Profit E-Magazine Issue 34

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8 Weekly Roundup 12 Why ‘no profit’ still makes Zong happy 18 The FATF ‘grey list’ means more trouble for Pakistan than you think

24 24 Good cricket but bad business 28 What makes AkzoNobel go bullish on Pakistan?

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32 How high should a high-rise be 34 An economic imperative: Adding women to Pakistan’s workforce, substantively 38 Social media changing female entrepreneurship dynamic

Managing Editor: Babar Nizami l Joint Editor: Yousaf Nizami l Contributing Editor: Farooq Tirmizi l Business Editor: Agha Akbar Editor Reporting: Farooq Baloch l Reporters Aisha Arshad l Arshad Hussain l Bilal Hussain l Eleazar Bhatti l Syeda Masooma Ahmed Ahmedani l Director Marketing: Zahid Ali l Regional Heads of Marketing: Muddasir Alam (Khi) l Zulfiqar Butt (Lhr) Mudassir Iqbal (Isl) Design & Layout: Rizwan Ahmad l Illustrator: ZEB Photographers: Zubair Mehfooz & Imran Gillani Publishing Editor: Arif Nizami Contact: profit@pakistantoday.com.pk

CONTENTS

Readers Say This is an exemplary proof of how this corrupt political and Monetary systems join their hands to exploit the poors. Almost all of us will blame a poor milkman who add ice in milk to enhance its shelf life but we rarely listen about the exploration where the sugar mill owners delay the crushing just to reduce the weight of sugarcane sitting in the trollies. No one focuses on the fact that sugarcane is bought through paper money which was printed by banks through government permission. This monetary system which has no Intrinsic money (like gold, silver, commodity etc) behind it but which is based on Fiat currency which can be created out of nothing in the computers in the banks controlled by few rich people which are not trustworthy as well (how pity).

(Apropos: Sugar Sharks: How does the most powerful lobby in Pakistan get its way?)

Waqas Habib, Facebook The harvester will sell the sugarcane to govt on official rates on cash or same day po . the mill owner will buy the sugarcane from govt.

Time period of selling and buying should be set to prevent from the perishability of cane . if mill owner act in same manner the govt export all cane and import sugar for public .

Let their crushing machines get rusty.

(Apropos: Sugar Sharks: How does the most powerful lobby in Pakistan get its way?)

Fahad Alpa, Facebook

How to ContaCt

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

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So many disparities in your article. One thing I would actually like to clarify the waiting line is based upon the capacity of the mills to crush. Suppose a district is growing 20,000 tons but the seasonal capacity of all the sugar mills in that area is 10,000 tons? So you see the problem? And if there is an act existing, I guess it is for a reason right? I wonder why would they want sugar cotton plantation in the area?

Geographic feasibility would be the answer. The mills are actually running over their capacity to ensure continuous crushing. I guess you should have shown the other side of the picture as well.

(Apropos: Sugar Sharks: How does the most powerful lobby in Pakistan get its way?)

Ubaid Azher, Facebook Great story - but the mills aren't making as much money as you imply. I would support entire deregulation - no support prices and no ban on import of sugar.

(Apropos: Sugar Sharks: How does the most powerful lobby in Pakistan get its way?)

F.Zaidi @Oval54 Twitter

TV Channels should focus on this and other Mafia's and expose them and pressurise FBR to tax them and increase revenue, or maybe the COAS can take notice!

(Apropos: Sugar Sharks: How does the most powerful lobby in Pakistan get its way?)

Farrukh Sheikh, Founder HUB FHS Retail chain of stores

Well written article but the writer has little exposure to the technical side of the sugar industry and the costs associated.

The industry in general is operating on v low margins and some of them are practically out of business because its not viable to produce sugar at rates set by the government. PSMA officials can explain the situation but somehow they didn’t respond to this author.

(Apropos: Sugar Sharks: How does the most powerful lobby in Pakistan get its way?)

Saad (Profit website)

Maybe this year's losses will dissuade other farmers also from growing sugar-cane, killing the goose that lays the golden sugary eggs. It has dissuaded me. Sugar-beet is environmentally less harmful.

(Apropos: Sugar Sharks: How does the most powerful lobby in Pakistan get its way?)

Imran Ahmed, retired physician, farmer

A very nice article… the research done shows the hard work that has been put in… also you should do the same for more companies which are not under focus.

(Apropos: Is Treet Corporation Pakistan’s next big conglomerate?)

Furqan Punjani

COMMENTS

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By Farooq Baloch araz Ahmed, a resident of Anda Mor, North Karachi, wakes up at four every morning and sets off to his vendor’s home closeby. Leaving his motorcycle there, he logs into the Uber app and starts his day. “The first ride is usually to the airport or Cantt. railway station,” Ahmed tells Profit, carefully navigating his black Daihatsu Mira on a busy Korangi Road towards DHA Phase 2, one of his favorite areas that gives him ride after ride. In his 12hour workday, he caters to commuters from various parts of Karachi to meet his vendor’s daily target and earns Rs80 per ride in commission. For him, ‘fast Internet’ is crucial for smooth functioning of the app.

Though at a nascent stage, the growing use of data-intensive apps like Uber and Careem has increased data usage in the country. It has become an important source of earning for telecom operators whose revenues are stagnating because of over-the-top services (OTT) such as WhatsApp that offer free voice calls and text messages -- the same services, which were telcos’ core business until recently.

These ride-hailing services require drivers to have a reliable smartphone and a portable high-speed Internet (mobile broadband) connection. With Jazz (formerly Mobilink), Telenor, Zong and Ufone all offering mobile broadband services, choices are aplenty. But, booking a few dozen rides, at least in Karachi, would confirm an overwhelming majority of these drivers use Zong’s data service -- who is number two in that area is anybody’s guess because there is no public data to ascertain that.

“It’s the cheapest service and offers excellent network quality in every part of the city,” Ahmed says of China Mobile Pakistan, which operates under the brand name Zong. The market experts we spoke to second the cabbie, saying Zong’s success, particularly in 4G where it had the first-mover advantage, is mainly a function of lower price, higher network quality and a wider coverage.

China Mobile, the parent company of Zong, acquired Paktel in 2007, to become the latest entrant in what was then a five-operators telecoms market – the company at that point had a tiny 2% share in the market. Known for selling its services on prices lower than industry average, it fought Ufone tooth and nail in the price-sensitive, low-end voice and text messages (2G) segment, giving the latter a run for its money.

It was the first operator to sell subscriber identity module (SIM) cards for free to quickly expand its subscribers. Back then, naysayers, particularly competitors would mock the company, predicting it won’t survive long with this strategy.

Zong neither saw it as an issue, nor gave a whit about the critics. Speaking to this correspondent in late 2012, Zong’s former chief executive Fan Yunjun had said they were under no hurry to increase their tariffs. Until 2011, Zong was the smallest player in the market, but the company’s aggressive strategy of lowering prices to expand its customer base helped it surpass Warid Telecom (now Jazz) in fiscal year 2012 and Ufone in fiscal year 2014.

With all mobile phone makers and service providers looking to tap into 4G, the Chinese are once again using economies of

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scale to take on the European giants, Jazz and Telenor in the high-end data segment, which is touted as the “next oil” by experts.

That said, there is a downside to this strategy. More than 10 years into the market, Zong claims that it has yet to book its first-ever profit. “Our focus is to expand into, and develop a sustainable 4G ecosystem, profits will follow,” Maham Naeem, Director Corporate Affairs and Director Strategy, China Mobile Pakistan tells Profit over phone -- an indication that it is unlikely to increase tariffs anytime soon.

Explaining, the company’s strategic head said Zong 4G has a very unique business model. “For us, providing the best customer experience is the top priority. We are determined and focused on transforming the lives and creating a digitally inclusive Pakistan.”

The company, in its responses to Profit, clearly states that being the official Chinese cellular company in Pakistan, their strategy is to enable connectivity for the government, businesses and people of Pakistan and provide them with wider and faster 4G network thus not worried about profits even 10 years after commencing operations. Both competition and critics may mock Zong for this strategy, but a telecom expert sees method behind this madness.

“If the industry is earning $2 [ARPU] from voice, Zong is earning $10 from data,” a telecom expert told Profit, requesting not to be identified. “Their strategy is good and it has even worked.”

Unlike voice where it is still at number three and has a much lower Average Rev-

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‘PAKISTAN IS A STRATEGIC PARTNER FOR CHINA, OUR FOCUS IS TO DEVELOP A SUSTAINABLE 4G ECOSYSTEM WHICH WILL BE AN IMPORTANT PIECE OF THE PUZZLE FOR CONNECTING MULTIPLE PROJECTS OF CPEC ACROSS PAKISTAN. PROFITS WILL FOLLOW’ Maham Naeem, Director Corporate Affairs and Director Strategy, China Mobile Pakistan enue Per User (ARPU), Zong enjoys an unprecedented lead in the 4G segment, the next battleground for telcos. It is the largest 4G operator in the country, accounting for more than half of this segment. Its share in 4G is 10 percentage points higher than that of Jazz and Telenor put together based on Pakistan Telecommunication Authority (PTA)’s data for January. Even in the combined category of 3G and 4G, Zong is now number two, closely following numero uno, Jazz.

