Profit E-Magazine Issue 59 by Profit (by PT)

welcome

TIME TO TEST THE ENERGY POLICY Long before he ever became finance minister, Asad Umar had begun formulating what would eventually become the energy policy of the Imran Khan Administration. While his understanding of the core of Pakistan’s energy sector’s problems were no different from any other political party, his solution was somewhat different from that of his political rivals. Umar agrees that the Pakistani energy sector suffers from rampant power theft, which in turn causes a severe liquidity crunch, which in turn discourages investment in power production, causing shortages, and thereby exacerbating the theft problem. He even agrees that the government should not control the entirety of the energy supply chain. Where he disagreed with his rivals in the Pakistan Muslim League Nawaz (PML-N) was in which part of the energy supply chain should be privatised. The PML-N leadership believed that since theft was the core problem, the part of the chain that should be privatised is electricity distribution: the utility companies that sell electricity directly to consumers. The hope was that the private sector might improve bill collection, which would then create positive knock-on effects further up the energy supply chain. Asad Umar and the Pakistan Tehreek-eInsaf (PTI), however, disagree. They contend that improving bill collection is fundamentally a question of law enforcement and hence a core govern-

FROM THE MANAGING EDITOR

ment competency that should be improved while remaining in government hands. The part of the energy sector they wish to privatise is the power generation companies. And in the decision to privatise and possibly publicly list a major stateowned power generation company – the National Power Parks Management Company – for approximately $2 billion, the PTI will begin the experiment into which approach to managing Pakistan’s energy sector is superior. If the Imran Khan Administration is able to improve the reliability of the energy grid, both in terms of shorter outages and smaller line losses, the government can reasonably claim that its policy has been a success. We suspect, however, that without a significant realignment of incentives on the electricity distribution side – which we believe can only come with privatisation – that the government will struggle to fix that which ails Pakistan’s energy supply chain. We wish them luck in their approach nonetheless.

Farooq Tirmizi Managing Editor

Readers Say The potential of telecom is at its peak and there is any hardly room for further growth in terms of active subscribers and revenue. The only thing which may lead telco to add more revenue at existing portfolio is at quality and service level. Service industry has a lot more room for improvement and it's time to get services of service oriented leadership rather than any sales or marketing guru. It's time for Amir Ibrahim to jump out of his personal projection and start hiring professional advisors who can help driving Jazz faster than Ferrari instead of getting him into one for self publicity and projection. It’s a team work which enables any brand to grow rather than individual projection. I believe Aamir has the ability to learn from mistakes and lead from the front with people who can deliver him the fastest Ferrari. (Apropos: Jazz failed to build Veon into the WeChat of Pakistan. That’s why it will succeed) Syed Rehan Saeed Fanah He is positive and full of ideas and energy. I know him he will deliver what he has promised. Everywhere in the world service is same it's the mindset which makes one not to experiment new ideas. Remember fortune always favors the brave. (Apropos: Jazz failed to build Veon into the WeChat of Pakistan. That’s why it will succeed) Syed Najam Ali

How to ContaCt

facebook.com/Profitpk twitter.com/Profitpk linkedin.com/showcase/13251020 profit.com.pk profit@pakistantoday.com

It is a global phenomena. Across the world, revenues from voice are declining, however, in Pakistan’s case as the article mentions has witnessed exponential growth in data usage since the launch of 3G/4G services in 2014. The pivot towards Jazz Cash by the company’s CEO and the growth in mobile app transactions is indicative of where the potential revenue growth lies, which is a lifeline for any telecom company, including Jazz which holds a 36.7% market share in Pakistan. Albeit, diversifying revenue streams is a necessity for telco companies in Pakistan and there are other sectors which remain untapped where they could make strategic investments to reap its bene-

fits later. So in hindsight, the focus towards JazzCash is a welcome move and it probably holds the key to bolstering the biggest telecom company’s revenue base in the future. (Apropos: Jazz failed to build Veon into the WeChat of Pakistan. That’s why it will succeed) Anonymous Umar Saif is a visionary indeed, he has done a tremendous amount of work in the tech and education sector here in Punjab. In forming ITU, he has set the foundations of a university which could usher in a new wave of technology graduates here in Pakistan, which will lend good credence to the country’s nascent tech sector which is experiencing significant interest from overseas. However, ITU will still require time to grow and develop its stature as Pakistan’s MIT, which at the end will be a good thing for prospective students. The country’s higher education landscape still requires a lot of development and universities like ITU, LUMS, IBA, Comsats, Nust etc would need to develop their curriculum, which provides its students the analytical and thinking skills to compete at an international level. (Apropos: Can ITU become Pakistan’s MIT?) Anonymous Excellent, great to see our talented Pakistani people. And love you guys for making our nation proud. (Apropos: Amazon does not have a Pakistan presence. These Pakistani entrepreneurs are selling on it anyway) Ghulam Farooq Ali The recent coverage on the technology front by Profit and the in-depth analysis is such a refreshing change and provides a different outlook about the sector in Pakistan. Considering the rise in technology startups in Pakistan, giving them coverage provides them a platform to be recognized and get noticed. (Apropos: Amazon does not have a Pakistan presence. These Pakistani entrepreneurs are selling on it anyway) Anonymous

COMMENTS

Minister of State for Revenue Hammad Azhar

QUOTE

“By promising a culture of savings, we can narrow our fiscal deficit”

“The western route of CPEC is still to be completed; funds should be released so that the route can be complete” PML-N leader Ahsan Iqbal

13.2pc

growth in remittances was recorded during the first quarter (July-September) of current financial year 2018-19 with inflows crossing $5 billion. The increase in remittances was more pronounced from the non-GCC (Gulf Cooperation Council) corridors, especially the United States and the United Kingdom, owing to many factors, official data revealed. First, increased economic activity in the developed economies may have incentivized the Pakistani diaspora in these countries to remit more to their families, according to the first quarterly report by State Bank of Pakistan (SBP). It added that besides, the months falling before Eid Ul Azha usually witness an uptick in inflows, as expatriates remit funds back home for buying sacrificial animals. Importantly, the report said, remittances from the GCC in general, and Saudi Arabia (KSA) in particular, witnessed marginal growth in this quarter, which might be due to a seasonal phenomenon. Since the first quarter of FY 2016-17, remittances from these corridors have been largely following a declining trajectory, barring small seasonal spikes. In the first quarter of FY19, inflows from the GCC and Saudi Arabia (KSA) grew by 4pc and 2.8pc respectively. According to the report, it is possible that the pace of layoffs from Pakistani workers in the region has fallen in recent months, which might have led to a bottoming out of the decline in remittances from GCC.

9.66%

decrease in trade deficit was recorded during the first seven months of current financial year 2018-19 to $19.265 billion. The exports during the corresponding period of current fiscal year also witnessed an increase of 2.24 percent to $13.231 billion from $12.941 billion during Jul-Jan (2017-18). Similarly, the imports declined by 5.17 percent to $32.495 billion from $34.265 billion recorded during first seven months of current fiscal year, data released by Pakistan Bureau of Statistics (PBS) revealed.Meanwhile, a statement issued by the Ministry of Commerce said interventions of the ministry to effectively control the fast-widening trade deficit have started delivering positive results. In the first 7 months of the current financial year, over 2 billion dollars have been saved and earned. It said only in the month of January 2019, the trade deficit closed by $1.14 billion. In January, imports declined by $1,066 million (19%) while exports increased by 4%. The imports have contracted to $32.54 billion in July-Jan 2018-19 as compared to $34.26 billion in July-Jan 2017-18. The exports were $13.29 billion during the July-Jan 2018-19 compared to $12.94 billion in July-Jan 2017-18 Imports.

$6b

have agreed to be lend by the International Monetary Fund (IMF) to Pakistan from the start of next financial year in July. Sources told Pakistan Today that the government’s economic team and the international lending organisation has reached an agreement in their recent communication. “IMF has agreed to give the loan on Pakistan’s conditions,” they claimed. According to details, Pakistan has assured the lending organisation that the government would make reforms in the Federal Board of Revenue besides increasing the revenue at 1.5pc of the GDP from next fiscal year. Earlier, it was reported that the finance minister had refused to revise the revenue target of FBR despite the shortfall of Rs188 billion in the first seven months. Sources claimed that the economic team also assured the lending organisation that the government would increase the spending on its social safety network. In the budget presented in April 2018, the allocation for Benazir Income Support Programme (BISP) had raised to Rs124.7 billion for the fiscal year 2018-19 and the PTI government, in its manifesto, had stated that it would increase the funding for the downtrodden segment of society. Sources further claimed that the PTI government assured the IMF team that expenditure would be further cut down to 10pc.

