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Pakistan’s textile industry in its worst patch in history

FARHAN ZAHEER

KARACHI

With stagnant exports and continuously declining market share in the international arena, Pakistan’s textile industry is going through the worst patch in its history.

The gap between Pakistan and its regional competitors has widened so much that now it looks unlikely that the country will ever catch up. The situation started deteriorating a decade ago but the stark disparity in exports became much more visible in the last five years.

Value-added textile: Industry fears further drop in exports

The story of Pakistan’s textile sector is not different from other major export-oriented industries of the country. The only difference is its sheer size in the country’s total exports that allows it to remain in the limelight. Other than securing the Generalised Scheme of Preferences (GSP) Plus status in the European Union (EU), textile exporters say this government has not done anything noticeable for the industry.

“The major difference is the attitude of our government and the governments of regional countries. The response time in Pakistan is too slow,” commented Ziad Bashir, Executive Director of Gul Ahmed Textile Mills, one of the country’s largest composite textile mills.

There is not a single major reason why Pakistan is lagging dramatically behind regional competitors. Problems like security challenges, energy shortages, high interest rates, lack of policy implementation and high utility prices have all contributed equally to the decline in textile exports, he added.

Manufacturers gear up for Chinese interest

“Had the government failed in securing the GSP Plus status, textile exports would have been in a much worse situation,” said Bashir.

Pakistan got the GSP Plus facility in December 2013 that allowed it to export its products to the EU on reduced or zero duty.

Regional comparison

According to the World Trade Organisation (WTO), world trade in textiles and clothing increased to $766 billion in 2013 from $454 billion in 2004, a significant increase of 69% despite the fact that the world experienced one of the worst financial crises in 2008-09.

Pakistan’s textile export share in the global market decreased from 2.2% in 2006 to just 1.8% in 2013. During the same period, Bangladesh’s share jumped from 1.9% to 3.3%, China’s share increased from 27% to 37% and India’s share improved from 3.4% to 4.7%, according to data compiled by the All Pakistan Textile Mills Association (Aptma).

Textile sector dreading gas suspension

Total exports of Pakistan in fiscal year 2014-15 were $23.6 billion, down 4.8% from $24.8 billion in fiscal year 2010-11. Similarly, textile exports have been hovering around $13 billion for the last five years.

This shows a practical breakdown of Pakistan’s export-based industries, including the textile industry that contributes over 50% to total exports.

Pakistan Apparel Forum Chairman Jawed Bilwani said he is certain textile exports will drop further. “The government knows everything about the international and domestic challenges of the textile industry and yet it is not doing anything.”

Textile industry: Think tank outlines factors hitting competitiveness

Pakistan is facing numerous economic problems but the prime minister has just met the exporters after assuming the office two and a half years ago, Bilwani said, adding this shows how serious the government is about arresting the dwindling exports.

Global impact

The economic slowdown in Europe and North America – the two most important textile markets for Pakistan, India, Bangladesh and Sri Lanka – has affected all the textile exporting nations of the region. However, the worst hit is Pakistan, indicating it has its own domestic problems that are contributing to low exports.

“It is not lack of innovation; it is the cost of doing business that has resulted in the decline in exports. Pakistan lagged behind in the region mainly because of its own domestic problems,” Aptma Chairman Tariq Saud said when asked about the decline in textile exports in the last decade.

We represent the entire textile industry: APTMA

The cost of gas for the industry has jumped to $6.7 per million British thermal units (mmbtu) mainly due to the imposition of Gas Infrastructure Development Cess (GIDC). Gas price in India is $4.2 per mmbtu, $3.1 in Bangladesh and $4.2 in Vietnam.

Pakistan’s electricity tariffs are also highest in the region. Average electricity prices in regional countries are in the range of 6-9 cents, but the price is 14.5 cents per unit in Pakistan, said Saud.

Published in The Express Tribune, November 30th,  2015.

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Pakistan’s luxury cars

FARHAN ZAHEER
KARACHI

The size of Pakistan’s luxury cars market might be debatable, subjective and controversial.

Even adding safety bags to a sedan might seem like a luxury when you have cars on the road that would better serve humanity in the scrapyard.

Range-Rover Vogue 2

But when it comes to raising the bar on outright luxury cars, details become clearer. The recent macroeconomic stability and improved security situation might tempt more to pursue high-end objects.

