses other models, enhancing performance in complex conversations.

In the wise words of Hannah Montana, "Nobody's perfect," and that includes Claude 2. It faces challenges like biases in its generated text and occasional factual errors. Anthropic claims to be actively working to minimize hallucinations, prevent data regurgitation, and produce more helpful and accurate responses.

Moving ahead.. Claude 2 is now available in beta, allowing users in the U.S. and U.K. to experience its enhanced capabilities. The model can be accessed through the web or a paid API, with several businesses already piloting its usage, including Jasper and Sourcegraph.

TLDR: Anthropic launches Claude 2, an AI model guided by Constitutional AI principles. It outperforms its predecessor, excelling in exams and coding. With a large context window, it enhances response accuracy. It is now available in beta with pilot users.

What else is new in news

✶ India's Chandrayaan-3 lunar mission successfully launches, aiming to achieve a soft landing near the Moon's south pole. If successful, India will join an elite group of countries that have achieved a soft landing on the lunar surface, including the USSR, USA, and China.

Local 🇵🇰 

Freelance freedom in the works

Pakistan's Ministry of Information Technology and Telecommunication has introduced a new "National Freelancing Policy" to support freelancers and position Pakistan as a global freelance hub.

• The policy suggests a reduced sales tax rate, not exceeding 2 percent, for freelancers registered with the Pakistan Software Export Board (PSEB).

• The PSEB, in partnership with the State Bank of Pakistan (SBP), aims to streamline foreign exchange remittances for freelancers. This includes opening foreign exchange bank accounts and allowing retention of 35 percent of their foreign exchange income received as inward remittances.

• Freelancers with a track record of at least two years of exporting IT & ITeS services exceeding $5,000 per year will receive support in obtaining visas, facilitating access to international markets.

• Freelancers with a minimum of five years of annual export remittances exceeding $12,000 will be eligible for subsidized home loan schemes from government and private initiatives.

• They will also enjoy an income tax exemption until 2030 on export income received through formal banking channels.

TLDR: Pakistan's "National Freelancing Policy" offers tax benefits, simplified remittances, easier visas, and income tax exemptions until 2030 to support freelancers and boost Pakistan's position as a global freelance hub.

Tech tour of news

✶ Another significant player in Pakistan's startup ecosystem, Jugnu, operating in the B2B e-commerce supply chain sector, has decided to shut down its core business operations.

More interesting Itla (اطلاع) we consumed:

💪🏻 Mom was right - turns out that what we put into our bodies really does impact everything in our lives. This video on gut health by Ali Abdaal breaks down all about gut health (as well as the surprising impact it has on mental health).