Profit E-Magazine Issue 70

welcome

The wrong kind of governing You can always trust the government of Pakistan to take a look at a problem created by the private sector in the country and somehow manage to make it worse with their intervention. Such is most definitely the case as described in our cover story this week, where we take a look at the television ratings market, which determines how nearly Rs38 billion of advertising money will be spent on television advertising, which in turn is what funds the journalists, the producers, the researchers, and the writers who inform the citizens of our republic in addition to the actors, directors, producers, designers, and other artisans who entertain it.

It is an enormous power, and by all accounts, the company wielding it – MediaLogic – has not always been the most responsible custodian of that implicit public trust. The government would justified in its attempts to intervene. The manner it chose to do so, however, was perhaps the least productive possible.

Firstly, the Supreme Court of Pakistan is hardly the venue for the kind of litigation this case would have entailed and we find ourselves surprised that the honourable court decided to take up the matter at all. Having done so, however, their decision to empower the Pakistan Electronic Media Regulatory Authority to publish numbers, and for them to then also increase the cost of doing business for any new competitor in the field by raising the required minimum sample size, cannot possibly serve any real purpose.

On the surface, it solves the problem of MediaLogic withholding data about certain channels that, by all

accounts, refused to play the game they way MediaLogic wants it played. But the numbers have now been lent the credibility of a government agency, without any effort being made to improve the quality. Increasing the minimum sample size appears to do that, though it only serves as a deterrent to smaller players that might be able to enter the market and disrupt MediaLogic’s monopoly, which is the real source of the problem.

Ultimately, however, the market will sort out what the market caused: television’s place as the dominant medium is on its way out, with the rise of digital advertising. Why should an advertiser pay for flawed data from MediaLogic when they can get much cleaner data from YouTube or Facebook? In this, as in many things, technology may ultimately render the problem redundant. We just hope the damage to our public discourse is not too great before we get there.

Farooq Tirmizi Managing Editor

Executive Editor: Babar Nizami l Managing Editor: Farooq Tirmizi l Joint Editor: Yousaf Nizami Reporters: Syeda Masooma l Muhammad Faran Bukhari l Taimoor Hassan l Abdullah Niazi l Ahmed Jamil Bilal Hussain l Director Marketing: Zahid Ali l Regional Heads of Marketing: Muddasir Alam (Khi) l Zulfiqar Butt (Lhr) l Mudassir Iqbal (Isl) l Layout: Rizwan Ahmad l Photographers: Zubair Mehfooz & Imran Gillani l Publishing Editor: Arif Nizami l Business, Economic & Financial news by 'Pakistan Today' Contact: profit@pakistantoday.com.pk

FROM THE MANAGING EDITOR

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The biggest so-called mystery about CPEC is as follows: if CPEC was supposed to be such a huge bonanza for Pakistan in terms of investment, which is it not showing up in the foreign direct investment (FDI) numbers? Why is Pakistan’s current account balance still negative? In fact, why is Pakistan’s current account balance actually getting worse?

The answer is relatively straightforward: because CPEC is not an investment into Pakistan, it is structured as a resource extraction exercise. CPEC does not show up as FDI, but instead in the trade statistics, as an import, against which Pakistan will have to arrange foreign currency from somewhere. We estimated how much of that is CPEC-related by assuming that the pre-2013 levels of imports from China can be categorized as the “normal” level and the amounts above that are broadly CPEC-related. By our calculations, using data from the Pakistan Bureau of Statistics, we estimate that Pakistan’s CPEC-related imports have come to $31 billion over the past six years.

News IN NUMBERS

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Actual investment flows from China during that time have been higher than in the past, it is true, but still relatively smaller compared to Pakistan’s increase in imports from China. Since 2013, China’s net investment into Pakistan has been $2.5 billion, much higher than the $813 million China invested in Pakistan in the 10 years prior to 2013, but still a relatively small sum compared to the wild projections and promises that the Pakistani press and government wanted to believe when it was first announced. Here is how it works: China announces that it has invested in a project in Pakistan worth, let’s say $1 billion. That $1 billion, however, is required to mostly be spent on Chinese equipment, and labour, a significant portion of which is to be imported from China as well, with very little by way of supplies coming from the local economy. That $1 billion, therefore, never hits Pakistan’s economy as an investment. It is $1 billion that goes from the Chinese government or state-owned company to a stateowned company within China to pay for equipment. Even the Chinese labour gets its salaries deposited into bank accounts within China. The money, in other words, stays completely within China and so never shows up as foreign investment into Pakistan. It only shows up as imports, and as a liability on the balance sheet of the government or whichever company is undertaking the CPEC project.

News IN NUMBERS

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By Taimoor Hassan

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latform businesses – those that make money by providing a platform for other business to sell their products to consumers – are typically associated with e-commerce businesses rather than those with a physical location. But one woman operates a dessert bar in the Y-Block market of the DHA neighbourhood in Lahore, which offers desserts made by chefs and bakers from around the city.

Muniba Javed is the founder of Dessert Directory, a luxury dessert bar as she likes to call it.

Dessert Directory is different from your traditional dessert shops around the block. What makes the brand unique is that the desserts offered here are prepared by home-based patissiers in Lahore, who are allowed to display and sell their products under their respective brand names at Dessert Directory. Muniba says she allows others to sell their products at her facility to promote entrepreneurship, and that a personal experience drove her to do it.

“I started off with a home-based business in 2012 by the name of Prime Edibles. Later, Prime Edibles started Prime Events. Prime Edibles received a lot of success. We used to take orders while sitting at home, for occasions such as Mother’s Day, Father’s Day. We used to make fruit bouquets. The demand started increasing a lot because the market we were operating in was a stagnant market. People would go to somebody’s house and take a cake or sweets along. People were

demanding something new. So, when we received a lot of success there, people started approaching us to have our products placed at their shops, but without our brand name,” Muniba told Profit in an interview.

It might seem an interesting proposition.

For a nascent business, placing products at famous outlets, the names of which Muniba refused to reveal, would understandably increase sales and profits because of the strong customer base of established brands. But putting their products at other shops under a different brand name was a deal-breaker for Muniba, and which later became the basis of her new business.

“They insisted that we should place our products at their shops. There is so much that we did, our chocolates were very popular. So they said that keep your things with us, it will increase your sales but you won’t get a name on it. We told them that we don’t do what we do for money. We do it because we like it, to keep ourselves busy.

We were trying a new thing. We gave their offer a thought and denied it,” she says.

It was in February 2016 when Dessert Directory was born. Muniba says she came up with this idea when she was being approached by a lot of people to sell her products without her brand name. She thought that there must be so many other people also working from home but who did not have enough money, resources, and time to run their own outlets individually, although they might be selling online.

“At that time there were no luxury desserts bars in Lahore. There were some [dessert places] but their offering was limited. We thought that Lahore lacks a proper luxury dessert bar where you

FOOD

can find 30-50 types of desserts under one roof which cannot be found anywhere else. I was already working on Prime Edibles. We decided that we will ask other people to join us as well. We started approaching different people, through different online food blogs. We started searching for home-based bakers. There were 600 people on the list who approached us. That is when we decided to start Dessert Directory, a dessert bar where others would also sell their products under their own brand names,” Muniba told Profit.

Dessert Directory advertises its brand online on social media pages but lacks a proper website or a phone app to take orders. Businesses these days aggressively leverage technology to scale and increase sales. Muniba says that the technology factor is there in the form of advertising and marketing the brand on the internet,

but there is no online order taking mechanism through a website or an app because they don’t have a delivery service yet.

“We were approached by food delivery businesses to partner with us to deliver our products through online orders, but they asked for a huge commission. The commission is going to go out of my pocket, I don’t see a benefit in doing that,” Muniba tells Profit.

Since the Directory has an online presence, and there’s no better way than looking up on social media about people’s perception about a business, especially in the food industry, Profit looked at what people, who visited Dessert Directory, had to say about the place on social media and found mostly positive comments, reflecting a good overall perception of the business. For instances where people had a bad experience at the place, they were promptly

It was in February 2016 when Dessert Directory was born. Muniba says she came up with this idea when she was being approached by a lot of people to sell her products without her brand name. She thought that there must be so many other people also working from home but who did not have enough money, resources, and time to run their own outlets individually, although they might be selling online 12

responded to by the management, and even the vendors at times.

Presently, Dessert Directory has 10 bakers -- all women -- on six-month contracts, selling their desserts on its platform. That is besides the in-house production of Prime Edibles, the main source of revenue for the business. Muniba says that the number of patissiers she works with varies and they have partnered with as many as 15 patissiers at one time and five of them have been with her from day one.

Though all the vendors presently working with Dessert Directory are women, there is no women-only bakers policy and anyone can be a part of the cohort to sell their boutique desserts at the Directory, given that they meet the quality standards of the platform.