“4G throughput is much higher. It is twice as much of 3G throughput,” said the telecom expert -- measured in megabits per second (Mbps), throughput is the amount of

data passing through a network at any given time. “So on that basis, they may actually be the largest data provider in the country,” he said. The expert further said Zong is not bound to report their financials publicly, but he would not rule out the possibility of them actually being in profit.

Both Jazz and Telenor, the market leader and the second largest player respectively, are growing their 4G subscribers at a faster rate, but they are struggling to catch up with Zong 4G, said Parvez Iftikhar – an Islamabad-based Information and Communications Technology (ICT) expert.

“When it comes to data, Zong is far ahead of the competition and the latter will take a lot of time to catch up with them,” Iftikhar said – by PTA stats, Zong had a 55% share in 4G market at the end of January but the company claims it is 70%.

Bullish on 4G, the company plans to invest $225 million in (4G) network expansion this year, which will take its total investment in the country to $2.4 billion.

Once the smallest player, Zong has now become a data giant with its 4G footprint expanded into more than 300 cities. It has even rebranded itself as ‘Zong 4G’, but how it got there makes an interesting study for both local and international businesses operating in Pakistan because of Beijing’s growing interest in the country.

Chinese companies are often accused of using economies of scale to destroy markets,

small wonder then Pakistani traders have expressed their reservations regarding the multibillion dollar trade project, China Pakistan Economic Corridor (CPEC). Lower prices may benefit consumers in the short-term, but in the long-term it discourages other investors because of a low price-low profit scenario, they say.

If one can recall, the price wars sparked

by Zong and Ufone made it extremely difficult for operators to compete because it squeezed their margins. A low tariffs and high tax rates scenario would mean players had to fight in pennies. Besides Warid’s merger with Mobilink, other players went for consolidation and some made layoffs and reduced their physical presence. Eventually, there were talks of introducing a floor price to end the price war.

“Over the last few years, Zong 4G’s core focus has been on value and scale both,” Naeem of Zong says. As far as the floor pricing is concerned, every operator has its own strategy that’s tailored to their own business needs, he said. Explaining, the Director said they are constantly increasing their scale, “but we don’t believe in scale only”, customer experience is a core focus area for the company because no business can have a sustainable future without it.

Diplomacy takes precedence over acumen ne can’t accuse it [Zong] of selling low, they are the leader in the high-end 4G market,” said the telecom

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‘IN THE ABSENCE OF COMPETITION IN 4G, ZONG PLAYED AGGRESSIVELY IN TERMS OF NETWORK ROLLOUT. WHEN IT COMES TO DATA, ZONG IS FAR AHEAD OF THE COMPETITION AND THE LATTER WILL TAKE A LOT OF TIME TO CATCH UP WITH THEM’ Parvez Iftikhar, ICT consultant expert quoted earlier, praising the company’s overall strategy. “They were the first ones to move on 4G full throttle and got an early mover’s advantage to capture that market,” he said referring to April 23, 2014 auction of licenses for next generation mobile services where Zong was the only operator to bid for the 4G spectrum.

Iftikhar, however, seems to disagree.

“Zong certainly has a competitive advantage in 4G, but the situation would have been different if the government had structured the auction in a better way.”

Explaining, the ICT expert said firstly the base price was too high, which discouraged investors to participate with enthusiasm. The base price for 10 MHz of 3G

license was $295 million while it was set at $210 million for a 4G license. Secondly, the government imposed conditions on the 4G spectrum. That meant an operator had to buy 10 MHz of 3G spectrum to qualify for the bidding of a 4G license, making the latter all the more expensive from an investment point of view. “It didn’t make a good business case.” Those who bought 5 MHz of 3G could not qualify for 4G either.

Moreover, the government restricted the 850 MHz spectrum – of the defunct Instaphone – to a new operator. This frequency is a lucrative spectrum all over the world and had a demand in Pakistan because it could match with frequencies of both Warid and Telenor. Because of these conditions, both the 850 MHz and 10MHz of 4G remained unsold. If these conditions were not there, a player like Telenor would never have wasted that opportunity, he said.

It may be added here that Telenor Group’s then president and CEO Jon Fredrik Baksaas flew to Islamabad just before the auction and met former finance minister Ishaq Dar and minister of IT and telecom Anusha Rahman to convey his reservations regarding the auction including high prices. At that time, Telenor was so apprehensive that it even conveyed to Islamabad that it might even exit the market if its reservations were not addressed, according to an industry source.

One might argue if the spectrum was so expensive and didn’t make a business case, why would Zong go out of the way to buy 10MHz each in both 3G and 4G.

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Unlike other operators all of whom were private investors, says Iftikhar, Zong’s parent company is 100% owned by the Chinese government, which changes things – China Mobile had $70 billion in cash reserves months before the auction.

Regardless of all the success Zong had in 4G, Iftikhar still believes it wasn’t a wise decision from a business point of view. And, he may be right because there is enough credence to the talk that the Pakistani government had pushed its Chinese counterpart to make a major investment in the spectrum auction – and Zong’s responses to our queries suggest the same.

“Pakistan is a strategic partner for China, and the friendship between the two countries is very deep. We value this national level relationship much more than just profit,” Naeem said.

Elaborating on his point, Naeem said, Zong’s model and business strategy is different because it is owned by the Chinese government and has a strong financial backing by Beijing. Zong was the single largest investor in the 2014 spectrum auction contributing more than $500 million.

“Our focus is to invest in network development, we have re-invested all our earnings in Pakistan. We have never taken the money out of the country and this is also going to be our future strategy,” Naeem says. “Our communications network will be an important piece of the puzzle for connecting multiple projects of CPEC across Pakistan.”

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The first-mover advantage trong financial backing of the Chinese government and diplomacy may have been the prime reason for Zong’s early bet on 4G. But the company has made full use of its first-mover advantage in that area.

Both Telenor and Jazz also ventured into the 4G space later on, but by the time they started their rollout, Zong was sitting atop four million 4G users – the early adopters of this high-end broadband segment.

“In the absence of competition, Zong played aggressively in terms of network rollout,” says Iftikhar, adding it turned out to be a timely decision for the company.

When other operators were deploying 3G, which is an outdated technology, Zong was upgrading its towers to 4G because they had deep pockets. So on one side it was behind Jazz and Telenor in 3G, but on the other hand it was leading in the 4G segment. It currently has 5 million plus 4G users, followed by Jazz’s 2.2 million and Telenor’s 1.8 million.

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Is the honeymoon over? fter an initial surge, which almost entirely went to Zong, the growth in 4G subscriptions seems to have slowed down. However, in recent months both Jazz and Telenor have been growing their 4G user base both in percentage terms and absolute numbers at a much faster rate than Zong. In the first seven months of fiscal year 2018, Telenor has ex-

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panded its 4G user base by a whopping 210%, followed by Jazz, which increased its 4G users by 138%. On the other hand, Zong increased its 4G users by 25%.

Since Zong’s base is large already, the percent increase may not give the actual picture, but even in absolute terms both Telenor and Jazz have sold more 4G connections – averaging close to 200,000 per month – during the last five months compared to Zong’s 100,000 per month during the same period.

Do the latest number indicate end of Zong’s honeymoon period? Since Telenor and Jazz still have larger user base on overall basis, including 2G, which still accounts for two-thirds of the market, they will just need to convert their existing users to 4G. Simple it may sound, yet it is not.

Experts believe, even at current pace, counting on Zong not moving a muscle to fight back, it will take Telenor and Jazz a couple of years to match Zong’s 4G base.

On an overall (3G plus 4G) basis, Jazz is leading the data segment with 16.7 million broadband subscribers followed by Zong’s 14 million, but a deeper look explains why experts find Zong to be far ahead of its competition.

Experts believe Zong has 10 megahertz (MHz) of 4G spectrum, which is largely unused because of its lower subscriber base. Moreover, it has highest number of 4G base transition station (BTS) towers or cell sites in the country, which translates into wider coverage. In other words, it can absorb many more users without compromising on speed and quality. In other words, Jazz and Telenor have to increase the number of their 4G towers to outpace Zong. And that will take time.

However, experts also say Zong’s lead is mainly a function of first-mover advantage, and who ever has better strategy from now onwards, will be the leader. As this report is being filed, Zong has its new CEO join the company. But it continues to play aggressively by keeping tariffs low even in data.

Ifitkhar, the ICT expert, says Zong will gain more subscriptions and may even snatch greater share from its competition, especially from Jazz if the latter’s OTT app Veon doesn’t click. “It is too early to say anything about Veon, which has just launched, but I don’t see Jazz and Telenor catching up with Zong 4G in the near future.”

Though the current focus of 4G rollout

is the previlleged consumers, who are early adopters, experts believe Zong will go further down to the bottom of the pyramid. The 4G penetration remains under 10%, and a large number of mobile phone users still doesn’t have a 4G compatible smartphone.

