MNCs: Imports vs exports
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
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
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
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