The Express Tribune looks at the luxury cars market and what it currently has to offer for those looking to convert dreams to reality.

Bentley reveals world’s fastest, most luxurious SUV

Porsche Cayman

“A luxury car is one that is better built, offers greater comfort, an extravagant drive wherein everything is premium,” noted PakWheels.com CEO Mohammad Raza Saeed, adding that the price of a vehicle cannot determine whether it falls in the luxury category.

Since price is not the only factor involved, he says it would be improper to classify vehicles according to their price range.

“It is tough to lay an exact definition of a luxury vehicle in Pakistan.

“The latest Toyota Land Cruiser ZX is priced at Rs22.5 million, but it is not even a luxury vehicle to challenge the luxury sport utility vehicles (SUVs) such as Range Rover and Porsche Cayenne,” he added.

The auto sector

Pakistan automobile sales are on a continuous positive trajectory and are expected to hit a seven-year high by the end of this fiscal year in June 2016.

Porsche Boxster

Automobile analysts say macroeconomic recovery, better security situation and revival of banks’ interest in car financing are helping car sales. “Porsche is opening up a centre in Karachi now. Audi’s sales have picked up and newer BMWs are not as rare as before.

Hot wheels: Fancy vehicles vroom into Faisalabad

“But these automakers don’t have big numbers, not even in three digits in a month,” he said, when asked about the correlation between economic recovery and luxury car sales.

Mercedes-Benz-E-Class-2015

SUVs, especially Japanese vehicles, are much more popular in Pakistan than luxury saloons. “Within the SUV segment, Toyota Land Cruisers are the undisputed market leaders in Pakistan,” said Merchants’ Automobile’s Fahim Aslam – a Karachi-based luxury car dealer.

After SUVs come German saloons like Mercedes Benz S-Class, E-Class and Porsche, all of which have company-operated centres in Pakistan. Furthermore, these companies have also launched their latest series in the country.

“Company-operated offices are very helpful because all luxury cars are intricately built and require regular maintenance to operate at a certain standard level,” said Saeed.

NED University hosts super-car exhibition

Popular used cars in luxury segment

Despite a big difference in the market dynamics of every country, there remains one common factor: prices of all luxury cars depreciate faster,” said Saeed.

“For instance, a new Mercedes S-Class will cost you over $100,000, but within four to five years its price reduces to $20,000-$30,000.

“The more expensive the car is, the faster its price comes down. That’s the standard formula. You cannot help it,” agreed Aslam.

“One of the reasons why some people prefer used luxury cars is the low price factor. But this can cost you more money if you fail to cut a good deal,” said a top corporate executive.

Audi A7

“I have had a very bad experience with a used Mercedes Benz mainly because of its expensive maintenance. I would recommend people to only buy used luxury vehicles from company authorised or reputed dealers to get satisfactory maintenance services,” he said.

Some expensive units sold in Pakistan

Range Rover’s price tag of Rs35.5 million or Audi A8’s Rs22.5 million is not enough to deter some Pakistanis. They are willing to spend, but less than forthcoming with their transactions.

On display : Vintage car lovers throng auto show

But keeping aside the high import duty that shoots up the price of any foreign-made vehicle when it gets shipped into Pakistan, luxury cars will always have a market – be an economic boom or a recession.

They might be few on the road, but turn heads when they are.

The writer is a staff correspondent 

Published in The Express Tribune, December 21st,  2015.

Islamabad protests: Lights dim in the housing, construction industry

KARACHI
Among the many businesses that have taken a hit during the current political deadlock that has persisted for over three weeks, the housing and construction industry is easily noticeable where activities are at a virtual standstill.

The dynamics of this industry are quite different from others. Perhaps more than any other industry, construction is highly interlinked with the political situation and economic growth of the country.

When Pakistan Peoples Party led-coalition government completed its five-year term in 2013 and for the first time power was transferred from one democratically-elected government to another, the construction industry experienced a strong rebound after a gap of over five years.

Though confidence grew across all sectors of the economy after the general elections of 2013, the surge in confidence of the construction industry was one of the most prominent.

This industry started enjoying a boom following improvement in the confidence of Pakistanis in the democratic process. In the past one year, many residential and commercial building projects emerged on the landscape and portals and property dealers reported a considerable jump in real estate prices in all big cities of the country.

Investors were expecting a further increase in interest in the real estate market, but the on-going political impasse put a big question mark over the future of the government what to talk of political stability.