“Banks should adopt a focused approach, especially towards the underserved areas, for achieving the agri-credit target” State Bank of Pakistan, Governor Tariq Bajwa

5.7pc

QUOTE

1.63m

tax returns were filed in the first seven months of FY19 as compared to 1.17m tax returns in the same period last year. In a press release, FBR authorities informed that as many as 1.179 million tax returns were submitted to the tax collecting body in the first seven months of the fiscal year 2017-2018, while the body collected 1.630 million tax returns in the first seven months of the current fiscal year 2018-2019. “However, the number of taxpayers as compared to the population of the country is very low,” the board maintained, adding that the department has been taking concrete measures to increase the number of taxpayers in the country. The authorities stated that the number of taxpayers would increase further by the end of the current fiscal year.

$100m

have been raised by online real estate portal Zameen. com’s parent Emerging Markets Property Group (EMPG) in a Series D funding led by KCK Group and eight other investors, including Exor Seeds. According to a statement, the funds will be used for acquisition and investment opportunities, technology development, and strengthening its leadership across its MENA and South Asia markets. Imran Ali Khan, Group CEO of EMPG said: “EMPG has grown from strength to strength by adding value to real estate markets through our unique business models and bespoke technology platforms. With the conclusion of this round, we will be looking to expand our geographical footprint.” EMPG is currently in 40 cities across the UAE, Pakistan, Bangladesh, Morocco, Spain, and Romania. It is the parent company of several property portals, including Bayut.com in the UAE, Zameen. com in Pakistan, Bproperty.com in Bangladesh, and Mubawab in Morocco.

growth was witnessed in active social media users in Pakistan till January 2019, according to a report released by We are Social and Hootsuite. Pakistan’s mobile internet users as a percentage of the population were recorded at 21% at end of January 2019, as per the report prepared by We Are Social and Hootsuite. The percentage remained unchanged from the previous report published in January last year, which documented Pakistan’s mobile internet users as a percentage of the population at 21%. Pakistan’s mobile subscriptions stood at 154.3 million, internet users with a penetration of 22%, active social media users at 37 million with a penetration of 18% and mobile social media users at 36 million with a penetration of 18%, said the report. Annual digital growth (Jan 2018-Jan 2019) according to the report for mobile subscriptions witnessed a 5.6% increase or addition of 8 million, active social media users rose 5.7% or by 2 million and mobile social media, users grew 13% or by 4 million. Device usage (survey-based) as a percentage of the adult population for mobile phones (any type) was recorded at 82%, smartphone 32%, laptop or desktop computer 10%, tablets 1%, television (any kind) 76% and wearable tech device 1%, observed the report. Pakistan’s total number of active internet users based on active user data and active use of internet-powered mobile services was recorded at 44.61 million till January 2019. Moreover, internet users as a percentage of the total population stood at 22% and the total number of active mobile internet users at 43.40 million as of January 2019. The number of internet users for Pakistan sourced from different places stood at 44.61 million according to Internet World Stats, 31.45 million as per International Telecommunication Union (ITU), 31.45 million as per World Bank and 31.34 million CIA World Factbook, the report stated. The frequency of internet usage on an everyday basis for personal reasons was recorded at 58% every day, 31% at least once per week, 8% at least once a month and 3% less than once per month, the report stated.

8.79%

growth was registered in bank deposits during January this year. It increased from Rs12,002,239 million in January 2018 to Rs13,057,570 million in the same month of 2019. According to the data issued by the State Bank of Pakistan on Monday, the deposits of scheduled banks on a month-on-month basis decreased by 2.21pc, as the deposits in December 2018 were recorded at Rs13,353,916 million. Total investment by the scheduled banks, however, decreased by 31.60pc to Rs5,223,417 million in January 2019 as compared to the investment of Rs7,637,035 million recorded in January 2018. Meanwhile, total advances of scheduled banks increased by 19.59pc to Rs7,840,684 million in January 2019, against the total advances of Rs6,556,145 million recorded during the same month of last year.

BRIEFING

Cheetay.pk hopes to capture the delivery business with positive unit economics by tackling the hardest segment first By Shoaib Pervaiz

hen it comes to food, Lahore has never held back. The streets of Anarkali, old Lahore, or the busy M.M. Alam Road and Liberty Market never see a dull moment. Jampacked with the young and old, all trying to hit the latest food hot spot Lahore lives for food. It’s not just the commercial areas where you’ll notice the city’s obsession for food. If you drive in any neighbourhood in the city, you will most likely come across a delivery bike with a branded box attached to its back, carrying food for someone who called a restaurant, or used their phone to choose a cafe or a local food dhaba, found food from a kaleidoscope of mouth-watering options, selected a payment method, and ordered. One company serving that market is Cheetay Logistics, which operates cheetay.pk. The company began in 2015 with a simple premise: if they can learn to handle food delivery right as

their first product, they will be able to develop the infrastructure and ethos to become a scalable tech-enabled logistics company. “Food was good as a start because everybody is ordering food. Food gave us the opportunity to develop a robust distribution system and allowed us to train our delivery-men in real-time because people are very fickle about food - there’s no forgiveness - people want their food hot and on time,” says Ahmed Khan, CEO of Cheetay Logistics, in an interview with Profit. “Our idea was always to tackle food first because it was challenging and rewarding at the same time,” said Khan, a seasoned e-commerce leader who has also led Daraz.pk and Kaymu. pk.

STUNNING GROWTH

Through e-commerce, Lahore has developed a technology-backed ecosystem that has transformed old methods of trading into smarter methods of ordering not just food, but all sorts of goods and services online. Pakistan has seen a steady growth in businesses which generate money by making people’s lives more convenient, and have developed processes that facilitate both the restaurant and the consumer. A restaurant that is listed in a food-delivery company’s app and website will likely get more hits, receive more orders, and generate more revenue. The user will have the ability to select food from a number of restaurants without having to call each one of them, and will also likely get the chance to avail a discounted offer. E-commerce has allowed products

Growth rate of all e-commerce in Pakistan, according to data from the State Bank of Pakistan

93.7%

“FOOD WAS GOOD AS A START BECAUSE EVERYBODY IS ORDERING FOOD. FOOD GAVE US THE OPPORTUNITY TO DEVELOP A ROBUST DISTRIBUTION SYSTEM AND ALLOWED US TO TRAIN OUR DELIVERY-MEN IN REAL-TIME BECAUSE PEOPLE ARE VERY FICKLE ABOUT FOOD - THERE’S NO FORGIVENESS - PEOPLE WANT THEIR FOOD HOT AND ON TIME. OUR IDEA WAS ALWAYS TO TACKLE FOOD FIRST BECAUSE IT WAS CHALLENGING AND REWARDING AT THE SAME TIME” Ahmed Khan, CEO of Cheetay Logistics to be available for a large number of people. It has also enabled people and businesses to trust technology and make transactions on a regular basis. The e-commerce industry, according to a report released by the State Bank of Pakistan (SBP) says that Pakistan’s e-commerce sales have witnessed a sharp rise of 93.7% in 2018. The primary reason behind the rapid growth has been attributed to greater internet accessibility, and increased usage of smartphones in the country.

Cheetay and the share of wallet

heetay Logistics came into existence in 2015 when it developed an app to order and deliver food online. The online food-delivery market at that time was dominated by the Rocket Internet-backed Foodpanda. Part of the reason he decided to get into the food business was to maximise the share of wallet. “Whatever your income is, whatever you spend on, your share of wallet reveals what you spend on most from your income. Our guess is that most of the money is spent on food as a basic necessity.” For a business that intended to provide customers with what they spent on or wanted the most, Cheetay.pk, under the leadership of Khan, already knew what the customer wanted, and didn’t take much time to penetrate the market. “The rough number that we’ve come to, is that we’ve cracked about 20% of the Lahore market,” reveals Khan. Capturing 20% of a major market

in such a short time is no small feat. Capturing a market that already had international players such as Foodpanda speaks volumes about Cheetay.pk. “The idea was simple,” says Khan. “I was the CEO and Founder of Daraz. pk and Kaymu.pk, which later merged to form a major player in the e-commerce industry in Pakistan, and then was later acquired by Alibaba. They were backed by Rocket Internet GMBH, so when that came to an end, I realised that the two big gaps in e-commerce were fulfillment and payments. I felt that until these two problems were not solved, e-commerce and digital businesses could never grow the way they have in South East Asia, India, and the developed world.” Having started in October 2015, Cheetay.pk has witnessed exponential growth. Starting with an in-house fleet of 15 riders, the company now has a dedicated fleet of over 50 motor bikes.