“Initially, it was 8-10 bakers we started off with. They were providing us their products on a daily basis. Then we took it to 15. We also started in-house production. This is not a commission, not a profit-based business. We are just empowering entrepreneurs, people who are working from home. Right now, we have 10 bakers, but the number is always varying.

We don’t want everybody to start placing their product on our platform. We only allow very selective things. We take advice from different customers about what sort of dessert should we have here. We have tasting sessions. When the dessert is approved and finalised, that is when people would stock it here. There is a standard that we follow, and it has almost been three-

and-a-half years now that we have maintained our standard,” she says.

Likewise, there is no constraint for any of the vendors to leave the Directory either.

They can choose to quit if they are not satisfied with the sales or do not want to continue their business anymore for any reason, after giving a month’s notice. Moreover, the vendors are not restricted to sell their products on any other platforms, online or otherwise, while they sell at the Directory. According to Muniba, if she promotes other businesses, it does not mean she has bought them. Sarah Ali, one of the vendors selling her desserts at Dessert Directory under the brand name ‘The Pink Kitchen’, told Profit that she provides five different types of desserts to the bar after they were approved by a panel of six judges. And while she provides to the Directory, she takes orders online as well from her social media page without any objection from Dessert Directory.

A customer Profit spoke to found the prices of the desserts exorbitantly high for the desserts that were stocked there. A similar concern was also found online among the customers who had been to the Directory.

Muniba disclosed that partners provide desserts to the Directory on a daily basis and the sale price of the dessert is mutually decided by these partners and the Directory’s management.

The Directory only adds GST on the sale and a minimal service charge for people working there, which usually runs between Rs20-40, according to Muniba.

Sarah tells Profit that the sale price of her products at the Directory and what she sells online are similar, except that when the products are sold at the Directory, GST and service charges are added on top of it. It is similar for other vendors as well, says Muniba.

For its services, Dessert Directory charges a rent of Rs5,500 per month, per product, per vendor. The sales go back to the partners as revenue and whatever is unsold is either their loss, or they can sell on other platforms.

Sarah Ali says that she has been with Dessert Directory when they started and continued because it has been a good experience so far, and mainly because it has been profitable.

But while the business is profitable for her

vendors, for what Muniba charges her partners, the business would hardly sustain on its own with all the overheads and costs of operating an outlet on a rental property, an assessment Muniba agrees with. She, however, insists that the business is profitable because a major chunk of the revenue comes from in-house production of desserts by Prime Edibles, which also does catering and events.

“Our margins come from the in-house production we have for our brand Prime Edibles.

Initially, we had in-house production for drinks only, coffee menu and cold beverages as well.

Then we got into cakes and started introducing our own desserts as well,” she says.

“We treat Prime Edibles as a vendor like others. We have production for that on a daily basis. And Prime Edibles was already a brand.

Profit looked at what people, who visited Dessert Directory, had to say about the place on social media and found mostly positive comments, reflecting a good overall perception of the business. For instances where people had a bad experience at the place, they were promptly responded to by the management, and even the vendors at times

It started Dessert Directory as a second brand.

Prime Edibles is still doing their orders from our office here at Dessert Directory. We are doing fruit baskets, fruit bouquets and catering,” she tells Profit.

On a question as to why Dessert Directory does not charge its vendors a percentage of commission on each product sold, Muniba responded that there are certain profit margins that the vendors have set for themselves after calculating their expenses and if she starts charging a commission on each sale, the price of the product would increase to achieve those margins, decreasing the demand of the product.

For the three-and-a-half years that Dessert Directory has been in existence, it has failed to open another branch. Muniba says that though they have plans for expansion, it has been slow because she is the only one taking care of the business and has a lot to take care of to keep things running smoothly.

“It is a one-man show. I do everything myself. I have rebranded the shop recently, all the interior was done by me. I have to monitor our products and I am also training the staff myself.

In hospitality, the staff does not stick for longer periods. So the trainings keep going on. But we are planning another branch and will announce by the end of this year hopefully,” she says.

The Directory also does not allow any

FOOD

competition between vendors. “If somebody is offering Cadbury Mousse, no one else will be allowed to sell that Mousse. So there is no competition between two vendors. Even Prime Edibles’ product is different from other vendors.

We work as a single team, that is how we have developed ourselves,” says Muniba.

“If let’s say we have 30 desserts here, each product is different from the other. If people come, we want everyone to leave as a satisfied customer. We are also trying to kill the generic product, the market of customers that comes and only asks for a certain dessert, like molten lava cake or bread butter pudding. We were trying to get out of that. We have all sorts of desserts that people demand mainly. Everybody’s palate is obviously different. So we are trying to cover all of it,” she adds.

On a question how much a vendor makes on average, Muniba disclosed that each vendor makes a different amount as the sales for each product vary. “It depends on the sale. It is summer these days so the demand for fruity desserts is high. The demand for chocolates desserts is low. But it is also not true on the other hand because on the weekends and some days, even chocolate desserts would get completely sold out,” she says.

“I have made payments to my vendors of Rs50,000 at times for their sales and Rs150,000 at times as well. It varies. Each vendor makes a different amount and at different times,” she disclosed, adding that the earnings of each vendor are distributed on a monthly basis.

An unregulated enterprise?

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ccording to the guidelines provided by the Punjab Food Authority (PFA), all food-related businesses, including those selling online, are required to obtain a license from PFA for their business.

Once they apply for the license, the food authority checks their kitchen, food and supplies to

BUSINESS MODEL

Rs5,500

The fees charged by the Dessert Director per product per month per vendor in order to continue selling their products at their retail outlet, in addition to small markups on each product sold

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mark it safe for consumption.

Though Muniba says Dessert Directory is licensed by relevant authorities, one of the

NUMBER OF VENDORS

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The number of independent patissiers who are currently utilising the Dessert Directory platform to sell their products

vendors Profit reached out to, which supplies to the Directory and also sells online individually, expressed ignorance about the licensing requirements of the food authority and said that she does not presently have a license, but says that she maintains high hygiene in her kitchen.

A representative from the PFA told Profit that home-based kitchens should get a license from the authority as soon as possible before action is taken against them. PFA informed Profit that the license for home-based kitchens can be applied on PFA’s online app, and the license costs around Rs11,000.

The representative further said that the home-based kitchens also need to register with the PFA all the products they are selling, and the cost to register each product is Rs5,800.

“It is the same for all home-based kitchens in Lahore, except those in the Cantonment area, which fall under the jurisdiction of Cantonment Board,” he says. n

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By Abdullah Niazi

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dvertising has become spooky. Just imagine, how many times has it happened that you have nonchalantly Googled something – anything – a mattress, or a fridge, or a jacket, only for it to show up on your Facebook timeline with a link to shop for it online the next time you open the app on your phone? Or you sent your friend a message on WhatsApp asking for opinions regarding what place is best to get certain sports gear for instance. Next thing you

know, it is right there in a sponsored post on Instagram. Perhaps the most chilling one is when you have not even put anything on your phone, and an ad for something you were just talking about with someone in person shows up.

Targeted advertising has evolved – and with its level of invasiveness, and in turn, accuracy, it holds the key to the future of marketing. Because of its eerie prevalence, one imagines that it is set to leave traditional advertising in the dust. Sure, billboards are not going anywhere for now, but how long until companies realise there are much more targeted and efficient ways to advertise their products than buying expensive

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“Globally, it is considered a best practice to have a single TV ratings data provider that all advertisers and broadcasters can agree upon. This is done by tendering this service every few years and awarding a contract to whoever comes up with the most effective measurement plan as per the specifications of the tender. The same practice is repeated after few years to ensure healthy competition and latest methodology” Salman Danish, CEO of MediaLogic airtime or print space.

In Pakistan, it would seem like there is significant time yet. Because despite the rapid expansion of targeted advertising through social media, television channels are still vying for a slice of the whopping Rs82 billion a year advertising pie, of which Rs38 billion in spent on television ads, according to estimates

by Aurora magazine. And with hundreds of channels to choose from, companies have a tough time figuring out what slot of airtime they should pick to push their product to best reach their target demographic.

At the center of these decisions are television ratings, or Television Audience Measurement (TAM) numbers in industry jargon. These are those hallowed numbers that powerful media executives salivate over, and producers and hosts are willing to sacrifice an arm and a leg for. Every time an uncle sees something he does not like on television, the mantra he mutters under his breath is that the media sells out for ratings.

But television ratings themselves are a product – a currency as TAM providers like to call it. From the old days of diary entries, measuring media ratings is a complex exercise in the field of data science and analysis. At the center of this system in Pakistan is MediaLogic, and overnight ratings provider led by its founder and CEO Salman Danish. With a sample size of what they claim is a carefully selected 2,000 households, MediaLogic provides advertisers with data such as what age, gender and other demographic are watching what and at what time – allowing advertisers to optimize their buying of media.