“The construction industry reacts too fast. It can react positively or negatively. In the current political standoff, it acted very negatively,” said Engineer Akbar Sheikh, a builder in Lahore.

Sales and marketing of almost all housing projects in Lahore have virtually ground to a halt, said Sheikh, who is also the northern region chairman of the Association of Builders and Developers (ABAD) – a body of over 700 builders and developers.

Builders and developers say work on all projects in Punjab including those of Lahore Development Authority (LDA) has stopped with the government busy in breaking the political deadlock. The provincial government is not pushing ahead with the schemes and bidders are also hesitant to make offers.

“Who will come up with bids for state projects when nobody knows the future of the government,” Sheikh asked.

The situation is not different in Karachi and Islamabad, in fact, the capital has been hit the most.

“The protests and sit-ins in Islamabad have badly disturbed my housing project. I have encountered difficulties in purchasing cement and steel as roads are blocked and suppliers are also unable to run their businesses,” said Arif Jeewa, proprietor of Capital Residencia in Islamabad.

He was of the view that the political crisis had weakened the government and that could affect its decision-making powers, which were necessary to address grave economic challenges.

“I fear for the country’s economic growth and I think this government will become just like the previous one, which was politically weak,” he said. “The political instability will not allow the construction industry to grow much in the next four years.”

ABAD Senior Vice Chairman Salim Kassim Patel commented that many of the foreign companies had postponed or cancelled their visits in the last one month just because of the uncertainty.

“Investors are shying away, it’s difficult for them to take decisions in the present uncertain situation. Recoveries from customers have also slowed down, causing cash flow problems for those who are in the midst of their projects,” he added. 

Published in The Express Tribune, September 8th, 2014.

PTI protests: Investors play safe, want quick settlement

KARACHI
When the PML-N took the reins of the country in June last year, few businesspersons would have thought that the government, which is perceived to be pro-business, will face such a strong protest movement within 15 months.

The situation took a sharp turn in mid-August when long marches and sit-ins by two political forces forced investors to play safe while considering their short and long-term investment plans.

According to some investor accounts, persistent protests in Islamabad have not only hurt the economy, but more importantly, have dented the confidence of local and international investors in the country’s economic progress.

“The on-going protests and sit-ins have put a question mark over political stability, which no business, whether small or big, can afford,” said Asad S Jafar, President of Overseas Investors Chamber of Commerce and Industry (OICCI), an association of over 195 multinational firms operating in Pakistan.

OICCI, whose members come from 35 different countries, conducts surveys regularly to determine the mood of investors.

It released on Friday a quick survey on the on-going agitation against alleged election rigging. About a third of the respondents expect a fresh review of their investment plans for the next three years, indicating that the investors are perturbed about the prospects of future capital injections.

Earlier in an interview with The Express Tribune in May this year, Jafar had, however, said despite unfavourable conditions OICCI members were planning to invest around $3 billion over the next five years. In the survey, over 50% of respondents said recent events had caused the postponement or cancellation of scheduled business meetings in Pakistan with overseas shareholders and regional management.

Apart from long-term repercussions, there was some immediate ripple effect on business operations and product distribution. About 40% of respondents expect a decline in sales and profitability with a possible drop in tax payments.

Similarly, a majority of them (62%) foresee serious damage to the 2014-15 fiscal targets of the government.

“Pakistan is a country that offers a lot of business opportunities and that’s why many of our long-term investors look at it positively. But yes, the protests are detrimental to the investment plans, especially for the short term,” Jafar added.

Bearing the brunt

Talking to The Express Tribune, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Zakaria Usman said investor confidence had borne the brunt of the political standoff as it had been shaken to the core.

“The current crisis will continue to haunt the country at least for months, if not for years,” remarked Usman, who represents the apex trade and commerce body of the country.

Endorsing the OICCI survey, he said multinational companies must have been disturbed by the political impasse. “Nobody will invest when your country and the government are stuck in such a crisis.”

He was of the view that the politicians could not even estimate the loss businesses had suffered in the past few weeks, adding many of the business people were just looking at factors that were tangible and could be calculated like the loss of factory output, decline in exports and imports, etc.

“But what about the impact on future investment that may get late or probably will never come. The decline in confidence of investors, especially foreign investors, is intangible and irreversible,” he said.

Taking a cautious stance, Pakistan Business Council Chief Executive Kamran Y Mirza stressed that it was too early to say that investor’s trust in the economy had been badly hit and investments would drop in coming days.

