Profit issue-04

WELCOME

HOP, HOP AND AWAY! ussain Dawood is one of the richest men in Pakistan. However If one were to ask from which business exactly did he make his wealth, it would be difficult to know from where to start and where to end. His business interests have been all over the place.

It seems his money keeps on travelling from one industry to the other. And that's not because he lacks consistency. Rather he just never (well, almost never) lets his emotions come in the way of prudent business decisions. Unlike many other businessmen he is neither afraid to buy a business in uncharted waters nor to sell one when the time is ripe. In person he is a true gentleman but in business he can be cut throat. In fact, his biggest claim to fame, Engro Corp’s acquisition in 2005-6 was through a successful hostile takeover bid; one of the very few ever witnessed in the country’s corporate history.

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When I met him earlier this month to ask the rationale behind his latest divestitures in Engro Foods, Engro Fertilizer and HUBCO, Dawood told me “I am not a control freak. I know my strengths and my weaknesses. If there is someone else who can do a better job running these companies I would let them do just that.” An ardent believer in the ‘best-owner principle’, Dawood sold off 51% of Engro Foods, to a European Food company, RFC, because he felt the new owners with an experience of over 140 years could create more value for the company. With over

200 brands and products in their portfolio he feels that their new joint venture partner can take the company to the next level. I am not sure how competitors like Nestle are viewing this acquisition but I would surely be upping my game if I were them.

Although Dawood is an astute businessman, the ride has not always been smooth for him especially whenever he has had to deal with the Government. Despite this, in the case of Sindh Engro Coal Mining Company he is a JV partner with the Sindh Government of PPP. This is the same party which gave Dawood’s Engro Fertilizer a very tough time when it was at the centre. More importantly, his latest bet on the energy sector means that he will have no choice but to sell most of his electricity to the Government. Will putting his trust once again in the Government, pay off this time around? We explore in our cover story from page 18.

On a lighter note, we all know that winters have been late this year. It might not be obvious but this has had serious ramifications for some businesses. On page 42 we explore how the players in Karachi’s Landa Bazaar have ended up with huge stocks of warm clothes lying unsold. On the other end of the spectrum, winter collections from highend retail fashion brands are also moving slower than usual

Babar Nizami

Publishing Editor: Arif Nizami l Managing Editor: Babar Nizami l Joint Editor: Yousaf Nizami l Editor Reporting: Farooq Baloch Reporters Karachi: Aisha Arshad l Nida Jaffery l Arshad Hussain and Usman Hanif l Reporters Lahore: Syeda Masooma l Abbas Naqvi and Hassaan Ahmed l Reporters Islamabad: Amir Sial l Ahmed Ahmedani Director Marketing: Zahid Ali l Regional Heads of Marketing: Muddasir Alam (Khi) l Zulfiqar Butt (Lhr) l Mudassir Iqbal (Isl) Design & Layout: Rizwan Ahmad l Illustrator: ZEB Photographers: Zubair Mehfooz & Imran Gillani Contact: profit@pakistantoday.com.pk

FROM THE MANAGING EDITOR

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18

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8 Weekly Roundup 12 The Big Bird’s-eye view of Pakistan’s IT industry 17 Digital Distribution – The Case for Digitizing Pension Payments in Pakistan Amaar Ikhlas

18 18 Return of the billion dollar gamble 26 Reinventing fashion the Ego way 29 The Return of the Stay at Home Mom! Ayesha Aziz

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30 In Ads We Trust 34 Job hunting? Ask Aunt LinkedIn 36 Betting on Gwadar

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42 42 Landa Bazaar Feels The Heat 48 Talking Heads

Corrigendum A quote by Ali Hassan Naqvi, GM Marketing Dawn (Profit, issue 03, cover story: Too little, too late) related to the print version of classifieds and not to the recently launched Dawn career portal as implied in the article. The error is regretted.

CONTENTS

“Political parties in Pakistan have divergent interests. We hope that the political parties can work together to resolve their differences and make CPEC a success,” ZhengXiaosong, Vice Minister of International Department, Central Committee, The Communist Party of China (CPC).

QUOTE

BRIEFING

:“Entrepreneurship, innovation and use of modern technology are the basic things to achieve the goals of national development” AsadUmer, Pakistan Tehreek-e-Insaf central leader.

Senate disapproves Companies Ordinance 2016 The opposition tabled the resolution to disapprove the new ordinance while Law Minister Zahid Hamid said that the government was ready to make any amendments given the opposition presented its reservations and suggestions over the new ordinance. Finance minister Ishaq Dar first presented the Companies Bill 2016 in the National Assembly. Currently the 32 year old Companies Ordinance of 1984 is in place. PPP leasers Nafisa Shah and Yousaf Talpur had expressed their reservations over the bill saying the government was rushing into it while chairman of the senate committee of finance, Senator SaleemMandvivala said that there is no need to make laws through ordinances.

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40pc

SBP approves sale of Burj Bank

stake in Pakistan Stock Exchange (PSX) has been sold to a Chinese consortium that made the highest bid of Rs28 for 320 million shares at an estimated value of $85 million. The Chinese consortium comprises three Chinese exchanges — China Financial Futures Exchange Company Limited (lead bidder), Shanghai Stock Exchange and Shenzhen Stock Exchange.With 40pc of the PSX equity already vested with the 200-strong stock broker fraternity, the remaining 20pc would be offered in an initial public offering (IPO) to the general public.he 20pc shares to be offered to the public would raise another Rs4.5bn.

Approval has been granted to Bahrain based bank Alkhair to sell its stake in Burj Bank to a subsidiary of Bahrain’s Al Baraka Banking Group. AlBaraka which is the Gulf’s top Islamic banking group said in September that its Pakistan unit would merge with Burj Bank to create a joint institution worth more than $1.1bn

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regulatory bodies have been placed under the control ministries after the federal government signed off on the controversial and much opposed move. The National Electric Power Regulatory Authority (Nepra) had been given under the control of the Water and Power division, Oil and Gas Regulatory Authority (Ogra) under the Petroleum and Natural Resources division, Pakistan Telecommunication Authority (PTA) and Frequency Allocation Board (FAB) under the Information Technology and Telecom division and the Public Procurement Regulatory Authority (PPRA) under the Finance Division. Opposition from other provinces was completely ignored as the prime minister approved the transfer.

BRIEFING

17,800 passenger and light commercial vehicles were sold in the month of November exceeding expectations 16,000. Despite the higher sales in the month of November there was a 5% year-on-year drop in automobile sales with 71,877 units being sold in the period July-November according to the Pakistan Automotive Manufacturers Association. Honda Atlas Cars was the best performing manufacturer registering an increase of 49pc in sales in the period under review due to the launch of the new Civic. Sales of Suzuki Motor Company and Indus Motor Company dipped 25pc and 8pc respectively in the same period.

QUOTE

“Disbursements of foreign grants, loans for infrastructure and energy projects should be monitored” Finance Minister Ishaq Dar

Siemens offer $2.5bn credit facility for TAPI pipeline The German based engineering company Siemens has offered $2.5bn credit facility to finance the supply of compressors to the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project.9 compressors need to be installed along the pipeline to transmit gas from energyrich Turkmenistan to Afghanistan, Pakistan and India. Negotiations with the company are at an advanced stage.

Turkmenistan will bear 85% of the cost of the $10bn project while the remaining will be borne by the other three countries. Apart from this around $15bn will be required for developing the gas field – a project undertaken by Japanese firms. TAPI is expected to achieve financial close by the end of this year.

Volatility in the currency open Market After falling to almost Rs110 per dollar earlier in the month of December, the rupee bounced back rising to 107.20 on December 8th and has since maintained this level. The gap between the open market and the interbank however is still quite wide at 2pc against and ideal gap of 0.5-1.0pc.

The rupee was trading at Rs104.80 per dollar in the interbank on 15th December. The gap is attributed to exchange companies not being allowed to bring back the dollars they had purchased in Dubai causing a shortage in the open market.

Senate approves Rs5000 deregulation The upper house approved the withdrawal of Rs5000 notes to reduce illicit money flow. PPP senator Osman Saifullah who happened to own 38 offhsore companies aaccording to Panama leaks moved the resolution. Around 30 per cent of banknotes in circulation are Rs5000 notes. The idea has come after India abruptly withdrew Rs500 and Rs1000 notes in order to curb corruption. The senator argued however that he is not following the India model; rather it is the State Bank of Pakistan which has said that the people tend to keep physical cash at home rather than opening bank accounts and keeping the money there.

45% was the fall in FDI year-on-year to $460 million in the first five months of the current fiscal year. Inflows were dominated mainly by Turkey and China.

Although it was expected that China Pak Economic Corridor (CPEC) would attract more FDI, inflows from China plummeted by 58% to $156 million in July- November. China in the last three years has become Pakistan’s biggest trading partner but Pakistan still remains at the bottom of the list of countries in the region receiving FDI. Highest investment was in the energy sector with $145 million.

bRIEfIng

BRIEFING

CNG price deregulated

$446.81 million is the estimated price paid by Dutch company Friesland Campina Pakistan BV (FC Pakistan) to complete its acquisition of a majority stake in Engro foods. 51% stake has been acquired at Rs120/share of Engro foods. 47.1% of the shares have been bought from Engro Corporation –the holding company- while the remaining 3.9% has been bought from the general public. The new owner is expected to bring new products in the foods segment adding to current range of leading products of the company that includes packaged milk, juices and ice cream. The final sale price is to be calculated within the next 40 days. Analysts believe that the proceeds of the sale will add towards Engro Corporations long term plan of diversifying into energy projects that give higher returns.

The ECC was notified by the Ministry of Petroleum and Natural Resources about their decision to allow compressed natural gas (CNG) dealers in Sindh and KP to set their own prices and sell the fuel in litres instead of kilograms. Until now Sindh and KP was selling CNG at regulated price of Rs66.14/Kg. This will remain the price for a week or two while a price formula is made. The main reason for deregulation was the varying quality of gas available from across different regions that translated into different input costs. Chairman of the All Pakistan CNG association, Ghiyas Abdullah, said that this has been a three and a half year effort. Punjab has been deregulated since May 2015 and selling CNG in litres with price determined by market forces

Demonetisation

Trade with Vietnam

The Senate adopted a resolution to withdraw Rs 5,000 note from circulation last week. Pakistan Peoples Party (PPP) Senator Usman Saifullah tabled the resolution arguing that the note was being used in illegal transactions and should be withdrawn in a time span of three to five years. The resolution comes in the wake of India’s recent demonetisation drive, in which Rs 500 and Rs 1,000 bank notes were pulled from circulation. Law Minister Zahid Hamid opposed claiming the move would have repercussions on the economy as is unfolding in neighbouring India.

Agriculture and seafood were the areas where Vietnamese companies were keen to invest according to Ambassador of Vietnam to Pakistan Nguyen Xuan Luu. He said there was also an interest in provision of expertise in various other economic sectors of Pakistan. In a meeting with the President Federation of Pakistan Chamber of Commerce of Industry (FPCCI) Abdul Rauf Alam, the Ambassador said both countries were enjoying excellent relations adding that bilateral trade and investment was much lower than the actual potential.

