INTERVIEW WITH KHALID IQBAL SIDDIQUI, DIRECTOR RESEARCH INVEST & FINANCE SECURITIES LTD.

KHALIL AHMED
(feedback@pgeconomist.com)
Aug 29 - Sep 11, 2011

PAGE: TELL US SOMETHING ABOUT YOURSELF?

KHALID SIDDIQUI: I am an MBA from Institute of Business Administration (IBA). I started my career at Invest Capital & Securities (Pvt.) Ltd. in 2002, and after attaining the position of head of research, moved to J.P. Morgan Pakistan as country strategist & banking analyst in 2006.

During my time at J.P. Morgan, I was ranked as the No. 2 analyst in Pakistan by foreign fund managers in a survey conducted by Asiamoney magazine. I moved to Invest & Finance Securities Ltd. as Director Research in 2008, and now also on the board of directors of the company.

PAGE: YOUR VIEWS ABOUT EXPORTS OF CEMENT AND TEXTILES FROM PAKISTAN?

KHALID SIDDIQUI: Cement exports have suffered recently as the Middle East is still trying to recover from its downturn. The African markets are pretty well supplied by manufacturers over there. Therefore, cement exports from Pakistan (especially with high oil prices) are expensive to transport. I believe it will be another tough year for cement manufacturers as global recession fears are currently overwhelming even emerging economies. Textile exports performed exceptionally well in FY11. However, FY12 is likely to be much different as international cotton prices have come down by more than half from recent highs.

This decline is likely to translate into lower yarn prices and Pakistan's textile exports in US$ terms are likely to suffer. On the other hand, a reduction in volumes may also be on the cards as global recession fears hurt US and European economies, i.e. two of Pakistan's biggest textile export destinations.

PAGE: HOW COULD PAKISTAN INCREASE ITS EXPORTS OF CEMENT AND TEXTILES TO AFRICAN MARKETS?

KHALID SIDDIQUI: Pakistan's cement manufacturers are beaten on cost competitiveness by African manufacturers who have the ability to bring down prices. However, Lucky Cement has recently initiated a project to set up a cement plant in Africa, which will be the first such overseas venture by a Pakistani cement company. We believe this could be one of the ways that Pakistan's cement manufacturers could increase their sales to Africa. On the textile front, African market is viable for hosiery and other basic clothing. Therefore, these should be the areas of focus. Also, Pakistan's textile companies could set up textile fairs in Africa to try and gain market share over there.

PAGE: HOW DO YOU SEE THE FUTURE OF CEMENT MANUFACTURERS?

KHALID SIDDIQUI: The fortunes of cement companies are linked very much to the health of the economy. Therefore, if Pakistan's economy continues to trudge along at 2-3 per cent growth per annum, it would be quite damaging for cement manufacturers. Demand from housing and government sectors are key for sustainable profitability of the sector. The export market is only available to a selected few with location advantages. However, if the economy continues at this slow pace, the smaller and less cost-competitive cement producers may end up winding up their businesses or selling their capacities to larger players.

PAGE: YOUR VIEWS ABOUT COST OF DOING BUSINESS IN PAKISTAN?

KHALID SIDDIQUI: I believe that one of the exporters' constant complaints is the country's unfortunately heavily oil-dominated energy mix. Pakistan's energy mix is well and truly dependent on thermal power generation, of which majority comes from oil, especially when hydel plants are down. There needs to be some restructuring of energy mix and coal reserves' exploitation is one of ways to do this. Apart from this, there is a huge problem that several industries are facing these days, which is gas and electricity load shedding. Self generation of electricity and use of oil is increasing costs manifold for manufacturers. And finally, the latest development that has been in the limelight is extortion mafia. This all also adds to the cost of doing business in the country. All these costs do tend to make Pakistani exports somewhat less competitive.

PAGE: GIVE YOUR VIEWS ABOUT COMPETITION EXPORTERS CONFRONT WITH IN THE INTERNATIONAL MARKET?

KHALID SIDDIQUI: Pakistan's exports are mainly textile and rice. Textile export is a mainstay and will continue to be so going forward. For textile exporters, energy costs and extortion are two issues that have recently compelled some groups to even look to moving their operations to Bangladesh, where subsidized energy is available for the export-oriented industries. These sorts of issues could deal a blow to Pakistani exports. Therefore, with energy prices rising globally and in Pakistan, exporters have become somewhat less competitive. Coal is there, but the reserves are yet to be exploited.