PBC, a business policy advocacy body that represents 44 leading conglomerates of Pakistan, enjoys a considerable influence in the policymaking circles.

“It is good that the situation is still in control of the authorities. But we wish to see it (political crisis) settled as early as possible,” Mirza remarked.

Published in The Express Tribune, September 8th, 2014.

Mango exports to EU: Exporters angry over strict quality controls

KARACHI
The government is caught between the devil and the deep blue sea as it can neither afford a ban on mango exports to the European Union (EU) nor does it wants to see a sharp decline in shipments.

After receiving stern warnings on quality issues, the government is cautiously clearing consignments for the EU, making exporters angry who have never faced such strict quality controls in the country’s history.

But the government is taking a strong position, saying it will not compromise on quality come what may. It says the country can afford a slump in exports but it cannot even think of a blanket ban on all fruit and vegetable exports.

The extra cautious approach is the result of a recent EU ban on the import of five types of fruits and vegetables from India over presence of pests and fruit flies in the consignments.

“We know mango exporters are perturbed by the number of export consignments rejected, but they also understand that we cannot take any risk of sending substandard fruit to the EU,” Department of Plant Protection (DPP) DG Dr Mubarak Ahmed told The Express Tribune.

DPP is one of the 14 organisations that works under the Ministry of National Food Security and Research and provides complete quarantine facilities to the fruit and vegetable growers.

Learning from the EU’s ban on Indian products, Pakistani government with the help of growers and exporters have carved out a stringent standard procedure in the last three months that is now creating problems for the mango exporters.

After surveying about 200 farms in Sindh and Punjab, the DPP has granted clearance certificates to just 11 farms in Sindh and 14 in Punjab. The exporters can only buy mangoes from these farms if they wish to export to the EU, as these orchards are free from fruit flies and other fruit diseases.

But small mango exporters say their consignments are being rejected even if they buy the fruit from certified farms.

“DPP officials at airports are rejecting many consignments. They are just extra cautious,” said Ahmad Jawad, Director of Harvest Trading, an Islamabad-based consultancy firm for fresh fruit exporters.

Jawad, who is also a fresh fruit exporter, said he understands the DPP’s responsibility but he is also perturbed, as the country will face a huge decline in mango exports this year.

On the other hand, the DPP DG has different views. “We are strictly following the standard procedures that we have recently announced for the industry,” Dr Mubarak Ahmed said. “We are not discriminating against anyone. We have rejected consignments of small as well as top exporters who did not comply with our standards.”

Even after purchasing mangoes from the certified farms, some exporters are mixing B or C quality mangoes with A quality. “Exporters have never experienced such strict measures on the part of the government. This is why they are a little upset but hopefully they will learn from this year’s experiences,” Ahmed added.

What is appreciable is that no mango exporter has so far complained of dishonesty or corruption in the application of standard procedures to exports to the EU market.

“We know the government is extremely harsh with the exporters, but we also know they are doing all this for the country and for this industry,” a top mango exporter told The Express Tribune. “This year, we will see a big dip in mango exports but we are sure exports will grow strongly next year after learning from this year’s experiences.”

Published in The Express Tribune, June 16th, 2014.

Broadening horizons: Pakistani mangoes make their way into US households

KARACHI

Pakistan has started commercial exports of mangoes to the US – the world’s biggest and arguably the most lucrative market of mangoes.

The first consignment of 2.9 tons has already been sold out just within a few hours of reaching stores in Houston and Dallas – the two US cities with a considerable Pakistani Diaspora – while another shipment of six tons is going to be airlifted this week. After covering Houston and Dallas, their next consignment will be directed to New York – the biggest concentration of Pakistani community in the US.

The company behind all this is not a renowned one. In fact, its owners are exporting mangoes to the US for the first time and they have completed all the necessary arrangements – from US import permit certificate to the shipment – within three months.

“It all started when a Pakistani American told my partner three months ago that the Pakistani community wants to taste Pakistani mangoes. And, that he should do something,” Farm House Export Director Naveed Nadir told The Express Tribune in an interview. “My partner and I took it as a challenge and we finally succeeded in our goal.”

“I think in the past Pakistani exporters did not pursue the right channels to reduce the export costs, which is why no Pakistani exporter succeeded in exporting mangoes to the US markets,” said Nadir. The two partners said that they wanted to bring in the best taste of Pakistan mangoes to their customers in the US. “One of the reasons why we have made mango exports feasible in the US is our route through which we are completing the necessary irradiation process in Houston.

