MADE IN PAKISTAN

LABEL NEEDS SERVICES OF INTERNATIONAL DESIGNERS

By AMANULLAH BASHAR
August 09 - 15, 1999

"How to make 'MADE IN PAKISTAN' label the best seller in the export market" is a pertinent issue to be addressed both by the public and private sectors in the country.

Actually, the label is struggling for its survival in the world market for want of a genuine support by quality products, price competitiveness, honest, sophisticated and aggressive marketing efforts to make a place for itself, both at home front and in the international market.

Honestly speaking, it wouldn't help to attract local customers merely by raising slogans like "Be Pakistani and Buy Pakistani" unless strategic marketing efforts are made and good quality products are offered in return, to the people.

For instance, the overwhelming response to international food chains like KFC, McDonald and Pizza Hut etc. in Pakistan speaks itself that it is the quality and presentation of the products which matters. These international chains have become the much sought after food products in Pakistan despite the fact that these companies are selling Pakistani chickens but it is the quality and way of presentation which have outclassed the local vendors. The speedy penetration of these international fast food companies into Pakistani market signals that people would go for quality products even if they have to pay more. Practically speaking, no amount of patriotism can excel the poor stuff over quality goods, even in the local market what to say about choosy export market.

BRAND FRANCHISING

Gulzar Firoz, former chairman, Pakistan Tanners Association (PTA), while supporting the idea of 'Pakistani goods with the labels of internationally known companies' said: "Marketing strategy demands that we should make our presence felt in the world market with the support of the internationally known brands."

He said that as the first step we should go into franchise with renowned marketing houses to make our place in the world market. As there is no harm in it as it is practiced elsewhere in the world. The marketing companies having internationally known brands originally are not the manufacturers. These companies have hired the services of manufacturers to produce goods in different countries, however, the designs of the goods is provided by the marketing companies.

Regarding leather and leather goods, Gulzar said: "Pakistan exports finished leather and leather garments. The total exports of leather and leather goods was over $511 million in 1998-99 as compared to $541 million in 1997-98. Out of the total exports in 1998-99 finished leather fetched $172 million while leather garments fetched $339 million. In the segment of leather garments, Pakistan is exporting only leather jackets, while export of other products like wallets, bags or footwear is insignificant which is hardly between 6-8 per cent of the total leather garments exports. As far as the quality production is concerned, leather jackets, produced in Pakistan are second to none, however, they are unable to fetch the price they deserve because they do not carry the label of internationally known designers.

Since these designers charge heavily for designing the products, their services cannot be hired by the exporters individually. He strongly recommended that the Export Promotion Bureau (EPB) should organize seminars about branding of the products in which international designers be invited to speak on this important subject. The services of internationally known designers can be hired for designing of Pakistani products. There could be a provision in the Export Development Fund (EDF), collected by the government, for payment of charges of these designers in the larger national interest to promote our export on sound footings, he suggested. The designing of Pakistani products like leather garments, fashion apparels, sports goods, surgical items, footwear, and other exportables can do a magic in increasing export volumes from Pakistan, he felt.

Gulzar, who led a delegation of Pakistan leather products manufacturers in the 9th International Shoes and Leather Fair, held in China recently, said that Pakistani leather products fetched export orders worth Rs10 billion in that particular exhibition. This was for the first time that Pakistan had participated in that Fair. The volume of trade in such fairs can go to any extent provided our products are designed and marketed under the labels of international designers and marketing companies.

SPORTS

Pakistan's sports goods, however, have their identity in the export market. International sports marketing companies like Nike and Adidas have started marketing of Pakistani sports goods under their labels from Pakistan. Pakistani exports of sports goods declined last year due to non-tariff barriers like ISO-9000, environment issues and child labour charges erected by developed countries. These barriers and also international recession were the factors for the decline. The export of sports goods stood at $383.61 million in 1997-98 which sharply declined to the level of $256.67 million in 1998-99. It is, however, expected that export volume of sports goods is likely to take a quantum jump following arrival of world's sports giant into Pakistan sports manufacturing sector. Pakistan has recently participated in world's largest sports goods fair ISPO Summer, held in Munich. About 32 exporters of sports goods participated in that exhibition.

NIKE has awarded a $5 million contract to Emery Company for one year to provide air cargo services for its products to North America from Pakistan and other countries in the region.

The agreement includes air transport from Pakistan to destinations in Europe, North America and Asia.

Nike, the world's leading manufacturers of sports goods including sports apparel, equipment and footwear, buys from Pakistan and other regional countries, raw and finished goods and materials for its wide array of products. Emercy Worldwide will also ship Nike products to North America from India, Singapore, Bangladesh, Sri Lanka, The Philippines and Malaysia.