But while MediaLogic claims to be an overnight ratings provider, they have not been free of scandal and controversy. In 2015, a back and forth spat with the Express Media Group had involved accusations of bribery, kidnapping, extortion and a plethora of unethical behaviours.

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Despite all this, the company continues to hold a virtual monopoly on the TAM services business – something it claims is a good thing that encourages a uniform ‘data currency’.

The hold of MediaLogic had prompted action in the recent past by the controversial former Chief Justice of Pakistan, Mian Saqib Nisar. Since the Supreme Court delivered its decision, new TAM providers have entered the market and all ratings now go through the Pakistan Electronic Media Regulatory Authority (PEMRA).

But MediaLogic still remains top dog in the industry, which begs the question: how exactly did Salman Danish come to wield this much power and influence? How do television ratings in Pakistan work in the first place, how has the system changed since PEMRA has become involved, and what is the future for the TAM industry? Profit takes a look.

The Nielsen rating

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ometimes, a product is so deeply influenced by a company that the product becomes known by the company’s name. And much as Coke become synonymous with cola, so did Nielsen with TAM services. The ‘Nielsen’ rating was the first of its kind television audience measurement system that used something called ‘peoplemeters’.

The people meter was a small box attached to a television set that would ask viewers to inform the television about their sex and age before they watched television to monitor their television-viewing habits. Today, it seems a primitive type of data collection. A sample of ‘Nielsen families’ would be paid a small stipend to have their television activity monitored and recorded. These families would make up a representative sample to provide advertisers with information that would allow them to most effectively place their product on

television.

So, when Pakistan was undergoing its television boom in the early 2000s, it was not so strange that the Pakistan Advertisers Society (PAS) approached AC Nielsen Pakistan to help them introduce people meters to Pakistan. Much like the rest of the world, advertisers were no longer satisfied by throwing money at the television and hoping something would stick. Now they wanted to know what age, sex, and social demographic was watching which channel at what time so they could directly take their product to them.

Before this big step from the PAS, Pakistan had still been using the diary system of ratings that were provided by Gallup – an archaic system even back in the 1980s when it was first introduced in Pakistan, which involved viewers accurately recording their television watching habits on a physical diary.

But all the hopes that the PAS had vested in Nielsen Pakistan were dashed when the company refused to do in the country what it was known best for – provide Nielsen ratings.

Back then, Nielsen had expressed a distrust in the market.

“I think only AC Nielsen can answer this [question as to why they refused to offer people meters in Pakistan]. Every company has its own investment priorities and its own risk profile. Pakistan offers unparalleled potential, but it also has its own pitfalls so as an investor you have to decide whether this is the right risk profile for you or not,” says Salman Danish.

After the possibility of Nielsen Pakistan taking on this task for the PAS had crashed and burned, there followed another attempt to get Kantar Media to take on the job – a distant second to Nielsen globally. But when that fell through as well, the PAS joined hands with the Pakistan Broadcasters Association (PBA) and the deal was finally swept up by Salman Danish and MediaLogic.

The sample size

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fter the contract was awarded to MediaLogic, they conducted an initial Establishment Survey of 3,500 homes, and selected a sample of 500 for people-meter installation and Nielsen-style ratings for the first time were available to advertisers. Today, MediaLogic has expanded to an Establishment Survey of 18,000 homes and a sample size of 2,000.

“These households are recruited as a sample of the population i.e. they need to be representative of the characteristics of the overall population. While trying not to make this too technical, I will explain the selection system,” said Salman Danish, in an interview with Profit. “This is done through a two-stage process. The first stage is called an Establishment Survey. This is a large-scale survey of the population (in our case more than 18,000 homes) from where demographics, lifestyle and TV viewership trends are documented.

Results from the Establishment Survey give us indicators on the parameters of the population such as gender split, socio-economic class (SEC) breakup, TV and cable penetration in each city.”

“These also become the targets for the sample. From amongst this data, then the sample is selected to represent the same breakups that the Establishment Survey results reflected. For example, if the Establishment Survey shows that 95% of homes in Karachi have cable, then our sample should also select 95% of homes with cable access and so on,” he goes on to explain.

MediaLogic has also recently partnered with Kantar Media. And while the overall methodology of MediaLogic remains the same, Kantar has been instrumental in the larger sample size. It has also brought the latest TAM technology to Pakistan – Kantar boxes.

These souped-up people-meters currently deployed in Pakistan are state of the art and the same ones used in UK and China panels.

“I also believe that the client-end software

SIZE OF THE PIE

RS38 BILLION The total amount of money spent on television advertising in Pakistan in the fiscal year ending June 30, 2018, according to Aurora, an advertising magazine

offered by Kantar is much superior and advanced than the one we were using previously,” says Salman Danish.

Despite this expansion, a sample of 2,000 in a country with a population of nearly 200 million does not seem representative – and the scientific method that goes behind TAM numbers seems compromised.

Across the border in India, which has a population of more than 1.3 billion, the viewership habits of over 197 million television households accounting for 836 million TV viewing individuals is measured by the Broadcast Audience Research Council (BARC).

BARC is a joint industry company founded in 2010 that is the world’s largest television audience measurement service. Its measurement system is based on 40,000 homes all across India.

The ratio of sample size to population in India is nearly four times larger than in Pakistan. But little can be done about this, since the sample size is a simple question of demand and supply. The more that advertisers are

Back in 2012, Aurora had reported on MediaLogic and people-meters as well. The report from seven years ago says that there is “a serious trust deficit in people-meters. The bulk of the controversy is related to two issues: erratic spikes and drops in ratings which have led people to believe that certain channels may be ‘buying’ the ratings; and the delay in the delivery of data (Medialogic delivers the data with a one-day time lag) leading to the conclusion that it might be doctored”

willing to invest in TAM numbers, the larger a sample there can be.

“This is totally correct and unfortunately not very well understood by people. The larger the panel, the greater the cost of research,” says Salman Danish. “However, our market, while being very large in population is not very large in terms of its market size. Therefore, clients cannot afford a very large sample.

Therefore, they decided to start with a very small panel.”

“So obviously the first and most important factor that influences the market to spend more is market size. If the media market keeps growing, the panel size will also grow.

The second factor is the importance given to research. Again, unfortunately in our market a lot of clients do not spend very big amounts on research and in times of financial pressures, research and advertising budgets are the first to go,” he goes on to say.

“Thirdly, I also feel that the number of international companies operating in Pakistan is an important factor. These companies are used to looking at this data and also understand the cost that is associated with TV ratings panels. Therefore they are much more willing to invest in larger panels that local clients. Of course, there are exceptions. There are some local clients who are very supportive and have been instrumental in expanding the panel.”

Salman Danish would have you believe that the relatively small sample is the result of a lack of vision on the part of advertisers.

But there seems to be something more at work that has kept MediaLogic at the top of the game. AC Nielsen had not joined the TAM fray because it lacked confidence in the market back in 2001. When contacted, they told Profit

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that since they do not have a presence in TV audience measurement and ratings in Pakistan, they would forego commenting in this area.

However, some officials did separately say off the record that not only did they lack confidence in the market, but also had to look out for their image as an international company, since the ratings business in Pakistan was a dirty one.

The court hearings

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n September 2018, a three-member bench led by former Chief Justice of Pakistan Saqib Nisar announced that TAM ratings would from then onwards come through regulatory body PEMRA. As a measure to curb malpractice in the issuance of ratings, the SC ordered ratings agencies to provide the viewership data they collect to PEMRA, which would then display the data on its website and use it to assign ratings independently.

It also issued official license forms and set a 2,000 sample size minimum for companies to operate as TAM providers. While other, smaller TAM companies had also been caught up in the new regulation, at the center of the issue was Salmand Danish and MediaLogic.

The case had gone to court after Bol TV accused MediaLogic of withholding its ratings, favouring other news channels and being in an unholy alliance with the PBA. In the courtroom, proceedings had gone in a way typical of the Justice Saqib Nisar era. The powerful Salman Danish was paraded in front of court, handed a contempt notice, threatened with the forensic audit and closure of his company, and publicly berated like a petulant child.

Justice Nisar did what Justice Nisar did best, he uncle’d and he uncle’d and then let Salman Danish go scot free. During the course of the proceedings, their lordships hammered away at MediaLogic for its monopoly, but when it came time to give a decision, PEMRA’s involvement was the only concession TAM providers had to make. In fact, the court also ruled that the PBA would no longer have anything to do with ratings, effectively given Salman Danish more power and influence over media ratings. And when Bol’s counsel argued that this would simply result in the creation of a cartel all over again, the court said the matter was settled.

Defending the idea of a monopoly in the TAM business, however, Salman Danish insisted that it was good practice to establish data currency. “This is a very interesting aspect of the TV ratings business. Globally, it is considered a best practice to have a single TV ratings data currency that all advertisers

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DECLINING IN SIZE

-9.5% Growth rate in advertiser spending on television in fiscal 2018 compared to the previous year, a more rapid decline that the 7% decrease in total advertiser spending across all media types

and broadcasters can agree upon. This is done by tendering this service every few years and awarding a contract to whoever comes up with the most effective measurement plan as per the specifications of the tender. The same practice is repeated after few years to ensure healthy competition and latest methodology,” he said.