SECP 621 new companies had been registered during November this year by the Securities and Exchange Commission of Pakistan (SECP) recording an increase of 23% as compared to the corresponding month of preceding year. Around 85% companies have been registered as private limited companies, while around 11% companies were registered as single member companies.

Sale of motorcycles 18.1% increase was recorded in the sale of motorcycles and three wheelers in the country. According to latest data released by Pakistan Auto Manufacturing Association 648,419 units were sold in first five months of the current fiscal year, from 549,013 units in same period of previous year. Motorcycles sale in November also rose by 26.48% as compared to sales in the corresponding period last year.

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Security for CPEC 15, 000 military and civilian armed forces part of the Special Security Division (SSD) has been raised to ensure safety of the Chinese working on different projects under CPEC. This was stated by the Prime Minister during a meeting with Zheng Xiaosong, Vice Minister of International Department of the Central Committee of Communist Party of China. The PM underlined the benefits of Free Trade Agreement (FTA) which were visible in growing bilateral trade that crossed the figure of $18 billion this year.

BRIEFING

STRATEGY

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The

JEHAN ARA SHARES HER VIEWS ON ALL THAT CHALLENGES THE DYNAMIC IT SECTOR IN PAKISTAN, BUDDING ENTREPRENEURS, AND THE WOMEN LOOKING TO MAKE AN IMPACT

Big A Bird’s-eye

view of Pakistan’s

IT

I N D U S T R Y

By Aisha Arshad

writer, entrepreneur and the face of Pakistan’s IT and start-up ecosystem, Jehan Ara, President of Pakistan Software Houses Association (P@SHA) for IT and IT-enabled services, recently led a delegation of 41 people to Taipei for APICTA Awards where Team Pakistan won nine awards - highest in the 16-year history of the regional awards.

Known as ‘The Big Bird’ at The Nest i/o – P@SHA’s tech incubator, Ara shares her views on the IT industry and the tech start-up culture in a conversation with Profit.

Profit: Tell us about your professional journey so far that eventually led you to become the face of tech-entrepreneurship in Pakistan?

Jehan Ara: Well, I never started off being a techie. I still am not one. I started my journey as a journalist and wrote for a newspaper in Hong Kong for a year. Journalism in Hong Kong meant going out at night and all sorts of things which my parents thought were not suitable for me. So I agreed to quit.

Then I went into advertising and marketing.

These kinds of things open up opportunities for you. I started a [monthly] magazine for a shipping company and worked on it for about three years, later moved to UAE and worked for Gulf News in the advertising marketing department. I even sold life insurance for a year. I still continue to do freelance writing.

Then, we moved back to Hong Kong where I became managing director of a media company. I was running the company for whole of the Asia Pacific for nine years. [Then] my dad, who was a banker, retired and my parents were moving back to Pakistan. I thought that one of us should move back with them and we came here in 1993-1994.

TECHNOLOGY

Profit: How did you finally enter the field of IT? Jehan Ara: I started a multimedia company called Enabling Technologies with a partner Zaheer Kidwai after I came to Pakistan; that’s where everything came together. Multimedia was an amalgamation of text, video and advertising. Communications was basically where it was at. Fortunately, that became a part of IT. That’s how I entered the field of IT, sort of through the back door.

Profit: How were you selected to represent Pakistan at Global Entrepreneurship Summit? What did you speak on during the summit?

Jehan Ara: I have been speaking at some events domestically and earlier this year, I was invited to Columbia University to speak at an event about the technology sector and what’s going on here in the entrepreneurship space. Before that, I went to a summit in Milan where we talked about the impact of entrepreneurship on the local economy.

But, this [GES] came as a total surprise because it’s a major conference, [and] this was the 7th year it was being held. [Every year] there are a thousand delegates who attend it, and it is hosted by the US President. When you receive an invitation out of the blue, the first thing you do is check whether it’s actually legit or somebody is just pulling your leg. I checked. It was a legitimate request.

I felt it’s a great opportunity for me to go and talk about Pakistan and what we’re doing here. It was an awesome experience meeting delegates from across the world comprising of entrepreneurs, investors, founders and professionals. I was a speaker at the summit where I spoke about "Investing in South Asia".

Profit: How long have you been participating in the APICTA Awards? And how was this year in terms of Team Pakistan’s performance?

Jehan Ara: We have been participating in the APICTA Awards since 2003. This year is indeed the best year in terms of the number of awards that we have ever won, with the team bagging three gold and six silver awards. I led the delegation of 41 people that included 5 judges and mentors, an Economy Coordinator and participants from across 4 cities of Pakistan, including established IT companies, start-ups, university students and school students.

Profit: What role is Pakistan Software Houses Association (P@SHA) playing in

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the IT sector? And how did you become its full-time president?

Jehan Ara: At P@SHA, we have several jobs and one of them is to engage with the government to make sure that the right policies are in place for the growth of the IT sector. We also help companies scale up so we create networking opportunities, we talk about the work they do, and we provide access to capacity building workshops.

I joined P@SHA as a member because I felt that if you’re a part of any industry, you should also be a part of the association. I used to go to all the monthly meetings, listen to what everyone had to say and be very vocal about what I thought. Since I was so vocal, they asked me to run for the elections and I became Vice President of P@SHA. Eventually, I became its president in 2001.

In 2008, they asked me to join full time.

I was a volunteer until then. I was fed up of Enabling Technologies. It was also doing well but it was same all the time and P@sha was what I was spending most of my time on. So I decided to accept their offer and on January 1st in 2008, I officially took over as the CEO. I initiated some new projects at P@SHA, like the ICT Awards, the Launch Pad program and The Nest i/o, which is the latest. I thought they needed visibility, not just domestically but also internationally. Recently, P@SHA held its 13th Annual ICT

Awards in which we recognised innovation in the IT sector. We have also published our annual IT Salary Survey and are about to publish our Women in IT Survey.

Profit: Tell us about your latest venture The Nest i/o?

Jehan Ara: Start-up interest came because we thought let’s go talk to young people and find out why they are not starting companies.

And one of the things that kept coming back was that they don’t know how to start a company. They know how to innovate, how to create technology but not how to start a business. So they need mentors, access to a network of people and investments.

We decided to start this place and it has been good. We’ve been able to help a lot of young people and we hope to continue doing that.

The Nest i/o has been represented at Startup Istanbul, the Web Summit in Lisbon and more recently at APICTA. Our start-ups are gaining attention and respect from several quarters both locally and internationally. The fourth cohort of start-ups graduated from The Nest i/o a few weeks ago and we will be starting our new cohort in the last week of December.

Profit: Only 14 per cent of females are in the IT sector according to P@SHA Employment Survey. What is the reason for such a small-scale female representation in

the industry?

Jehan Ara: There are fewer women in science, technology and engineering worldwide.

Although, we have seen a growth internationally in women starting their own companies, it’s still much smaller than it should be.

In Pakistan, I feel that it is the university and the families that should tell young women that they can do whatever they want. Unfortunately, nobody tells them that these opportunities are also available for them to explore.

When we opened The Nest i/o, only one woman-led start-up joined. I didn’t understand why that was the case. I then went to all the tech and business universities and asked how many women would want to start their own companies. You would see the young men saying they would want to start a company, maybe many of them will not. But the women, they weren’t any who raised their hands. I asked why, and they said they didn’t think this was an option for them.

I think it’s just a question of them not realising. Yes, it’s not easy to start a company, even for young men it’s not. But in the tech sector it’s one of the easiest things to do. You have a laptop, you have an internet connection and you can even start your company from home.

Profit: What can be done to help boost women participation in the IT sector?

Jehan Ara: In the previous cohort (batch) we had 30% women. The new cohort joins in the last week of this month and although we are shortlisting start-ups, it looks as if we will have 40% women-led start-ups, which is a great sign. As women realise that this is an opportunity for them, they can start businesses from home and then scale up to move into offices. I think it still needs to grow a lot and we need to encourage women.

There are tech companies now that are providing day care facilities and flexible hours. They are providing transportation so that more women will enter the workforce. As more of that happens, I think more women will join companies that provide a safe and productive environment for them, and more women will start their own companies with this environment.

Profit: How many women are at managerial positions in the corporate sector, particularly in IT? Do you think more women are moving up the ladder?

Jehan Ara: Now you see more and more women, especially at project management and at human resource managerial level, be-

cause they are very good at what they do. It is increasing but still it’s not satisfactory. I think it needs to grow more.

I think some of us have to play that role of convincing young women that they can do it and then they will prove that they are much better than those women who were there before. It’s not going to happen on its own.

Profit: We see a number of women-owned businesses on social media. What is your perception of the phenomenon?

Jehan Ara: It’s just easier to start a business [online]. And it’s not just women. Men are also starting businesses on Facebook or social media.

I think these businesses start at home, but they will not stay at home. It’s just an easier way to start a business. You don’t have to pay rent or utilities, you already have a room

ance from the community.

When they come into incubators we tell them: “Hey, you could fail, right? But fail fast, learn from it and then start something else.

Don’t be afraid of failure. If you’re afraid of failure, you will not take the steps you need to take to create a successful business.”

Pakistan has a very large population (approximately 200 million) and we’re never going to have enough jobs. We need to have people to create jobs and now, using technology we can do it much better. We have to change mindsets by convincing parents and faculty to talk about entrepreneurship as an option.

Profit: Major start-ups of Pakistan including Pakwheels, Rozee.pk, Zameen.com were not produced by incubators. Do you think incubators really matter?

“START-UP COMPANIES NEED FIRST THREE YEARS OF THEIR JOURNEY TO GROW, AND THEY DON’T HAVE THAT KIND OF REVENUES THAT RESULT IN PAYING SEVERAL TAXES” that you’re operating out of. You’re not hiring people at that stage, but as you start to hire people you will move into offices, you will raise investments. I think even investors are also beginning to see that women have a lot of passion for whatever they do and they have a lot of drive. In fact, they are investing in women-led businesses.

Profit: Our society is more job-oriented.

How do you think incubators like yours can make a difference on that count?

Jehan Ara: One of the reasons I think we don’t see many more companies emerging is that as a country we are risk averse. We think that if we fail it’s the end of the world.

Whereas around the world failure is encouraged, unless you try you’ll never start something that takes off. Not everyone is going to be an entrepreneur, not everyone is cut out that way but there are young people who are [capable] and I think they face a lot of resistance from families. They face a lot of resist-

Jehan Ara: There are start-ups coming up.

Yes, many of the companies that started in the tech sector like Systems Limited, NetSol, and TRG, all those came out on their own. There were people who decided to start their own businesses and that’s fine. That’s always been the case around the world, but because we don’t see enough of them.

Young people have so much [talent] that they are already doing well without us. If we just offer little bit assistance, we’ll see that they are the ones who’re going to kick start this economy. All we do is facilitate and provide them the knowledge that they need, and give access to mentors. We have the support of organizations like Google and Samsung.

The US State Department has also given us a grant which allows us to do this without charging young people anything.

Technology is easy, the hard part is business. We connect you to a mentor who has done [business] and he tells you about lo-

TECHNOLOGY

gistics, distributions, returns, and what kind of people to hire. Incubators are playing that role. When you’re at a university you cannot have access to people who, in addition to being mentors, can be your potential investors or customers. That’s the role incubators are playing. There will still be lots of successful entrepreneurs who will come on their own.

Profit: How many start-ups have gone through The Nest i/o?