Expanding from the food base

n 2017, Cheetay Logistics received an investment of $1.1 million in Series A funding from high net-worth individual investors and venture capitalists based in the US. It further raised

$3.675 million in 2018, and announced that it was venturing into other business segments such as books, healthcare, and groceries. “Now we’re looking at the share of wallet again, and basically asking what’s your next biggest expenditure after food. We’re out looking for more customers. Once we have those customers, we’re looking for as many things to sell them as we can, and provide a better service, improve their lifestyle, and give them quality products,” says Khan, talking about his plans for expansion. Payments and fulfillment are the cornerstones for the company, said Khan, explaining the idea behind the company, and how it intended to compete with existing companies in the same industry. The digital payments industry has been an evolving concept in Pakistan for the last couple of years. There are good players in the market when it comes to payments such as SimSim, PhonePay, OneLead, EasyPaisa, and JazzCash. “When we started, online payments wasn’t a thing in Pakistan as it is now. So this concept is new in Pakistan along with e-commerce, but they seem to be heading in the right direction as of now. So let’s see which model is the most successful, whether it is the digital wallet, or the bank-backed wallet, or if the open wallet works better,”

MARKET SHARE Estimated market share for Cheetay.pk in the Lahore food delivery market

20% E-COMMERCE

says Khan. New entrants always have a plan of action to penetrate the market. Cheetay focused on doing things others couldn’t, were unable to, or unwilling to try. The company does not incur costs per transaction when it sells books, or delivers a box of makeup. “Every sale that we do, we get a commission on the product, and we get a delivery fee. So, we don’t hold inventory, and hence don’t incur any inventory costs, or any carriage costs,” says the CEO. The key to the company’s ability to scale up, says Ahmed, has been positive unit economics. “We receive a certain percentage on every product sold from the dealer, and we charge a certain delivery fee to the customer. Every transaction for us, has positive unit economics for us and we have to maintain that, otherwise, businesses can’t run. You need to have positive gross margins. You can’t scale if you don’t. If you’re losing money at the gross level, then every additional order increases the loss. Not a good deal,” he says.

Tackling competition

lthough there are new entrants in the food-delivery business such as Eat Mubarak along with Careem and Uber which have announced their own intentions to step into this business, the food-delivery market in Pakistan, and specifically in Lahore is shared by Foodpanda and Cheetay.pk. Most restaurants do have their own websites and deliver food. However, people usually prefer looking at other options which can only be found in online apps. “What Foodpanda doesn’t do, is that it doesn’t get you Aylanto, because Aylanto does not have a deal with them, or it won’t deliver outside a certain radius. We, on the other hand, can get our customers everything,” says Khan, as he talks about how his business also merged the concept of an errand service with e-commerce and logistics. Cheetay Logistics knew exactly what it needed to do to turn customers away from its competition. “We realised that Pakistan is a developing market, and until we do the fulfillment and logistics ourselves, we would not succeed here,” says Khan, as he explains how utilising online financial

payments was key to enabling a better and more seamless experience for customers. Talking about Cheetay’s main competition, Khan says, “Right now, it’s foodpanda. Because we’re primarily in food. And we have to face competition from upcoming players in this business. So, when we launch multiple categories, we’ll have to go against the

likes of Daraz and OLX.” E-commerce, delivery businesses, and even ride-hailing have a common problem to solve – a flaky digital payments system that can turn the customer away within a minute, which is why, Khan believes that the person who provides the easiest payments solution, will win the most customer. “A lot of these people are trying

VENTURE CAPITAL The amount of money raised by Cheetay Logistics in two rounds of venture capital financing

$4.775m

to build what we call the super app now. Where there is one app and one can do everything through it. Order a taxi, order food, pay the gas bill for example how it is in China with the WeChat,” he says, talking about potential competition from existing players, and further adds, “It’s the same problem, everyone has their own solution to it. Maybe one day SimSim or EasyPaisa will also launch a business such as ours, so we just have to be ready.” The company is, in fact, in a great position to allow easier ways for customer to pay. It has a mobile fleet that can also act as an ATM. For example, when you go to deliver food, the delivery-men can ask customers whether they would like to top-up their digital wallet, deposit cash, or withdraw cash. “For us, it’s a very versatile use of our fleet”.

Security and data privacy

he year 2018 saw cybersecurity explode and come to the surface as one of the most important issues facing businesses worldwide. Facebook got entangled in the Cambridge Analytica scandal and the EU implemented its own safeguard against cybersecurity and to protect data privacy – GDPR. Careem faced a cyber attack where hackers got through the encryptions on its servers, making customers’ private and confidential data available. The Pakistani banking industry faced embarrassment when hackers stole millions from several commercial banks. Companies such as Cheetay.pk which also hold customers’ personal information such as phone numbers and credit card data, need to boost up their security, and constantly upgrade their security systems to safeguard against possible cyber attacks. “Our biggest investment, if you take a look at our balance sheet even

today, is technology and security,” claims Khan. “We’ve spent a lot of money, on powerful equipment and safeguards. Very powerful piece of tech. Very robust. We use Amazon products. Our main code is in Python, it is very secure. We have exceptional engineers working with us. We’ve built our technology through Arbisoft, which is probably one of the best engineering companies in the country. We have also come under criticism for spending a lot on tech, but as you say, it is the need of the hour in this day and age. And we keep stress-testing it, and asking ourselves if our technology has the capacity to scale.” Because, even when you put a new lock on your door gate, the thief will find a way to break it. Things keep changing and you have to keep designing new security systems with time.

COMPANIES SUCH AS CHEETAY.PK WHICH ALSO HOLD CUSTOMERS’ PERSONAL INFORMATION SUCH AS PHONE NUMBERS AND CREDIT CARD DATA, NEED TO BOOST UP THEIR SECURITY, AND CONSTANTLY UPGRADE THEIR SECURITY SYSTEMS TO SAFEGUARD AGAINST POSSIBLE CYBER ATTACKS

Iterating into the future

heetay Logistics has thus far gained share in a market with one dominant player, but continues to iterate its business model, and at some point will come up against other, even more well-financed competitors. “This is something we are very cognizant of, and we’re very careful that we stay cutting-edge at every step.” The real test for the company will be to face incoming competitors such as UberEats and Careem – which are bigger players and know the dynamics of this market well enough, have tried and tested robust distribution and payments systems backed by technology and a strong brand image. “Necessity is the mother of invention”, says Khan. “We use technology to improve our businesses, and improve the lives of our customers. We consider ourselves a tech company. Technology makes our lives easier, and reduces costs. We are committed to using technology to solve all our issues. So, we are experimenting with electric bikes with a couple of companies, that will reduce our costs, render the delivery men to drive at more convenient speeds, and also, essentially, strive to be better for the environment. So, we will adapt,” says the optimistic e-commerce veteran. n

E-COMMERCE

PHARMACEUTICALS

t is an ad that relies on contrasts: a product as traditionally Pakistani as Hamdard’s Rooh Afza being consumed by non-Pakistanis in New York’s Times Square, in front of a digital billboard on the NASDAQ building displaying the product’s branding. And as if to really drive home the point that this is a company seeking a new image for an old product, this Buzzfeed-style video of Americans trying a traditional Pakistani drink for the first time was run as a digital ad on Facebook video and YouTube. The ad was meant to serve as the coming out party of Hamdard as a modern brand and one of the first major moves by its new CEO, Usama Qureshi, a 39-year-old executive who was hired away from K-Electric and whose experience prior to Hamdard was largely in the energy industry. Qureshi is the first non-family person to run Hamdard Laboratories Pakistan since the company moved to

Karachi after Partition in 1947. His hiring in 2017 was the start of a major shift in a company that has been part of Pakistan’s cultural landscape since its very beginning. He faces a monumental task: turning around a brand that is iconic, but may be fading in relevance as a new generation of consumers comes of age and may not have the same affinity for its products as their parents.