For example, in case of Ahmed, the Uber cabbie, both the phone and the data package is paid for by his vendor. “I live in a rented house and can’t afford a smartphone of my own,” Ahmed says.

In an emailed statement to Profit, Zong explained that it would continue to invest in the 4G market. Zong is opening up its customer care centers across Pakistan when others are closing theirs, it said. “We don’t have an urban or rural area policy, we go to areas where we see potential even if it already has presence of other operators,” Naeem says of Zong’s expansion strategy.

Talking to an obscure industry web portal, Zong’s ex-CEO Liu Dianfeng said recently: “Our core desire with respect to the local market is to build on our technological edge in 4G LTE to revolutionise the lifestyle of Pakistani people. This includes expanding both, our Network Infrastructure and data based product portfolio. It’s a long journey and it will take time but the market is reacting stronger and stronger in this area every year, especially after the 4G launch in the country.”

OTTs, a threat or opportunity? s per a report by Profit in a recent article, data now accounts for 30% of industry’s total revenues, up from 21% of the previous year, but this growing usage of data is not translating to growth in overall revenues of the telecom sector.

OTT apps like WhatsApp, Viber, Skype and Facebook Messenger use the incumbent’s network and provide free messaging and voice and video calls, denting their revenues. On the hand, operators are forced to invest in infrastructure to cater to the growing demand for data. And things are going to get worse. According to a research by McKinsey & Company, the OTTs share could be as high as 60% of messaging and 25% of voice revenues this year.

To counter the OTT threat, Veon, the Amsterdam-based parent company of Jazz, launched its own OTT app, also called Veon, in several countries including Pak-

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istan. Besides several other features, Veon offers free messaging and calls to Jazz subscribers even if their credit is nil, the unique selling point for the app to counter international rival WhatsApp. “If we didn’t become an OTT, WhatsApp would kill us. The risk of not taking this risk is much higher,” Jazz’s Chief Aamir Ibrahim said at the time.

However, soon after Jazz started promoting Veon, Zong came up with an offer to give its data subscribers free and unlimited access to all WhatsApp services on all networks anywhere in the world, clearly indicating its core strategy regarding the threat of OTTs. “OTTs are the future and eventually everyone has to move in that direction. It is a question of when, not why,” Naeem said, adding Zong didn’t view it as a threat and was not scared either. “We rather want to adopt it and partner with OTTs because it helps bring more people on data.”

Explaining, the Director said, “4G handsets penetration is less than 5%, so we don’t want to build our entire model around one app.” Responding to a question about WeChat, an OTT app that has taken the Chinese market by storm and is said to be direction Veon is taking, he said, “WeChat was successful because the 4G ecosystem in China was mature enough to support it.”

Naeem further said even with the presence of 4G technology it took time for WeChat to become a hit among the users.

Overtime, it has become a standalone mo-

bile app with over 980 million active users and is known as an ‘app for everything’ in China, but the market dynamics are different in Pakistan, he said and it will take a while before 4G is fully mature in Pakistan.

“OTT are the future and have the potential to fill many technological gaps that still exist. Hence, we would always look forward to collaborate with OTT providers,” he said.

As opposed to Veon, which ventured into OTT to lure customers to its network, Zong’s strategy is to bring people to data using existing platforms, like Facebook, WhatsApp, Uber and Careem, which are already popular among a large segment of population, said the telecom expert. “Once they have brought in consumers in big numbers to their data network, then products like Ali Baba and WeChat can be introduced,” he said.

Giving an example, the expert said majority of Uber and Careem drivers experienced data and smartphone for the first time because of Zong. This also holds true for Ahmed, the cabbie. If it were not for Uber, he would wait longer to experience a 4G-compatible smartphone.

Ahmed earns more than 25,000 a month but still has a basic phone with no Internet connection. “I will buy a smartphone when I will drive my own Uber [car],” he said. His objective quite obviously is leasing out a car in the next 18 months – followed by a data connection. Which network? “Of course, Zong!”, he said, adding, “for it is the cheapest one can find.” n

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Don’t be fooled by those who say it will not impact the economy in the short run

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By Farooq Tirmizi t Profit, we have normally tried to stay away from politics as much as possible in our coverage of Pakistan’s economy. This is not as the result of some misguided belief that politics does not have a profound impact on business and the economy, but rather because we feel that there are already enough articles on Pakistan’s economy, published in local and foreign press that have the obligatory paragraphs about nuclear weapons, terrorism, and religious extremism. We would much rather talk to you about the “economy” part of Pakistan’s political economy.

But sometimes, the “political” is inescapable.

It is not simply the fact that Pakistan will get placed on the multilateral Financial Action Task Force’s (FATF) so-called “grey list” in June of this year, an action that is by its very definition at the intersection of the otherwise divergent worlds of counterterrorism and global finance. It is the fact that Pakistan’s civil servants and diplomats walked into a strategic blunder of epic proportions by failing to read the extent to which the tide of global power politics has turned against the country.

Because make no mistake: this is much more than about arcane rules and procedures at banks about anti-money laundering (AML) and countering the financing of terrorism (CFT). This is about the fragile foundations of Pakistan’s macroeconomic stability and the extent to which they are still dependent on the largesse of both Washington and Beijing. And if Islamabad does not swiftly and meaningfully change its behaviour, the government of Pakistan will begin to notice a sharp difference in tone and attitude during their next few conversations with the International Monetary Fund (IMF), especially later this year.

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The technical details he FATF is a multilateral organisation originally created in 1987 by the G7 group of large industrialised nations to counter money laundering. After the terrorist attacks in the United States on September 11, 2001, the organisation added countering terrorism financing in its mandate. The FATF is headquartered in Paris.

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The FATF technically has no legal powers and only consists of voluntary guidelines and cooperation agreements on AML/CFT regulations for banks and other financial institutions. In reality, however, its guidelines are being taken increasingly more seriously and have significant repercussions for a failure to comply.

At the apex of the organisational structure of the FATF is a group of countries that are directly members of the FATF, a group that includes the United States, most of Western Europe, China, India, Brazil, Turkey, and a few other countries. Other countries around the world are members of regional organisations that fall under that group. Pakistan falls into this second category of countries, which are not part of the policymaking process of the FATF. The lists of jurisdictions ranked by their level of AML/CFT risk are maintained by the organisation’s apex body, which for convenience many journalists have taken to talking about as the “grey list” and the “black list”. The actual name of the grey list is “jurisdictions with strategic AML/CFT deficiencies for which they have developed an action plan with the FATF”. The name of the blacklist is “jurisdictions with strategic anti-money laundering and countering the financing of terrorism (AML/CFT) deficiencies for which a call for action applies”.

You can see why people prefer grey list and not the blacklist.

What does all of that jargon mean in layman’s terms? It is easiest to illustrate this with an example.

Let us say that you are Gul Ahmed Textiles. You own a factory that makes readymade garments, in which you have invested millions of dollars, and you rely on export orders from the United States and the European Union for your business. When you meet an American buyer from let’s say Macy’s at Heimtextil (a trade show in Europe), they do not know you and you do not know them, but there is a potentially profitable relationship to be had, if only the trust barrier could be resolved.

That is where the global banking system comes in. Gul Ahmed will go to a bank in Karachi and say they want a letter of credit to be able to export their goods to the United States. Gul Ahmed’s bank – let’s say Faysal Bank – will then contact their corresponding bank in New York, say, JPMorgan Chase. JPMorgan Chase will then connect

with the Macys’ bank in Chicago (US Bank, for example) and serve as an intermediary to ensure that the transaction takes place.

Faysal Bank will procure evidence from Gul Ahmed that they have put the goods on a ship in Karachi, bound for the port of New York and New Jersey. The US Bank, meanwhile, will hold money in escrow from Macy’s and will inform JPMorgan Chase that it has done so. JPMorgan will then inform Faysal Bank that the money is in the bank and ready to be wired to Gul Ahmed as soon as the ship safely reaches New Jersey.

This is of course a highly simplified version of what happens, but in a nutshell, that process is the lifeblood of global commerce.

In between, however, there are several steps that take place. Before deciding that it will be the corresponding bank for Faysal Bank in the United States, for example, JPMorgan Chase will have to undertake due diligence on just how trustworthy an institution Faysal Bank is. Among the factors they will look at are the AML and CFT compliance procedures that are in place at the bank.

Now, obviously, if every corresponding bank had to physically inspect and examine every other corresponding bank’s branches and audit them for AML and CFT procedures, nobody would ever have enough time to do business with anybody else, so in reality, they rely on measures of risk from third parties, one of the most important and trusted of which is the FATF.

The consequences of the lists o if the FATF says “banks in these countries do not have good AML/CFT controls”, that puts banks of other countries in a bind. Their reaction to how to proceed next is dependent on what the FATF says next. If the FATF says “they do not have adequate controls but are trying to put them in place” (the grey list), banks in other countries have a little more leeway.

“If a country is on the grey list, that just means more scrutiny on every single transaction that takes place between banks in that country and the United States, for example,” said one former corporate banker who worked as the lead corresponding banker for South Asian banks at HSBC in New York, and declined to be identified.

