INTERVIEW WITH MAJYD AZIZ, FORMER PRESIDENT KCCI & FORMER CHAIRMAN SITE ASSOCIATION OF INDUSTRY
Feb 14 - 20, 2011
Majyd Aziz is President of MHG Group of Companies and Seatrade Group of Companies that are family owned enterprises involved in textiles, shipping, cargo handling, and imports and exports of commodities and minerals such as coal, chrome ore, cement, oilseeds, etc.
He has been President of Karachi Chamber of Commerce and Industry and twice the Chairman of SITE Association of Industry. He is Chairman of SME Bank Ltd and Member of Pakistan Railways Board. He is on the steering committee of Benazir Bhutto Shaheed Youth Development Program. He has been Director of KESC, SITE Ltd, and has been on the board of seventeen educational institutions.
He is one of the Founders of Citizen Police Liaison Committee, Founder Chairman of SITE Crime Monitor Cell, and has been one of the Founders of WEBCOP, Skill Development Council, Pakistan Japan Business Forum, Pakistan Sri Lanka Business Forum, and SITE Child Labor Bureau.
He is also Honorary Citizen of the City of Houston, Texas and the City of Austin, Texas, USA.
He has attended the prestigious National Security Workshop at the National Defence University, Islamabad being the only industrialist among 50 participants. He has also participated in the strategic dialogue between National Defence University Islamabad and National Defence University, Washington, D.C. being the sole representative of trade and industry.
He has represented Pakistan at international forums, is regular on Voice of America radio, on various electronic channels, writes for various newspapers and magazines, and speaks at various institutes and organizations. He has won many awards and laurels.
PAGE: WHAT IS YOUR OPINION ABOUT EXPORT POTENTIAL OF PAKISTAN? WHAT DO YOU EXPORT?
MAJYD AZIZ: It has taken Pakistan over six decades to inch up to the figure of $20 billion in official exports. Of course, over 55 per cent of the export regime is textile-based, including raw cotton. The country's export managers as well as the business community have not made substantial efforts to get out of the shadows of textiles and, in fact, the Trade Development Authority of Pakistan, the Federal Commerce Ministry, as well as the (late-starter) Textile Ministry primarily zeroed in on textiles. Undoubtedly, we consider ourselves as a major player in textiles, but because of textiles, Pakistan continues to get a raw deal in major trading blocs and in major importing countries. In spite of being a cotton-producing country, in spite of decades of textile-related experience, and in spite of massive capital and work force investment, Pakistan has never been accepted as a global player in textiles. There may be many textile exporters who may take umbrage at my statement but the fact of the matter is that Pakistani textile exports move at a snail's pace while major competitors, especially regional ones, have overtaken Pakistan's textile exports.
Apart from textiles, Pakistan can be a formidable player in other sectors. Pakistan's cement industry has proved that Pakistan can become a big player in cement, especially to Middle East and Africa. Pakistani cement found it way even to India and Afghanistan and if land route facilitation was possible, Pakistan cement would have made its way to Nepal and even Bangladesh. Pakistan can also be a major player in minerals exports and without too much of marketing, it can manage to cater to just the Chinese demand and, in the process, may surpass even textile exports. This may sound too radical to many people, but it is possible and doable. Balochistan and KPK, and even Gilgit-Baltistan, can be major sources of minerals, but what is needed is the will, the facility, and the desire.
My family group is heavily involved in the export of chrome ore, primarily to China, and we can attain US$100 million in exports annually. We are a relatively new company in exports of minerals but in two years we managed to become the largest exporters of chrome ore and at present we have about 60 per cent of share of the chrome ore exports. Our formula for success is very simple. The reason we made the difference was that we brought a management and marketing strategy that should have been adopted by companies who were in this business for decades. We made sure we attended strategic conferences and exhibitions in China (not depending on TDAP handouts or subsidies) where we were able to target new but major buyers and convince them of our sincerity and potential. And finally, we never reneged on our commitments and preferred to take a major loss in order to keep the Pakistan flag high. We try to work on low margins and high volumes in order to develop a major niche for Pakistan. Our biggest gripe is that the mine-owners have a myopic outlook and do not understand market dynamics. They do not price their commodity keeping in view the global demand and supply and in this way, Pakistan's share is encroached.
I have personally lobbied with Balochistan Chief Minister Raisani, Former Prime Minister Zafarullah Jamali, and other senior Balochi political leaders that they must inculcate the essence of market dynamics into the brotherhood of mine owners but so far I have not been able to cut the ice.