Origins in Delhi

oth Hamdard and its flagship product Rooh Afza are households names in Pakistan and have their origins in the Hamdard Dawakhana, a traditional medicine pharmacy set up in Delhi in 1906 by Hakeem Hafiz Abdul Majeed. The company likes to point out that year is the same as the year of founding of the All-India Muslim League, the political party that would go on to lead the movement for the creation of Pakistan. When it was first set up, it was a small clinic and herbal medicine shop focused on treatments that rely on a form of traditional medicine tibbe-yunani. Literally translated, tibb-e-

Hakeem Said

yunani means “Greek medicine”, and it does rely in part on principles first laid out by the legendary Greek physician Hippocrates. Over time, however, it has come to be more closely associated with Muslim societies in Northern India. Most prominently, the hakeems (physicians) of tibb-e-yunani gained prominence under the Delhi Sultanate when Alauddin Khilji was emperor. In its current form, tibb-e-yunani can be said to be the traditional medicine most closely associated with pre-Mughal Muslim India. It does bear some influences from traditional Indian medicine such as ayurvedic and some traditional Chinese forms of medicine as well. As a traditional medical company, Hamdard’s focus has largely been on what might be described as natural, herb-based pharmaceuticals. Its flagship product – Rooh Afza – was developed almost as a byproduct of that business, a rose-flavoured drink meant to combat the effects of heat exhaustion in the oppressive summer heat of Delhi and most of Northern India and what is now Pakistan. Hakeem Abdul Majeed’s busi-

Hakim Abdul Majeed Who Started Making Roohafza in 1907

“OUR PRODUCTS ARE ORGANIC, MADE OUT OF NATURAL INGREDIENTS UNLIKE THE SYNTHETIC, MAN-MADE CHEMICALS OF THE ALLOPATHIC [PHARMACEUTICAL] INDUSTRY. WE ARE SLOWLY LEARNING THAT NATURAL IS THE BEST FORM OF EXISTENCE. THE FOOD THAT WAS ONCE CONSUMED JUST BY FARMERS IS NOW CONSUMED BY THE VERY RICH, I.E. ORGANIC FOOD. WE ARE GOING BACK TO BASICS. A FEW DECADES BACK, THE ELITE ATE JUNK FOOD. NOW THEY EAT ORGANIC. AND SINCE THE ELITE ARE TRENDSETTERS, THIS LIFESTYLE OF NATURAL AND ORGANIC CONSUMPTION IS MAKING ITS WAY BACK INTO SOCIETY” Usama Qureshi, CEO of Hamdard Laboratories ness in Delhi took off shortly after he launched, to the point where he very quickly had to move into a larger building in 1922 to keep up the pace with his clientele. Unfortunately, he did not live long enough to see the fruits of his success, since he died that same year, aged just 39 years. His wife, Rabia, took over the business and continued running it while also raising their two sons, Abdul Hameed (then just 14 years old) and Saeed (just two years old back then). She did so until both boys grew old enough to begin managing the business. Abdul Hameed started helping out by the 1930s, though his younger brother, the man who would become known as Hakeem Muhammad Saeed, did not join the business until 1940. With both sons taking an active role in the company, Rabia could retire, and it looked as though the future of Hamdard Laboratories was secure. Then came that violent summer of 1947 that preceded Partition.

Partition and splitting the business

or reasons that are never fully explained, despite being Delhi-based, the family decided to split the business upon Partition. The elder brother, Hakeem Abdul Hameed, would stay on in Delhi and the

younger brother, Hakeem Saeed, would move to Karachi, in what was now Pakistan. The splitting of the business could have been a body blow to Hamdard, which is organised in both countries not as a for-profit corporation, but as a charitable trust. However, both brothers seemed determined to grow the legacy of their father in the two countries post-independence. And to a large measure, both succeeded in the dual mission of Hamdard to offer both products that consumers would find useful, as well as the broader public service mission. Both Hakeem Abdul Hameed and Hakeem Saeed grew their respective businesses based out of Delhi and Karachi, and both also created a separate charitable foundation – the Hamdard Foundation – with separate arms in both countries. In addition to the core traditional pharmaceuticals business that produced products such as Safi (a medicine meant to cleanse blood of toxins), Sualin (a tablet to treat sore throats), and Joshina (an herbal tea to treat colds and influenza), the company also began mass production of the drink Rooh Afza, which was sold as a concentrate to be mixed by consumers themselves with cold water to form the rose-flavoured beverage. The combination of a non-profit

traditional pharmaceutical business and a charitable foundation brought with it a tremendous amount of public goodwill towards both brothers, which was recognised by the governments of both India and Pakistan. In 1965, Hakeem Abdul Hameed was awarded the Padma Shri (the Noble One in Blossom), the fourth highest civilian award, by the government of India. Not to be outdone, in 1966, Hakeem Saeed was awarded the Sitara-e-Imtiaz (the Star of Distinction), the third highest civilian honour, by the government of Pakistan. Both brothers would go on to receive even higher awards later in life. For Hakeem Abdul Hameed, it was the Padma Bhushan, the third highest civilian award in India, in 1991. For Hakeem Saeed, it was a posthumous award of the Nishan-e-Imtiaz, Pakistan’s highest civilian honour, in 2002. Both brothers also lived lives that reflected the varying fortunes of Muslims in South Asia. Hakeem Abdul Hameed was a semi-prominent traditional physician in Delhi, who was moderately recognised for his services by the government of India. By contrast, Hakeem Saeed was much more prominently known in Pakistani society for his contributions, and went on to be appointed the Governor of Sindh, a position in which he served between July 1993 and January 1994. Hakeem Abdul Hameed passed away peacefully in 1999 at the age of 91. Hakeem Saeed was mercilessly gunned down in 1998, aged 78. The two brothers were born 12 years apart, but the older outlived the younger by almost a year.

PHARMACEUTICALS

Hakeem Saeed’s legacy in Pakistan

akeem Saeed did not rest on his laurels of setting up the traditional medicine business. He expanded the reach of Hamdard across a variety of other endeavours, most notably education. Hamdard published Naunehal, an Urdu magazine for children, designed to inculcate a love of reading and literature in Pakistan’s youth. And in 1991, he set up a university – Hamdard University – which would further contribute to his legacy in education. “Hamdard is a name that all of us born before 1990 know and can associate with,” said CEO Usama Qureshi. His assertion is borne out in the result of an online poll conducted by Profit. More than 76% of people between the ages of 33 and 53 know who Hakeem Saeed is, but only 44% of people between the ages of 13 and 33 know his name, suggesting a significant generational divide in the brand perception of the company. The magazine, particular, meant a great deal to Pakistanis of a slightly older generation. When Masood Ahmed Barkati, the longtime editor of the magazine passed away in December 2017, social media in Pakistan was filled with tributes to his legacy and that of the magazine. “Another chapter of my childhood closed. Kids from my generation will remain grateful to Masood Ahmed Barkati for that little Naunehal that was part of my childhood. Sadly kids today have nothing to develop their interest in Urdu Adab,” wrote Sana Adnan, a digital marketer, on Twitter. That sentiment was also echoed by the CEO. “The name Hamdard was most strongly associated with Hakeem Saeed and our children’s magazine Naunehal. But unfortunately, teenagers today are largely unaware of Hakeem Sahab’s work and of the cultural and literary importance Naunehal once held.”

A new CEO, and the weight of legacy

he trouble with success in building a brand is that in its success lies the seeds of its own demise. Once a brand becomes too wellknown, it becomes easy to take it for granted, and not think of it as providing value to the consumer, at least not

Hamdard’s diverging paths after Partition Headed by: Hakeem Muhammad Saeed

Headed by: Hakeem Abdul Hameed

Born: 1920

Born: 1908

Died: 1998 (assassinated)

Died: 1999

Beverage products: Rooh Afza

Pharmaceutical products: Safi, Sualin, Joshina

Literary product: Naunehal

Literary product: (none)

Philanthropic arm: Hamdard Foundation (1964)

Education: Hamdard University

Education: (no major projects)

Honours for founder:

Sitara-e-Imtiaz, 1966 (3rd highest civilian honour)

Padma Shri, 1965 (4th highest civilian honour)

Nishan-e-Imtiaz, 2002 (highest civilian honour, posthumous)

Padma Bhushan, 1991 (3rd highest civilian honour)

Hamdard Laboratories Pakistan

value that the consumer is consciously aware of. That rut appears to be what has hit Hamdard: a name and product suite known by the majority of its target market, but one that does not spark thoughts of innovation, or products that the company’s younger consumers would consider using. Enter Usama Qureshi, the new CEO. Qureshi is the first non-family CEO appointed to run Hamdard Laboratories. His appointed reflects a desire on the part of Hakeem Saeed’s family to move the business into the modern era and focus on appealing to younger consumers. Indeed, the very choice of Qureshi may well be reflective of that fact: he was just 37 years old when he