Jehan Ara: We have had about 60 start-ups and most of them are still surviving. Maybe, one or two people have decided to go and do their masters after they have gone through the incubation cycle while others are generating revenues and some have raised investments through mentors who came to this space.

Even after they leave, they know this place is available for them.

I think we are creating a community of people who are not only successful themselves but will help each other. It feels good that you’re creating a community of people who are there for each other.

Profit: What challenges women entrepreneurs face in particular?

Jehan Ara: I think that women everywhere have multiple roles, like women do. Women have roles and family expectations. So anything that they do requires a lot more effort.

Starting up a business is like you have to be at it 18 hours a day if you want to make it successful. Women who goal for it actually put in a lot of time and are very driven, but I think they can do it because multitasking is the strength of women.

There are other challenges in a country like Pakistan, security challenges, networking challenges. Also, when they go looking for money, a lot of banks here don’t give them the loans that are required. So I think the support structure needs to be a little better.

Profit: What are the main challenges facing the IT sector?

Jehan Ara: A lot of tech-companies work for customers around the world and all they get to see about Pakistan is negative. They are a little nervous to give business to Pakistan which has been a challenge. Yet, we are growing at 30% to 40% every year. With the infrastructure, quality of human resource, and with now some capital being available, we’ve seen that IT companies have been able to draw investments from not only within Pakistan but also abroad. I think things can only look up.

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“DON’T BE AFRAID OF FAILURE. IF YOU’RE AFRAID OF FAILURE, YOU WILL NOT TAKE THE STEPS YOU NEED TO TAKE TO CREATE A SUCCESSFUL BUSINESS” I would request our government that the only way the tech sector can grow is if they are facilitated and no extra taxes are imposed.

Right now, we are one of the sectors that pay heavy income tax because we pay heavy salaries, whether it be general sales tax, provincial taxes, federal taxes, or withholding taxes, it keeps the companies from growing.

Start-up companies need first three years of their journey to grow, and they don’t have that kind of revenues that result in paying several taxes.

We are talking to the government and have received positive feedback from both Federal Board of Revenue and Ministry of IT. And also, we have been talking to the local government. This sector needs a little more nurturing. Other thing is to promote these companies and make sure that unnecessary regulation is not put in the way.

Profit: With the growth of 3G and 4G, how do you see the future of IT-based entrepreneurship in Pakistan?

Jehan Ara: Up until now the market was

limited to those with laptops, but with the emergence and use of 3G and 4G, growth in Pakistan is very high. The kinds of products some of our companies are producing are for smart phones. There are a lot more companies developing their games and products for either smart phones or tablets. When the infrastructure in terms of internet improves, it gives us an opportunity to both develop and test our products to sell them internationally.

Profit: You have been lobbying for Pakistan's tech industry for quite some time now and recently, it seems we are getting international attention. What impact do you think it will have on the industry?

Jehan Ara: No amount of lobbying is enough. Several of us have been doing this for years. And every little effort makes a difference. Increasingly, the perception of Pakistan as an IT destination has increased. Our innovations are being recognised and we are seeing increased interest in terms of business and investment.

Profit: What would you advise those who are looking towards becoming entrepreneurs?

Jehan Ara: They owe it to themselves to try it at least once, to give it a shot if that’s what they want to do. If they don’t succeed, what have they lost? They have learnt something from the exercise. And if they don’t want to start their own companies, they can go into companies and try to be entrepreneurial there.

If you haven’t tried it then you’ll always wonder what would have happened if you had. You don’t want to grow old and say, “Oh, I wish I had!”

TECHNOLOGY

OPINION

Amaar Ikhlas

Digital Distribution – The Case for Digitizing Pension Payments in Pakistan ension payments in Pakistan constitute one of the largest payouts at an institutional level in cash.

With modern technology bringing a wave of change with itself, it is also introducing solutions to digitizing transfers. For pension payments in particular, digitization has the potential to revolutionize the payout and enable financial inclusion in a manner that will lead to use of accounts, and not just opening one.

At a policy level, digitizing the payments for nearly 1.6 million pensioners in the country is a massive assignment that will have to be organized across different departments, financial institutions and ministries of the country. A collaborative effort will not only lead to bringing efficiency into the systems, but will also add clarity as those designing the payment channels work in conjunction with those who are designing policies for financial inclusion. Absence of a joint effort would render no visible impact on financial inclusion.

Undoubtedly the road to digitizing pension payments in Pakistan is fraught with challenges as nearly 70% of the country’s population

P

Amaar Ikhlas is currently Head of Branchless Banking at Bank Alfalah Limited

FINTECH

resides in rural areas, while several others lack infrastructure and connectivity. This, coupled with a lack of awareness and limited financial literacy makes the endeavor even more challenging in the Pakistani landscape.

Now the obvious benefit for digitizing pension payments in a country like Pakistan is that the plumbing for digital payments already exists in the form of robust branchless banking services and the agent network associated with it. At an institutional level, the government can leverage this constantly expanding network for disbursing pension payments in Pakistan. A few successful transformations have taken place such as the electronic transfers of EOBI pensions into Bank Alfalah branchless banking wallets in Pakistan. Each wallet is opened at any Bank Alfalah branch and has a UnionPay International Debit card tagged to it.

Once a pensioner is registered with Bank Alfalah, his or her pension is automatically credited into the mobile wallet at the beginning of each month, which can subsequently be withdrawn from any ATM across the country, eliminating the painstaking process of visiting designated bank branches and spending hours to receive their claims. However, while this may be a step in digitizing payments, the financial product delivered as per EOBI’s requirements is a closed-loop one; hence restricting the impact of financial inclusion.

The process is, albeit slowly, gaining momentum as renewed efforts are being made by the national government to introduce convenience for pensioners into the equation of pension withdrawals. In an announcement this year, the government is making efforts to introduce a new pension system that will facilitate receiving of pensions into bank accounts, which will have ATM cards and cheque books issued against them.

To encourage sign up onto this system, the government is promoting the account opening process without any service

charges.

At the governmental level, there is room for centralizing the supervision of payments and building a mechanism that various institutions can utilize for pension payments to citizens.

The journey that will have to be undertaken to build a robust digital system to reach every remote area in Pakistan, while being transparent, eliminate leakages and corruption will undeniably be arduous. Rather than working in silos, it is crucial that policy makers and financial solution providers engage in regular dialogue and leverage their resources to make a digital channels for pension disbursement more viable. Despite the hurdles that may be faced, there are always stakeholders who are committed to achieving the end goal, especially since it is a journey that is worth struggling for.

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COVER STORY

HUSSAIN DAWOOD IS PUTTING HIS EGGS IN THE ENERGY BUSINESS WHERE GOVERNMENT IS THE LARGEST BUYER. HAVING SUFFERED AT THE HANDS OF GOVERNMENT PREVIOUSLY, WILL HIS BET PAY OFF THIS TIME?

By Farooq Tirmizi

STRATEGY

he Enven plant in Daharki, Sindh is gargantuan in more ways than one. At 125 metres (410 feet) in height, it is the second tallest structure in Pakistan. It is the largest single-train urea manufacturing facility in the world, and cost $1.1 billion to build: the single largest private sector investment in Pakistan ever. It is also quite possibly the single biggest strategic blunder Corporate Pakistan has ever made in terms of greenfield industrial investment, and its major shareholders know it.

Its genesis lies in 2001, when the government of Pakistan, then led by President Pervez Musharraf, decided to follow through on a decades-old plan to increase Pakistan’s domestic fertiliser manufacturing capabilities by offering incentives to any manufacturer willing to set up a new plant. The biggest of those incentives was offering, through the state-owned natural gas distribution companies, 100 million cubic feet per day (mmcfd) of natural gas, the main raw material for urea, at a highly subsidised rate of $0.70 per million British thermal units (mmbtu), backed by the full faith and credit of the Government of Pakistan.

The gas supply would be guaranteed for 20 years, and the highly subsidised rate was slated to last for the first ten years the plant was in production. (Incidentally, the subsidised rate was set to match the rate at which the Saudi state-owned oil company Saudi Aramco sells gas to the state-owned petrochemical giant Saudi Arabia Basic Industries Corporation.)

The final auction to determine who would bid for the gas blocks was held in December 2006. By that time, Engro’s major rival, the military-owned Fauji Fertilizer Company, the largest fertiliser manufacturer in Pakistan, had already backed out of the project. Among the final four bidders, Engro was the only company that actually had a presence in manufacturing fertilisers in Pakistan. So it was no surprise that they won the auction.

Engro got to work almost immediately on the plant and was able to get the plant up and ready for production in December 2010.

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It was at that point that it became painfully obvious that the Government of Pakistan had been making promises it had no intention to keep: the country was facing a massive shortage of natural gas and fertiliser was much further down the food chain of the government’s list of natural gas users, behind urban middle class household cooking and heating needs, power generation – both for the national grid and for the captive power plants owned by the larger textile companies – and the compressed natural gas (CNG) fuel suppliers who had allowed middle class Pakistanis to soften the blow of rising global oil prices with artificially cheap domestic gas for their cars. By comparison, cheaper fertiliser for poor farmers simply did not make the cut in terms of political priorities.

For much of 2011 and 2012, Engro Fertilizers’ shiny new plant effectively limped along. At first, it was a nearly six-month delay in its commercial operations start date, which had to be moved to June 2011. In the first six months, the plant was only able to operate at approximately 50% of its capacity. For the entirety of 2012, however, Enven was only able to produce about 9% of its 1.3-million-ton capacity. Revenue rose in 2011 mostly due to price increases, and was actually down 2.3% in 2012.

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1.1 billion spent to build the gargantuan 410 feet high Enven Plant

It is worth spending some time trying to place in context just how much debt Engro had taken on for the construction of Enven, a project financed almost entirely by debt. At the end of 2006, Engro had just over Rs3.7 billion in total long term debt. By the end of 2010, when construction of Enven was finally completed, that number had risen to Rs105 billion.

The scale of borrowing from a non-government entity was completely unprecedented.

Rumour had it that Engro had effectively exhausted its counter-party limits with most banks, which is why it turned to borrowing from foreign investors and even issuing the first ever corporate bond directly marketed to

“THE REASON FOR THE ENGRO FERTILIZERS TRANSACTION HAD LITTLE TO DO WITH A DESIRE TO EXIT THE BUSINESS OR TO SCALE DOWN EXPOSURE TO IT AND MORE TO DO WITH THE POSITIVE DESIRE TO RAISE CASH TO EXPAND BOTH ENGRO AND DAWOOD HERCULES’ PRESENCE IN THE POWER GENERATION SECTOR” Hussain Dawood, Chairman Dawood Hercules Corporation

retail investors.

Needless to say, the experience was traumatising, both for Engro management and for its major shareholder, Dawood Hercules Corporation, owned by industrial magnate Hussain Dawood.

During those two tough years – 2011 and 2012 – the company’s top leadership was spending upwards of 70% of its time trying to persuade the government to honour its sovereign guarantee for the supply of natural gas to the plant. Rohail Muhammad, then CFO of Engro Corporation effectively acknowledged to the strategic mistake in public.