“However, the Honorable Supreme Court felt that this practice should be adapted in Pakistan to allow multiple service providers and tasked PEMRA with this as a regulatory body. Medialogic became the first licensee of PEMRA fulfilling all their license requirements and is now operating under the new regulatory regime. While any new system encounters teething issues, so far our experience with PEMRA has been quite positive and we are delivering data as per the regulators specifications.”

But this was not the only time MediaLogic has had a controversial run in with the law. Back in 2015, Salman Danish had accused the Express Media Group of bribing MediaLogic employees to manipulate and get more favourable ratings for their television shows.

Express responded by claiming that Danish was trying to extort Rs450 million from them and accusing the ratings provider of a wide range of illicit activities, including but not limited to kidnapping, ransom and blackmail.

The fact remains, that people meters are easy to manipulate, and a single person having so much control of the data means that there remain unanswered questions about the possibilities of wrongdoing. What happened to Bol TV was a single case of MediaLogic withholding information. What happened with Express a scandal that can be read either way.

Back in 2012, Aurora magazine, Pa-

kistan’s leading publication dedicated to covering the advertising sector, had reported on MediaLogic and people-meters as well. The report from seven years ago says that there is “a serious trust deficit in people-meters. The bulk of the controversy is related to two issues: erratic spikes and drops in ratings which have led people to believe that certain channels may be ‘buying’ the ratings; and the delay in the delivery of data (Medialogic delivers the data with a one-day time lag) leading to the conclusion that it might be doctored.”

“Beyond those issues which people are willing to discuss on the record, there is plenty of off-the-record comment. Although no one will give exact names and facts, many say that the panel is subject to tampering. Others contend that the reason the system remains largely unregulated is because it is in the interests of the larger media buying houses and agencies (which endorse a particular channel or group of channels) to keep it that way,” it goes on to read.

The situation today remains the same.

Media buying houses and channels continue to hold that data is often slow to arrive by up to three days. MediaLogic claims that the one-day lag is also only because they have to screen the data, but the company’s detractors have raised the question of what exactly they’re checking if the data is all computerised?

“The situation was crooked as it was, but ever since PEMRA has come in, it has become even shadier,” says the owner of one major media group speaking to Profit off the record. He sees a more sinister angle to it, indicating that the involvement of PEMRA could be another censorship tool. “What PEMRA says will go, what the powers that be

tell PEMRA is what the ratings will be,” he says.

“Before it used to be Salman Danish himself, now it will just be Salman Danish and PEMRA. It used to be one man fudging the numbers, but now it’ll just be two or three doing with them what they please.”

“Meanwhile the advertiser will go on believing the ratings. Their people in Pakistan will tell the multinationals these numbers are legitimate and they will go on believing,” he ends.

“This is factually incorrect,” Salman Danish simply says. “There have only been a few instances in the past 12 years where data was not delivered the next day and these were only when there was a technical issue. For example, the government has at times in the past shut down cellular service in the major cities which restricts us from collecting data that day so obviously we cannot release data till we collect it. Otherwise we always deliver data next day. I don’t think there has been any such instance since 2015 when we switched to Kantar technology which has improved our data collection rate as well.”

The future

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he future of TAM services is a questionable one. We started this piece with the dawn of a new kind of advertising – one targeted to every single consumer instead of targeting demographics. In such a world, one wonders how much longer television and television audiences are going to be factors.

The data is already showing the trends.

According to Aurora, even as total advertising spending in Pakistan fell by 7% from Rs87.7 billion in the fiscal year ending June 30, 2017 to Rs81.6 billion in fiscal 2018, the market for digital advertising grew by an astounding 46%. Even more astounding: the pace of growth in digital advertising is actually increasing: in the fiscal years 2016 through 2018,

THE RAPIDLY GROWING PART

45.5% Increase in digital advertising spending in fiscal 2018 compared to the previous year, one of the few types of advertising spending to witness an increase over the past year

digital spending has grown by 27%, 22%, and 46% respectively.

Even within the world of television itself, some have said that the proliferation of direct-to-home (DTH) television itself could take down TAM provision in a single swoop.

“Not at all. The data DTH companies have is very different from TAM data. Nowhere in the world does DTH data become industry currency because of many factors.

Firstly, DTH data is never representative of the entire population, it only represents a small premium market segment,” Salman Danish counters.

“Secondly DTH data is not individual data, it is household data which is not what advertisers require. Thirdly and perhaps most importantly it is one distribution platform data. Channel placement, bouquet formation, pricing, all determine viewership on that platform and may be very different from viewership on other distribution platforms like cable, IPTV etc. So DTH data in terms of TV

During the course of the proceedings, their lordships hammered away at MediaLogic for its monopoly, but when it came time to give a decision, PEMRA’s involvement was the only concession TAM providers had to make. In fact, the court also ruled that the PBA would no longer have anything to do with ratings, effectively given Salman Danish more power and influence over media ratings. And when Bol’s counsel argued that this would simply result in the creation of a cartel all over again, the court said the matter was settled.

ratings is never considered industry currency for ratings.”

“Having said that, TAM companies like us have to be open to collaboration with new platforms like IPTV and DTH so that our data continues to remain representative. We have to evolve and create data platforms that accept and integrate with new data streams coming from DTH and IPTV. Combining these data streams, I believe will be the key to accurate TV measurement in the future” he ends.

Clearly Salman Danish is confident in his technology and secure in the thought of his company’s future. What remains, however, is the shroud of mystery that continues to surround media ratings in Pakistan. PEMRA, while giving oversight, still is only collecting and distributing the numbers to stop MediaLogic or other TAM providers from withholding information – they have no control over the numbers coming in.

Back in the earlier mentioned Aurora story in 2012, one of the suggestions had been a joint industry committee (JIC) to regulate the system. The only problem, again, had been a lack of trust in the transparency of the numbers. Across the border, also, the BARC was a similar concept to a JIC – a joint venture of the media industry to help each other out by promoting fair competition and regulating ratings themselves. Today, the same hitch remains with such an arrangement, and now with the Supreme Court ruling that PEMRA would distribute the ratings, the chances of a JIC are slim to none.

With all the mess surrounding what should simply be computer generated numbers and data, one wonders if Nielsen was not right all those years ago when they refused to get into what they saw would be murky waters. n

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OPINION

Nadeemul Haque

The opportunity of dead capital For the economy to prosper, Pakistan’s policymakers must consider a fundamental restructuring of the way the country utilises its productive assets

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conomics has become a science of the loudmouth with numbers. Economists come on TV to show off that they have numbers and predictions. They will invent all kind of estimates and terms that no one has heard of to prove how erudite they are. But never will they submit themselves to peer review which is the international yardstick of quality work.

Whenever I hear them speak, I worry that this is not the economics I learnt — and I worked with about 10 Nobel laureates.

These speakers and commentators always talk macro numbers — fiscal deficits and balance of payments, etc. — and always discuss

Nadeemul Haque is an economist and the former Deputy Chairman of the Planning Commission of Pakistan, and the former Vice Chancellor of the Pakistan Institute of Development Economics. He previously worked for decades at the International Monetary Fund.

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simple accounting numbers with great aplomb. For example, “we must increase revenues because the government is losing money”? Never “why is government losing money like there is no tomorrow.” Then someone will yell “we have money to repay and import bills that must be met, so look for aid or borrowing.” Why did we borrow so much? Why are our import bills what they are? Why is the government borrowing at a faster rate than the economy is growing? These questions are never asked by our economists and therefore never debated.

Adam Smith, the father of economics authored the “Wealth of Nations” to initiate worldwide study of economics. Since then understanding the forces of growth, development and income distribution have been the most important areas of study in economics. Individual behavior — consumption, savings and investment decisions –are studied to understand how they can be tweaked for increased welfare. At the heart of economics is the quest for increasing human welfare through expanding opportunity for self-actualization through innovation, entrepreneurship and risk taking.

Is all government expenditure for public good?

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eldom will you hear our economists talk of the Smithian grand quest of growth, development and welfare. Led by international donors their quest is to malign Pakistan as a nation of tax cheats and a den of corruption. Revenues must be increased without telling us what, if anything, will the government do for us. They remain unaware that a large majority of Pakistanis are paying income tax on a withholding basis on many transactions. It is well known that this tax withheld is never returned.

The mantra is that the government needs the revenue and it must be increased. My fellow economists think that all revenues collected by government will be utilized productively for the welfare of the country.

They never review the waste in the government: the numerous houses made for officials; the real estate developments made to provide plots to favorites; the wasteful and needless road widening for the cars of the rich; the expansion of sui gas pipelines even though we have run out of gas; whimsical projects that MNAs are allowed to direct for vanity reasons; wasteful expenditures on the PM or CM directives that are non-productive or too expensive; and ill thought out subsidies to the rich or political favorites.