Hamdard Laboratories India

was appointed to run the company, in January 2017. Qureshi comes from a solidly middle-class family in Karachi, the kind of people for whom Hakeem Saeed’s philanthropic bent and service ethos meant a great deal. Qureshi grew up in a household where education was important, but which also struggled to cobble together the resources that might have put his career on the fast track. For instance, when he graduated from high school, Usama wanted to go on to do a bachelors in business administration (BBA), but at the time, the only institutions that offered that degree were either the expensive private universities or public, but still relatively expensive Institute of Business

Administration (IBA). Instead, he attended a bachelor of commerce (B.Com.) program at the University of Karachi, graduating in 2001. He then worked at telecom companies, and briefly at a bank in Oman, before joining the state-owned Pakistan State Oil (PSO), the largest oil retailer in the country, in 2004. At PSO, Qureshi helped run the prepaid and loyalty cards program, which itself was meant to invigorate the brand of a company that was a household name, but not known for innovation. From there, he moved on to the Abraaj Capital-owned Karachi Electric Supply Company (KESC), the only integrated utility company in Pakistan, and as the Chief Marketing Officer, helped lead the transition of its branding from the staid-old KESC to the new name K-Electric. Following a stint of independent consulting for a couple of years, Qureshi applied for, and was accepted to the job of CEO of Hamdard. After all those years in the energy sector, why did he move to a pharmaceutical / beverage company? Qureshi says it was for the challenge. “I feel that I am not a person who could work for a very stable company,” he said in an interview with Profit. “For one reason or another, I have always worked either in a position or in a company that was very problem-ridden or challenging. The idea of helping to turn around the legacy brand and make it more appealing to younger consumers, in

Rooh afza’s 23rd march ad at times square New York particular, spoke to him. “In my conversations with the board, they made it very clear that they wanted to make this a ‘young’ company,” he said.

Reinvigorating the brand

“H

amdard is not just another brand,” said Qureshi, laying out his strategy for reinvigorating the brand while staying true to its origins. That is why Qureshi embarked on the idea of promoting Hamdard as a uniquely Pakistani brand that might have global appeal, and possibly even serve as soft diplomacy on behalf of the country at a time when it could certainly use the help in creating a better image for itself outside its borders. That integration of Hamdard as a brand

ON MARCH 23, 2018 (PAKISTAN DAY), THE COMPANY SET UP A STALL IN TIMES SQUARE IN NEW YORK TO ALLOW NEW YORKERS AND TOURISTS FROM AROUND THE WORLD TO TASTE THE PRODUCT AND PERHAPS ASSOCIATE SOMETHING POSITIVE WITH PAKISTAN WHERE PREVIOUSLY THEY MAY NOT HAVE DONE SO. ON AUGUST 14, 2018 (INDEPENDENCE DAY), THEY DID A SIMILAR EVENT, THIS TIME AT STATIONS ON THE LONDON UNDERGROUND

both of Pakistan and for Pakistan is the thought process behind the publicity events in New York and London. On March 23, 2018 (Pakistan Day), the company set up a stall in Times Square in New York to allow New Yorkers and tourists from around the world to taste the product and perhaps associate something positive with Pakistan where previously they may not have done so. On August 14, 2018 (Independence Day), they did a similar event, this time at stations on the London Underground. Both New York and London are global cities, associated in the minds of consumers around the world as representing commercial and economic success. To have consumers in those markets appreciate the company’s flagship product would instill not just positive associations with Hamdard and Rooh Afza but also instill a sense of national pride that may also help the company in the long run. In order to trumpet their success at sampling the product in global markets, Hamdard turned to Facebook video and YouTube, producing a viral video that was viewed more than 4.5 million times across both platforms. That use of patriotism in marketing has a broader purpose as well. “Rooh Afza should be the national drink of Pakistan,’ said Qureshi. “Tea is not grown in Pakistan. Our product is also quite versatile, which will be on display

PHARMACEUTICALS

at Karachi Eats [food festival].” Both Qureshi and the chairperson of the company – Sadia Rashid, daughter of Hakeem Saeed – are determined to give their old brand a new look, and having consumers view them in a way they have not done so before. To do that, Qureshi wants to emphasise the fact that the company’s products are made from all-natural ingredients, hoping to capitalise on trends moving away from all things seen as artificial or manufactured. “Our products are organic, made out of natural ingredients unlike the synthetic, man-made chemicals of the allopathic [pharmaceutical] industry,” said Qureshi, seeking to position his company’s products as part of the broader movement of consumers away from modern food and medicine. “We are slowly learning that natural is the best form of existence,” he said. “The food that was once consumed just by farmers is now consumed by the very rich, i.e. organic food. We are going back to basics. A few decades back, the elite ate junk food. Now they eat organic. And since the elite are trendsetters, this lifestyle of natural and organic consumption is making its way back into society.”

Connecting with the millennial consumer

“W

e are aware of the change in demographics and the resulting changes in values and sources of information,” said Qureshi, laying out the company’s strategy to target millennial consumers. “Going modern and connecting with the younger generation is actually nothing new for us. In fact, Hakeem Saeed was a modern visionary for his time, and that is visible in Hamdard’s organizational structure when he was in charge. He also always emphasized the importance of young people, and

Naunehal Assemblies are proof of that,” he said. However, the modern consumer wants to access their products differently. On the magazine front, for instance, consumers are increasingly abandoning print publications in favour of digital formats, and Hamdard is determined to keep them reading Naunehal even as they do so. Hence, the company has launched a digital version and is working to monetise the medium. And the company, long known for its old-fashioned television commercials that a whole generation of Pakistanis grew up with, is increasingly looking towards digital platforms to market its products. “We have transformed our marketing, communication, distribution, and packaging efforts that will not only help in retelling the legacy of our company but also make it convenient for the coming generations to consume our products,” said Qureshi.

The export urge

he digital advertisements Hamdard ran in its attempt to put forward the Pakistani brand on a global platform and expand overseas were situated in New York, London and Toronto. And it is not surprising that these three cities were chosen, since they are also home to a large number of expatriate Pakistanis as well as people of Pakistani origin. The Pakistani diaspora in these countries holds considerable economic weight and is an attractive market to sell into. According to former World Bank economist and finance minister Shahid Javed Burki, the total income of Pakistani Americans is likely in the range of $45 to $50 billion a year. And brands like Rooh Afza are likely to have appeal even beyond the Pakistani diaspora to the wider South Asian community in North America and Europe, which includes people of Indian and Bangladeshi origin.

HAMDARD’S GROWTH STRATEGY DOES INVOLVE REACHING THE PAKISTANI DIASPORA MARKETS AS WELL. THE COMPANY’S EXPORTS OF ROOH AFZA HAVE GROWN BY 25% OVER THE LAST TWO YEARS, IN PART DUE TO THE DIASPORA-FOCUSED MARKETING TECHNIQUES, AND ADVANCED IN DIGITAL MARKETING ABILITY 26

Rooh Afza’s ad back in the days Hamdard’s growth strategy does involve reaching these markets as well. The company’s exports of Rooh Afza have grown by 25% over the last two years, in part due to the diaspora-focused marketing techniques, and advanced in digital marketing ability.

The health clinic expansion

ut perhaps the biggest opportunity may lie closer to home, with the Hamdard CEO laying out the beginnings of a plan to expand the footprint of Hamdard clinics across the country to capitalise on the lowcost, trusted brand of the company in healthcare and pharmaceuticals. Hamdard plans to open more clinics in a bid to standardise the tibbe-yunani medicine model in Pakistan, which Qureshi admits is plagued by quacks who have given the industry a bad name. “Many in our industry do not want to get regulated. We want to standardise our industry and bring it on par with allopathic medicine. Therefore, we are having conversations with regulators, specifically the Drug Regulatory Authority of Pakistan (DRAP), to standardise our industry.” It is certainly an ambitious plan on the part of Qureshi, but if he is able to pull it off, it would be one of the most impressive turnaround stories in Corporate Pakistan today. It would also help modernise an otherwise highly traditional and old-fashioned industry.