That extra legwork that the bankers at

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JPMorgan would have to do for every transaction, however, may mean one of two things: either JPMorgan will charge Faysal Bank more for each transaction, or they will stop doing business with Faysal Bank altogether.

In the first case, that cost will have to be borne by someone, and Faysal Bank will no doubt pass it on to Gul Ahmed, which will raise Gul Ahmed’s cost of doing business at a time when Pakistani exporters are already complaining that they face higher costs compared to competitors in Bangladesh and Vietnam.

A worse thing that JPMorgan could decide to do is to say that having to bear the burden of the extra cost of doing due diligence on every single transaction from Faysal Bank is simply not worth it (New York salaries do not come cheap, after all) and cancel the correspondent banking relationship with Faysal Bank altogether.

Now, of course, one bank cancelling their corresponding relationship with Faysal Bank is not the end of the world and there are plenty of other banks they could turn to.

But how much do you think the other banks will charge Faysal for their services, knowing that JPMorgan fired Faysal as a client.

“Generally speaking, a lot of US banks decide that it is simply not worth the hassle to have those kinds of relationships, especially from countries with smaller economies and transaction sizes,” said the former HSBC banker.

If, however, the FATF says that “banks in these countries do not have adequate controls in place and they are not even trying to do anything about it”, a country gets placed on the blacklist and that causes all sorts of trouble.

“I have no idea what happens to those countries, because I have never seen a transaction from them,” said the former HSBC banker.

There are even mechanisms in place to trace the origins of transactions so that you cannot simply evade the rules by going through a third country, though as the fines on HSBC and Standard Chartered Bank in New York in 2012 illustrated, there are

‘generally sPeakIng, a lot of us banks decIde that It Is sImPly not worth the hassle to have those kInds of relatIonshIPs, esPecIally from countrIes wIth smaller economIes and transactIon sIzes’ clearly ways to get around those, especially if the banks get sloppy. However, those fines also motivated previously lax banks to tighten their AML/CFT monitoring.

One particularly unnerving impact of being on the blacklist: it gets harder for expatriates to remit money, and individuals of Pakistani origin in other countries, who send money to their families back home, may face more personal scrutiny for having a regular stream of transactions with a country on the blacklist. Some of them may decide to reduce the frequency with which they send money, or start sending it through illicit channels, both of which would have a negative impact on the country’s remittance numbers.

so, what happens now? ontrary to Planning Minister Ahsan Iqbal’s tweet, Pakistan has never actually been on the blacklist, though it has been on and off the grey list since at least 2008, and most recently came off the grey list in February 2015. This fact has led many Pakistani commentators to say out loud some version of an argument best articulated by former federal finance secretary Waqar Masood, in an opinion column in Business Recorder: “This is not the best thing that has happened to Pakistan, but this is also not a calamity fallen on the country.”

Essentially, the argument goes, if we have faced it before without the country’s economy collapsing, we can face it again. In one of his astonishingly few public statements on the matter, Miftah Ismail, advisor to the prime minister on finance and de facto finance minister, said in an interview with Capital TV: “The greylisting carries with it no sanctions, so it will not make a difference…

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‘It Is the fact that PakIstan’s cIvIl servants and dIPlomats walked Into a strategIc blunder of ePIc ProPortIons by faIlIng to read the extent to whIch the tIde of global Power PolItIcs has turned agaInst the country’ 20

in the day-to-day life of a Pakistani industrialist or shopkeeper, there will be no difference.”

Ismail, who himself owns a company that exports goods (Ismail Industries, a confectionary manufacturer), did acknowledge that there is a reputational risk associated with a grey listing. “If we go out into the capital markets to raise [sovereign] bonds, we obviously do not want to be grey listed,” he said in the same interview. “It is an embarrassment that we will have to face and a question we will have to answer from investors.”

Miftah Ismail’s confidence in stating that this decision will have no impact comes from his assertion that there is absolutely no possibility of Pakistan ever being placed on the blacklist. While that level of confidence might perhaps not be warranted, he is certainly correct in his assertion that most serious consequences of getting on the FATF’s bad side start at the blacklist level, not at the grey list level and that the probability of Pakistan being placed on the blacklist is relatively low.

The problem with this argument, however, is that it is too narrowly focused on the specific consequences of the FATF grey list itself, and – to the horror of Pakistanis who have been paying attention – not remotely concerned with the machtpolitik machinations behind it.

the complete blindsiding of the foreign office t is by now cliché to say that Pakistan’s foreign policy is overly obsessed with India. Yet it is nonetheless important to point out the specific ways in which that hurts Pakistan. Even now, for instance, one of the few public statements by Foreign Minister Khawaja Muhammad Asif about the FATF debacle was to blame Indian diplomacy at the FATF meeting in Paris for having been responsible for Pakistan’s placement on the grey list.

The problem with the stalker-like obsession with India, however, is that the Pakistani foreign policy establishment – both civilian and military – miss when key variables from other

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parts of the world change around them. They have no way of understanding, let alone appropriately reacting, to changes around the world.

Yes, it is true that India made it a point to lobby for Pakistan’s placement on the grey list, but India has lobbied many times before. A good strategic thinker would ask: what changed? A Pakistani military officer or diplomat would simply assert: “India finally succeeded.”

What changed is that the United States now defines its strategic interests in South Asia differently than it has since 2001, a change that has been accelerated by the advent of a new administration in Washington.

What changed is China finally getting more assertive about including Pakistan’s alleged jihadi proxies among the list of terrorists it would like to wipe off the face of the earth.

Islamabad may believe in “good Taliban, bad Taliban” but Beijing never has, and – under President Xi Jinping – is not willing to ignore it anymore.

In the case of the United States, it has been clear since the US began its drawdown

of troops in 2014 that the focus of US policy in the Afghanistan-Pakistan region was inverting. In 2001, the policy started off as the United States thinking of Afghanistan as the strategic threat and Pakistan as the strategic ally. By the second term of US President Barack Obama, however, it was the opposite: Afghanistan started becoming more of a strategic partner, if not outright ally, and one that enabled the US to monitor the strategic threat emanating from Pakistan.

This change is being accelerated by the Trump Administration, which has a more overtly hostile attitude towards Pakistan, and one that is less likely to be tempered by the US State Department, which has been hollowed out, and many of the policy experts who could have pushed a dissenting view have been pushed out. There have always been anti-Pakistan hawks in the US national security establishment, and their voices grew louder after May 2, 2011 – when Osama bin Laden was found hiding in Abbottabad. Now, however, they are completely ascendant and the pro-Pakistan

‘WE HAVE TO FACE THE REALITY THAT, BY ACCEPTING CPEC, PAKISTAN HAS MORTGAGED ITS ECONOMIC INDEPENDENCE AND FUTURE OVER TO CHINA, AND BEIJING IS A MUCH HARSHER MASTER THAN WASHINGTON, AND OUR OLD OVERLORDS IN THE UNITED STATES ARE IN NO MOOD TO BAIL US OUT OF OUR MISTAKES’

doves that the Pakistani national security establishment is used to dealing with are gone, never to be replaced again.

In the case of China, one needs to go all the way back to April 2000 to understand Beijing’s attitude towards Pakistan. In that month, the anti-Taliban Northern Alliance had caught some Taliban fighters and gleefully paraded them in front of the cameras of the international media. Among those were several foreign fighters, including some men from the East Turkestan Islamic Movement (ETIM), a rebel group seeking the secession of China’s Muslim-majority western province of Xinjiang.

In that moment, China very politely issued what was effectively a veiled threat to Pakistan: rein in your proxies’ support of the Taliban, or else face the consequences. It was left implied that the military option was not being ruled out. Indeed, soon afterwards (June 2001), China announced the creation of the Shanghai Cooperation Organisation, which was meant to be a collaboration between China, Russia and the Central Asian republics against terrorists who had found refuge in the then-Taliban controlled Afghanistan. Pakistan’s applications for membership were pointedly refused for decades, and India’s application for observer status was accepted long before Pakistan’s.

Islamabad took away from this the lesson that, China cannot be directly threatened and in turn could even rely on Chinese support to prevent United Nations sanctions against them. This may have been true in

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earlier eras, but even under former President Jiang Zemin, it was clear that China wanted Pakistan to actively help them crush the militant movement in Xinjiang.

Indeed, former President Pervez Musharraf was asked by China to give a speech in Urumqi, the capital of Xinjiang, to the Muslim community there, the theme of which was to discourage an armed uprising against Beijing. Musharraf gave the speech in Turkish, a language he is fluent in, and one that bears linguistic similarities to, and is intelligible to the native speakers of, Uighur, the language spoken by Muslims in Xinjiang.

What does all of this have to do with the FATF, you might ask.

Everything.

The coming trouble with the IMF ear in mind that the reason Pakistan was placed on the grey list due to its failure to take sufficient steps to curb terrorist financing, not specifically anti-money laundering. No international criminal gangs use Pakistani banks to launder their money, certainly not the kind that the rest of the world would care about. But funds for terrorism do flow through Pakistani banks.