The government is full of waste and no one wants to discuss this issue. Instead we are all ready to give it more money through a bad tax policy. The government has no money or time for clever research to promote economic transactions. The government has lost more than 3 trillion rupees in energy over the last 10 years. Unthinkingly this government is signing sovereign guarantees without thought or planning to build more and more energy. As a result, both the circular debt and energy cost are increasing to impose a huge cost on the economy. Yet, my fellow economists think that a wasteful inefficient and thoughtless government’s mistakes must be covered by more increased oppressive senseless taxation.

Where is growth and development?

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et the biggest issue I take with my fellow economists is that they never focus on growth and productivity. At most there will be the usual plea for industrialization and export promotion, for both of which the only instrument seems to be more subsidy in one form or another. For over five decades, these economists have pushed the flawed strategy of promoting the government coddled industry and exports. Despite lackluster performance, considerable subsidies, many tax concessions, and much tariff protection, industry grows sporadically and exports as a percentage of GDP remain virtually static. Yet the mantra is maintained.

Economics in Pakistan has indeed become a set of mantras. They even go to the extent of saying, “we know what is to be done.” “We have all the solutions.” Basically, what they are saying is no new research is required. The old mantras of more taxation for more subsidy to industry and exports is enough. Mind you this has been firmly drilled into us through a series of large advocacy programs organized by very expensive donor funding. Why do donors fund advocacy? Why do we allow expensive propaganda against ourselves? I will never understand.

For the last 50 years or so, we have been running on these mantras with committees, task forces and many, many donor-funded consultants. Yet our long run growth seems to be declining as is our productivity. Few new industrial sectors have opened up while the old industry remains largely uncompetitive and cartelized if the Competition Commission is to be believed. The economy has grown thanks to the orphan sector that economists do not talk of — service or domestic commerce.

Einstein said that doing the same thing again and again and expect different results is insanity. Back then there was no donor funding!

But now failed policies are repeated without much rethinking and it is not insanity. We merely call it “bad implementation.”

Our economists also have little to say about the mess that is the public sector.

Another mantra prevails here: “just privatize.” No matter that our previous thoughtless privatizations were not as successful as we thought — badly priced, accusations of insider transactions, and some still not fully paid for.

Is the purpose of privatization merely to rid the government of a bad asset? Why would someone buy a failing asset? Can even government monopolies be privatized? Is a private monopoly better than a public monopoly?

Should privatization not improve the market and consumer welfare? Mantras don’t consider these possibilities.

Think city-markets-governance

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ow I would like economists to think differently? In my book, Looking Back: How Pakistan became and Asian Tiger in 2050, I have outlined a different approach.

We must look at the economy as a complex system in which humans interact individually or in groups to learn, innovate and transact for their collective and individual welfare.

Spatially much of this interaction happens in cities where markets, institutions and the mass of people are located. Much of this activity is guided by laws and regulations that define markets both physical and virtual.

Economic growth is driven by technology that people in cities strive to develop to increase the exchange of goods and services in the market place. Discovery through exchange lies at the heart of the human enterprise.

Conceptualizing the economy properly in this fashion immediately suggests that at the heart of the economy is the city and its markets and how they are governed. My fellow economists must ask themselves if we have this nexus of city-market-governance configured for the requirements of the 21st century?

The answer is immediately obvious. We do not.

The Pakistani state can probably best be described as an attempt at the preservation of the colonial structures for continued ‘control and extraction’ now for the brown elite instead of the empire. Much of the legal system, the judicial system and the executive and regulatory agencies continue to function as inherited. If any innovation was made in these, it was to introduce politicization and corruption. The shortfalls of this system are often measured in the Ease of Doing Business indicators of the World Bank. Sadly, these measures distract from the main point: the need to modernize the state — reform it into the 21st century.

How can you expect the city and the market that is organized by a state that is not only stuck in past practices but has also been distorted for personal gain to provide for the needs of progress and discovery? Our cities lack modernity and hotly contested spaces for various mafias, one of which is officialdom that enriches itself through controlling city land.

Similarly, the colonial state so used to ‘control and extraction’ gives huge advantages to vested interests such as large industry and large landlords. Antiquated laws and judicial systems make transactions and businesses extremely complicated to the cost of growth and welfare.

Is it possible to expect this state to

deliver the kind of institutions, laws and governance system that the 21st century requires?

If not, how do we expect good things like exports and taxes to increase?

The colonial state chokes investment

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his state imposes a huge regulatory burden on the economy which does not seem to concern my friends. We estimated in the Framework for Economic Growth that I developed in the Planning Commission in 2011 that this regulatory burden may be as high as 70% of the size of the economy. It is clear that the economy is laboring under the yoke of obsolete, unreformed and distorted colonial governance structure.

Yet this issue is not of central importance to the economist at large.

Frequently, commentator economists lament the lack of investment in the economy — the investment-GDP ratio remains at 15% of gross domestic product (GDP) whereas in India it is over 30% and in China it is 40%.

Because these numbers are pronounced upon without understanding the structure of the economy, analysts seldom ask: “where is the room for investment?”

Dig deeper and you will find that the colonial enterprise is holding back investment in more ways than one.

As I state in Looking Back: How Pakistan became and Asian Tiger in 2050, the state controls over 70% of the market. With that big a footprint, market competition which is the premier driver of investment is crowded out by the state. In addition, crony capitalism which has captured the colonial state is able to erect barriers to entry in the form of SROs (statutory regulatory orders, bureaucratic code for selective tax exemptions), protective tariffs as well as exceptional access to inputs.

In such an environment, investors correctly find limited opportunity.

As if this were not enough, the colonial state lacks specialized skills to manage the requirements of modern public good provision.

Complex areas like energy and water management, city design and development and regulating markets are clearly of a lager era and far beyond the competence of the ‘control and extraction’ civil service.

The accumulated losses resulting from the poor management of the economy has led to repeated fiscal and balance of payments crises. IMF adjustment programs have frequently been requested but with little success in managing a policy coherence for sustainable growth. This policy uncertainty which once again arises from the lack of professional management of the economy, is a deterrent to investment.

COMMENT

Sprawls without commerce and investment space

hysically too space for investment has been severely restricted by the colonial hangover state. Modern city development was never a part of the colonial enterprise. They wanted people to continue living in old cities while the masters lived in airy suburbs. Natives had no need for serious enterprise. They would have small shops, limited schooling and limited space for modern activities. They needed to be controlled and the only enterprise necessary was to extract for the welfare of empire.

The bureaucracy and the army took over the role of the colonial state and immediately occupied the colonial habitations and proceeded to keep the colonial traditions alive. At first, they tried to keep everyone where they were to maintain the divide between the brown sahib and the natives. With the relentless population pressure, they had to reluctantly gave ground.

They protected their colonial habitats which by then had become the center of city and were interfering with commercial development as well as with city mobility plans.

Tight controls on building were kept, preventing the development of organized density, commerce, leisure, and even education. For decades, city demand for space for commerce, storage and warehousing, offices, education, leisure, mobility and many other functions increased. All these developments were forced into the informal sector through encroachments or violations of poorly conceptualized colonial zoning. Even today we are going through a cycle of litigation and demolishing encroachments which arose because of poor city zoning that sought to prevent the natural growth of cities.

The poor, commerce, and other constituencies counted for little in the colonial model.

But the growing elite, of which the bureaucracy, the army, and the judiciary were now a part, had to be accommodated. Responding to this demand as well as the availability of the car, the colonial state allowed for suburban development beyond the areas they had inherited from colonialism. As a result, cities have expanded to giant unmanageable sprawls with the centers being occupied by elite mansions and clubs instead of mixed-use high-rise development as in other cities of the world.

tion, etc. — all of which were dispensed by the colonial bureaucracy.

The country has remained beset with this early development model refusing to see fresh developments in economics. Our PhD economists remain rooted in the past of the planning models vacillating between prioritizing between agriculture and industry and looking for exports.

Domestic commerce, services and construction were deliberately repressed in an effort to develop what were thought to be leading sectors — industry and agriculture.

In 1996, the Nobel prize was awarded to Robert Lucas and in 2018 to his student Paul Romer. Both of them pointed to the engine of growth being the city, a place where people converge to exchange and share ideas, goods, money, services, space and activities. Many thinkers have pointed to the importance of the city in history as a crucible of innovation, entrepreneurship, knowledge and creativity.

It has also been shown empirically that cities are engines of growth are dense, walkable with mixed use, high rise city centers. Unfortunately, our cities are sprawls with estates for colonial officials and polo grounds in the middle. And sadly, this research has not reached our policy economists who sit on task forces.

Construction always leads development.