“Mistake would be a strong word, but we would not erect this huge fertiliser plant in today’s scenario.” said Engro’s chief financial officer Rohail Muhammad in 2011 Naz Khan, the CFO of Engro Fertilizers, and now of Engro Corporation, even came up with an elaborate justification of why giving more of the country’s limited supply of natural gas to the fertiliser manufacturing sector would generate more economic value than supplying it to any of the other of the competing industries seeking that gas (the math involved essentially ignoring the economic value of a stable supply of electricity that

would be possible by giving the gas to power generation companies).

Much of that pain was alleviated when the centre-right Pakistan Muslim League Nawaz (PML-N) won the 2013 general elections and Prime Minister Nawaz Sharif made more of an effort to fulfil the government’s sovereign guarantees than his predecessors in the Pakistan Peoples Party-dominated government led by President Asif Ali Zardari, who seemed at best indifferent to Engro’s concerns.

The higher gas supply that became available to Engro after the Nawaz Administration took office allowed the company to have a little more breathing room. By the end of 2015, the plant was operating at 86.5% of its capacity, and the company had been able to reduce its consolidated long term debt load down to Rs 59.6 billion, a 43% reduction in just five years.

For a while, it looked as though Engro’s investment in Enven had been touch-and-go, but would ultimately be worth the massive risk the company took. But on June 7, 2016, Engro announced that it was selling a 28% stake in Engro Fertilizers in a private placement transaction that raised $185 million.

The announcement was not entirely surprising to analysts who have been following Engro and its major shareholder Hussain Dawood’s moves over the last few years. Engro Fertilizer is not the only fertiliser company Hussain Dawood has had a major stake in. He also owned a majority share in DH Fertilizers, a smaller manufacturer and a subsidiary of Dawood Hercules Corporation until June 2015, when it was sold off to the Fatima Group, another major player in the fertiliser space.

That sale, combined with the partial divestiture of Engro Fertilizers certainly makes it look like Hussain Dawood wants to exit the fertilizer business. In an interview with the Managing Editor of this magazine , Dawood acknowledged the fact that fertilizer manufacturing is a difficult business to be in and that this difficulty was the primary motivator behind selling DH Fertilizers. But he denies that the Engro Fertilizers’ transaction was related.

“The reason for the Engro Fertilizers transaction had little to do with a desire to exit the business or to scale down exposure to it and more to do with the positive desire to raise cash to expand both Engro and Dawood Hercules’ presence in the power generation

STRATEGY

sector.” he says.

This assertion has been backed up by interviews with Engro executives over the last year and certainly has at least some evidence to back it up.

As Kazim Alam pointed out in The Express Tribune, Engro is also selling a 51% stake in Engro Foods for $448 million to a Dutch food company FrieslandCampina in large part to raise cash to invest in the energy projects that are meant to be part of the ChinaPakistan Economic Corridor (CPEC). Engro Foods has been growing at slow clip since 2013, but is widely regarded as the company with the most promise in the Engro portfolio.

The reasons that apply to the sale of Engro Fertilizers most certainly do not apply to that of Engro Foods. But given the fact that Engro is reducing its stake in Engro Foods in addition to Engro Fertilizers suggests that there is more at play than the difficulties of manufacturing urea in Pakistan.

As Engro President Khalid Siraj Subhani told Alam, the company wants to be able to invest in CPEC power projects with as little debt as possible. That statement suggests that at least part of the lesson that Dawood learnt from the Enven experience was that the debt taken on by Engro for Enven was a mistake.

However, Dawood denies that this was the case. In fact he confirms that Engro and Dawood Hercules are running up against the counterparty limits for most banks and simply have relatively little room to borrow further from the domestic financial sector for their expansion.

In the years since Enven came online, I have had the chance to ask several Engro executives the same question: how did you not see the gas shortage coming? Every single one of them has given the exact same response: nobody else did either, and the World Bank’s International Finance Corporation (IFC) signed off on our feasibility study.

(Strictly speaking, this is not true: the Petroleum Ministry is rumoured to have had reports as early as 1995 predicting a gas crunch around 2010, almost exactly when it actually happened.)

Not a single one of them think it was a big mistake to rely on a government promise for the reliability of the supply of such a large proportion of their cost of goods sold. Nobody thought that asking the government for such a massive incentive was a bad idea. Nobody thought that way because, for 40 years prior to Enven’s troubles, nobody had needed to. Both

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Engro and Fauji had been operating fertiliser manufacturing plants without a problem for nearly four decades, with a reliable supply of gas from state-owned gas companies.

Yet, in hindsight, maybe they should have been able to see that relying on government favours for such a massive portion of the company’s income statement was a bad idea.

Okay, that is probably unfair. They had no way of knowing.

But what about now? Now they do know better. Now we know that the Government of Pakistan’s sovereign guarantees should be taken with a bucketful of salt.

So why is Hussain Dawood selling Engro’s stakes in a promising food company (Engro Foods) and rushing headlong into the electricity business (China Power Hub Generation Company and Sindh Engro Coal Mining Company), where the sole buyer and rate-setter is the government? Having just sold off a stake in a fertiliser business where his cost of

goods sold was dependent on the government, Dawood is now entering into a business where the government decides his revenue?

Does that make strategic sense?

Dawood’s son Samad Dawood, Director Dawood Hercules seems to think so “We are long on the Pakistan energy market. Our group took over a controlling stake in HUBCO back in 2012. we brought in new management, a new board, invested into the plant to improve its performance while simultaneously entering into some strategic partnerships with the Chinese, Engro and GE. As a result of these efforts not only the operational metrics went up but the market also appreciated the work we did.

And since our acquisition we have been able to create 45% annualised shareholder return over the last four years.”

Dawood himself has a simpler explanation: they are investing in energy production because that is where they see the greatest opportunity lies in Pakistan right now. Dawood

states that he is aware that coal is not, and cannot be, the long term solution to Pakistan’s energy problems, but in his view it is the only short- to medium-term fix.

In addition, Engro Foods’ executives are candid about Engro’s struggle to grow its foods business. In past interviews, Engro Foods former CEO Afnan Ahsan acknowledged that the company had effectively reached the limits of its “me-too” product development strategy. Samad also acknowledges that having a European dairy company come in and bring its expertise in the dairy sector to Engro would likely result in Engro Foods being able to move out of its slowgrowth rut.

The thought process behind the energy venture, meanwhile, is simple: yes, the Government of Pakistan does not always make good on its word, and yes, it nearly defaulted on the money it owed the Hub Power Company (in which Dawood Hercules and related entities now own close to 20%) in the late 1990s, but the government has ultimately tended to pay the power companies what it owes them because they have ironclad contracts.

Here is the problem with contracts, though: they all have “force majeure” (unforeseeable circumstances) clauses and there is a circumstance that virtually the entire power industry in Pakistan is failing to foresee: the changing economics of the energy business, specifically the speed with which solar power is becoming affordable.

In an earlier article in Profit, I argued that the largest, best-paying end-consumers of electricity in Pakistan – the upper middle class

and industrial consumers (who account for more than half of all electricity consumed) – are likely to be making the shift to solar power over the next decade.

A power project is expected to pay for itself typically over a 25- to 30-year period, meaning that for the latter two-thirds of their existence, these new power plants are likely to have to be selling to state-owned utility companies that have just lost most, if not all, of their best customers. How much is that government guarantee going to protect those power companies then?

To this, Dawood also has a response.

“WE ARE LONG ON THE PAKISTAN ENERGY MARKET. OUR GROUP TOOK OVER A CONTROLLING STAKE IN HUBCO BACK IN 2012. AND SINCE THE ACQUISITION WE HAVE BEEN ABLE TO CREATE 45% ANNUALISED SHAREHOLDER RETURN OVER THE LAST FOUR YEARS” Samad Dawood, Director, Dawood Hercules

While he acknowledges that selling to the government is not as risk-free as investors once thought it was, he says that he is going ahead for two reasons: firstly, the government is by law the largest buyer in energy so it is impossible to be an energy producer without selling to the government. The second, somewhat more compelling reason, is that the downside risk is limited by the high returns being offered by the government, which shortens the payback period for investors. He estimates that for equity investors, the payback period has been reduced to approximately seven years.

So what is Hussain Dawood’s feeling on the central lesson from the difficulties at Engro Fertilizers? He clearly feels that neither leverage nor trusting government guarantees was the central problem, exhibiting a willingness to take on both risks while setting the strategic direction for two of the largest industrial conglomerates in the country.

Is that wise? I am certainly tempted to be skeptical.

But I think the ultimately reasons for his motivations are even simpler than they appear.

Dawood owns companies that have to allocate hundreds of millions of dollars in capital at a moment in time. He cannot afford to ignore the single biggest avenue for large-scale investment in Pakistan right now: coal-fired power generation. Whether that is ultimately the best use of capital is an open question, and one that only the next decade will truly resolve.

STRATEGY

ExEcutivE dEcisions

Hussain Dawood comes clean on his investment strategy

By Babar Nizami Earlier this month, Profit had a chance to interview Hussain dawood, chairman dawood Hercules, which holds majority shares in Pakistan’s largest private sector conglomerate, Engro corp. during a casual conversation, which stretched little over an hour, the industrialist opened up about some of the key decisions he made pertaining to his fertilizer and foods businesses and the new direction his investment firm seems to be taking.

From divesting stakes in Engro Fertilizers and Engro Foods to investing in energy sector, and business ethos that are centric to his strategy, dawood talked at length about reasons behind his recent decisions and his future plans for both shareholders and the country.

Profit: You have sold off Dawood Her-

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cules Fertilizers and are divesting a significant portion of Engro Fertilizers. What are some of the factors behind those decisions and is it an indication that you are not keen on the fertilizer business in Pakistan?

HD: People are reading too much into it and sometimes make unnecessary connections. the two transactions were made for entirely different reasons. in case of dH Fertilizer, the problem was that there was not enough gas to run the plant efficiently. We (dH Fertilizers) were way down in the government’s priority list for the supply of gas to our plant. Even the amount of gas promised to our plant was allocated elsewhere without any compensation to us. Getting the gas had become a battle of influence and political expediency. so as soon as we were able to find a willing buyer in the shape of Fatima fertilizer we sold it off. dHF gave Fatima Group the necessary scale espe-

cially in urea production that was missing previously and gave them strategic depth in the business to make them a significant player in the industry. i'm not sure about the gas issue but probably they thought they could better manage the gas issue in terms of dealing with the govt than we could.

As for Engro Fertilizer we are still in the business and it would be incorrect to assume that we are not keen on the fertilizer business anymore. We faced a lot of trouble regarding gas commitments in Engro Fertilizer as well but things improved post 2013. However, to understand the motivation behind selling our partial stake in Engro Fertilizer, you would need to understand our business ethos.

A) create value for our shareholders B) Profitability is not everything. For us qualitative aspects of an investment decision come first. so while we try to ensure that

shareholders benefit by investing in our companies we also see how much the country will benefit.

So when in mid 2013 the Prime Minister personally asked me to play my role in resolving the energy crises I made a commitment to add 2400MW of electricity. You need to understand that at the time energy was the biggest problem facing Pakistan. According to estimates we were losing 2% of GDP due to it but if you factor in the opportunity costs it would be close to 4% in my opinion. So I had to play my role. This is not to say that we compromised the shareholder in anyway. In fact, we feel that a good business has to play its part in solving big problems and the better the solution the more value gets created for the shareholders. So we decided to reallocate our resources according to the needs of the country.