Here is why this is relevant: the United States is sufficiently willing to use international pressure on Pakistan against terrorism financing that it was willing to call a vote a second time after Foreign Minister Khawaja Asif prematurely tweeted out that Pakistan had dodged a bullet at the FATF after the first vote. It strong-armed Saudi Arabia and, crucially, convinced China to back down from supporting Pakistan.

What makes Islamabad think that Washington will not be willing to use the IMF – an organisation literally headquartered in Washington DC, less than half a mile from the White House – to do its bidding to also turn up the pressure on Pakistan? And if China was willing to go along with a US vote against Pakistan at the FATF, why would it resist US efforts at the IMF,

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‘THE GOVERNMENT MAY YET MANAGE TO PULL THROUGH WITH AN IMF PACKAGE THAT WORKS FOR THEM LATER THIS YEAR. BUT THE PONZI SCHEME THAT IS THE GOVERNMENT OF PAKISTAN IS RAPIDLY RUNNING OUT OF TRICKS TO KEEP ITSELF AFLOAT’ where it has less influence?

Here is the reality nobody in Islamabad wants to hear: the United States has completely run out of patience with Pakistan and is slowly bringing out all its tools to start piling on the pressure on the latter until it cooperates. This is not the United States doing what India wants it to do. This is America paying back the country where the murderer of 3,000 Americans was living – the perpetrator of the worst foreign attack on American soil – for a full decade in a house that cost over $1 million. Are we seriously deluded enough to think that the United States does not have enough reasons to hate Pakistan on its own that it needs India’s cajoling to get it to act against us?

And now that Pakistan is moving ever more firmly into China’s sphere of influence, Beijing must be thinking to itself: “must we tolerate the kind of two-faced behaviour that Islamabad has shown the Americans? Absolutely not!”

China did not abstain from the vote because the Americans persuaded it to, or, as the Chinese embassy stated, because it would have been diplomatically unwise to go against a winning motion. They abstained because they want to punish Pakistan, and they didn’t want their fingerprints all over it.

China and America are teaming up on Pakistan and playing good-cop, bad-cop.

It is the worst kept secret in Islamabad that the government of Pakistan is already in talks with the IMF for another bailout later this year, most likely after the elections. Let us not forget that the last two bailouts – in 2008 and 2013 – were approved on very soft terms by the IMF board because the White House pressured them to go easy on Pakistan.

‘THIS IS ABOUT THE FRAGILE FOUNDATIONS OF PAKISTAN’S MACROECONOMIC STABILITY AND THE EXTENT TO WHICH THEY ARE STILL DEPENDENT ON THE LARGESSE OF BOTH WASHINGTON AND BEIJING’ 22

How inclined does anyone think President Trump – or US Secretary of State Rex Tillerson – are to help Pakistan out with the IMF? And in the absence of that help, what kind of terms will the IMF be willing to extract?

Here is the worst-case scenario: the civil servants from the finance ministry go into IMF meetings thinking they know exactly what to expect. The IMF likes to play tough, but ultimately concedes to targets that Pakistan says it can achieve, which tend to not be very difficult targets at all. And even when the government misses them, US influence typically means that the IMF is often willing to let those failed targets slide.

But Pakistani bureaucrats do not see the US pulling the strings in the background. They think it is their own brilliance and negotiating skills that won them the day.

That illusion may well come crashing down very soon. And when that happens, Pakistan will find itself needing a lot of cash very fast. And lest anyone in Islamabad think China-Pakistan Economic Corridor (CPEC) money will come to the rescue, Beijing made it abundantly clear in both 2008 and 2013 that it is in no mood to help Pakistan out of the mess created by its own inability to pay for its own bills. CPEC money will fund the infrastructure projects that China wants, and nothing else.

We have to face the reality that, by accepting CPEC, Pakistan has mortgaged its economic independence and future over to China, and Beijing is a much harsher master than Washington, and our old overlords in the United States are in no mood to bail us out of our mistakes.

The government may yet manage to pull through with an IMF package that works for them later this year. But the Ponzi scheme that is the government of Pakistan is rapidly running out of tricks to keep itself afloat. Heaven help us when that time inevitably comes. Lord knows we have made enough enemies who will gleefully laugh at us and kick us on the way down.

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Focus on PSL 2018

The PSL is only ever going to reach its full potential, both from sporting and commercial perspectives, when all of its matches are hosted in Pakistan

By Bilal Hussain he Pakistan Cricket Board (PCB) is said to be raking in somewhere around Rs1.7 billion annually in revenue through its flagship event, the Pakistan Super League. But according to some sources, the league is set to sink if its current business model is not changed.

“Franchises are incurring losses and they can’t keep that up for long. They will shut shop [if things didn’t change for the better],” a source familiar with the development of the PSL confided to Profit. “The franchise owners initially enjoyed the status and attention they received, but now they’re starting to feel the heat from all the money they’ve been burning.”

According to another source, the cheapest of the first five franchise, Quetta Gladiators, has already incurred losses to the tune of Rs320 million even as the league

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moves through its third season. Not surprisingly, the Gladiators have not been forthcoming with the details and did not respond to any of the questions posed to them. Naturally, the losses incurred by other franchises must be even higher, given the more substantial annual fees they have had to pay out.

Multan Sultans debut n the other hand, the PCB seems to be expanding rather than changing their game plan, having sold a sixth franchise – the Multan Sultans – debuting in this year’s edition. Acquired by the Schon group at a whopping price tag of $5.2 million (per year for eight years), the Multan franchise is valued at three times more than the average price of the other five franchises.

However, market pundits are saying that each of the first five PSL franchises

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must have a higher valuation than the new entrant. Karachi and Lahore should be deriving better market value as they represent the two largest cities of the country.

Meanwhile, the Peshawar Zalmi is the defending champion and Islamabad United won the title in the inaugural edition. The Quetta Gladiators has also been runner-up in both editions.

According to well-placed sources, the Karachi Kings, the most expensive team in PSL at $2.6 million annually, was looking to haul in sponsorship worth Rs900 million before the season 3 kicked off. Meanwhile, the Quetta Gladiators was looking to touch somewhere around the Rs400 million mark.

However, a source said that the hopes of receiving such big sponsorships won’t be happening any time soon.

Of the branding done on venue in a PSL match, 70% is reserved for the PCB,

explains our source. The two franchises’ playing on the day apparently have to split the remaining 30% of branding space.

In comparison, the Indian Premier League (IPL) runs on a system where the teams playing share the entire space between them, while the Board of Cricket Control in India (BCCI) and the IPL have no stake in it.

“From a marketing perspective, what the IPL has been doing is quite understandable since mostly the fans of the two franchises are interested in the match. So, the brand association of the two franchises with their fans cannot truly be capitalized in the PSL’s case,” the source added.

Majority of franchises in default here have also been reports, carried by daily Dawn, that a majority of the franchises were in default with the PCB, which may take over defaulting franchises and auction them all over again.

However, the Peshawar Zalmi, the Quetta Gladiators and the Islamabad United – the three most successful franchises in PSL – so far have all come on record to announce that their accounts with the board were in the clear. The PCB has kept mum on the issue.

“It really cheesed off sponsors. Who would sponsor a team that has been defaulting and might lose their rights on the franchise?” the source said.

One marketing head, who has information about the ongoing sponsorship

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deals of some of the franchises, said that prospective and current sponsors do not seem as keen to jump the gun this time around.

“Why would sponsors be interested when you haven’t prepared a good package for them? There is little understanding about the things sponsors want. According to my assessment, only the Karachi Kings has tried to attract sponsors. It has flexed its media muscle to impress sponsors, but I think even they are trying to sell their sponsorship rights expensively,” he said.

The Karachi Kings owner Salman Iqbal has also confessed that there are fewer sponsors this time around.

“There are two sponsors this time while there were around nine last time. But these two sponsors outweighs that nine,” Iqbal said during a Karachi Kings’ partner-

‘FRANCHISES ARE INCURRING LOSSES AND THEY CAN’T KEEP THAT UP FOR LONG. THEY WILL SHUT SHOP [IF THINGS DIDN’T CHANGE FOR THE BETTER]... THE FRANCHISE OWNERS INITIALLY ENJOYED THE STATUS AND ATTENTION, BUT NOW THEY’RE STARTING TO FEEL THE HEAT FROM ALL THE MONEY THEY’VE BEEN BURNING’

ship with yayvo.com by TCS. Bahria Town is the main Titanium sponsor of Karachi Kings while Arkadians and Nurpur are their platinum sponsors.

Nurpur of Fauji Foods joined just as the tournament was around the corner. Imtiaz Super Market is also said to be sponsoring Karachi Kings and are their super market partner.

However, an official of the PCB seemed skeptical of Salman Iqbal’s explanation, and said it was difficult to comprehend how two sponsors can outweigh nine.

Bizarre explanation he skepticism is understandable, but from the point of view of someone like Salman Iqbal, if his franchise is to keep its brand value intact, it needs to demonstrate that it is getting enough sponsorship.

However, given the visibility, since they cannot lie about the number of sponsors, the team owners thus had to come up with such bizarre explanations.