“Our cost of irradiation in Houston is just 50 cents per kg compared to the other irradiation facility in Chicago whose price is $5 per kg,” he added.

Food irradiation is a promising food safety technology that eliminates disease-causing germs from foods. Since the US authorities want to complete the irradiation process at its facilities, many Pakistani exporters get discouraged in exporting to the US. “We have completed all the safety requirements of the US authorities so we are sure if anyone comply all the required packaging requirement, he or she can also export mangoes to the US,” he said.

According to Nadir, the retail price of his 2.5kg mango pack is $25, which is reasonable compared to Indian mangoes available in the market. The retail price of Indian Kesar is $30 per a 3kg pack while the world-renowned Alphonso mangoes are available in $35 per 3kg pack.

Currently, Mexican and other South American mango varieties are widely imported in the United States, along with Indian and Australian mangoes. It is for the first time that Pakistan has got an opportunity to supply the country’s mango to the US market.

The USA remains the most important destination for mango exporters, having an annual demand of 200,000 tons.

Farm House Export wants to export over 100 tons of mangoes to the US in this season.

Published in The Express Tribune, June 18th, 2014.

Strawberry plants: Born in the US, raised in Gilgit-Baltistan

KARACHI

Contrary to what you may have started believing the story is not about militancy or insurgency. It is about something red though.

Pakistanis will get a taste of Californian strawberries and that too in the luxury of their own backyard as a local company has invested in importing plants from the US.

The aim, however, does not end here and goes higher as the company, which is growing these strawberries in the fields of Gilgit-Baltistan (G-B), also intends to export the high-value fruit to regional markets.

The development is in contrast to the tradition of Pakistan exporting raw material only to see value-addition by foreign countries before importing the product.

The Pakistani-American businessman, however, has taken the initiative to import strawberry plants, along with other fruits, to make some money and help small farmers in the province at the same time.

He imported the Californian strawberry varieties including Seascape and Tribute and planted them in the picturesque valley in Naltar. With over a 25% share, the US is the top producer of strawberries in the world. The share of California is over 80% in the figure.

The plan seemed simple — import, plant, grow, distribute and export. However, the businessman was soon to learn that the path was not as juicy as he thought.

“I know I may not get the best results this year, but I know high-value fruit crops like strawberry can gradually 1be a good source of earning for both growers and me,” Farm House Export Business Development Director Zulfiqar N Momin told The Express Tribune.

Momin imported over 60,000 strawberry plants (at 16 US cents or Rs16 per plant) in April this year, costing around Rs1 million. Since it was the first experiment of planting strawberries at such a high altitude – though the weather is perfect – around 10,000-15,000 plants failed to grow due to the inexperience of local farmers.

Despite the challenges, the plant importer and growers expect to supply the first crop of Californian strawberries in local markets in the first week of July. The retail price of these strawberries at local stores would be between Rs700-800 per kg – about four times as that of strawberries produced in Pakistan. However, the imported Californian strawberries cost over Rs2,000 per kg, according to Momin.

“The important part of growing these strawberries in G-B is that there is no regional country that grows or can grow them owing to weather constraints. And hence, Pakistan can export these to high-value markets like the UAE and other countries,” added Momin, who has already successfully exported G-B cherry to UAE in the last two years.

According to Momin, the landed cost of these strawberries in UAE is $5.5 per kg and its retail price is $8-9 per kg, which is far above the price of traditional fruits (mango and kinnow) that Pakistan exports to the Emirates. This year, the expected output of these strawberry plants may remain between 15,000-35,000 kg, he informed, adding that it depended upon weather conditions.

But this is not enough — the ambitious fruit exporter has something more profitable in mind.

“I am now working on plantation of blueberries and blackberries. Apart from the extraordinary prospects in export markets, one can also sell these fruits locally where the retail price is already touching Rs7,000 per kg,” he said.

Momin believes that since Pakistan has a large number of farmers who have small lands, especially in G-B, it is very important for the country to move on to high-value fruits. This would help farmers increase their income.

“It’s time for Pakistani fruit exporters to move to high value fruit exports if they want to earn more and increase the overall fruit exports of the country,” he stressed.

Published in The Express Tribune, June 23rd, 2014.