Profit: You are also divesting Engro’s stake in Engro Foods, or at least a large chunk of it. What would you then describe as Engro’s core business? Because for a long time, it was fertilizer. Where does Engro go from here?

HD: Our target was to achieve 20% corporatization of the dairy sector but despite all our efforts only 8% of the dairy sector is corporatized at the moment. We have realized that this not our strength and so we were looking for a strategic partner who could bring in the right experience, technology and vision to achieve this goal. And this is what we did by bringing in someone with more than 100 years of experience in 100+ countries. However, they asked for majority shares to close the deal and we agreed. You see we are not fascinated by control. Our strength lies in project management i.e. we are good at setting up big projects. If there is someone who can run it better than us, then we say why not?

At a time when multinationals are not coming to Pakistan, bringing in FDI was no mean feat. You need to realize that for foreign players Pakistan is not a top destination to invest in. In fact, sadly it is somewhere near the bottom of the list. The FDI numbers released by the Government also include investment in the stock exchange which is not true FDI, as it’s not going to stick here.

Profit: There were reports that Hub Power Company is reducing its equity stake in its joint venture with Chinese energy companies for coal-fired power plants. Can you talk to us about the reasons behind that decision?

HD: Same was the case with Hubco.

The Chinese wanted 51% and we agreed. In fact, truth be told, we had no choice but to agree. Firstly, let me clarify that I am not keen on coal. However, it is cheap and probably the only solution in the short-medium term to the energy crisis in our country. And please remember that the only country willing to invest in coal powered plants is China.

Secondly the Chinese wanted a USD 2 billion bank guarantee in order to sanction the loan to undertake this project. It was not workable for us to guarantee such a large amount by putting up asset collateral. On the other hand, Chinese banks were willing to lend to the Chinese on corporate guarantees without the strict requirement of bank guarantees. So it was natural and fair to let the Chinese have 51% controlling stakes since they were taking the bulk of the risk.

However, we were able to negotiate a fairly good deal which gives us the option to go back from 26% to 49% of the JV company at a later stage.

Profit: Had it not been more cost effective to issue fixed-rate debt at a time when interest rates are at a 42-year low rather than raising equity by selling these stakes?

HD: You are right debt is much cheaper but according to SBP regulations regarding single party exposure we have already reached our limit. So to answer your question, no we are not averse to debt.

Profit:Looking at the Dawood Hercules portfolio, it becomes increasingly clear that your focus is on the energy business in one way or another. What do you see as the more promising investment: traditional power plants or alternative energy?

Because your investments right now

tilt towards traditional energy.

HD: We are very bullish about alternative energy and as technology improves and rates come down further this will be the future of energy. We have invested in alternative energy projects as well as traditional. We will be ready when the time is ripe. Pakistan needed an immediate solution and we played our part.

The LNG terminal is also a case in point and we are very lucky that 50% of Pakistan's infrastructure is on gas, which is great.

Profit: Enven suffered since the Government did not honour its commitment for gas allocation. Now you are entering into a business where the government decides your revenue. How do you explain this?

HD: As for trusting the government once again we had no choice as government is the only customer of electricity. We had a responsibility and this was not enough to deter us.

Profit: Considering that power projects typically have a 20- to 25-year payback period, how do you think your investments in traditional power can be impacted by the changing economics of the energy business, specifically the speed with which solar power is becoming affordable?

HD: With assured 15 to 20% dollar returns the payback period of the projects is between 5-10 years. This is very good ROI especially considering that it is assured in dollar terms.

Profit: There were rumours that Engro was looking at K-Electric. We have known since the day Abraaj bought KESC that they would eventually want to sell it.

Was it ever a consideration for you to buy it?

HD: We are intent on contributing to Pakistan through our work. Hence we keep evaluating business opportunities as a matter of routine.

Profit: What are your plans for Dawood Lawrencepur? It has been converted from being a textile company into an alternative energy company. What is the plan to grow that business line?

HD: We firmly believe that renewables are the energy of the future. It is also our responsibility to invest and promote alternate energy for a sustainable future for our next generations. We are not motivated by financial returns when it comes to the betterment of mankind and of our people. Hence we will keep pushing this agenda of availability, affordability and sustainability in both Energy and agriculture.

STRATEGY

TEXTILE

By Aisha Arshad

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I

n fashion, what works and what doesn’t has for long been the subject of many debates. But lately, how fashion works, especially in the digital age, has been the topic of much interest. According to a report for 2014, the fashion industry worldwide attracted 28.1 million fans on Facebook pages - the highest number among top five categories which include telecom, e-commerce, beauty, and electronics.

The trend also holds true for Pakistan, or at least for Ego - a contemporary clothing brand whose online store generates higher sales than any of its top three outlets: the Dolmen City Clifton (Karachi), Dolmen Mall Tariq Road (Karachi), and Centaurus Mall (Islamabad).

Ego, which deals in women wear, owns 17 outlets across Pakistan and two in Dubai. But the success of its online store can largely be accredited to the presence of 4.7 million Pakistani women on Facebook, where Ego has a fan following of 1.4 million one of the largest among fashion brands in Pakistan.

This surge in fashion savvies has undoubtedly benefited Ego for it is composed of the company’s target market - young and modern women who are a major part of the online population worldwide. So much so that it has intrigued Ego to set up its mobile app – the first of its kind by a fashion brand in Pakistan.

“I wear Ego because it’s stylish. It lets you embrace latest trends with a hint of eastern touch,” says Misbah Imad, a 22-year-old Facebook user and buyer of Ego’s products. Imad is one of the many young women across Pakistan who opt Ego for its unique cuts, funky prints, and distinctive designs, even if they are disapproved by their grannies.

And apparently, that is what works.

“If the grandmother hates it and the daughter loves it, you got it right,” owner of Ego, Adil Moosajee shares his brand’s motto, chuckling as he does so. In a conversation with Profit, the ever-socasual Moosajee, decked in a pair of jeans, a blue t-shirt coupled with flip flops, recounts his “mazeydaar” clothing ventures that have led him to his own successful venture.

After returning from the U.S in 1996, he was expected to join his family’s iconic store - Moosajees, a

famous garment business located in the heart of Saddar. But the then 24-year-old Moosajee had some other plans. It took him ten years to finally conceive what later would become his own identity in the clothing industry – Ego. In 2006, the year it launched, Ego’s only outlet at Zamzama looked quite different from the chain of stores it owns now. With a clothing line for men, a western clothing range and formal wear for women, Moosajee says the brand offered more than it should have, all of which was cut down to women

“IF THE GRANDMOTHER HATES IT AND THE DAUGHTER LOVES IT, YOU GOT IT RIGHT” Adil Moosajee, owner of Ego

prêt wear within a year and a half after he identified his target market.

“I thought I knew what I was doing, but until I set it up I didn’t really know whether it was too big, too small or the right size” he says.

“We eliminated men’s and western wear and started concentrating on a very small prêt kurti line for women, and until now that is our forte,” says Moosajee regarding the product that today generates 80% to 90% of Ego’s revenues.

After opting for prêt wear, Ego stumbled a little before it finally set itself in the right direction.

Recalling the old days, Moosajee says it was nothing short of an interesting journey towards discovering what really worked. The

urban-desi combo he wanted to introduce in Pakistani fashion was “worth hanging on the wall”, but the women who loved it didn’t dare to wear a bird printed on their shirts, or for that matter a loose flowy outfit in a simpler cut.

However, it was only a matter of when, and not why for Ego to find that particular kind who wouldn’t mind wearing a kurti with a bird printed on it.

“We [eventually] discovered that it was those women who grew out of social norms and realised they’ll wear what they want. Once those women discovered us and we discovered them, it was a beautiful relationship and we’ve been in that relationship ever since,” Moosajee says.

To date, Ego has opened outlets all across Pakistan, including in cities like Faisalabad, Gujranwala and Multan, where the presence of an urban brand might surprise the market itself. However, according to Moosajee, marketing works different compared to the past, and today he is able to find Ego’s clientele everywhere.

“Ego caters to a certain clientele, and that can be anywhere in Lahore, Karachi, Rawalpindi, Mumbai, Delhi, New York, California. They work, act, talk exactly the same way. What I sell here or in Rawalpindi, Lahore or what I sell in Dubai is nothing different. I find the same packets or pockets of people everywhere.”

Although the market that once lacked variety in prêt clothing drastically changed

RETAIL

over time and a lot of new brands have, over the years, jumped in to claim their share of the ‘pie’, Ego still holds the tag of being the first in many things.

“I think that we were extremely daring in what we were doing. We were the first in doing separates – separate kurti and pants.

We also renamed dupattas and scarves as wraps,” says Moosajee about their willingness to experiment. “The concept of just buying kurtis or pants and mixing matching them was something that we were the first to get into. Even placement of motifs, one motif on the back, another on the sleeves, there was nothing like that when we came in.”

After catering to a huge clientele in prêt wear for over nine years, last summer Ego ventured into shoes, accessories, and unstitched clothing collection, and the response has been phenomenal, according to Moosajee. “I think there’s limited choice for the woman who wants unstitched clothes tailored to her own style. Most stores are giving you extremely flashy, super colourful, extremely elaborate prints, like the whole

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jungle is on that one shirt. I really feel it’s difficult to find a simpler unstitched print or embroidery, something that’s subtle, mature and tasteful, and I want to fulfil that need,” he says while explaining the idea behind his unstitched collection.

As for his achievements, Ego tops the chart for being his own endeavour. However, it isn’t the only venture Moosajee has stepped into. He has more or less worked on ten different projects, which according to him served their purpose well. “I like to take pride in bringing ideas and teams together to execute those ideas.” Sipping his tea, Moosajee talks about his journey with a tinge of satisfaction. “After Ego I initially started up the Raintree Spa, set up training company for HBL called Packaging You, and The East End restaurant, which is a very high-end cuisine experience.”

“What I enjoy most and what you might call success is picking up an extremely challenging idea and making it work.” Moosajee believes that while most of his competitors hail from textile-mill backgrounds with huge investments and deep

THE URBAN-DESI COMBO HE WANTED TO INTRODUCE IN PAKISTANI FASHION WAS “WORTH HANGING ON THE WALL”, BUT THE WOMEN WHO LOVED IT DIDN’T DARE TO WEAR IT pockets, he is the only one who comes from a modest investing background and with no deep pockets. “So I would consider Ego my success. I have a lot of fun doing it and saying that, ‘Oh! They are doing something I cannot, so what can I do? How would I make this work?’ We ask ourselves this question everyday and make it work.”

Other than starting his own projects, Adil Moosajee also mentors the new breed of entrepreneurs who he believes need things that cannot be taught: confidence and grit, to hold onto their dreams.

“There is no right formula. It cannot be taught or learnt. It comes from within; it has to be your own decision. You have to say, ‘No! This is my quest and I can do it!’ Have that grit to be able to go through difficulties and challenges, even if nothing happens and nobody joins, you have to be able to say I’ll still do this. It is still going to happen,” says Moosajee about the passion that has helped him come this far.

