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Why our exporters suck at exporting

PDFChamp

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No big boost in exports is expected till Pakistani manufacturers reorient their business model and target achieving scales to integrate effectively in the global supply chain.

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They might also need to build agile organisations to quickly restructure and reconfigure market strategies to compete for a bigger share in the international market.

The perception that the private sector of Pakistan lacks capacity and capability can’t be true as it did prove its mettle by competing and breaking the stronghold of multinationals in the domestic market when it chose to. Thirty years back, multinationals ruled the drug market in Pakistan. Today, the local pharmaceutical industry commands the lion’s share in the domestic medicine market.

A recent report by the Pakistan Business Council (PBC) titled “Enhancing the Competitiveness of Pakistan’s Refrigerator Industry” provides a valuable insight in this regard. The local labour-intensive refrigerator industry that caters to 98 per cent of domestic demand by utilising 75-80pc capacity hasn’t been able to break into the export market. The said report dissected the costing and regulatory duty framework to conclude that the biggest hurdle in entering the export market is neither expensive power nor high dependence on imported raw material. Rather, it was the limited volume of production and Pakistan’s low economies of scale.

It is not surprising, therefore, that over the past decade, the contribution of the manufacturing sector to GDP has been hovering in the range of 12-14pc, which is the lowest in the region. The huge trade deficit (where export earnings were barely one-third of import spending) speaks of the poor show of the corporate sector in the global marketplace. The PTI government did succeed in containing and narrowing the trade gap but it was more through import suppression than export gains. Did the government and the private sector pay attention to expand the domestic market, achieve volumes and economies of scale to enter the global marketplace more confidently?

The attempt to approach the hierarchy in the Ministry of Industry was in vain. An officer who promised to share the position of the ministry in writing later excused herself saying that the team was preoccupied with some other work and had nothing to offer on the subject. Hammad Azhar, federal minister for industries and production, was not available either.

Abdul Razak Dawood, adviser to the prime minister on commerce and industry, responded promptly. In a written statement, he listed nine reasons for laggard growth of manufacturing and exports. He claimed: “We have removed most of these impediments so we are witnessing excellent growth of industry and exports.

“Manufacturing has been stuck at the 12-14pc of GDP for the following reasons: (a) severe energy crisis, (b) artificially overvalued rupee that encouraged imports over local manufacturing, (c) indiscriminate use of customs duty, additional customs duty and regulatory duties, making imported inputs too costly, (d) high duties led to an anti-export bias, which shrank exports, (e) holding back exporters’ refunds, (f) wrong setting of customs duty drawback amounts and then not paying them, (g) badly negotiated Free Trade Agreement with China, (h) putting revenue considerations before industrialisation and (i) not giving exporters competitive energy rates.”


Commenting on the role of the private sector in this regard, a retired bureaucrat who served in trade offices of Pakistan embassies in several key capitals blamed the business class. He mentioned several occasions when he saw businessmen flouting trade opportunities over the course of his career. “I have personally felt humiliated many times when consignments were rejected and the embassy was dragged in to clear the mess at the port of delivery.

“Economic diplomacy is tough but the irresponsible conduct of Pakistan’s businessmen makes it so much harder. They are hardened free riders. I’m not sure if they are naive or pure evil.”

He was bitter. “Addicted to protection and patronage, desperate for quick returns, shy to invest in innovation and standards, local companies lack what it takes to compete globally.”

A senior officer blamed protectionism for making the private sector of Pakistan lethargic, corrupt and complacent. “When car makers can sell cheap old models for a fortune to a captive customer base, why would they bother to improve anything? You allow free import of cars, introduce competition in the auto market and see for yourself what happens,” he pressed.

Azhar Ali Chaudhry, former federal secretary of industries, agreed. “The short-sighted business class of Pakistan is so fixated on profit margins that they never tried to achieve scale or integrate in the global supply chain.”

Contesting this line of argument, PBC CEO Ehsan Malik pulled out the aforementioned report in defence of the business class. He wrote: “Refrigerators in Pakistan are sold at a lower price than India. This is despite 80pc reliance on imported materials and a higher cost of utilities. So it is incorrect to assume that local manufacturers are pursuing margin over scale. Indeed, the opposite is true. With 42pc penetration, and 75pc spare capacity, local manufacturers are trying to grow the market and achieve scale by keeping their margins and prices down.

“The contention about lack of global integration is also incorrect. Eighty per cent of the components are imported and the three big players accounting for 90pc market share are now owned or allied with global chains – Dawlance with Arcelik, Haier is a global player and PEL with Panasonic. Hence, they have access to global know how.

“Scale is a function of domestic and global reach. As 98pc of refrigerators in Pakistan are direct cool but global demand is for no-frost refrigerators, the priority for domestic manufacturers is to gain local scale before they can possibly address global demand.

“The refrigerator industry does not enjoy any protection beyond what is afforded to the engineering industry. Its imported components, apart from glass, carry a zero tariff. Impacting the competitiveness of the refrigerator industry is seasonality – bulk of the sales are made from March to May. Hence, the need to build inventory and carry the cost of working capital. The government provides tax holidays to new entrants while heavily taxing existing companies.”



 

Dalit

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This is a country where the consumer will continue to buy Suzuki cars even if it had other alternatives. You should observe the excuses. Mind numbing. What does this tell you about the attitude of the people in general? We are a stubborn people. We don't like change.

