IBA SEMINAR MNCs: Imports vs exports

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What are the problems which restrict attempts to export from Pakistan?

By SYED M. ASLAM
Apr 16 - 22, 2001

Why multinational companies, the best of them at least, have chosen to remain 'net importers' instead of using Pakistan as an export base? Why only a handful of them are engaged in exports, that too on a very small scale and only to comparatively smaller markets mainly in the Third World?

These and many other such questions were asked by members of a panel to the guest speakers at a seminar, "Cross Fire on Converting global companies from net importers to exporters", organised by Business Administration Students Club of the IBA and sponsored by the United Bank Limited.

Six guest speakers representing some of the best known multinationals operating in the country as well as those indirectly related to exports defended their position for choosing to cater exclusively to the demands of the local market. They also highlighted problems which restrict attempts to export from Pakistan.

The guest speakers included the Managing Director of Continental Biscuits Pakistan, Hassan Ali Khan; Director Beverages Lever Brothers Pakistan, Naeem Khokhar; Director Marketing Glaxo Smithkline Beecham, Masood Jaffrey; Managing Director Siemens Pakistan, Sohail W. Siddiqui; Sabir Imtiaz of Lakson Tobacco Pakistan; and Chief Executive of Thal Jute Pakistan, Masood Walji.

The panel comprised minister for Finance, Planning and Development Sindh, Dr Hafeez Shaikh; former federal minister Javed Jabbar; President of United Bank Limited Amar Zafar Khan; columnist and Head of Textile Institute of Pakistan, Irfan Hussain; Director of Stock Exchange Iqbal Ismail; and economist and academician, Dr Mahnaz Fatima.

The chargesheet against the 'global', read multinationals, companies accused them of 'failure to export from Pakistan' despite enjoying such edge as managerial excellence, special strengths, international brand equities, latest technology, access to premier markets and cheapest credit. It further stated that MNCs operating in the country have failed to establish credibility among consumers/customers in the developed markets despite enjoying recognition for quality across the globe. Even the best of these companies, thus, have ended up as 'net importers' in the context of Pakistan as they fail to earn hard currency and instead import capital equipment, spares and materials on the one hand and remit dividends and royalties on the other.

Hassan Ali Khan said that Continental Biscuits, a joint venture with a French company, is playing a very important role in the economy of the country like all other MNCs. 'We possess the managerial experience, latest technology and know-how and yet we remain the net importers because MNCs are here to serve the demands of the domestic market."

He, however, added that despite their choice to cater exclusively to the local demand the MNCs have, and are, benefitting the national economy in numerous ways: 'MNCs contribute substantial taxes, are good corporate citizens and have played a significant role to develop manpower otherwise not possible. They have helped transfer of technology and know-how on which no price tag can be put. They have helped save huge sums in import substitution in a country which has never been geared for non-traditional exports and stress on quantitative rather than qualitative exports.

The president of United Bank, Amar Zafar Khan, said that he was shocked that exports have remained static around $ 8 billion in the last twenty-four years. 'The fact that import substitution is perhaps fully exploited and that we can not create government-promoted demand any more, makes it all the more important to take a hard look at our exports as the demand has to come from the exports. Japan went to Malaysia not to sell products but to export from there. We are not talking about token exports but real exports.'

Masood Jeffrey said that MNCs are here to maximise- maximise market opportunities, profits and benefits to shareholders. The 23 multinational pharmaceutical companies, he said, enjoy 57 per cent share of the local market and helped in transfer of technology, development of quality manpower and training of medical professionals. And yet they enjoys not only the lowest profit margins in the world but the annual pharma market has also declined from $ one billion in 1996 to $ 700-800 million at present primarily due to restriction on prices.

Asked if Pakistan does not give the pharmaceutical companies the profitability they need give them all the more impetus for exports, he said the regulatory environment would not get prices in the foreign markets. This is primarily due to the fact the companies are asked to submit low prices at the time of registration license.

So where does the loyalty of MNCs lie? Sohail Siddiqui said that it lies where the business interest is best served and the profit is.

Javed Jabbar agreed that MNCs have played an important role in the economy — not only local but also international. 'One-third of the global trade, three-fourth of all commodity trade and fourth-fifth of all technology and management services are in the hands of the MNCs.' He, however, said that, public sector has played a much greater role to develop manpower — skilled, semi-skilled or otherwise — in Pakistan surpassing that claimed by the MNCs.

Dr Hafiz Shaikh said rather that targeting the MNCs one should appreciate the important role they play in the context of Pakistan. 'We should break way from the stigma of money making and realise that the best way of attracting foreign investment is to treat the investors already operating here more kindly. We failed good exports, just as we failed to good imports, for which we can not blame the MNCs.'