According to a Karachi Kings document, it has put Titanium sponsorship up for sale for Rs200 million, while its Platinum

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sponsorship is said to be selling for Rs150 million.

However, a source close to the development said that the Bahria Town became Titanium sponsors for Rs40 million – five times less than what the Karachi Kings quoted in its document for potential sponsors, while Arkadians and Nurpur too have paid up only Rs20 million apiece against the demand of Rs150 million each for platinum sponsorships.

“The Karachi Kings have received sponsorship of around Rs80 million. However, they will not be incurring losses this time since they would also be receiving from central pool of ticket sales and broadcasting fee,” the source said.

Que‫מּ‬a nets a big fish owever, Nadeem Omar, owner of the Quetta Gladiators, has struck a deal with the giant Engro Corporation, one of the largest conglomerates in Pakistan.

“We have caught the big fish,” said an excited Nadeem Omar, a business tycoon who owns Omar Associates, a privatelyowned company which deals in minerals such as talc, and gypsum.

“I can tell you that Engro is the best sponsor for any of the franchises in the PSL so far,” Omar said during an official ceremony in February.

Meanwhile, president of Engro Corporation, Ghias Khan, says that Engro hopes to engage with the youth through

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their new association with the Quetta Gladiators.

“It has given us a chance to work with role models for younger generation. Sports is really involved in people’s lives. It is sports that teaches us about failure – how to bounce back and pursue success after failure,” Khan said.

Khan, a huge fan of the Quetta Gladiators mentor, and the West Indian maestro Viv Richards, said that he was looking forward to seeing such legends wearing the Quetta Gladiators jersey with the Engro logo.

However, a source privy to the matter told Profit that the overall sponsorship amount the Quetta Gladiators received was ‘much much’ less than Rs400 million, which the franchise initially planned to gain this season.

“However, the owners seem very satisfied with what they could garner,” said the source. Another Quetta Gladiators insider said, that the franchise had incurred a loss of Rs320 million in the previous two seasons.

“Nadeem Omar takes a large entourage of relatives, friends and support staff to the UAE for the PSL. This in itself is a reason for running losses,” said the source.

What the ‘pundit in power’ has to say he PCB chairman Najam Sethi, who doubles up as the PSL supremo too, has admitted that the cricket league model is complex. That’s why sev-

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eral leagues, including Sri Lanka and Bangladesh have been failures. South Africa’s attempt at launching a league also didn’t take off.

Sethi says he has told franchises to bolster their marketing team and haul sponsorships early. In the same breath, however, he was also critical of franchises being greedy, and aggressively pursuing sponsorships.

“When there was a small pool of sponsors and every franchise tried to get sponsors for themselves, they subsequently had to lower their sponsorship rates since the sponsors were offered lower rates by other franchises,” Sethi said in an interview to Geo. “Most of them, not all, didn’t pay attention to raising revenue. This is my view.

We did workshops for them and briefed them and showed them that money can be made from such avenues. But other than finding sponsors for shirts and a few other things, they did nothing,” Sethi complained.

According to the Chairman, merchandising can also be a big source of business for franchises. Moreover, the franchises could have cashed in on fanfare.

“We should remember that they have just started and the market still has juice. If there was no juice in the market, we wouldn’t have been able to sell our sixth team for $5.2 million,” said Sethi.

He further said that PCB receives $128 million from ICC annually under the new understanding and PSL will be generating at least half of that soon.

‘The cheapesT of The franchise, QueTTa GladiaTors, fixing threat has already incurred losses To The Tune of rs320 looms large? ith the sale of Multan Sultans million... naTurally, The losses incurred by oTher at double the price of the franchises musT be even hiGher, Given The more Karachi Kings, there has been a reevaluation of the new marsubsTanTial annual fees They have had To pay ouT’

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‘LAST YEAR, THE PSL ALSO FACED SIMILAR INFAMY WHEN SEVERAL NATIONAL CRICKETERS WERE INDICTED AND SUBSEQUENTLY WERE CHARGED FOR FIXING’

ket worth of previous five franchises. One knows that he is repeating himself, the Multan Sultans price range is approximately three times more than the average of previous five franchises.

However, after interviewing several sources who are in close association with the PSL in different capacities and also listening to Sethi, one thing is clear: the franchises are incurring losses. The question is, how long will they be willing to endure it?

There’s no denying that the idea of organizing the PSL was on the table since the success of IPL in 2007. For the PSL in every avenue, the IPL has indeed been the role model.

Although much more popular, the IPL has been hit hard by corruption scandals, something the PSL may have to worry about.

Two of the Indian league’s franchises – the Chennai Super Kings and the Rajasthan Royals – were banned for two years following illegal betting, and an investigation into match-fixing. Gurunath Meiyappan, a former team official of the Super Kings, and Raj Kundra, a former Royals coowner, were banned for life from any involvement in cricket matches.

Shanthakumaran Sreesanth, who took Misbah-ul-Haq’s catch in the inaugural World T20 Championship final for victory, was arrested along with two other cricketers and several bookies in 2013. He served a year in jail before being bailed out. In 2012,

five low profile cricketers were nabbed for involvement in corrupt practices.

Last year, the PSL also faced similar infamy when several national cricketers were indicted and subsequently were charged for fixing, including Sharjeel Khan, Khalid Latif and Nasir Jamshed.

The present circumstances of PSL where the franchises were incurring losses, is similar to that of IPL. It could make some stakeholders deal in underhand practices in an effort to become profitable from a lossmaking franchise. But it is hoped that the PSL will largely remain immaculate and the franchises start generating profits from legitimate sources.

Hints of cricket returning to Pakistan nternational cricket is slowly returning to Pakistan - thanks to PSL final in Lahore in 2017. The ICC World XI played three matches in September 2017, and a month later, Sri Lanka landed in Pakistan to play the last T20 match of the three-match series in Lahore. Before that, Zimbabwe had come to Pakistan in 2015 since the terrorist attack on Sri Lankan cricket team in Lahore back in 2009.

This year, two playoff will take place in Lahore while the final is scheduled to be played in Karachi’s National Stadium, currently undergoing a serious makeover.

According to Manager PSL, Naila Bhatti, organizing the PSL tournament abroad has been their biggest challenge and an expensive one too. Moreover, spectators are expected to turn out in huge numbers to

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THERE HAVE ALSO BEEN REPORTS, CARRIED BY DAILY DAWN, THAT A MAJORITY OF THE FRANCHISES WERE IN DEFAULT WITH THE PCB, WHICH MAY TAKE OVER DEFAULTING FRANCHISES AND AUCTION THEM ALL OVER AGAIN’

see even early matches of the tournament, if it were organized in Pakistan, which is unfortunately not the case in UAE. Quetta Gladiators’ officials have on many occasions said that they lost the final in Lahore to Peshawar Zalmi in the second edition because their foreign players didn’t come to play. However, this time around most of the foreign players have consented to come to Pakistan if their team qualifies for knockouts to be held in Pakistan. Moreover, Najam Sethi has also said that in 2019, half of the PSL matches will be held in Pakistan.

The PSL is only ever going to reach its full potential, both from sporting and commercial perspectives, when all of its matches are hosted in Pakistan.

Meanwhile, after this ongoing third season, the title sponsorship is scheduled to expire. According to the PCB, the title sponsorship will be up for grabs but with a much higher price after the third season. After the ongoing third season, the title sponsorship is scheduled to expire. According to the PCB, the title sponsorship will be up for grabs but at a much higher price after the third season.

The PCB had initially sold its title sponsorship to HBL, for a relatively insignificant Rs250 million each for the first three editions.

Is T10 a threat to PSL? source, requesting anonymity, said that the T10 League held in Dubai couldn’t dent the PSL. “Only one Peshawar Zalmi sponsor abandoned it to join the T10. Nothing else happened. There was no need for creating such a hue and cry for the league.”

Moreover, PCB is also pondering over to hold its own T10 League in Pakistan.

“There are few options regarding next T10 League in UAE. One is that we hold our own T10 League. Number two is that we send our players and earn some money as before. And the third is that we don’t send our players and say goodbye to our friends in UAE,” Sethi said. n

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Interview

For the multinational in paints, Pakistan remains a unique and successful market – and the anticipation is it will only get better By: Eleazar Bha‫מּ‬i and Muhammad Faran ith a board meeting, a product launch and the company’s business review all crammed together, Jeremy Rowe, AkzoNobel’s managing director for decorative paints in South East, South Asia and the Middle East, was in Pakistan for a busy little spell this past week.

A management consultant, specialising in strategy and business transformation, of quite considerable repute, Rowe has worked across many companies and continents. He was appointed to the AkzoNobel Pakistan’s board on Oct. 27 2016 – in addition to many country boards (including Indonesia, Thailand, Oman, in the vast region, making him, in a manner of speaking, the king of all he surveys in one of the leading paint brands.

Not unfamiliar to Pakistan, Rowe has been visiting this country since around 2005 – more often in the recent past. And in his latest

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sojourn, he sat down with Profit for a tete-atete about the whole gamut of paint business in this country and also the regions that he oversees. The following are the excerpts.