Imran Khan said it right. Shortcuts. We love shortcuts. An even bigger problem is scepticism among Pakistanis. We don't have any self-belief. It cannot be done is the common attitude. There is a lethargic and broken mindset.

You know what the funny thing is? When our people move abroad their ways change too. Suddenly they do know and understand how to be innovative, exploit opportunities etc. We become successful entrepreneurs.

I am not against local business overruling multinationals.
 
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Norwegian

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This is a country where the consumer will continue to buy Suzuki cars even if it had other alternatives. You should observe the excuses. Mind numbing. What does this tell you about the attitude of the people in general? We are a stubborn people. We don't like change.

Imran Khan said it right. Shortcuts. We love shortcuts. An even bigger problem is scepticism among Pakistanis. We don't have any self-belief. It cannot be done is the common attitude. There is a lethargic and broken mindset.

You know what the funny thing is? When our people move abroad their ways change too. Suddenly they do know and understand how to be innovative, exploit opportunities etc. We become successful entrepreneurs.

I am not against local business overruling multinationals.
Simple: Pakistan never had or even tried to have export led economy. This is why we are stuck in perpetual current account deficit crisis and going to IMF for the past 60 years
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@ziaulislam @Patriot forever @waz @PakSword @Black.Mamba @TaiShang @beijingwalker @Joe Shearer @koolio @PakistaniAtBahrain @syedtalhamaududi @Muhammad Omar @Mav3rick
 

Dalit

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Absolutely. No effort was made to turn Pakistan into an export nation.

It all boils down to who your leaders are. Are they visionary? If not, you are doomed. The people are also partly to blame.
 

Indus Pakistan

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“Refrigerators in Pakistan are sold at a lower price than India. This is despite 80pc reliance on imported materials and a higher cost of utilities."

This paragraph says everything. Refrigerators are not exactly hi-tech yet after so many years enjoying tariff protection why the fcuk are they still imprting 80% imported materials? That means only 20% of these units are actually Pakistani made. How can you call these Pakistan products? They are foreign products that get a makeover in Pakistan.

And if they are cheaper than those in India why the fcuk are they not exporting these across all of Asia and Africa? The truth will be for the privilage of buying so called home made units the Pak consumer is probably paying out of his nose for a shoddy product. Of they got rid of tariffs foreign made units would wipe out local so called manufacturers.
 

PakistaniAtBahrain

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we are also bad at advertising what we make, even our agricultural produce. as an example, the local greengrocer i go to in Bahrain doesnt know some of the fruits and vegetables he is selling is from Pakistan. he has been in the business a long time, and he will point out which stuff is from India, Iran, local, Egypt, Saudi, etc. but wont know which ones are Pakistani. i recently went to him to buy Pakistani kinnow oranges, and he didnt know what i was talking about. i went through his whole stock myself till i found it, and on the box in very small letters (easy to miss) it was written "Produce of Pakistan". one time he told me Pakistan makes next to nothing, in terms of fruits and veggies, which isnt true, but if we are bad at advertising our goods and its quality then that narrative will remain true to potential buyers.
 

ACE OF HEARTS

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So many items are imported that are NOT manufactured locally and the government doesn't encourage IMPORT SUBSTITUTION, following which the local / domestic industry fails to develop.

If you don't have a local industry then you can't export
 

Dalit

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“Refrigerators in Pakistan are sold at a lower price than India. This is despite 80pc reliance on imported materials and a higher cost of utilities."

This paragraph says everything. Refrigerators are not exactly hi-tech yet after so many years enjoying tariff protection why the fcuk are they still imprting 80% imported materials? That means only 20% of these units are actually Pakistani made. How can you call these Pakistan products? They are foreign products that get a makeover in Pakistan.

And if they are cheaper than those in India why the fcuk are they not exporting these across all of Asia and Africa? The truth will be for the privilage of buying so called home made units the Pak consumer is probably paying out of his nose for a shoddy product. Of they got rid of tariffs foreign made units would wipe out local so called manufacturers.
It is daylight robbery. The masses in Pakistan are pathetic. The most pathetic you will ever come across. They can be taken for a ride. It is a miracle this country still exists.

There is a reason Pakistan hasn't been taken seriously. The Americans came in fully knowing this country can exploited to the maximum and no one will even bat an eye lid. Every Tom, Dick and Harry can just walk in and exploit. No shortage of sellouts.

Penalty after penalty. You look at the Reko Diq case and so many others. Just plain pathetic. Total shambles. The economy wrecked and burdened with loans. Export none to zero. Imports way too high. Everything seems disproportionate.

Imagine if Pakistan was a household. How on earth would it be possible to run this household? It is nothing short of a miracle.
 
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Yankee-stani

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“Refrigerators in Pakistan are sold at a lower price than India. This is despite 80pc reliance on imported materials and a higher cost of utilities."

This paragraph says everything. Refrigerators are not exactly hi-tech yet after so many years enjoying tariff protection why the fcuk are they still imprting 80% imported materials? That means only 20% of these units are actually Pakistani made. How can you call these Pakistan products? They are foreign products that get a makeover in Pakistan.

And if they are cheaper than those in India why the fcuk are they not exporting these across all of Asia and Africa? The truth will be for the privilage of buying so called home made units the Pak consumer is probably paying out of his nose for a shoddy product. Of they got rid of tariffs foreign made units would wipe out local so called manufacturers.

A good example is the Haier Pakistan laptop scheme remember that from 2015 what happen to that
 

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