Even today, markets are continuously watching leading indicators many of which are based on construction activity. Go to any city in the world you will see tower cranes everywhere, many of them. A rapidly growing economy like China has sites that look like forests of tower cranes. Yet most Pakistani cities have hardly seen a tower crane. Look around you and you will see no tower cranes.

As analyzed above, in Pakistan, the continuation of the colonial enterprise has preserved colonial estates in the center of the city while also maintaining the colonial bias against enterprise in the middle of the city. To preserve this model, the colonial bureaucracy which controls the city has archaic zoning and building laws that are biased against density, walkability, mixed-use and high-rise. Is it any wonder that the construction industry is not a growth industry in this environment? Can we expect to accelerate our growth without a strong growth of construction based on real city development and not this colonial sprawl development?

Choked up engines of growth

Unlocking Dead Capital

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arly development advice suited the colonial bureaucracies for it prioritized industrial growth which policymakers conveniently put outside the city in industrial estates. They also derived further power since the development policy advice of the time emphasized planning industrial development through licenses, subsidies, cheap credit, protec-

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T

here is an opportunity for real and sustained growth acceleration and for huge improvements in welfare if Prime Minister Imran Khan takes up the challenge of changing the city paradigm. He must uproot the colonial centers that are located in busy downtowns and allow high-rise mixed-use

construction.

In most cities, city center land for urban regeneration is hard to get. The colonial enterprise has kept this precious capital inert for their private use and held back city development as well as employment and growth possibilities. It is time maker this dead capital work for us.

There is tremendous opportunity that is possible. The key challenge is going to be how to do it right for maximum public benefit. As an example, consider Lahore has more than 10,000 acres of prime commercial land held by the public sector in various areas. We must use this land for maximum value creation and employment gains. My tentative calculations show for only the five GORs (Government Officers Residences) which represent about 4,000 acres the following possibilities. n We can make about 35 buildings of highrise mixed-use buildings like Centaurus in Islamabad leaving more than half empty for greenery. Each costs, say, about $500 million, bringing the total investment required to $17.5 billion. n Employment in construction is estimated at about 5,000 people per building directly employed, and a similar number indirectly employed, bringing the total amount of employment created during the construction phase to about 350,000–500,000 people. n Each building will employ similar amounts or more when completed. n At an average height of 35 floors, this will be 225 million square feet of construction for all uses.

It should not be made a speculative play for trading. It should not be hijacked by qabza mafias. This land represents a huge part of city wealth.

My suggestion would be for all cities to create City Wealth Funds which should own this land and have these funds professionally managed. Professional managers can develop projects and sell these as public private partnerships on a “build, operate, and transfer” basis.

This could be a way for city to earn maximum revenue over a longer period of time. The timebound nature of these contracts would force quick construction and returns.

Sadly, the Framework of Economic Growth (FEG) of the Planning Commission did present this approach to developing growth acceleration to the cabinet and parliament in 2011 and 2012. Though the FEG was approved, it was never implemented due to the opposition of the colonial bureaucracy to preserve its estates. It will require a strong government to do this and good process to make this happen professionally, protected from politics.

If we want to progress, we must truly end vestiges of colonialism and move into the 21st century. n

COMMENT

Funco offers its services to families who want to combine a fun outing with physical exercise the whole family can participate in ENTERTAINMENT

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By Muhammad Faran Bukhari

f you happen to drive past the MM Alam Road in Lahore, you would notice a striking similarity among the business outlets situated on both sides of the road. Almost all of them are either restaurants and high-end cafes or clothing lines. A few hundred meters away on Gulberg’s Main Boulevard, stands Mall One, again housing a few clothing outlets and number of high-end restaurants that have recently become the go to place for the residents of the city.

On the other side of the boulevard, stands Funco, a trampoline park, that looks seemingly out of place among another cluster of shopping centers and eating outlets. The area the park covers is as large as what other medium-sized

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shopping centers are built on in the vicinity, begging the question that does building a trampoline park in the middle of food loving and shopping crazy Lahore makes good business sense? Profit sat down with Eeman bin Anwer, the man who runs and owns Funco, to find out.

“I worked in the field of banking in Washington DC for a period of six years, after which I moved to Dubai where I again took up an assignment with a Swiss bank. After working with the bank for two years, I decided to move back to Pakistan and venture on my own,“ says Eeman.

In the United States, Eeman had worked as a financial advisor and private banker at Merrill Lynch, one of the largest brokerage firms in the world. There, he advised high net-worth individuals on their personal investments. The Swiss bank he mentions is Banque Pasche, a Geneva-based private wealth management firm.

But switching from the financial sector to setting up a trampoline park is not move a lot of people make. However, according to Eeman he saw a gap in the market that compelled him into doing something in the kids and leisure sector.

“My kids were in Pakistan and I saw that there was not too much for them to do or visit.

You usually have parents going to the mall and then just sitting around while the kids play in the play areas. With this concept, I wanted both the mom and dad to have an activity that they could actively do together with their kids.”

However, Eeman says that Funco is not just an alternative for play areas but also an alternative to gyms. A study conducted by NASA in 1980 found that ‘the external work output at equivalent levels of oxygen uptake were significantly greater while trampolining than running, the greatest difference being about 68%’.

“We are introducing fitness classes as well. According to NASA 10 minutes of bouncing is equal to 30 minutes of workout. So you are having fun on the trampoline you get a quick

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“What international standards say is that there has to be clear jump of 19.5 feet.

We had to move our air conditioning units up to meet these standards. This is the only [trampoline] park in Pakistan that adheres to international standards” Eeman bin Anwar, founder of Funco fitness workout as well,” he says.

Currently, one of Pakistan national gold medalist gymnasts uses the facility as a training ground while another athlete from a team sponsored by the Water and Power Development Authority (WAPDA) offers boxing trainings to visitors.

“Gymnastics is an Olympic sport. However, most gymnasts in Pakistan do not have a platform where they can practise and get trained. Over here, we have the only facility in Pakistan where professional gymnasts can come and train,” he said.

However, having placed his offering as an alternative to play areas and gyms, Eeman feels that he is in competition with neither of these.

“We are neither competing with play areas or gyms. What we are offering is a blend of both,

where families can come and do something together that is also physically beneficial,” says Eeman.

Is jumping good for business?

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unco’s biggest competitor in Lahore is Bounce, another trampoline park situated inside the Emporium Mall. But while Bounce is situated comparatively on the outskirts of the city, Funco’s central location in Lahore has given it a competitive edge.

“This is the center of the city. Maybe if Funco was in the outskirts of the city, we would probably not be getting the amount of customers we are getting. Why? Because generally women after 7pm to 8pm, are reluctant to take their kids to such far off places,” says Eeman, “People who used to go to Emporium Mall now come here instead. We get people from Bahria Town. Since this is the center of the city, people from the outskirts are more likely to come here compared to people from the center who are reluctant to travel to the outskirts at

night. In this sense I think the location is key.”

Currently Funco charges Rs750 for a 30 minutes visit, Rs1,000 for a 60 minutes visit, Rs800 for 45 minutes (including special socks for trampolines) and Rs1,500 for unlimited time per day (including socks and water bottles).

Kids under 5 years of age are charged Rs550 for a 30-minute visit (including socks) and Rs750 for 60 minutes (including socks). A pair of socks individually costs Rs150.

According to Eeman, the prices charged

by Funco are almost 60 per cent less than the international prices. “Kids with a college ID can get a 50% discount during weekdays (from Monday to Thursday) and access the facility for around Rs375 for a 30 minutes slot,” says Eeman.

However, generally when it comes to domestic competition, Funco prices are on the higher end of the spectrum. At Bounce, a 45 minutes visit costs Rs400 (including socks), which is half of what Funco charges for a similar time span. Eeman justifies the higher price point on the basis of quality and adherence to international standards. “The whole park has been built in the United Kingdom. We had a whole team fly in from there who made the whole park right from scratch,” he says.

“What international standards say is that there has to be clear jump of 19.5 feet. We had to move our air conditioning units up to meet these standards. This is the only [trampoline] park in Pakistan that adheres to international standards.”

Unlike most other businesses in the vicinity, the park never had an official launch event. But despite that and the higher prices it charges, that the facility has done well from a business perspective over the last four months of operations since its beginning, says Eeman while refusing to give any estimates related to foot traffic, revenues or profitability.

However, according to estimates reported

in the print media, on average almost 500 people visit the facility on the weekends.

“We technically have not had a launch.

Why? Because I want to slowly take this on. My team has to be ready. At the end of the day it is a physical sport and people get hurt. How do we take care of that?,” says Eeman.

“We don’t want that we launch and have a rush of people coming into the facility. Even though we can take in a 150 people at one time, we put a cap at 85 to make the place safer.”

Something for everyone

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hat sets Funco’s business model apart from other businesses is that it focuses on catering to a large demographic segment.