PHARMACEUTICALS

OPINION

Ayesha Aziz

Return of the Stay at Home Mom – The Second Innings uring the time when I was desperately looking for a job, I got a call from a recruitment manager of a well-known company. I was naturally very excited because any opportunity which would bring me back to the world of work, was a milestone achieved. I went for the interview and the guy who called me said to me that if I knew why I was called for the interview. “Obviously, because I fit the role and am qualified for it”, I replied cheekily. By this time I had gained enough confidence by going through so much rejection, that I thought I had nothing to lose really. He said, “No, it’s because in my career spanning over two decades in the field of HR I have never even once come across someone wanting to re-join the workforce after such a huge gap – 13 years is HUGE!” When he received my CV, he was shocked and went online to research about women re-joining the workforce after a huge gap and found out that such cases were rare. He told me that even if women like me get a job somehow, they usually don’t last more than a year. He said, “If you do, you’ll turn the tables!” Although I didn’t get the job, but his words stayed with me. Now I had a challenge more difficult than the one of actually landing a job, which I did exactly five months after this inter-

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

view. I was nervous and unsure of myself because I had been away from the industry for over a decade. I felt old and wasted and wanted to give up every single day. I wanted to go back to being a regular everyday woman I was used to for the past 13 years. My body hurt because of the long hours and lack of sleep. I was overwhelmed by the transformed corporate dynamics and trying to balance my duties as a mother with my new job. I had no one to talk to because everyone was so much younger and different, or so much older and different! What are these millennials! The people I used to work with so many years ago had gotten old and gray, and become kind of scary! I felt like an alien in the workplace because no one really understood why I was there in the first place. I felt like Captain America!!! Initially I was discouraged, because during the first few months at my new job, many people did not take me and my work seriously. They thought I was just there for fun and time pass, or some other reason they couldn’t probably fathom! It was very difficult to make myself heard and seen and to ensure that people know that I mean business! Whenever I wanted to quit, the words of that man haunted me like a demon– will you be one of those who didn’t last a year? Here I am, two years down the road. I was able to make it this far because I didn’t give myself the choice of quitting, but also because I was extremely lucky. I had mentors, who believed in me, an amazing team bursting with infectious energy, and my girlfriends who put up with all the cancelled plans and long silences which lasted months, but still gave me hope and courage to carry on. Some of you may say that I haven’t mentioned my family; of course to be able to go on this path would not be possible without a

supporting family. This International Women’s Day I want to tell all of you who are afraid to step out in search of your dreams to take the leap of faith and go for it, even if no one supports you. To all the recruiters – give their passion and abilities a chance instead of rejecting their career gaps. I don’t know if I am able to turn the tables or not, but at least I made it past a year in the industry. I am still struggling but I have learned a lot in the past two years and my work is making a difference – for now that is enough.

DIVERSITY

Employers fail to invest in their workforce or pay them adequately, employees tend to shirk and lack a strong work ethic

By Taimoor Hassan

n the year 2000, Pakistan’s labour productivity exceeded that of both China and India. A decade later, China had more than doubled its labour productivity and surpassed Pakistan in 2008, while India had caught up and eventually exceeded Pakistan in 2012. So what happened? How and why did Pakistan fall behind? And what exactly is labour productivity and why is it important? Economists define labour productivity as the amount of economic output per worker in the economy. As a mathematical matter, it is calculated by dividing the gross domestic product (GDP), adjusted for purchasing power parity (PPP), by the total size of the labour force. Pakistan’s labour productivity is estimated at $15,430 in 2018, according to data from the International Labour Organisation (ILO), having grown at an average of 1.5% per year since the year 2000. India’s labour produc-

“[‘DISGUISED UNEMPLOYMENT’] IS COMMON IN THE SERVICES SECTOR OF PAKISTAN, WHICH FORMS ABOUT 53% OF OUR GDP. THE SECTOR IS LARGE ENOUGH TO ABSORB THE LABOUR EMPLOYED ON THE BASIS OF RELATIONSHIPS RATHER THAN QUALIFICATION OR PRODUCTIVITY. WHILE AN EXTRA PERSON MIGHT NOT INCREASE THE PRODUCTIVITY OF THE BUSINESS, HIS EMPLOYMENT WILL BRING DOWN AVERAGE PRODUCTIVITY” Dr S Akbar Zaidi, economist tivity is 20% higher, at $18,565, having grown at a much faster average of 5.7% per year during that same time period. China’s labour productivity is $29,499, having grown at 8.8% per year since 2000. Labour productivity is one of the hallmarks of development. It drives economic growth and affects everyone in the economy. A highly productive economy will be able to produce more goods or services with the same amount of resource, or produce the same level of goods and services with less resources. For businesses, higher labour productivity will bear greater profits whereas for the workers, it can translate into higher wages and better working conditions. For a government, a higher level of productivity can bring in more tax revenues. So where did Pakistan fall short? Profit’s conversations with business owners and experts suggest that Pakistan’s workforce, in all its classifications, lack two big things: skills, and a strong work ethic, relative to labour in developed economies. Pakistani employers, by and large, are too short-sighted to invest in the productivity of their labour force, which in turn means that the labour force is paid very little, which results in both shirking and a lack of sustained effort, which in turn results in a low level of trust between business owners and labour, and therefore the business owners continue to not invest in their labour force. Moreover, firms in Pakistan mostly reek of structural flaws that make the businesses and ultimately the whole economy less productive.

And then there is the problem of what might be called ‘disguised unemployment’. That describes a scenario where a person is employed, but does not have much to do, and hence is not really working. That can happen in circumstances where a person is employed by a business run by members of their immediate or extended family. While the business does not need their labour, it is employing them as a form of family support. “That person is not contributing towards productivity and even if he is removed from his post, labour productivity will not come down. The practise is common in the services sector of Pakistan, which forms about 53% of our GDP. The sector is large enough to absorb the labour employed on the basis of relationships rather than qualification or productivity. While an extra person might not increase the productivity of the business, his employment will bring down average productivity,” Dr S Akbar Zaidi, an expert on economy told Profit, terming such a form as non-productive employment. One might think that this is a relatively uncommon phenomenon, but it is so prevalent that the Pakistan Bureau of Statistics actually measures it, calling it “contributing family workers”, who form 21.4% of the total labour force, or 13.2 million people. In the manufacturing sector, productivity needs to be seen as the number of people needed to manufacture a product. If a product is being produced by, for instance, 20 people at one place and the same product is being made by 8 people at another place, it means that

the 12 extra people can be engaged to do something else. Pakistani businesses tend to have a significant over-staffing problem, and at times it renders them uncompetitive relative to their foreign peers. It can even result in them being unable to raise capital from overseas investors. Shehzad Ilahi, owner of garments manufacturing company Mushrooms, gave the example of a Pakistani textile company that was selling one of its manufacturing units: “The Chinese were considering buying the unit. They were, however, appalled when they got to know about the number of managers running that unit. They could get the same work done by a smaller number of managers. The sale eventually did not go through.” “Another example is the government departments. If you reduce the workforce to half in these departments, their productivity will not be halved. It might improve actually. When half of these people will leave, the remaining half will have to be more productive,” Dr Zaidi says.

Lack of skills and training

t is no surprise that the Pakistani business owners, especially the ones operating export-oriented industries such as textiles, are dreading the thought of competing with the international players because they never invested in training and developing the skills of their labour force. Productivity is intimately linked with the skills of a labour and is particularly important in the manufacturing sector. It is indispensable because if somebody is skillful in operating a ma-

MACROECONOMICS

“MONETARY MOTIVATION IS LOW TO THE POINT OF TYRANNY IN PAKISTAN. IF YOUR LABOUR DOES NOT HAVE ENOUGH MONEY FOR EVERYDAY NEEDS OF HIS FAMILY, HOW CAN YOU EXPECT PRODUCTIVITY FROM HIM? BUSINESS OWNERS HAVE MADE MONEY BUT DID NOT SPEND IT ON THEIR OWN PEOPLE. THEY WERE NEITHER SPENT ON THEIR COMPETENCY NOR ON THEIR FINANCIAL STABILITY” Yameenuddin Ahmad, CEO of Timelenders chine, he’ll produce more products from it as compared to the one who is not that skillful. To improve skills requires putting the workforce through training and skills development programmes; a taboo in the Pakistani economy. “Without requisite training, a labourer cannot be deployed on the [production] floor,” says Yameenuddin Ahmad, CEO of Timelenders, a firm that provides strategic and time management trainings to organisations. “In China or Philippines or Europe, workers have certifications, qualifying them for a certain job. However, if you go on the production floors of factories here in Pakistan, you won’t find such training certificates. A machine operator works on the basis of experience. It has put a whole set of industries at the risk of being entirely wiped out because the labour they had is about to retire but the new labour has not been trained.” “Industrial owners in Pakistan admit that they did not realize that the textile

industry will go through such massive technological changes. We don’t have a long-term vision. So, you cannot blame labour alone for the low productivity. Owners have played their part as well. There is no time management or training. Because trainings incur a cost; learning is expensive. The results are in front of you now,” he says. Besides trainings, access to technology and the ability to leverage it are crucial for productivity. In the absence of technology, only traditional tasks can be performed but since the world is moving towards new value added and upstream products, technological savviness is a must. “That requires literacy. If you can read things, you can better use technology. In the absence of literacy, you’ll only be able to do outdated tasks. Creating an iPhone in Pakistan would be more time consuming since technology is limited here and literacy is low. Where literacy is high and technology is advanced, it will take less time to produce a similar product,” Dr S Akbar Zaidi says.