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OPINION

Ayesha Aziz

The Return of the Stay at Home Mom! hile all the other little girls played with Barbies and doll houses, this peculiar one dreamt of the stars and the galaxy and her idol was Valentina Tereshkova, the first female astronaut. She was a day-dreamer and a night-time thinker, with a burning desire to reach the stars. So our short and stout little lady went ahead and enrolled herself into the Mechanical Engineering Department of the University of Engineering and Technology Lahore, to much horror and surprise of her doting and over-protective parents. Mechanical engineering was not a lady’s job, and definitely not for this little lady who loved her nail polish! Her only strength was her grandfather, Abaji, who always believed in her and supported her in all her endeavours. Abaji would always tell her that one day she would make him proud and win the Nobel Prize like Dr. Abdus-Salam. She did not win the Noble Prize, but she did top the University, which meant nothing less than holding both the sun and the moon in her palms.

Abaji did not live long enough to see her graduate, but she still pursued her dream of reaching the stars, when an essay on her idol, Valentina Tereshkova, landed her a job at one of the most prestigious oil-gas companies of the world. She was all set to go to France for her training when she found out that life had chosen a different path for her. Not much later she was engaged to be married to an eligible young man and had accepted a job at a great company. Life changed; she was now a married, young, working woman, multi-tasking with taking care of her domestic responsibilities and working full-time at a job she loved. She was often

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Ayesha Aziz Mom, Mechanical Engineer, Teacher, Aspiring Masterchef and Photographer, Wanderer and a lot more!

PERSONAL FINANCE

over-worked and under-slept, but she couldn’t have been any happier.

The arrival of a little bundle of joy changed her life again, and she was over the moon when her company allowed her to bring the baby along to work. Both mama and baby got ready every morning to go to work and it was all fun and games until she was assigned a sixweek project where she had to stay odd hours at work. Grandmas came into action and the baby was in tender, loving care of, not one, but two grannies! Life sailed smoothly until her husband got a job in a far-away land and she had to bid farewell to, not only her loving family and support system, but also to her dream of chasing the stars.

There was no support system that could take care of the baby while she worked, and she could not bear to leave the apple of her eye to the care of nannies. Instead, she decided to quit and become a fulltime mom. There were no regrets, but just a thorn in her heart, sometimes, when she thought of her dreams, but she would never, ever put her dreams in the way of being there for her kids.

Now the kids are all grown up and independent, so she decides to try her luck in the corporate world again. Very excitedly she puts herself out there and started talking to people she knew and applying – left, right and center! She was confident that she was smart and educated, and had a solid working base, so getting back to work would be a piece of cake, but to her dismay, the response she mostly got was no response at all. No-one took the middle-aged, out-of-job-for-a-decade woman seriously, including close friends and family. She didn’t give up, she tried harder until she started getting noticed, and started getting calls, but they weren’t interview calls. People were curious about why a woman in hibernation for a decade would suddenly be looking for a job in the field? Why couldn’t she just stay at home and bake cookies like all the other moms? Why didn’t she become a teacher or a fashion designer if she felt bored? Oh! She must be having problems with her husband! Nailed it! That must be the only reason a married woman wants to come back to work. No-one was willing to give her a chance to start over, but a few had other ideas of “helping”

our not-so-young-anymore lady.

Then she looks around and sees other moms who have either chosen their dreams or their kids. Why should there be a choice? Why should a woman have to choose between her dreams and her kids? In my eyes, there is never a choice and kids’ wellbeing cannot be compromised for anything at all. Then again, what are we teaching our kids; that it’s okay to give up on your dreams?

Five years ago my ten-year-old son came and said to me, “Mama, I wish you were still a Mechanical Engineer so that I could brag to my friends, but you’re just a normal mom!” That was the first time it hit hard and got me thinking that I wasn’t me – that I was someone else. Someone who got buried in the sands of time and responsibilities.

Someone who was a misfit, because she belonged amongst machines, not by the stove!

It was time to take that person out from down-under, but the question was, “How?”

29

INDUSTRY

By Nida Jaery and Arshad Hussain

T

he global ad market is reeling with notable boost each year. It is on course for a 4.7 percent overall growth this year (2016), up from 3.9 percent in the previous year, according to a forecast by Publicis Groupe's ZenithOptimedia – a leading media agency operating out of United Kingdom. The scene in Pakistan is even better as the local industry is growing much faster than the global average.The total money spent on TV, print, radio and digital advertisement for 2015 pegged at Rs 6,500 crore with Rs 4,500 crore spent on TV, Rs1,700 crore on print media, Rs230 crore on radio and the rest on digital media, as estimated by Fouad

30

Hussain, CEO of GroupM, the largest media buying house in Pakistan. The market is growing at an annual rate of 10 to 15 percent based on the latest data, Hussain said.

On a whole the industry’s total ad spend – including the cost of making ads – has increased by 11 percent to Rs 16,000 crore in 2015 compared to the preceding year’s tally of Rs 14,450 crore, according to a report by Media Monitor, which monitors commercials on 98 different TV channels.

The major advertisers include Unilever, the Anglo-Dutch Foods and Consumer goods Company with 30 percent of the ad market share, followed by Ohio-based consumer goods giant P&G and the American beverage giant Pepsi with 13 and 11 percent market shares respectively.

The latest edition of Media Monitor’s report also explains that food and consumer goods sector dominates the entire ad market with almost 57 percent share of the total industry, which explains the ascendancy of Unilever and P&G over the overall market. The telecom sector carries 9 percent and Real Estate sector carries 8 percent of the total adspend.

The viewership of news is very widespread in Pakistan hence advertisers prefer to buy airtime for their ads during news programs.

T h e

genre of news led the ad market in 2015 with 42 percent commercials played during news. Entertainment programs like soap operas followed news and managed to gobble 31 percent ad share in 2015. Regional television shows and music earned 12 and 7 percent share respectively.

Apart from electronic ads, outdoor advertisements like hoardings and billboards are gaining extensive fame since the last few years.

Industry experts term it essential for brand registration among general audience. But, with the advent and widespread acceptance of digital means especially social media, billboards are becoming e-boards and e-banner ads. However, the general ad populace will take some time be-

fore it understands the proper use of these platforms.

“I think we are going through a learning curve,” said Hussain. “We understand the potential of digital

are spending more time on it to search, socialise and consume content. Dailymotion, a video content website, is among the top five most popular websites in Pak-

means but do not exactly understand how to use them.”

Although digital is only about 1 percent of the total ad market currently, Tech giant Google expects it to grow up to 30 percent by 2025 in Pakistan. This alone seems to give comprehensive boost to the total ad market of Pakistan in the years to come.

“Since the advent of TV, no other traditional channel such as print, radio or out-ofhome media advertising (OOH) has significantly challenged the dominance of TV. However, online channels, including mobile, are slowly taking share from TV as the digital ecosystem becomes stronger. Part of the shift is because digital’s measurability is equal (if not superior) to TV’s, but mostly because consumers

10-15% Annual growth rate of ad market according to latest date

istan; an estimated 10% of the 340 million monthly visits to dailymotion.com are from Pakistan.” says Amin Rammal Director, Firebolt63 Pakistan’s reclassification from Frontier to emerging markets in the MSCI global stock market index is also expected to pull greater foreign investment in the country which may lead to more spend on marketing and advertising.

Advertisements on television, radio and print are facilitated by different media buying houses and agencies. Ad agencies facilitate the

MEDIA & MARKETING

“ROOH AFZAH IS FAMOUS AS THE RAMADAN DRINK IN PAKISTAN BUT, IT WAS MINDFUL OF THE CHANGES REQUIRED IN ITS ADVERTS TO TAP THE INDIAN MARKET. SIMILARLY IF NEWSPAPERS DO NOT WANT DIGITAL TO EAT UP THEIR MARKET, INNOVATION IS THE ONLY WAY FORWARD" Nauman Nabi, CEO Brand Partnership

brands in creating and selling ads whereas a media buying house buys bulk airtime from companies and sells to media houses on their own rates.

GroupM leads the media buying market with 57.6 percent market share. Brainchild and Orient Communication follow with 38.5 and 13.7 percent share each, as reported by Media Monitor. The report also mentioned that ad agencies like Evernew Concepts and Manhattan Int. were dropped from the top 25 agencies’ list in 2015. TV ads lead the market mainly because TV guarantees greater publicity in lesser time and money. It provides better and enhanced experience with the amalgamation of both audio and video.

“Television has brighter future because of its quick response in Pakistan compared to any other Media. Companies want high quality publicity against their little money hence, TV is their go-to platform,” said Hussain.

Some media gurus place the responsibility of declining proportion of newspapers on newspapers themselves. Nauman Nabi, CEO Brand Partnership, one of the leading media and ad agencies operating out of Karachi, recently said in a conference arranged by All Pakistan Newspaper Society that newspapers need to bring innovation to attract advertisements.

He elucidated via examples of the efforts made by Pepsi before the 1982 Cricket World Cup to pander to a market where Coke pre-

“WE UNDERSTAND THE POTENTIAL OF DIGITAL MEANS, BUT DO NOT EXACTLY UNDERSTAND HOW TO USE IT” Fouad Husain, CEO of GroupM

32

vailed. Similarly, he mentioned Rooh Afzah’s innovative and slightly modern ads in India, opposed to the religious ads it makes for the consumers in Pakistan.

“Rooh Afzah is famous as the Ramadan drink in Pakistan,” said Nabi. “But, it was mindful of the changes required in its adverts to tap the Indian market.”

He added that if newspapers do not want digital to eat up their market, innovation is the only way forward.

For now, TV wins. Some say because of the lobby, others, because of the advantage it offers over print.

Whether with interest or with contempt, viewers have to watch 20 to 25 minutes of commercials during an episode of their favorite soap operas. Meanwhile, news channels air 30 to 35 minutes of commercials in an hour.

Although preference is given to TV commercials over print ads, industry pundits say the size of print media has also been increasing for the last five years.

“This is not because of the increased attention of advertisers towards print but because of the increased rates of print ads,” said an expert.

“Supposedly, if print media owners were earning Rs 1 lac per month five years ago, they are get-

ting Rs10 lacs now for the same number of ads.”

The improvement in the law and order situation of the country has also proved to be an augmenting factor for the advertisement industry. National and multinational companies are increasing their advertisement shares on TV and print media while fashion brands and wellknown designers have also started to trust the medium and spend more on media ads.

Despite the flourishing advertisement scene of the market, flaws in the system cannot be neglected. One of the major setbacks is the presence of movie channels by cable providers.

Providers have their own channels on which they run ads between movies. Mainly unregistered companies and those that do not pay general sales tax use these cable channels to advertise their products and services.

“Mainly estate agents and snacks companies use cable providers’ channels to market their agencies and services,” said Hussain.

If these malpractices are eliminated by documenting the economy properly, the ad industry has a lot more potential to grow in the years to come.

MEDIA & MARKETING

START-UP

By Nida Jaffery

34

one are the days when intimidating Executive Editor at Florida Today Newspaper, Bob Gabordi, personnel wearing horn-rimmed who was in Pakistan recently, narrated a similar story where he put a glasses grilled and scrutinized people cease to the hiring procedure of a very competent candidate after with their penetrating gaze in the screening her Facebook account. This implies that not only LinkedIn, dingy, dust-stained cubicles of their but other social platforms are also essential for landing jobs. recruitment agencies.