“Our target market is age 2 and above. A large part of our customer base are the youth that are in the 12 to 18 age bracket. Then there is school and college crowd that comes in. We have a separate space for toddlers where they can come and play on weekends. We even have elderly women who come in,” says Eeman.

ESTIMATED TRAFFIC

500

The number of people per day who visit Funco’s trampoline park, according to estimates published in news outlets

Currently Funco has a number of schools on board that bring in students to its facility on field trips. “We have got the Lahore American School, Lahore Grammar School, Beaconhouse School System, SICAS and city school on board,” says Eeman.

In December 2018, the Supreme Court (SC) of Pakistan ordered a 20% decrease in the fees of school that charge in excess of Rs5,000, hitting hard on the revenues of most private upscale schools. However, sources alleged that while getting schools on board might be an easier way for Funco to get customers, it might also have opened a channel for schools to make additional money.

Eeman confirms that he has heard similar reports, but maintains that he tries to give the best price to schools. “We try to offer the best package from our side and we do not take a dime over that. After that what the schools does is their own inside arrangement with the parents. If the schools charge something over the price we give then I cannot comment on that.

I have heard that it is happening. But I haven’t gotten confirmation regarding it,” he says.

On the other hand, with a 30% discount aimed at corporates Eeman feels that companies and small start-ups can offer a separate revenue stream to Funco. “So what happens in other countries is that startups and companies like having days out for team building exercises.

Funco provides them a platform where they can come and have food, play sports and do activities together,” he says.

In the future Eeman plans to expand Funco throughout Pakistan and offer consultancy services to entrepreneurs who want to build similar parks. “We are open to consulting other parties and opening parks with them. If someone comes to us and tells us that they dont want a park this big, we are happy to help them as well and design their park. So it is an open business model in this sense as well.” n

ENTERTAINMENT

OPINION

Asif Saad

Why can’t we compete in global markets?

While none of these are entirely incorrect, I would like to dig deeper and understand why our industry could not find answers to these issues.

None of these are problems which could not be effectively countered by sound thinking and good management. After all, the same sort of issues have been successfully dealt with in the domestic market. I therefore hypothesise that management skills are an important missing ingredient and a major contributor to our failure in the world markets.

We do not like talking about poor management as it is always easier to blame others for our faults. But the truth is, that as an economy, we have been lacking in management skills required to compete in the global marMore than anything else, our main kets. I would like to shed some light on where we went wrong and what disadvantage is incompatible and can be learnt going forward. poor management skills We have seen some announcements recently from companies in Pakistan wishing to venture into export markets. We will look at how they stand to perform in view of this analysis.

To begin with, post the initial few decades, our entrepreneurs never hy are Pakistani businesses unable to felt the need to compete globally. They preferred to operate in induscompete in the global markets? What is it tries which served the domestic market where they could leverage their that inhibits them from breaking through networks. If you look at Pakistan’s largest conglomerates you will see bulk overseas? As our exports continue to of their investments in industries like fertiliser, energy, cement, sugar, autodecline, the commonly heard responses to motive, FMCG and services – all meant for the local population. these questions from the private sector are lack of government While these were necessary investments required for the domestic support, expensive inputs, energy shortages and a slowdown in market, they were relatively more attractive given their unusually low risk global markets amongst many others. On the other hand, the govand high returns and it is this equation which caused the problem. When ernment blames past policies including currency overvaluation, capital is scarce it will naturally chase lower risk options. It became too limited product range and underinvestment by the industry. strong an incentive for industrialists to resist the low hanging fruit and hence the largest business houses focused their financial and human capital on the domestic market. Their attention was diverted from the potential export-based investments which required longer-term investment horizons.

It is interesting to note that most local industrial groups started in the textile sector and many Asif Saad of them still have textiles amongst their portfolios, albeit a much smaller proportion of their overall is a strategy consultant business than what it was when they got going. who has previously worked While textiles were the only export industry in which local entrepreneurs found sizable success, at various C-level positions there were two problems with the strategy they followed. First, their investments were primarily in for national and the commodity end of textiles value chain which provided small margins. They either produced yarn multinational and grey fabric and later developed home textiles and basic garments business. corporations International yarn and fabric middlemen played the key role in purchasing these products from Pakistan while sales to large wholesale and retail brands were made via buying houses and visits to trade fairs. Revenues in all cases were dependent on big buyers who exerted their power in terms of the minimal margins provided to Pakistani suppliers.

Even so, survival was possible until the quota regime lasted since Pakistani companies did not have to worry about many expenses such as marketing, business development and research on new

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products. But as soon as the quota allowances under the General Agreement on Tariffs and Trade (GATT) – the predecessor to the World Trade Organisation (WTO) – regime ended, Pakistan suffered badly as manufacturers could not remain competitive in many segments when compared to Bangladesh, India, Turkey and many other developing economies.

Second, and more importantly, our managers did not see the change coming and never realised that they had little competitive advantage. Lack of appropriate business knowhow coupled with limited information about international markets meant that Pakistani producers did not understand the competition, did not see the shift in trends in products and markets, the changing industry cost structures and the new global supply chains. Consequently, they failed to enter the value-added segments at the right time, giving up market share to new entrants who were far better organised to address the changed market needs. Incidentally, the few companies which did invest in value added sectors and modernised their businesses have reaped considerable rewards for their persistence and continue to do so.

In many other sectors, Pakistan has developed manufacturing skills and can make good products. We have traditionally been exporting surgical and sports goods from places like Sialkot, our basmati rice is known for its superior taste and aroma and our artisans can take pride in their arts and crafts. But unfortu-

nately, in almost every sector, we have failed to brand and package our products to appeal to the developed world.

Our aesthetic sense remains old school instead of fresh, inspiring and wholesome. We rely on basic production capabilities while the world invests in superior marketing and sophisticated aesthetics. We also live in relative isolation from the world markets. As a society, our exposure to diverse cultures is limited and we find it difficult to understand people from different backgrounds. We like to cling to our ways and are apprehensive of breaking cultural boundaries, which is another reason why our managers fear challenging the status quo and have problems understanding other markets.

It is no secret that all our South Asian neighbours are much better amalgamated in the global economy. In fact, we will find it difficult to compare ourselves with any other Asian economy in this respect, apart from North Korea perhaps.

We have therefore followed flawed strategies, developed and executed by poor managers who had no understanding of global markets and preferred to remain isolated. Since we have never invested in world scale capability, we end up relying on management teams which are good enough to run operations in industries protected in one way or the other by the state. But this skill set has no idea how to operate globally. It is not qualified to operate in international markets neither can this capability be developed overnight.

This brings me to the interesting announcements recently from a few major companies to invest in export-oriented businesses.

While the thinking is appreciated and it is in line with the spirit of the times, I wonder if any attention has been paid to the various points I have raised here. They should consider moving up the value-added chain instead of investing in commodities which add little value and create few jobs. Instead, they should follow a country like Vietnam which is now producing smartphones and computer chips having begun with textiles!

Even if we were to give these organisations the benefit of the doubt around their export strategy, history tells us that our chances of success will be low if we do not develop an internationally oriented managerial workforce.

This is where the state, the private sector and academia must join hands and develop educational programs in international marketing, export sales, project management, overseas customer support & service, product design & development and foreign languages & cultural awareness.

In addition to classroom training, companies will have to expose their people to global markets through secondments, international conferences and wider travel at various levels in the organisation. Over the medium to long term, Pakistan could develop management skills which are suited for global markets. For those who dare to venture forth without these, we will just have to wait and see. n

COMMENT

The district is one of the poorest in Pakistan, but during Eid-u-Azha, animals from Sibi are prized and sell at exorbitant prices

By Bilal Hussain

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qeel Karim Dedhi is one of the richest men in Pakistan. He is also very fond of sacrificial animals. Raising slaughter animals is a tradition he takes considerable pride in. He spends what would be a fortune for many on buying cows and bulls every year. And he is particularly fond of cattle from Sibi.

Sibi is among the poorest districts in all of Pakistan. Nearly half of its population – 48.2% according to the most recent National

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Socio-Economic Registry (NSER) Poverty Profile report – live below the poverty line.

Aqeel Karim Dedhi, a stockbroker and real estate investor famous in the country’s business community by his initials AKD, has a net-worth estimated well north of $1 billion. And when Eid-ul-Azha rolls around, there is no place else he would rather get his cattle.

Sibi’s cattle is the most expensive and Dhedhi has a liking for them. Sibi’s bulls are the toughest in the world because they are all purebred, Dedhi was quoted as saying in the Herald.

He went on to say extol the virtues of Sibi’s cattle and the people who raise them, saying

that “the people of Sibi do not sell their cows, they do not allow inter-breeding.”

The statement, of course, is a misconception: animals grow bigger and stronger through husbandry that frequently requires cross-breeding of different breeds of cattle.

Nonetheless, whatever the reason for Dedhi’s preferences, there is no denying that the annual maweshi mela (animal show) that takes place around Eid-ul-Azha at his home is testament to this fondness for livestock.