UNDEREMPLOYED

13.2 million 32

The number of people in Pakistan who were employed as “contributing family workers” in 2018, which is the Pakistan Bureau of Statistics’ term for people employed in family businesses more as a family favour rather than actual economic need; economists call this “disguised unemployment”

A matter of work ethic?

nother core problem is the lack of a strong work ethic. From the moment they are small children, Pakistani students enter an educational system that does not require of them a strong work ethic. It does not require consistent hard

work, and tends to focus only on end-ofyear or end-of-semester examinations, rather than requiring students to work diligently every day. The problem starts at home, according to Yameen, as parents have no vision about where they want their child to be. Furthermore, they have no mechanism to make the child a productive individual. Sajidoon Nadeem, co-founder at a software firm, MindBlaze Technologies, sees lack of ethics as an issue involving not only work, it also includes how a person behaves with his/her peers and one’s demeanor towards his/her superiors, in general. He sees irresponsibility or un-professionalism as a product of negligence on part of parents to build strong ethos during a person’s childhood. “Why a worker does not work efficiently can simply be because of unprofessionalism or irresponsibility that he has developed over childhood,” he says. But if we are to hold the above argument true, why is it that the same person, when he moves abroad, becomes more productive for the same sort of a role that he had here? It is not seldom that Pakistanis move abroad chasing lucrative careers and surprisingly attain stellar levels of work performance there. The same workers over here would give lethargic productivity and slack overwhelmingly. The answer lies in the work balance offered by foreign employers with monetary motivations that include better compensation and incentives, in tandem with intensive monitoring protocols and accountability to keep the workers from slacking. “Over there, people are worried about losing their jobs. In Pakistan, they’ll simply say that we’ll find another

one. If you have spent money to go to work in another country, you’ll be serious about your job,” says Dr Zaidi. “Another reason is that when people see others are slacking about their work, they slack too. If they see everybody is doing a good job, they’ll work harder as well.” While slacking is a global phenomenon, it is extraordinary in Pakistan. It is contagious and trickles down a hierarchy. “To start with, our business owners are slackers. Most of them are absolutely unproductive. They arrive at office at noon when they should start their work early,” says Yameen. Sajidoon argues that lower productivity can be seen as a consequence of low monetary motivation or simply because an employee is not satisfied with his job. That is topped-off by a corporate culture that also lacks ethical values. “Labour laws are not implemented here properly. Employers treat employees like slaves. That’s the sort of culture due to which a tussle erupts between employer and employee, leading to employee ceasing to care about the employer. The companies, instead of solving the problem at its root cause, hire managers on top of it and they start playing politics. This is the sort of corporate culture which leads to slacking. If you take care of your employees, they’ll take care of you. And if you’re doing that and your employee is still not working efficiently, he is not worthy of the job then,” he says. “Monetary motivation is low to the point of tyranny in Pakistan. If your labour does not have enough money for everyday needs of his family, how can you expect productivity from him? Business owners have made money but

did not spend it on their own people. They were neither spent on their competency nor on their financial stability,” says Yameen. So given the right motivation, monetary and other forms such as respect and value, Pakistanis can be equally hard working, according to Sajidoon. Working under such motivations, however, does not imply that a person has better work ethics. “In Pakistan, government workers are hedged from losing their jobs. That alleviates the fear and they do not work diligently. In the private sector as well, if you’re not working, you have a threat of getting fired. But working under a ‘threat’ does not count as having a good work ethic,” Dr Zaidi says.

How can firms curb slacking?

o how can firms crack down on shirking, or the act of not working during hours that are meant to be for work? MindBlaze’s Sajidoon says that cyber slacking has reduced over the years because of certain supervision and monitoring protocols that they have implemented. “There are software and tools that they have installed to monitor the activities of their employees that has helped improve productivity,” he says. Software firm Soft Pyramid’s CTO Farooq Khalid said that his firm has also deployed monitoring tools that keep an eye on how much time an employee spends on a certain task. “That helps keep a track on the employees. The tools take screenshots of employees’ activity on the computer

when they are in the office and tracks how much time an employee spends on a certain task. Our employees have access to social media sites such as Facebook and they use it for certain durations. But as long as the client’s targets are being met and projects are being completed on time, there is no issue with that.” Profit also inquired what should be the long-term strategy for the businesses to improve productivity. “Businesses need to have a longterm vision decide their course of action after analyzing where the world is going to be in the next 10 years. Once the long-term vision is clear, the workforce should be developed on that line,” Yameen says, stressing that businesses should train new people and start accommodating them in the industries. There should be concomitant efforts to extenuate the problems faced by their labour and bring them at a monetary level where they do not face fundamental existence problems. On a personal level, a worker needs to understand how his job aligns with the vision of the company and how he can add value to his job. The fourth industrial revolution that we are experiencing right now is all about adding value. Since the competition is tough, it is plausible to work on competencies to improve the weaker ones and develop the ones that are not there but are needed, he says. Introspection at both the individual and organizational levels will improve the overall productivity of the businesses, which will eventually translate into higher productivity for the overall economy. n

MACROECONOMICS

The Swedish giant has had a decades-long commitment to the Pakistani market and consumer needs in the country

Tetra Pak Pakistan officially came into existence in 1984, at that time supplying packaging solutions to customers like Milk Pak (Nestle), Haleeb, and Bambino. But the 80s were a period of struggle for the company as consumers were still warming up to the concept of packaged milk. Over the years, however, the market for packaged milk has grown as consumers become more aware and advanced machinery is introduced. By the year 2000, the market for packaged milk was well established and the growth has sustained since then. Today, Tetra Pak Pakistan’s customers include most of the big dairy and juice producers including Nestle Pakistan, Engro, Shakarganj, Haleeb, and Shezan. In 2011, Tetra Pak moved its operations to a larger factory in Lahore’s Sundar Industrial Estate, with an investment of €92 million, which today is the only plant in the country to have won an award from the Japan Institute of Plant Maintenance (JIPM) for manufacturing excellence. How has the company been able to achieve this? Let’s take a look.

By Muhammad Faran Bukhari s recently as the early 1970s, Pakistan had just one dairy plant that was owned by a company called Milko Limited, and packaged milk was virtually unknown to the domestic market. Then, the plant was acquired by Turnkey Dairies of Denmark, Tetra Pak of Sweden, and Packages Limited of Pakistan, who brought with them low cost paper-based packaging that had a shelf life of 15 days. This was no less than a revolution for the domestic dairy market.

Implementing Japanese Standards

ccording to Jorge Montero, Tetra Pak Pakistan’s Managing Director, Tetra Pak is the only non-Japanese company to reach JIPM’s second level, which is short of just the final world class level. “Tetra Pak’s Lahore factory is in the top three on most critical performance measures that we have,” Montero says in an interview with Profit. “The utilisation in the Lahore factory has improved to such an extent that it has resulted in Tetra Pak not having to build an additional three to four factories around the world. In terms of efficiency, capacity utilisation, waste, and accident prevention, as well as a

IN 2011, TETRA PAK MOVED ITS OPERATIONS TO A LARGER FACTORY IN LAHORE’S SUNDAR INDUSTRIAL ESTATE, WITH AN INVESTMENT OF €92 MILLION, WHICH TODAY IS THE ONLY PLANT IN THE COUNTRY TO HAVE WON AN AWARD FROM THE JAPAN INSTITUTE OF PLANT MAINTENANCE (JIPM) FOR MANUFACTURING EXCELLENCE host of other performance indicators, the factory in Lahore is leading.” He says the transition process from the smaller to larger factory was made smoother through implementing Japanese standards. “The whole methodology relies on improving worker know-how and autonomy. The idea is to delegate as much decision-making and know-how to the lowest levels in the organisation and creating a very open-door approach to things,” he explained. “Everybody has a say in whether a certain thing works or not. Usually the person who puts the idea forward leads the entire or at least part of the project. Changes then happen every day and continuous improvement takes place.” Interestingly, this Japanese methodology appears to have taken a far quicker route in Tetra Pak’s locations in developing countries compared to developed countries where generally there’s higher resistance. “Our factory in Pakistan is way ahead of the factories in Europe. In developing countries, people took this [approach] more positively. They took this change as a challenge and as an opportunity to learn and qualify themselves. We have much more resistance in Europe and America,” says Montero. This openness, coupled with Tetra