Our Group is the largest facilitator of cement exports from Pakistan and we provide a one-window facility to major cement mills. We facilitate thru land and sea transportation, thru port handling, thru finding buyers, and thru ensuring remittances of export proceeds. We believe that Pakistan will continue to be a strong player in cement and the policy makers must ensure that cement mills are able to generate huge exports.
PAGE: WHAT KINDS OF METHODS ARE REQUIRED FOR EFFECTIVE EXPORT SYSTEM IN OUR COUNTRY?
MAJYD AZIZ: The export targets or development of a significant export system are achievable but it would require the strong emphasis on three fronts. These are facilitation, promotion, and motivation. The successive governments have seldom adopted motivation of exporters as their way of thinking. I applaud the decision to set up Trade Dispute Resolution mechanism in the Ministry of Commerce. I also appreciate the decision to have a voluntary Pre-Shipment Inspection system as this improves the image of the country's products and would attract more buyers. But, what happens is that facilitation measures are announced but then neither the government nor the exporters continue with the follow up and we see all pragmatic measures go down the drain and we are back to square one. The appointment of Regional Trade Commissioners as envisaged in one of the previous Trade Policies must now be implemented.
My advice is that Pakistani government must set in motion a long-term program with Chinese government to increase exports from Pakistan to China. There is tremendous potential but the Pakistani exporters are not very proactive nor are aggressive in marketing products in China. Pakistan's exports have gone up after the FTA with China and Sri Lanka but the potential is huge. I also suggest that African market is another hot spot for increasing exports.
PAGE: WHAT SHOULD PAKISTAN DO TO BOOST EXPORTS?
MAJYD AZIZ: First and foremost is the availability of essential infrastructure. We don't have electric surplus, we donít have gas surplus, we don't have water surplus. All three important ingredients if the textile dyeing and printing industries are to maintain optimum production and if we want to go for value addition. So let us accept we have limitations and let us find alternatives and better ways to conserve and utilize the infrastructure. We have somehow managed to keep our heads in the sand whenever the issue of alternate energy crops up. Why are we trailing behind in introducing solar energy or wind energy? Why do we keep our economy hostage to the imports of furnace oil? We misused our gas reserves by allowing compressed natural gas to be used in vehicles. Our priorities are so lopsided no wonder we are getting nowhere. Do you want me to talk about the road network in SITE, for example? There is no visible development in the industrial estates. Roads that were to be built decades ago are still on paper or some cosmetic work has been done. Those roads that are not on the main avenues still look like the terrain in North Waziristan. No one really cares whether these roads would be built or not. SITE Karachi has turned into a pigsty. Going on Korangi roads is like the Desert Safari in Dubai. Better not to mention the pathetic situation in North Karachi, Federal 'B' Area, and Landhi. Industrial estates have been savagely violated.
My other beefs is the cost of capital. As you know, currently, State Bank of Pakistan is maintaining a tight monetary policy and in a bid to control the rising inflationary trend in the economy, the interest rates have been kept on the higher side. Inflation is still high and the excessive mark-up rate has impacted negatively on working capital requirements and other inputs. The government, jump-starting on the demands of multilateral lending agencies, has termed the word "subsidy" as a dirty word.
We must undertake to develop our gem and jewelry sector, our fisheries, our fruits and fruit products, and poultry as these could play a significant role in boosting export figures as well as providing plenty of employments, especially in the rural areas. Training subsidies, cold chain incentives, and low cost transportation can be major incentives to these sectors.
Our Information Technology sector is vibrant and is making its mark in the world. However, most of the exports are not being officially reported nor recorded and thus this sector has not found its presence in policy planning. The government must introduce facilitation measures to ensure that IT exports are done thru an official mode. Heavy tax breaks, cheaper financing, assistance in defraying training costs, better and cheaper connectivity system, and awards and incentives could induce many players to take the official route.
PAGE: HOW WOULD YOU COMPARE OUR NEIGHBORING COUNTRIES WITH PAKISTAN IN TERMS OF EXPORT?
MAJYD AZIZ: Although, in today's fast moving business environment, subsidies and handouts are being discouraged, the bare fact is that Pakistan's regional competitors still maintain a system of providing direct and indirect subsidies to facilitate their exporters. It should be noted here that Bangladesh and Sri Lanka enjoy GSP+ in EU as well as USA, while Pakistani exporters get the usual run around and are left with the crumbs. This has affected our market share as well as making our products expensive in foreign shores. All we want is a level playing field because Pakistan is bogged down in an economic quagmire due to floods, due to global war on terror, and due to the political and geo-strategic compulsions. SAFTA is all talk and no action. Pakistan allows imports easily while India and Bangladesh come up with non-tariff trade barriers. Notwithstanding the fact that Pakistan has been able to penetrate the Afghani market and exports are on the rise, the fact remains that under the APTTA and the planned facility to allow Indian goods to Afghanistan thru Pakistan will have a severe negative effect on exports to Kabul and this market may be systematically lost due to the nexus between Pakistan's two neighbors who enjoy more closeness and camaraderie.