Profit: Jeremy, what brings you to Pakistan?

Jeremy Rowe: Whenever I come to Pakistan I try to do more than one thing. We have a board meeting and a product launch, and I will be spending some time to review how the business was doing and how things were going according to our future plans.

Profit: Since when has Pakistan been under your purview?

JR: About three years, since 2014. Though I have been with the business here before, but it wasn’t in the same capacity as I am now. I first visited back in 2004 or 2005, and I have been familiar with the place as it’s been part of the region that I haved looked after for the last few years.In South-East Asia and South Asia we consider Pakistan sort of a medium size country along with Thailand, Malaysia and Sri Lanka, the big ones being India, Indonesia and Vietnam.

Profit: Looking at India, Sri Lanka, Vietnam, what are the similarities and differences between them and the paint industry in Pakistan?

JR: There are both similarities and differences between different countries. We can maybe split up also the paints and coatings market into different parts. So generally we would think about two parts, one being what we call the decorative paints market that goes to homes basically, plus some wood, metal and concrete type products. And then there is coatings or performance coatings which go on everything else – cars, ships, trains, cans, mobile phones. We call it performance coatings, because generally there is a higher level of performance needed for such products compared to a house or a building. Every market has those two types.

The decorative paints market is generally driven by only two things; how often you paint your house and the development of infrastructure, say new cities and towns.

The performance coating market is driven

sure we serve them properly in many different locations.

Profit: So which country do you think would be most similar to Pakistan amongst the big countries?

JR: You would certainly say in South-Asia, Sri Lanka, Bangladesh, India, Pakistan, the habits are somewhat similar of painters and consumers and also that is true in South-East Asia as well. We don’t see them being much different.

Jeremy Rowe, Managing Director, AkzoNobel Decorative Paints for South East, South Asia & the Middle East by the different sub-segments, so automotive would be driven by the number of cars [manufactured] and the number of accidents as well, but also big things like oil and gas developments, marine is driven by ship building. So there tend to be different factors for different categories involved. What we generally find is that the paints market is driven by GDP plus 1 time or 1.5 times GDP is generally the way paint market grows over the medium term. In terms of habits and behaviours, South-East Asia and South Asia are not so different. Unlike Europe, we will not find many DIY guys across Asia where a lot of people use painters to repaint their houses. Also there are a lot of consumers who tell the painters to even buy paint for them. So the structure of the market is a lot of small shops. We don’t get these big format retailers in Asia. Typically its small, and traditional paint shops who are the main channel of distribution to the market. And the performance coating segment is a bit more similar across countries, because if you

make cars, you make cars, if you paint ships you paint ships, so those are a bit similar across countries. And then there are habits like, the walls are a bit different in one country then the other, different painter habits, how much do they dilute the paint, also what colours people use as well. So colours tend to be most vibrant, in South Asia, in India, Pakistan and Sri Lanka, a bit mixed in South-East Asia, and if you go as far as North Asia, people tend to use whites and pastels.

One reason it is nice to be in Pakistan is that people like using colours, and since colours is our business it is nice for us.

There are plenty of similarities and that is good for a company like us, because we are in lots of countries, so we can try leverage what works in one country and not the other, best practices, and also learn what works here and take it to other countries, and that way we tend to work as a multinational. In the performance coatings you might as well have global customers anyway and we make

Profit: How is AkzoNobel doing in India?

JR: We have been in all these countries for a long time. I was actually trying to get data, when the business was established here. I know in Sri Lanka it was round about in 1965 and in India its in the 1970’s. I think its similar here in Pakistan. And generally what we are talking about, is the family of the ICI business because AkzoNobeitas grown through acquisitions and mergers over many years. Back in 2008, AkzoNobel acquired ICI globally. It is principally the ICI paints and coatings business, which has been in Pakistan for a long time. So what’s great about the Dulux brand is that it is really well-known. It’s a premium, high-quality, high-performance brand. We are doing well here, and India and Sri Lanka as well. We are also in Nepal and Bhutan and a little bit in Bangladesh. So we are all over South Asia. When we look at Pakistan, this has been as a country a long- standing and successful business.

Profit: Can you brief us the about your upcoming brand, Promise ?

JR: When most people think about Dulux, they recognize it as a premium, high-quality and a very reliable kind of brand. While it’s great, we decided to make that brand experience available to people at a more affordable price. That’s what Dulux Promise is all about, bringing the brand price of Dulux to a more affordable point. It’s a quality product. We have had an internal launch today, and we will be doing external press announcements and activations in the media soon.

Profit: How is this different from your Paintex brand?

JR: It’s a higher quality brand than Paintex – you may call it in-between the two. Paintex to my knowledge is only in Pakistan. It remains an important part of our portfolio, we are working also to improve and activate the

INSIGHT

Paintex brand as well. One of our philosophies as a company is, we want to try and address all the different segments, be it the different paint segments or the different levels of affordability of the market. Promise is an important part of fulfilling that mission.

Profit: So you are going to stick with Paintex as well?

JR: Yes, that will continue to exist. It’s a relatively large, volume brand for us.

Profit: According to data from Pakistan Economic Survey 2016 the Pakisani paint industry grew a steady 3.99% YoY for three consecutive years. Moreover according to Berger Paints Pakistan, the industry was worth approximately Rs38 billion. In that backdrop, what is your current market share?

JR: I can’t comment on the Berger numbers. I think we will point you to some external views of the size of the Pakistani paint market, there’s a wide range when you look at it. It is fair to say that the market pattern is a bit difficult to estimate in terms of the size of the market compared to some others. I think the growth numbers you have used are similar to what we would think as well. We are a bit forward looking than that.

We see Pakistan entering a phase where we think there would be a strong GDP and development of the infrastructure. And that tends to be good for the paint market. Both rising prosperity of the consumers and industrialization would hopefully be a good period for the paint market.

Profit: Are you expecting the growth rates to be above 5-6 per cent?

JR: I think, around 8 percent. If that happens, and that will rely on many things coming in, like investments. If it does, it should certainly get to that level.

Profit: While doing a story on the paint industry last year, what we found out then was post 2010 AkzoNobel started losing market share despite people associating quality with the brand since the ICI days.

Instead of AkzoNobel, the research indicated Brighto as the market leader while there are others that claim to be at No 2 and 3. What do you think is the reason?

JR: You got to be a bit careful if you are talking about volume or value because you will get different thoughts of market. As for our-

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selves as a premium brand obviously our value market share will always be higher than our volume market share simply because of where we play. We have Paintex, but obviously our strongest position is in the premium segment where we have Dulux. However, if you look at the market you will find a number of players of roughly equal size. The reality is the market is quite competitive, with lots of players who are not very different from each other in terms of size. Being number 1,2 or 3 is probably not very important actually. In some markets you get someone who’s much bigger than everyone else, that’s not Pakistan.

Here it’s a number of players, of relatively equal size. In a market with huge potential, who’s going to emerge as the leader in the next 5 to 10 years? We hope we will.

Profit: Your profile says you are basically a person from the consulting industry, a strategy guy, advising different companies.

In case of Akzonobel Pakistan what would your strategy be? We also noticed the share price in the last one year has fallen. Post 2010, the sales did go down, probably it was because of the token. What do you plan on doing?

JR: That is something I’d love to tell you but I can't. Unfortunately I will have to reveal that as we execute things. What you have seen today is one component in the launch of Dulux Promise. We have a couple of other things lined up for the next few years, which I can’t tell you about as it is competitively sensitive.

Profit: Some brands in the market are using token extensively. Even though AkzoNobel also uses it in the Paintex, it is complying with the government regulation of how to advertise it but others are not.

There is also some other foul play going on in the market. With AkzoNobel’s international policy, how are you going to compete with something like that?

JR: We are who we are. So, if we compete in Pakistan we will maintain our standards and the integrity of what we do, we wouldn’t think about doing anything different but we still need to be competitive. That is why our real focus is on things like long-term brand building, which has nothing to do with the financial activity derived by tokens. We have always had the belief that if we do something in the market long enough than it can help to change and professionalise the market. And we think

that will happen here in Pakistan as well. So, we will continue to do the things we think are right. So far, I would say that it is necessarily the right thing to do but it has worked for us really well for the last few years. So we are happy taking the right course and professionalising the market.

Profit: How are things in India and Sri Lanka. Do you face the same issues there as well?

JR: No. Token is rather a Pakistani feature – and not really prevalent in other markets.

There are similar things but not to the level of prevalence as here in Pakistan. Every market has its own uniqueness, ditto for Pakistan. In every market painters have a certain level of influence – higher in some economic or midranged price points, less so when you have an established brand in the mind of the consumers, who then say, I want Dulux instead.

The real way of dealing with it is building the value of the brand. Obviously a brand has heritage but we also need to be innovative. So we introduced Easycare last year and Velvet Touch before that. To build the brand properly is the best way to distinguish yourself in the market, where such promotional mechanisms help.

Profit: In other South Asian markets, things aren't as directed towards the painters?

