Achieving an Economic Jump Start through Export Success
'The problem is never how to get new, innovative
thoughts into your mind, but how to get old ones out' — Dee Hock,
business visionary and creator of Visa
by Moazzam Husain
Dec 11 -17, 2000
What is the quickest route to turn around
Pakistan's economy today? Many have spoken of the vicious cycle or the
logjam we are presently trapped in. The question is: what is the
fastest and least painful way to break out of it? Whilst the rest of
the world is going dot.com, and onto the broadband Internet, Web TV
and hand held devices, how do we reconnect ourselves with the rest of
There are a few options, like mass education,
improving the national image and investment climate, building national
infrastructure. The trouble with all these is that they are long term,
vague and capital intensive. Additionally, they raise issues of public
policy and therefore are not pragmatic at this stage. We don't want
public policy debates. We want prosperity. Quick. Starting now, and
results in 24 months: The wheels of the economy start moving again,
employment opportunities multiply, we are raking in foreign exchange,
and taxes are pouring into the national exchequer.
So what is to be done? An export boom has to occur
and we have to double our exports over the next 24 months i.e. from
the present US $ 9 billion to the target of US $ 18 billion. If we can
achieve this we will have time for education, image and
infrastructure. We will have time for public policy debates, for good
governance, for poverty alleviation. On the other hand, if we cannot
make this happen, our sovereignty will be at risk within 24 months.
The math of doubling is very simple. If today we
sell 100 units in the export markets at a unit price of $ 100 each,
our export earnings are $ 10,000. We need to lift our game to 160
units at $ 125 per unit to get to $ 20,000. In other words this model
looks to growing our export basket by 60% in volume terms and 25% in
value terms. This model also takes our share of world trade in
merchandise from 1% to 2 %. Merchandise I say because it does not
include machinery and electronic goods, commercial services, mining
The process itself comprises a sequence of 4
initiatives; time paced to collectively produce the rhythm. I caution
against attempting to implement elements of this plan in individual
bits and pieces, in the wrong order or in a poorly timed manner.
Individual instruments do not make a symphony orchestra.
•The process begins with the dismantlement of the
Export Promotion Bureau and its replacement with the Pakistan Export
Marketing and Development Agency (PEMDA). PEMDA is staffed by a
battery of private sector marketing professionals and backed by a
consulting organization like Andersen or the Boston Consulting Group.
It is organised along the lines of product category management i.e.
Engineering Goods, deep sea catch, Shellfish, Rice, Apparel, Soft
furnishings, Leather, Software etc. Each product category group is the
repository of best in class world practices i.e, product knowledge,
branding and market analysis, process and supply chain management.
So what business is PEMDA in? Very simply, it is a
talent-based enterprise that handpicks the best, most willing and
capable exporters, and teaches them how to fly. Reinforced by the
strength of the consultants' international network and depth of
industry expertise, it reaches out to top tier exporters and works
alongside them to pointedly uplift their game in every sphere: Design,
process, market, manufacture, distribute.
The group helps these exporters to develop winning
propositions and expand 'shelf space' in the international
marketplace. It is remunerated along with the consultants, on a profit
sharing principle: Bonuses from the PEMDA fund, which is paid out of a
World Bank-IFC export development grant to Pakistan, and share options
in future prosperity of the companies they select and work with. In
return, a panel of reputable firms audits these exporters to maintain
the required documentation for remuneration and taxation purposes.
It is significant that the model is developed based
on focus group research feedback drawing on the top exporters in each
category as well as on inputs from the consulting companies. The model
has to be a 'win-win' (even on an after tax basis) for all
stakeholders. With a little bit of imagination, consultation and
research, such a model is not difficult to create.
•I am not suggesting that all exporters will come
forward to work with PEMDA on the terms of this model. "Give you
share options and pay tax in return for your advice? Go away and leave
us alone." Instead PEMDA relies on selectively; creating and
nurturing role models for export success on the 80:20 principle. 80 %
of the export earnings are brought in by 20 % of the exporters. In
every group, there are early and late adopters. The model assumes that
the early one's are also the more progressive and capable.
The process of selection and qualification is based
on a points scoring model that applies criteria like financial
performance, quality of personnel, transparency of accounts and of
course quality of the business plan. PEMDA derives its success from
its 'can-do' culture and from its own self-interest in dividends and
shares of the success. Through the process of selection, it can focus
its resources towards the most willing, capable and progressive
PEMDA is effective at creating the role model
success and conspicuously showcasing it for others to see. It is a
self-sustaining model of mentor capitalism, a veritable pubic private
partnership and attracts overseas talent. This 80:20 rule is the
second in our sequence of timed initiatives.
Poorly timed or launched in the wrong order, this
model will become another of the countless failed 'schemes' launched
by governments in the past. For example, given the level of scepticism
and mistrust, if the present Export Promotion Bureau launches such a
scheme, we know the uniform response: "Give you share options and
pay tax in return for your advice? Go away and leave us alone."
Similarly, if the product category group at PEMDA is staffed by
bureaucrats or by second or third tier marketers, the model will
•Talent of course is the most difficult thing to
attract and more so to retain. The dynamic of today's business world
is not about lifetime job security and a long-term career rat race to
the top. It is about creating the fastest shareholder wealth. It is
about project-based successes through shifting paradigms and about
taking a slice of that wealth before moving on to the next project.
Start-ups spin offs and buyouts are where talent thrives.
Now, because PEMDA is envisaged as a talent based
enterprise, such dynamics are inevitable. PEMDA talent will attrite
and join up with top tier exporters in joint ventures, in equity
participation, or simply set out on their own. This is to be expected
and encouraged because it marks a defining moment in the development
of our export sector. This is the beginning of the stage where the 'centre
of gravity' of our export value addition begins to shift towards
design and styling, branding and export houses.
Amidst this vigour, lesser exporters (who earlier
said 'Go away') lured by the successful showcasing of the successes
are jumping onto the PEMDA bandwagon. At the same time top tier talent
from within the country and overseas is replenishing the ranks of
PEMDA. In a sense this is not even an initiative.