As reported in the studies by DMR, there are a total of 433 The present age is digital, and million users on LinkedIn and almost two new members are regisso are its recruitment procedures. tered each second. An average user spends almost 17 minutes on “Job seekers database is not a LinkedIn each month. A job seeker, however, spends much more gold mine anymore. Recruitments than that. are carried out on social media these The acceptance of the job posting tool of LinkedIn can be days, mainly through LinkedIn,” gauged by the fact that 60% of the total revenues of LinkedIn were says Rahila Narejo, a neuroscience accumulated by the tool in 2015. strategist and the Founder of Narejo HR – a top human resource However, it is crucial to understand that the Pakistani job marconsultancy firm operating out of Karachi. ket, including that of multinationals, does not use the job seeking “Recruitment and talent hunting services that were previously tool that LinkedIn has designed for recruiters. outsourced by many companies are now carried out in-house by “There is no evidence of actual hiring taking place from human resource departments. This is mainly due to the availability LinkedIn job applications. Headhunters hunt people through this of all kinds of recruitment tools on the internet.” medium and offer opportunities after interviews,” explains Khalid of Digitalization has taken the world by a storm. It has laid conCCP. “LinkedIn, however, helps professionals connect with job crete for the corporate sector to reduce physical labour and eventuseekers.” ally, eliminate it for admin-related and entry-level tasks by incorporating virtual tools. The employment industry is no different.

Boom of digital media especially, the advent of Facebook, Twitter, and LinkedIn, during the early 2000s has altered the sphere of the recruitment market tremendously.

According to a report by DMR Stats, a digital stats gathering website, 94% recruiters in the world use LinkedIn to vet candidates. Furthermore, a job post on LinkedIn is likely to get 5.7 and 3.1 times more views than that on Facebook and Twitter respectively.

The practice is also getting common among the 1.5 million LinkedIn users in Pakistan, which includes Rahila Narejo, Founder of Narejo HR both headhunters and job seekers. According to a report, Pakistan ranks among the top 22 LinkedIn using countries with respect to the number of members.

Talent acquisition companies and managers, instead, use “I use LinkedIn regularly to reach out to candidates,” says LinkedIn to build contacts and approach individuals after studying Sana Mughal, Human Resource Manager at Infotainment World their profiles. They use the networking tool rather than using the job Pvt. Ltd. (HOT FM 105). Mughal herself was recruited through posting tool.

LinkedIn. “Entry level candidates can be found on any local job porWhile this professional networking tool has proved to be vital tal, but if one is looking for aspirants for a specialized and technical for both recruiters and job aspirants, one must be on the watch out position, LinkedIn is the tool for them.” for fake job openings that have also been reported lately.

Industry experts say it is not just small and medium scale comOne example is the case of Fatima Hussain, a job seeker who panies that prefer LinkedIn for hiring employees, but multinational has been working from home for several years now. “I was hired for companies and large corporate giants also post job openings on the an accounting project. The Manager HR who approached me didn’t platform. appear to be a fraud, even for a minute,” recalls Hussain. “He and Additionally, one can access job openings by international his company vanished in thin air after the month ended. And so did companies on LinkedIn and can be considered by them more easily my pay-check.” now.

Despite the cons, the popularity of LinkedIn has proved to “Pakistan is a little late to most things, but all around the world augment the working procedures of the recruitment industry tremenwhen a candidate is considered for a position, his entire social media dously. Unlike before, the present age needs us not to be a master of presence whether it is Facebook, Twitter, or Instagram, is checked generalities. out before he is even called in for an interview,” says Maha Khalid, “Now is the age of specialists. We cannot afford to be generalCareer Advising Head at Career Counselling Portal Pakistan (CCP). ists anymore,” believes Narejo.

“JOB SEEKERS DATABASE IS NOT A GOLD MINE ANYMORE. RECRUITMENTS ARE CARRIED OUT ON SOCIAL MEDIA THESE DAYS, MAINLY THROUGH LINKEDIN”

PERSONAL FINANCE

JOURNEY

mtiaz Rafi Butt compares Gwadar to Karachi of the 40’s, considered a city of “little import and a relative backwater”at that time. He seems extremely optimistic about the economic future of Pakistan in general and Gwadar in particular. This he attributes to CPEC which he believes can yield “unbelievable results”. However Butt is not all talk. As founder of the Rafi Group, Butt has literally put his money where his mouth is by launching ‘Green Palms’, a housing project located along the main coastal highway in Gwadar.

As per Butt the project is aimed towards millions of people who will be moving to Gwadar to take part in Pakistan’s part in China’s one belt one road initiative.

Butt isn’t the only one willing to back the Gwadar dream. Thousands of people have already bought their plots in real estate projects in Gwadar. In the secondary market these are now selling at a premium to the original price similar to the famous ‘on’ charged by car dealers on a newly launched model of a Toyota Corolla.

Resuming his comparison with Karachi he says ”The price of land was very low and overtime it became a strategic city and Pakistan’s business hub. Islamabad is another example of low priced land until its strategic importance was realised and prices skyrocketed”. He explains that prices in Gwadar are similarly quite low which means there is a lot of potential for growth given the strategic importance now attached to the port city due to CPEC. This is the reason why Rafi Group has started its latest development project in Gwadar. He believes there is immense potential for growth and profit in Gwadar.

I

36

“There are no two opinions on the matter that the value of land in a strategic city shoots up rapidly when compared with the ordinary cities. Gwadar shall have the status of a mutual strategic port of both Pakistan and China and the very fact will prove to be a milestone in Gwadar becoming an important pillar of the economy of Pakistan akin to Islamabad and Karachi.” says Butt.

Rafi Group over the years has been responsible for the successful completion of many key buildings and housing projects in the country.

With new investment coming into the country due to China Pak Economic Corridor (CPEC), the company has now set its sights in developing Gwadar along the Makran coastal Highway that links Iran to Karachi running through Gwadar.

Talking with Profit, Imtiaz Rafi Butt recalled his early years where he strived to learn more about his iconic father Rafi Butt who sadly passed away in a plane crash in 1948 when Imtiaz Rafi Butt was only 2 months old. During his research he was able to find a rich correspondence between his father and Mohammad Ali Jinnah.

Rafi Butt was a fin-

ancier of the Pakistan movement for which he opened the Central Exchange Bank in 1936 at the age of 27. On the instruction of Quaid-e-Azam, he frequented Europe and USA –no mean feat in those days- to gather support for the Pakistan movement from Political elites in the West.

Butt speaks very fondly about his relations with some of Pakistan’s most famous politicians. “Benazir was an eloquent speaker and an intellectual beyond reproach. Pakistan still has not come to terms with the magnitude of the loss suffered on 27th December 2007. She was the only real equal to Nawaz Sharif” he said.

Nawaz Sharif and Butt are old school friends since 1960 when they were together in St Anthony’s. They campaigned together for his 1985 election as Chief Minister of Punjab as well. “Nawaz has grown over the years in both stature and acumen.

Allah has been very kind to Nawaz and he is a lucky man” he added.

He firmly believes that the gigantic size of investments and projects will advance Pakistan’s infrastructure and economy by decades and it is to the credit of the Pakistani state that it was able to provide a stable enough environment for China to undertake this massive venture. “China has chosen Gwadar as the Nexus point of its $700 Billion New Silk Road. Gwadar will be the focus of the largest infrastructure project in history” says Butt.

While expressing his international outlook Butt observed that we are at an inflection point in history with the rise of class warfare and the rise of the ultra-right wing which is evidenced by UK’s ‘brexit’ and Donald Trump’s win in the US presidential elections. Talking in a more regional context he believes that developments such as the dipping price of oil, the US’s closer ties to India, China’s economic development, the imminent conflict in the South China Sea and concerns about China’s new silk road along with the formation of the Chinese led Shanghai Cooperation

Organisation defence bloc all portend the new world order. In light of this he thinks Pakistan is increasingly being viewed as a safe place to invest with phenomenal potential for growth.

visits to Gwadar are excited to develop this future major city as it not only means Pakistan becomes a developed country and a major player in the region but also China will become a two ocean power, leading to superpower status” Rafi added.

Commenting on his home town Lahore Butt said that the city has been growing horizontally which means there are more housing units than apartments. Apart from administrative and travelling issues cause by this, housing has become unaffordable for people of normal means.

“The time is now for this city with a population of 12 million people to take the path of Mega Cities around the world and start developing vertically” Rafi added.

However Rafi Group and its

Butt thinks Pakistan is ready to take off on the back of CPEC and already economic activity is increasing.

“According to government statistics 2 million new jobs will be created. That is a number that even the Americans would be envious off” he added.

Since August 2016 there have been major project inaugurations and ground breakings, including the Gwadar International Airport which will be the country’s largest. “The Chinese officials that I've met on my

CEO Butt are currently focused on Gwadar and Green Palms and he has no time for other projects. The response has been phenomenal at the pre-launch stage. With Gwadar, Rafi Group plans to be at the forefront of Pakistan's development, to provide a modern living and aspirational lifestyle along with phenomenal investment avenues, delivered with the quality and value for money that they have come to be known for over the years.

“CHINA HAS CHOSEN GWADAR AS THE NEXUS POINT OF ITS $700 BILLION NEW SILK ROAD. GWADAR WILL BE THE FOCUS OF THE LARGEST INFRASTRUCTURE PROJECT IN HISTORY”

REAL ESTATE

Hamza W. Hashmi - CEO, TerraBiz giving Memento to Adnan Rizvi - Partner & Head of Deal Advisory, KPMG

M. Ali Tabba - CEO, Lucky Cement

"1ST PAKISTAN MERGERS AND ACQUISITIONS CONFERENCE 2016" The Terrabiz conference held in Marriott Hotel Karachi featured speakers, panels and presentations on best practices from merger perspectives, emerging global trends and challenges in mergers and acquisitions

Husain A. Basrai - Advisor, KPMG Murat Olcayto and CFO, Dawlance [Arรงelik A.S., Turkey]

Syed Irfan Ali - Executive Director, SBP and Shabbar Zaidi - Senior Partner and Chairman, A. F. Ferguson & Co

Audience view

Adnan Rizvi - Partner & Head of Deal Advisory, KPMG during his presentation

Hanif Ajari during Q&A session

Audience during Anthem

Group Photo of Speakers & Organizers

Nadeem Hussain - Founder & Former CEO & President Tameer Micro Finance Bank

Samad Dawood, Murat Olcayto, Shazad Dada, M. Ali Tabba

Anis A. Shah, Syed Masood Naqvi, Naved A. Khan, Hamza W. Hashmi, Fawad Haider and Farid Khan

Samad Dawood - Member Board, Engro Corp

Anis A. Shah - Sr Director Int'l Operations & Group Quality Lead, Martin Dow Ltd

Adnan Rizvi, Muhammad Sajid and Mehmood Mandviwalla

Shazad Dada - Chief Executive Officer, Standard Chartered Bank Audience

42

HOW GLOBAL WARMING HAS PULVERIZED AN ENTIRE MARKET IN JUST 3 WINTERS

By Aamir Majeed yaz-ud Din was sitting on his pushcart of second hand garments, commonly known as ‘Landa,’ and gazing at passerby’s. He is looking for customers like his four in-laws, who arrived in Karachi, the port city, in September to start the seasonal business of warm clothes.