Nike, based in Oregon in the United States, is the World's leading manufacturers of athletes footwear, apparel, equipment and accessories for sports. It has manufacturing facilities in Europe, North and South America and Asia.

SURGICAL GOODS

Like sports goods manufacturing sector, the manufacturers of surgical items were also facing charges of child labour. This left a serious effect on the exports of surgical instruments which have a reputation for their quality.

A team of International Labour Organization (ILO) and UNICEF which recently visited Sialkot, however, has exonerated surgical industry of child labour abuse charges.

According to surgical instruments manufacturers, a joint group of experts, belonging to the two top world bodies, visited Sialkot and adjacent areas recently where surgical instruments are produced.

The visitors found out that child labour was being used only at units which were operative in villages as part of the cottage industry. Almost all the units, set up at the industrial areas in that region and manufacturing high grade surgical instruments, had no traces of child labour, the team reported to an Italian NGO which arranged the visit to probe child labour abuse charges.

The surgical instrument manufacturers and exporters hope to boost shipments of surgical kits to European countries which consume around 65 per cent of the total exports of these goods from Pakistan.

Pakistan's exports which rose to Rs4.9 billion in 1996-97 from Rs4.2 billion a year ago, fell sharply during first half of 1997-98 in the wake of child labour charges. Pakistan's exports of surgical instruments was estimated at $125.29 million in 1997-98 which declined to $112.38 mainly on account of child labour issue.

With ILO and UNICEF report, exonerating Pakistan of these accusations, the exports may touch to Rs 5 billion mark as there has been an increased demand of Pakistani surgical goods in most European markets.

At present there were about 6,300 children engaged in manufacturing different surgical articles by mainly working as part time workers at cottage level units. The strength of the total labour force engaged in the surgical industry was more than 100,000.

The surgical industry, according to sources, provides all possible health care to its labour force and arrangements have been made for their education at schools set up by the industry by its own resources.

There is a scheme to employ these children, currently working in cottage industry, in the mainstream industry producing sophisticated surgical gadgets after completion of their schooling and other required training as they have inherited potential to produce best quality surgical goods.

The joint mission of ILO and UNICEF has, however, expressed the hope to cut down the size of child labour by at least 50 per cent in the next couple of years.

CARPET

Despite global recession and erosion in the unit value the carpet industry of Pakistan generated $190.063 million in 1998-99.

During the year, the carpet export in term of quantity increased by 295 thousand square metre or 8.51 per cent, but in term of value, the export of carpet declined by 5 per cent due to fall in unit value and devaluation.

This indicates that carpet sector has also potential to go far ahead provided strategic designing and marketing efforts are made in this sector. According to a carpet exporter, Afghan style trendy carpets had a lion's share in overall exports because most of the designs of Pakistani hand-knotted carpets have become outdated and unimpressive in the international market. In order to remain in the international market, eye catching colours and market oriented designs are needed to be introduced in Pakistani carpets, said an exporter.

The economic conditions in Pakistan always demand of the economic managers to evolve export policies aimed at earning more and more foreign exchange overcome resource constraints constantly faced by the country. In order to achieve this cherished goal they always rush to explore new markets and offering incentives to the private sector, yet the export sector is lagging far behind the desired goal despite having enormous natural resource potentials the country has. In the mad rush for enhancing the exports, the most significant area of image building of Pakistan as a producer of quality goods was not left neglected. Some unscrupulous elements in the export business damaged country's reputation by criminally comprising on quality and despatched shipments of sub-standard goods to make quick money. "To tell you the truth, whosoever they may be, they not only damaged the reputation of Made in Pakistan goods but also tarnished the image of Pakistan. These elements have done a damage to such an extent that for the past many years, the export target of $10 billion has become a psychological barrier for country's exports.

The commercial attaches appointed in Pakistan Embassies abroad can be highly significant for image building of Pakistan as a producer of good quality products. Unfortunately, the Pak envoys have failed to deliver the goods and majority of them is appointed on certain considerations and their party affiliations which can never serve the country upto the desired level.

Recently, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has taken a serious note of the case forwarded by the commercial attaches in which one of the leading Pakistani exporters of fruits and vegetables was accused of exporting sub-standard (over-riped) mangoes to Green Fellas of Singapore.

The government is considering to review the caliber and performance of commercial attaches posted in Pakistani foreign missions.

Defending the accused exporter, FPCCI has said that Al-Mahmood Establishment was the winner of FPCCI's export trophy for several years and it is beyond comprehension that the company which is a leading exporter of fresh fruits, especially mangoes for the last five years around the world will ship inferior quality mangoes on credit terms.