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“PAKISTAN IS VERY UNIQUE IN THE SENSE THAT WHOLE MILK (WITH FULL FAT) IS PREFERRED HERE. IT IS ONE OF THE FEW COUNTRIES WHERE THERE IS SUCH A SINGULAR FOCUS ON THE FAT CONTENT. MOST HEALTH AUTHORITIES AROUND THE WORLD PREFER A LOWER FAT CONTENT, PREFER HALF CREAM OR NO-CREAM MILK, AND ALSO FOCUS ON THE VITAMIN AND PROTEIN CONTENT” Jorge Montero, Managing Director of Tetra Pak Pakistan Pak’s stable history in Pakistan, encouraged the company to further expand its operations in Pakistan “We already had a strong base and the potential (in the Pakistani market) is quite large in terms of population and the size of the milk market. So, Pakistan was seen as a place where Tetra Pak had a huge potential to grow,” said Montero. “Tetra Pak already had a successful operation in Pakistan. However, we were constrained in terms of space and expansion possibilities. The old plant was already 30 years old (by 2011) so we decided to build a new plant altogether.” The company is now ready to apply to be recognized for JIPM’s highest standard. “We will apply for the world-class level this year and hopefully we will achieve it. We have been given the green light to apply for the award,” Sonya Kayani, regional communications director for Pakistan, Arabia Area, Egypt, East Africa and South Africa at Tetra Pak, told Profit. While Tetra Pak has expanded significantly in Pakistan, Montero said that several challenges on the exports front have meant that they are now building a factory in Vietnam. “Exports have been adversely affected due to government policies, levied between

2015 and 17, that introduced high levels of duties on raw material imports among other taxes and duties. About a third of Tetra Pak Pakistan’s production is exported around the world, which has recently been on the decline. One of our biggest export markets is South East Asia, where Tetra Pak’s exports to Vietnam have reduced by 40 percent. They are expected to cease altogether by 2020,” he said. “We are currently building a factory in Vietnam, hence Tetra Pak Pakistan will lose its export to that country. Had conditions been different, we would have expanded in Pakistan instead of building a factory in Vietnam.”

Competing with loose milk

espite gains made by Tetra Pak and other dairy companies, loose milk continues to be the major player in the domestic dairy market. According to an estimate, packaged milk constitutes only eight% of the total domestic milk market while the remaining 92% is captured by loose milk. “Pakistan is very unique in the sense that whole milk (with full fat) is preferred here. It is one of the few

IN THE US AND EUROPEAN MARKETS, NON-DAIRY MILK LIKE SOYA OR ALMOND MILK HAS GAINED POPULARITY WITH PEOPLE OPTING FOR VEGETABLE-BASED MILK WHICH THEY CONSIDER HEALTHIER AND LESS FATTENING. IN THE US ALONE, THE MARKET FOR OTHER MILK ALTERNATIVES IS AROUND $1.98 BILLION 36

countries where there is such a singular focus on the fat content. Most health authorities around the world prefer a lower fat content, prefer half cream or no-cream milk, and also focus on the vitamin and protein content,” Montero said. According to him, consuming loose milk is inherent unhealthy because cows have certain bacteria that the human body cannot process and these bacteria stays in the milk unless it is pasteurized. Secondly, he claimed, fresh loose milk has a lifespan of just two hours in climates like Pakistan’s so it is almost impossible for loose milk to be transported to the consumer within that time frame while remaining fresh. “How can they manage to transport loose milk in two hours from the farm, which is in most cases outside the city, to your home? The only way to keep it good for two hours is by adding ingredients to keep the milk cool. In best cases, that would be ice cubes, which begs the question: what kind of water is being used for these ice cubes? Punjab Food Authority (PFA) recently rejected half of the loose milk samples that it tested,” Montero said. Kayani adds: “In rural areas, people traditionally drink milk straight from the cow This is one of the leading causes of tuberculosis and perhaps one of the reasons why Pakistan is among seven countries in the world where tuberculosis has still not been eradicated.” The data bares it out: World Health Organisation says Pakistan has an estimated 510,000 new tuberculosis cases emerging each year and approximately 15,000 people develop drug resistant TB every year. In making the case for packaged milk, Moreno says that the supply chain

for loose milk is untraceable as there is no branding or labels on the product. “You just have to trust the person who delivers it to you, but the person who delivers is not the one who collected it which means you have to trust the whole chain of people who are involved. You are looking at a system with no quality controls.” On the other hand, Kayani said, packaged milk is fully traceable and consumers know who the producer is. “In the case of loose milk, even though you get to know that the food authority disposed a certain amount of milk, the source of production and adulteration remain vague.” Even in the case of milk regulation, standards are a challenge in Pakistan. In December 2016, three independent bodies – the Pakistan Council of Scientific and Industrial Research (PCSIR), University of Veterinary and Animal Sciences, and University of Agriculture Faisalabad – were asked to test samples of packaged and loose milk. All three came up with different test results, raising questions about the capability of these bodies to test samples and the authenticity of these results. The Supreme Court then asked the PFA to test these samples, which declared most of the major milk brands safe for consumption. They were also declared safe for consumption in 2017, but in June 2018, the PFA released a report saying that three milk brands were unable to fulfill the food regulatory bodies requirements. “Over the years, the PFA has built up its standards and made them more stringent. Now, we have different food authorities in different provinces and the standards in all the provinces vary. So, for example, there can be a variance in fat content depending on where the milk is coming from, but that does not make it unfit for human consumption,” Kayani explained. But while the PFA is able to regulate packaged milk, it is unable to regu-

late the loose milk market. “It’s a daunting challenge. If you take Lahore as a market, you will probably need half a million cows to fulfill the demand for milk,” said Montero. The problem, however, is that most farms are very small, sometimes even consisting of only two or three cows. If Montero’s figures are to be believed, at that scale it would take approximately 100,000 farms to supply milk to Lahore alone. “If you only look at the origin (dairy farms), and ignore the distribution, it is still a huge task. It becomes even more complicated when you add in distribution. PFA can occasionally catch loose milk samples at entry points of cities. But can that guarantee the quality of the product?”

What’s next for the Pakistani market?

he market for packaged milk is growing in Pakistan but the domestic market still lags behind other markets in terms of

DESPITE GAINS MADE BY TETRA PAK AND OTHER DAIRY COMPANIES, LOOSE MILK CONTINUES TO BE THE MAJOR PLAYER IN THE DOMESTIC DAIRY MARKET. ACCORDING TO AN ESTIMATE, PACKAGED MILK CONSTITUTES ONLY EIGHT% OF THE TOTAL DOMESTIC MILK MARKET WHILE THE REMAINING 92% IS CAPTURED BY LOOSE MILK

product offerings. “The variety of the products that are available all over the world and the kind of products our technology can provide are much larger compared to what is being offered in Pakistan. Our aim for the future is to try and widen that offering for the customer and bring in new products,” Kayani said. Given Pakistan’s energy situation, Montero adds, UHT-packaged milk is more convenient compared to loose milk because it does not need to be refrigerated so retailers can use their refrigerator space for other comparatively value added products. The Pakistani milk market also lacks diversification with almost 98% of the milk being sold is whole fat milk. “For the most part, packaged milk sold in the country is full cream milk. There are very few variations. For example, there are very few people who consume skimmed milk.” One product that could be ideal for the Pakistani market is lactose-free milk. According to Tetra Pak’s research, 20 to 30% of the population is lactose-intolerant and other research estimates from 2017 put the prevalence of primary adult lactose malabsorption in Pakistan at 60%. “Most people don’t know that they are lactose-intolerant. They know that milk does not suit them, but they don’t know what the underlying reason is. For most people, the diagnosis stays undetected,” says Kayani. In the US and European markets, non-dairy milk like soya or almond milk has gained popularity with people opting for vegetable-based milk which they consider healthier and less fattening. In the US alone, the market for other milk alternatives is around $1.98 billion. “I don’t see that happening in Pakistan, but the market for lactose-free milk has growth potential,” says Montero. The company also plans to develop the market for yogurt or smoothie-based drinks, which are popular in Europe and Southeast Asia but have failed to penetrate the Pakistani market. “In Pakistan, there are more traditional yogurt-based drinks like lassi. But the problem with them is that generally everyone has their own taste palette so they are kind of hard to standardise,” says Kayani. n

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