They finally choose Old Sabzi Mandi, the city’s busiest artery that connects University Road and Kashmir Road, to start a new journey. In between fruit vendors, Ayaz-ud Din and his relatives placed pushcarts and loaded them with second hand warm jackets, coats, gloves and socks, but there are no buyers.

“I am afraid it may prove as a failed venture,” Ayaz-ud Din said “I along with my four relatives arrived in Karachi from Bajaur few months back to start a business, due to the deteriorating law and order situation

DISRUPTION

there,” Ayaz-ud Din narrated his story.

“We purchased pushcarts and bought used warm garments from Shershah Scrap Market to start a business, but there is no winter in the city,” the disappointed vendor claimed. He explained that he has not even been able to cover the cost of the cart he purchased in October.

He explained that right now his entire family is praying for rain in Quetta as the winters there are closely linked to the climate in Karachi. “I have been observing people in this area for a month now and not one of them have worn a coat or jacket” he explained.

“Who will purchase warm clothes in a season in which people are still using fans to maintain room temperature in their homes,” he questioned. “We left our hometown for business due to lack of businessfriendly environment, but we can’t find business in the financial hub of Pakistan.”

Shershah Scrap Market is the country’s biggest wholesale market for used

44

warm clothes, but this year there has been a slowdown in activity. Despite low business activity the warehouses of used garments, spreading over thousands of acres are still full of used clothes. Masons can be seen engaged in sorting out the latest lot of used clothing for sale at the market while some of them pack the clothes deceptively to be sold at retail outlets elsewhere as new items.

There are two types of wholesalers; ones who import second hand warm clothes directly, and others who buy the used warm

“FEW YEARS BACK, WE USED TO PAY JUST RS 70,000 ON ACCOUNT OF TAXES FOR CONTAINERS ARRIVING VIA SHIP, BUT NOW WE ARE PAYING MILLIONS OF RUPEES ON ACCOUNT OF TAXES” Hakeem Shah, Anjuman Falah Tajiran Second Hand Clothing President

clothes through bidding, which usually takes place at the port after offloading.

“We import used warm garments from UK, US and Germany,” Aziz-ur Rehman, who owns a warehouse in Barkat Market inside Shershah Scrap Market claimed in an interview with Profit. Used garments are also imported from Belgium, Spain, France, Japan and China, but Pakistanis prefer imports from UK the most because of physical similarities between the British and Pakistani’s.

Second highest imports are from US. Rehman told us that a normal container of used warm clothes that lands at Karachi port, contains gloves, knit caps, monmouth caps, scarves, snowmobile suits, snowsuits,

sweaters, pashminas, knitted berets, ski trousers, woollen socks and warm long boots.

The first task is to separate the imported material from the cheaper local items. After separation, the second hand clothes are further divided into categories.

For instance, sweaters will be further divided into 12 more categories. The prices of these imported garments are fixed after categorization, depending upon the condition of items.

The ‘A’ category items are usually ex-

“GLOBALLY, EFFORTS ARE BEING MADE TO REDUCE EMISSION OF CARBON DIOXIDE AND INCREASING FOREST AREA TO DEAL WITH THE ISSUE OF GLOBAL WARMING, BUT IN PAKISTAN, DEFORESTATION IS GOING ON WITHOUT ANY CHECK” Dr Waqar Ahmed, Assistant Professor Karachi University’s Environmental Studies

ported to Afghanistan, Tajikistan and others landlocked countries of Asia. Pakistan even exports certain items to some African countries. Locally we sell ‘C’ category items as they are the cheapest in the lot and more affordable for locals as compared to ‘A’ category items.

Rehman claimed that the importers of used warm clothes are now earning from

exports rather than local sale as winters have started getting shorter and warmer the local market for used warm clothes has shrunk dramatically.

“I belong to Quetta, and have been running this wholesale business for the last 18 years, but the last two years I have suffered losses” Rehman explained. The second floor of Rehman’s warehouse is packed with stock from last winter which he was unable to sell due to the short winters.

Despite reduction in demand of second hand clothes there is still some activity.

Wholesalers from cooler cities with longer winters come to the market and buy in bulk.

One such buyer is Muhammad Shahbaz from Muzaffarabad in Punjab who opened a shop there last year and buys second hand clothes from Shershah market.

“I earned profit last year and I came here second time this year for buying as the items which I have bought in October were sold out,” Shahbaz claimed, adding that “The weather is cold and cloudy in Muzaffarabad and if I compare the temperature of

DISRUPTION

Muzaffarabad with Karachi, I can safely say it is just 20 percent of the cold which we are experiencing in Muzaffarabad.

The traders at ‘Light House’, the country’s biggest retail market of used garments, complained of low sales of warm clothes this year. Though, Lighthouse is popular for selling second hand clothes there are very few shops in the market left that deal in used clothes.

Many used garment trader have started selling first hand curtains, cushions and blanket while other sell sports items and first hand sportswear.

There are still shops that display winter clothes like sweaters.

Jacket and scarves but majority of the shoppers are still buying Tshirts and other summer clothes. Shopkeepers selling used winter wear at Lighthouse are now eagerly waiting for December to end and temperatures come down and their sales can go up. One such shopkeeper, Khan, explained that Karachi has had no winters for the last three years. He has therefore started selling used T-shirts during the summer in order to cover the losses of the winter season.

While second hand sellers feel the pinch of shorter winters, first hand warm clothes manufacturers and sellers are also feeling the brunt.

They believe that global warming has taken a serious toll on Karachi’s winters that have become shorter and warmer resulting in little to no demand for their products.

Similar big retail outlet centres like Zainab Market for example are going through the same thing. They are also selling summer clothes, mostly T shirts due to the warm winters being experienced this year. Winter wear business is at best only 20% of the business of warm clothes at Zainab market said one shop owner.

Royal Fashions, an outlet of leather wears in the market, has been operating in Zainab mar-

46

ket for the past 36 years. Apart from manufacturing and selling leather wear at wholesale rates through outlets in all major cities the company exports their products as well.

“If we talk about boom and bust in the leather wear business, I think the 90’s were our peak years as far as manufacturing and sales are concerned, but the business, gradually, lost attraction since last decade” the owner of Royal Fashions, Syed Asif Bukhari claimed.

The shop owner prays for a longer winter every year so that he can have a profitable year but that remains an elusive pipe dream with winters becoming shorter every year. This was clearly visible with almost no customers at his outlet during December which is supposed to be their best selling month. This year in 2016 we will be doing only about 7% of the business we did back in 1991-1992 he claimed.

He also attributed this fall in demand for his products due to cheaper products from China being sold there. Though the quality of Chinese products is comparatively low, their manufacturing is of a superior quality which is why people buy cheaper Chinese leather products as opposed to Pakistani leather wear.

The prices of leather wears increased globally, but we didn’t move an inch ahead. In 1992, we sold a leather jacket against Rs 1,275 and pay Rs 250 for its stitching. In 1992, the price of one US dollar was Rs 16, and now we are selling a leather jacket at Rs3,500 for which we pay Rs 2,000, but the price of one US dollar is 104.

Back in 1992 we sold leather jackets for Rs1,275

paying Rs250 for stitching when the price of one US dollar was Rs16. Now we are selling a jacket for Rs3,500 paying Rs2,000 for stitching and one US dollar is for Rs104.

So our margins have decreased as input costs have increased due to a weaker rupee.

Bukhari has no export orders this year either and is relying mostly on overseas Pakistani’s who buy cheaper high quality products from us to take back and wear in the colder climate countries where they are settled.

“Pakistan, India and Bangladesh would continue to bear losses of global warming, which is result of the excessive use of fossil fuels for unsustainable development,” Karachi University’s Environmental Studies Assistant Professor Dr Waqar Ahmed observed. “Another reason behind increasing intensity of global warming in these countries is deforestation on massive scale on account of development,” Ahmed added.

“Forests sequester carbon dioxide from the atmosphere and transfer it into the soil, but as forests disappear carbon dioxide is reemitted into the atmosphere resulting in unusual warming,” Ahmed explained.

“Globally, efforts are being made to reduce emission of carbon dioxide and increasing forest area to deal with the issue of global warming, but in Pakistan, deforestation is going on without any check,” Ahmed noted..

Anjuman Falah Tajiran Second Hand

“IF WE TALK ABOUT BOOM AND BUST IN THE LEATHER WEAR BUSINESS, I THINK THE 90’S WERE OUR PEAK YEARS AS FAR AS MANUFACTURING AND SALES ARE CONCERNED, BUT THE BUSINESS, GRADUALLY, LOST ATTRACTION SINCE LAST DECADE” Syed Asif Bukhari, owner of Royal Fashions

Clothing President Hakeem Shah says one problem for us is low demand due to shorter winters as a result of global warming but the imposition of higher import duties and taxes has become another problem for us making it difficult to survive. “Few years back, we pay just Rs 70,000 on account of taxes for containers arriving via ship, but now we are paying millions of rupees on account in taxes. There is no tax over the import of used garments in any country, but the Pakistani government is charging tax on import of used clothes” he added.

Just a few years back around 30,000 containers of used warms clothes arrived at

Karachi’s port. The number is now only 10,000. Similarly the pushcarts vendors who made up around 50% of Shershah markets used warm clothes sales came from Punjab. KP and Baluchistan and set up shop in Karachi. Now only wholesalers are coming from these provinces, buying the merchandise at wholesale prices and taking it back to their respective cities to sell there.

The business of second hand warm clothes is dying with sales dropping every year. Only about 10% of the shops in the biggest second hand retail outlets like Light house and Zainab market sell warm second hand clothes for the winters.

DISRUPTION

TALKING HEADS

“The concept of saving is missing in our country. The battle starts with educating the masses about how savings can help them, and from there you need to tell them of different avenues of savings” Umber Tanya Ansari Head of Marketing, UBL Fund Managers

“People form the backbone of any organization. The choice of the right people for the right position is by far the most important challenge for leadership” Azmat Tarin President SILKBANK

"The true benefit of digital is that you can totally zero in on your customers. If you are not doing that you are wasting money.

Targeting and tracking are the selling points of digital" Saad Siddique CEO Advertyze Networks

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“As the digital market is growing day by day, the competitors are lining up. Unfortunately, people are not well-versed with digital marketing and lack even the basic knowledge of digital” Sarocsh Ahmed CEO & Co Founder, Symmetry Group

“The biggest problem here is of human resource capacity. This is not just a government problem but even for the private sector. We have not provided adequate education and training to our people” Naheed Memon Chairperson of the Sindh Board of Investment

“Agencies need to think about the role communications can play in the lives of consumers. Our strength is our ability to understand them because we work on an array of brands, and that means we have a better understanding of changing consumer patterns” Shakeel Khokar CEO Bates & Interflow

TALKING HEADS

“As a banker i always say that this is the best time to borrow. We are going through a 42 year low interest rate environment and if you have an export business you are literally getting money for free. However borrow and utilize at the right places” Shazad Dada CEO Standard Chartered Bank

“Right now we are at the most important part of the merger i.e post merger integration. There is a lot of work to be done before we can realize the synergies that we had planned to achieve through this merger” Fawad Haider Director Corporate Strategy and M&A. Mobilink

“I pursued my passion for music and later gave it all up in my quest to be a better Muslim. I also had a family to support and that prompted me to look for ways I could earn a halal living which led to my first foray into business.”

Junaid Jamshed 50

TALKING HEADS