Green Fellas, the importer of mangoes in Singapore, has already remitted the proceeds with discount of five per cent to the exporter and has also placed further orders which is an ample proof that the party is innocent and allegations of supplying inferior quality mangoes against are unfounded.

Describing the action of the commercial attaché as unprofessional and immature, the officer has tried not only to tarnish the image of the company but done a colossal damage to the country's reputation as one of the best producers of agricultural items in the world.

Whatever the reasons may be, the fact remains that our commercial officers operating in different missions in the world need brain storming to build up country's image as the producer of quality goods.

Country's image as producer of quality goods plays the central role on international front. Japan, which was notorious for producing sub-standard quality goods some three decades back, has played a model role in fighting back to achieve number one position in the world market. To reach the present status, the key factor, however, was the gradual improvement in producing quality goods by Japan's manufacturing sector.

According to a leading exporter, bulk of Pakistan's exportable goods are re-marketed by reputed international business houses with their own brand names or labels of different origin. Generally speaking, exporters from Pakistan use detachable labels for their products on the instructions of the importers so that they could replace labels of their choice.

So much so, the matchless Pakistan's Basmati rice which is internationally known for their aroma and exotic taste are re-marketed under the label of "Packed in England". The marketing companies having respect and credibility for quality goods are charging 6-8 times more in European markets when compared with export prices fetched by Pakistani exporters. This was not the case with Basmati rice alone, by and large other products from Pakistan such as sports goods, surgical instruments, leather garments etc are facing the identical treatment.

The demand of Pakistani sports goods is reflected in the fact that Pakistani footballs are generally used in the international tournaments on the recommendations of the International Football Association. Unfortunately, these footballs do not carry "Made in Pakistan" tags.

We cannot blame the international business houses for selling Pakistani goods under their own brand names. They are taking advantage of the situation because of their goodwill and hard earned reputation in the world market.

Pakistan loses more than Rs250 billion annually in the international market due to poor quality of goods and services. This unfortunate situation would continue to be so if quality standards are not improved, stringent code of right and wrong is not adopted to root out all pervasive corruption from the public as well as private sectors.

Ahsan Iqbal, Chief Coordinator, Programme 2010, and Deputy Chairman, Planning Commission of Pakistan, while

delivering his keynote address at a seminar on: 'The Fight Against Corruption', organized by the Institute of Cost and Management Accountants of Pakistan, said that studies in cost management had shown that from 62 per cent to 80 per cent cost of goods was the "soft component" and that needed complete elimination. "Some corrupt countries have reduced the soft component to 50-55 per cent thus improved their competitiveness in the international market," he added.

He said that increase in cost was caused by many factors but the institutionalized corruption and poor quality production were the two factors which had made Pakistani goods incompetitive in the international market.

Analyzing the way, the public and private sectors were working, he said that they were yet to realize the damage, the corruption and other ancillary factors were doing to Pakistani trade and industry.

He acknowledged that the information system of the government was too bad to check irregularities in the system as there was no accurate collection of data and all statistics were questionable.

COST OF PRODUCTION

Despite availability of cheap labour resources, the heavy taxes levied by the government, accompanied by an army of corrupt tax collecting agencies, exorbitant price of utilities altogether have rendered our manufacturing sector incompetitive in the export market.

Although different governments, time and again, have acceded to the demands of the manufacturing sector for rationalization of tax regime, steps to correct the situation are yet to be taken.

The present government has appointed task force for amalgamation of eight labour-related taxes into one tax. The task force has been asked to submit its recommendations to the government latest by December 31, 1999. Another task force has recently been asked to evolve basic changes in the resource mobilization strategy in Pakistan.

This task force has been assigned to recommend changes in the taxation system to enhance built-in elasticity and to orient towards faster growing segments of the economy.

The working paper, given by the Planning Commission to the task force, suggests that budgets involving large increments in tax rates and heavy new taxation have not only been politically self defeating but have also not yielded the desired results.

The task force has been asked to focus on improvement in the quality of tax administration, which reduces the component of evasion and corruption in the process of tax collection.

The government, according to working paper, has realized that system should be fair in terms of treatment and the tax burden should be on the basis of ability to pay taxes by the persons.

It feels that the success of domestic resource mobilization over the medium term depends significantly on the implementation of comprehensive reforms in tax administration. The working paper agrees that strengthening institutional capacity and improving systems and procedures by giving greater autonomy to tax administration is necessary to achieve promising results.

The reform of tax administration should include elements such as wider registration of tax payers, the simplification of procedures for taxing the informal sector, the establishment of taxpayers compliance unit and staff training and computerization.