Pakistan must play the lead role to enhance intra-SAARC trade so that the regional composition of export figures enables SAARC countries to come closer and even undertake joint investments and regional cumulation for exports to EU, etc.
PAGE: WHAT STEPS, IN YOUR OPINION, HAVE BEEN TAKEN SO FAR BY PAKISTAN TO PROMOTE EXPORTS?
MAJYD AZIZ: I would like to delve deep into my mind and extract information stored inside it to highlight the measures taken by the government to promote exports. I may sound cynical or frustrated but the basic truth is that the government has lost the race to enhance exports due to non-planning of the post-textile quota regime. Superficial changes and superfluous announcements have been made with loud boasts of making Pakistan a big time player. On the one hand, there is this bragging of government being the facilitator and on the other hand, FBR sits on Rs50 billion worth of sales tax refunds of textile exporters. If on the one hand, government talks of providing continuous supply of power, gas, and water, and then on the other hand, mark-up rates go high, law and order worsens, and the nation's image is blemished all over the world.
No sir, I would not really be comfortable in praising any political or non-political government for assisting exporters. Yes, one can commend government for export refinance schemes, for tax breaks, for rebates, etc but these are old stories and do not reflect modern thinking or modern pragmatism. Like the Americans, we exporters also ask the government to "do more".
PAGE: WHAT INCENTIVES SHOULD THE GOVERNMENT OF PAKISTAN GIVE TO THE EXPORTERS?
MAJYD AZIZ: Here I would propose that the government must understand that unemployment is Pakistan's number one problem and all-out efforts must be made to tackle this issue. Unfortunately, the present government is stuffing state-owned enterprises with more and more people. This easy way out has led to an economic disaster but to no avail. The state-owned enterprises are hemorrhaging scarce national financial resources.
The government must force State Bank of Pakistan to reduce the mark-up under the Exports Refinance Facility and should also include any and all non-traditional sectors in this facility. The government must spend the maximum amount in providing core and service infrastructure to industries on an urgent basis. The government must intensify, with the support of the private sector, its efforts to convince USA and Europe to grant the GSP+ facility. The government must undertake a series of discussions with China to convince China to import more goods from Pakistan. The domestic knitwear manufacturers can pool their resources to make affordable T-shirts or polo shirts for at least 5 per cent of the Chinese population and this will increase hundreds of thousands of direct and indirect jobs in the knitwear sector.
Once the ROZ bill is passed in the US Congress, the government must invite Chinese investment, expertise, and ideas to energize the zones by producing designated textile categories here so that Pakistan's export figures show a substantial increase.
PAGE: HOW WOULD YOU PHILOSOPHIZE YOUR VIEWS ON EXPORTS?
MAJYD AZIZ: Pakistan must get out of the rat-hole of being a small time player in the global marketplace. We are not gaining substantial share of the world market. Most of the Pakistani exporters are what I call "retail-shop exporters" as they are not visionary, nor innovative, and depend on market pull rather than producer push to promote their goods. Moreover, the mentality of the Pakistani exporter is to go solo rather than as a formidable force. Markets are protected more thru individual efforts rather than utilizing an institutionalized strategy. Thus, many exporters become vulnerable and susceptible to demands and decisions of the players of the importing nation.
The reason I am narrating this factual situation is that there is a disconnect between exporters and government. TDAP still relies on sending favorites to various trade exhibitions and hackneyed measures are adopted to promote products. This approach now must be shed and a more cutting edge plan must be prepared to being about a revolutionary change in how we market our products. TDAP must be gradually transformed from an upgraded EPB into a private-sector led modern organization with a critical mass.
I would venture to state here that one should always be an optimist and keep a positive outlook. Despite the problems, we should not lose our hopes for better and prosperous circumstances. There is always light at the end of the tunnel. The falling, rising, booming and recovery phases are all part of the business cycle, which is one of the important topics of contemporary as well as classical economics. It is up to us whether we want to harness these and jump ahead or whether we want to be relegated to a ho-hum exporting country. The choice is ours. I would like to end with a quote by Roy L. Smith: "The successful man is the one who finds out what is the matter with his business before his competitors do."