Profit has learnt that at least 100 groups arrive at Karachi’s biggest maveshi mandi (cattle market) in Sohrab Goth from Sibi. Each

“Costs have increased and therefore livestock traders must be expecting to charge more as compared to last year. But the income of an average person has decreased during the last one year. The price of the livestock has gone up and the buying power has gone down. So, it’s a double-edged sword for the overall business on this Eid. This is the reason I am expecting a big slash in the overall trade” Mian Zahid Hussain, president of the Pakistan Businessmen and Intellectuals Forum (PBIF) , a think tank and business advocacy group group has between five to 10 people. There is usually a salesman, a sweeper, a person who prepares the fodder, and another who feeds the cattle, and any number of these functions can be performed by more than one person. The number of people in each group varies based on the number of animals a group brings. The traders or the owners of the expensive livestock are not usually poor but the staff that come along with them are. In these markets in Karachi, buyers perceive Sibi’s animals to be the very best money can buy, in large part because the cows and bulls are very large and white. This can mean a great deal of prestige for any buyer in their neighbourhood: a Sibi animal tends to attract a crowd when the animal is alive and being fed ahead of the festival itself, and many even attend

the actual slaughter itself.

Around 250,000 to 300,000 animals make it to the main animal market of Karachi that is spread over 900 acres of land, slightly bigger than Central Park in Manhattan, and about eight times bigger than Vatican City, the smallest country in the world by land area.

And it is not just the rich who splurge on buying expensive animals during Eid-ul-Azha.

Many of middle class buyers save money for the whole year to buy a sacrificial animal of their choice, often forgoing other purchases in order to be able to buy an expensive animal during that time of the year. Social prestige, combined with perceived religiosity are a powerful motivator for many people, though others perceive it as the best way to fulfil what they consider a

Sohrab Goth Maveshi Mandi

religious obligation.

Irfan Mujahid’s brother Asim Mujahid saves money throughout the year to spend on Bakr Eid. “My younger brother astonishes us every year when we go to buy a sacrificial animal.

When we are about to buy an animal for around Rs60,000 to Rs70,000 according to our budget, Asim ask us to increase the budget amount by Rs50,000 approximately and buy an expensive animal. He has been saving money throughout the year to eventually spend on buying a sacrificial animal,” Irfan said.

While the government does not keep track of precisely how much is spent on Eid-ulAzha sacrificial animals each year, it is estimated that nationwide, buyers spent upwards of Rs355 billion in direct spending on Eid-ul-Azha last year, according to Mian Zahid Hussain, president of the Pakistan Businessmen and Intellectuals Forum (PBIF), a think tank and business advocacy group.

The PBIF estimates that approximately 8 million sacrificial animals were purchased last year at a total price tag of Rs298 billion; another Rs26 billion went to butchers for the actual slaughter of the animals, and an estimated Rs10 billion was earned by the traders of hides. The PBIF’s estimates do not include the spending on other supplies such as animal fodder, rope, and other accessories for decorating animals, all of which see sharp increases in prices around the Eid season.

This year, however, is likely to be slower than last year, with PBIF forecasting up to a 40% drop in Eid-related economic activity in 2019 compared to the previous year. The main reason: the wide economic slowdown is likely to impact people’s spending on what is still largely viewed by many buyers as a discretionary item of spending.

“The condition of the economy is very bleak this year. I believe the economic activity this year would be around Rs200 billion on Eid. Activity in the livestock markets have yet to be observed despite the fact that Eid is just around

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the corner. It was not the case last year,” he said.

Profit sources corroborate that buying activity in the animal market is negligible so far this year, which was not the case last year.

“Costs have increased and therefore livestock traders must be expecting to charge more as compared to last year. But the income of an average person has decreased during the last one year. The price of the livestock has gone up and the buying power has gone down. So, it’s a double-edged sword for the overall business on this Eid. This is the reason I am expecting a big slash in the overall trade,” Zahid explained.

He added that the leather industry has been struggling due to an increase in the cost of doing business and is thus not able to take advantage of the massive rupee devaluation, which should otherwise have boosted the export-oriented industry.

“There will be fewer animals sacrificed this year. Many people who used to offer sacrifice of a goat would opt for a share in a cow. Many of those who opted for a share in cows may not be able to take part in the rituals at all this year. And despite the fact that there will be lesser hides this year, tanners would be reducing price for hides since they are already struggling,” he said.

A person who is qualified and willing to perform sacrifice ritual can fulfill their obligation by sacrificing a goat or lamb or take one share in a cow, which has seven shares. Offering a share in a cow is a cheaper option as compared to offering a sacrifice of a goat.

Karachi’s Mohammad Ali went to Mirpurkhas this year to buy goats but says it has been too expensive and he did not buy one. Traders were asking for Rs 30,000 to Rs 35,000 for an average healthy goat. He is now waiting for the

monsoon rains, which brings traders into the bargaining zone.

However, Ali says goats were also expensive last year as well as there was high demand and low supply. The livestock traders want to charge the same rate this year as well. But the buying power of the average buyer may not let them charge last year’s price. Either they have to

lower their expectations and charge less or take their livestock back with them. Dhedhi knows that many people consider his animal show ostentatious, an uncouth display of wealth, but he believes that sacrificial slaughter has to be done with ceremony. “My father and grandfather taught me this, and my children will do this after me,” he says. Much of what Dhedhi says and does is part of his family tradition and it seems it won’t be stopping with him.

In these markets in Karachi, buyers perceive Sibi’s animals to be the very best money can buy, in large part Livestock and the because the cows and bulls are very large and white. Pakistani economy ut what makes the display particularThis can mean a great deal of prestige for any buyer in ly egregious is the fact that livestock – while it may become big business their neighbourhood: a Sibi animal tends to attract a during Eid – generally a poor person’s crowd when the animal is alive and being fed ahead trade in Pakistan.

One in every six Pakistani households is affiliated the livestock sector of the festival itself, and many even attend the actual and it constitutes 11% ofwith the country’s GDP. slaughter itself. That 17% affiliated with the livestock trade,

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however, tends to be among the poorest households in the country.

This, incidentally, is despite the fact that Pakistan has among the highest populations of virtually every kind of livestock: among the top 10 populations of cattle, buffalo, sheep, and goats in the world. Yet that animal population is dispersed over a large human population that seeks to use them for subsistence-level livestock farming.

Over the past few years, several companies and provincial government have sought to remedy that situation by encouraging more Pakistani farmers to breed their animals for export, but that strategy has thus far yielded middling results at best. After increasing at an average annual rate of 27.8% per year for the 12 years between 2003 and 2015 reaching a peak of $264 million, Pakistan’s meat exports have declined over the past three years by 13.8% to $227 million.

“If we can’t compete in agriculture, then we should really just give up trying to do anything,” says Kazim Namazi, CEO of Global Gums & Chemicals, an agribusiness based in Karachi. The only publicly listed company that engages in the meat business is the military-owned Fauji Meat Ltd, which has been struggling to turn a profit since it was created in 2016. The company witnessed a net loss of Rs1.3 billion in calendar year 2018, virtually unchanged from a similar loss it experienced in 2017. The company’s revenues actually shrank by 9.9% during the year. Part of the problem has been simply trying to achieve scale in a market that is so fragmented.

There are hardly any cattle farms in Pakistan that have more than 1,000 heads of cattle.

This compared to countries like Brazil and the United States, where a single farm can often have over 1 million heads of cattle.

This lack of concentration of the animal population has proved to be quite a challenge: despite its proximity to the wealthy yet food production-starved Gulf Arab states, Pakistan’s share of the protein intake of those states is far behind its competitors. Brazil, from the other side of the planet, is able to sell several orders of magnitude more meat to the Gulf Arab states

Sibi Bull

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RECESSION EFFECTS

Rs355 billion

Rs200 billion

The amount of money spent in direct consumer spending related to Eid-ul-Azha in the year 2018, according to estimates compiled by the PBIF

Estimated amount of direct spending related to Eid-ul-Azha in the year 2019, according to preliminary projections by the PBIF

than Pakistan, which is less than a week’s sailing time from every single major port in the Gulf. For their part, the government of Punjab and Sindh in particular have sought to encour-

age greater investment in the sector, providing all sorts of incentives and infrastructure, including subsidies on feed and veterinary care for animals being reared for export.

And lest one think Eid might be an issue, it is not: the 8 million animals sacrificed during Eid represent a small fraction – less than 5% of the more than 160 million heads of livestock in Pakistan. The poor farmers in Sibi could certainly benefit from Pakistani beef being consumed in the nearby food-starved markets of the Gulf Arab states. For now, however, they mostly make do with the patronage of men like AKD. n

Around 250,000 to 300,000 animals make it to the main animal market of Karachi that is spread over 900 acres of land, slightly bigger than Central Park in Manhattan, and about eight times bigger than Vatican City, the smallest country in the world by land area

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