JR: Yes, our data would suggest that the painters are more influential here than in other markets. However, painters are influential in all markets. It's just a matter of degree and also we think it's also a phase of the market.

As consumers are becoming more discerning in Pakistan, and starting to ask what's the quality of the brand, what’s the quality of the paint, where does it come from and that draws them to the better brands.

Profit: So you have never decided to go after tokens, like one of the big paint companies in Pakistan did with their advertising campaign pegged on it?

JR: Yes, they chose to communicate and that was there choice. We think it’s better to talk about one’s own product, the brand and what it can do for you.

Profit: Do you feel you have benefitted from their campaign against tokens, without having to take the painters head-on?

JR: I don't know it it worked for us or for that

matter if it worked for them either. We think it's really proper to focus on the brand, the quality and the experience. We built the Dulux Visualizer to help consumers with colour selection. This is the way to develop the industry, to bring new experiences for the consumers. That is really something you will see that in all our activities over the last two to three years.

‘IN A MARKET WITH HUGE POTENTIAL, WHO’S GOING TO EMERGE AS THE LEADER IN THE NEXT 5 TO 10 YEARS? WE HOPE WE WILL’

Profit: And how do you think CPEC will play out for the paint industry?

JR: Any investment in a country is positive for an industry like ours, as there is new infrastructure, industrialization, and the wealth is created.

Jeremy Rowe, Managing Director, AkzoNobel for South East, South Asia & the Middle East

Profit: Do you think there will be a direct impact in Gwadar and Balochistan. Are your dealers reporting better numbers?

JR: I think not so obviously yet but we expect that to happen. Where you get centres of development in a country you get demand as well.

Profit: The news is that one of your biggest British investors Tweedy Browne decided to divest its shares. Will it impact on the goodwill of AkzoNobel, both locally and internationally?

JR: I think all investors everyday make their choices about where they wish to invest and it is absolutely their business and I wouldn't even seek to think of commenting about it because those are the choices they make. I think AkzoNobel has been fortunate enough to have had a lot of long-standing shareholders who have stood by us during various changes in the business and we genuinely think that is what shareholders want. They want us to be stable and maintain long-term focus on performance and that's what we try to aim for. We have made our future expectations globally quite clear to our shareholder in the 2020 targets laid down. We have laid out to our investors what we aim to achieve in the next three to four years for AkzoNobel as a whole. I think most of them will support us on that. It is up to us to deliver on that. That is our job as the management of the business.

Profit: Recently, AkzoNobel launched a Virtual Visualizer App (Augmented Reality). How effective was it in Pakistan?

JR: It was an international launch for the app but being a multinational, whenever we introduce new technology, we quickly bring

that to consumers internationally. The app was launched in over 40 countries including Pakistan and it is an innovation because there is no other app with augmented reality as part of it. Like with any new app, you hope on producing something that the people will download and use. That’s the two things we focus on right now. Globally we are in the 13-14 million download area, which is pretty good for a decorating app. In Pakistan, we have about 75,000 downloads, which is again pretty good. We can also measure how many people have used it, when people update and how long they use it for. I would say the app has been pretty encouraging and we think that is because people do need help in colour selection and that is what it is for, to help make confident colour choices. So you can see the colours before you buy the paint. You can use the app in live augmented reality or shoot a video, so it is more than a photo. It is designed to be easy to use, so you can just pick it up and use it. Mostly for colouring the main walls. You can also do sectioning and other things but they take a bit effort. You can also send it to your friends and share.

Profit: It would be really good for interior designers to show their clients the endproduct?

JR: As a consumer your main question is what's the colour, how is it going to go with the surroundings. For the interior designer, obviously they will give you the selection but their consumer might think how is it going to look. So the app gives a bit more confidence in selection of colours. I think you are right, it is good for both consumers and professional customers.

Although it is an app on the app store which was basically for consumers at this

stage. It is one of our big digital innovations in the decorative paint field. We also have done digital innovations in the performance coating side, like the virtual spray booth technology for training a car sprayer. When you can train them in virtual reality before they actually get to work, using the app saves a lot of paint. For marine business, we have very sophisticated parts and tracking shipping, how much fuel they save when going around the world using our coatings which can then be turned into things like carbon credits. A lot of digital innovation going on in the paints industry at the moment is quite exciting.

Profit: According to research the informal sector is bigger than the formal sector.

What do you think about the numbers, the phenomenon overall and what can be done about it?

JR: I am not sure about the numbers but it is very true that all paint markets start with a fairly large informal sector. It was also true about South-East Asia, but you go there now and it doesn't really exist anymore. In South Asia, there is a large informal sector in distemper products because it is not difficult for someone to make a cheap whitewash. What we have found out is that market just develops. As better products come into the market, first at premium level, then mass market and economy level, such products stop being used since they are neither cost-effective, nor highfunctioning. They may be cheap but then the customers have to redo it all the time. So, over time that informal market tends to disappear by itself. And the consumer eventually notices the difference in quality and it develops people's awareness about what properties real paint has. Honestly, we don't think about it that much. n

INSIGHT

Six storey buildings get the Supreme Court nod, providing partial relief to the builders, but height and number of floors remain a matter of interpretation

By Arshad Hussain he members of the Association of Builders and Developers (ABAD) heaved a sigh of relief after the Supreme Court judgement allowed construction of six-storey buildings under the Karachi metropolitan jurisdiction. That though is by no means enough, as it only facilitates 40-45 percent of the builders.

On January 15, 2018, the Supreme Court gave permission to the ABAD members to construct buildings not higher than six floors all over the province. Only the next day, the Defence Housing Authority (DHA) approved plans to build a 13-storey building in DHA Phase-I – China Gold Park Mall and Residency on plot no 133. According to a source working at the project, since the Supreme Court decision is not applicable on Bahria Town, the DHA and Fazaia Housing schemes, the approval was granted, allowing for booking by the buyers for space to commence.The project owners also placed a photograph of the DHA NOC on a wall, with the dates of the approval clearly mentioned.

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interpreting it the way they want he judgement of the Supreme Court must be binding on all authorities including Bahria, Fazaia and others working in the jurisdiction of Sindh,” said Hanif Gohar, former chairman of ABAD. “I don’t know too much about the ‘China Gold Park Mall and Residency’ and who gave its permission.”

The judgement clearly mentioned allowing a six-storey building on a commercial piece of land in Karachi, while the builders are interpreting it as half a dozen floors in addition to three floors for parking, two mezzanines and basement and first floor with shops etc.

To the ‘China Gold Park Mall and Residency’, the DHA’s approval contains additional floors in the aforementioned manner.

The curious thing is that the Sindh Building Control Authority (SBCA), and Clifton Cantonment Board (CBC) had given the project its seal of approval prior to the Supreme Court judgement. Subsequently, the Supreme Court had embargoed construction of high-rises from May 2017. Having purchased the land at a high price for a number of high-rise buildings, this Supreme Court verdict was a setback to a number of investors in Karachi. According to a rough estimate, only in Karachi the construction on almost 400 plans for high-rise buildings with a total investment said to be in the vicinity of Rs900 billion were then awaiting the SCBA approval.

“We are filing another petition in the Supreme Court’s Karachi registry and will try to get maximum relief in this regard,” said Hanif Gohar. This petition would be heard in April or May, he added.

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Top five builders and developers n the last decade and a half, the country’s top five developers have captured the luxurious housing sector all over the country. With the DHA in the van-

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guard in this category, the other top housing societies are: Bahria Town, Royal Residencia, Askari Housing Scheme, and Fazaia Housing Scheme.

Since most of the above housing schemes belong to the armed forces directly or indirectly, and also given their history of good return on investment, investors are easily attract towards these schemes.

In contrast, the projects initiated by builders who fall in the medium or small category, including the members of ABAD, are often beset with delays, causing heartburn to the investors.

In Karachi, the rivalry between DHA and Bahria Town is intense. Both the developers have ongoing schemes close to each other at the Super Highway. A one of its kind project in Karachi, Bahria Town is developing at a rapid pace while DHA, otherwise considered to be the stronger entity, lags behind in its under-development housing estate in Gadap Town. Located in the outskirts of Karachi, it spans over 20,000 acres and shall accommodate up to 250,000 people.

The DHA influenced the routing of the Karachi Bus Rapid Transit System (BRT) towards this new city despite its being around 35 kilometers away from Sohrab Goth. With the Sindh government obliging the DHA City Karachi, its residents would benefit from comfortable and efficient transport through the BRT’s Blue-Line.

residential units shortfall he existing shortfall in housing is exacerbated each year by a fresh requirement of around 270,000 residential units in the country. Yet the governments, both federal and provincial, are not doing anything substantive to ameliorate the situation by closing the gap. At best the government agencies, such as KDA and LDA, mere sell plots. In their schemes too development is slow to take place. A

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‘The judgemenT clearly menTioned allowing a six-sTorey building on a commercial piece of land in Karachi, while The builders are inTerpreTing iT as half a dozen floors in addiTion To Three floors for parKing, Two mezzanines and basemenT and firsT floor wiTh shops eTc’

case in point is Taiser Town Scheme, where the Sindh government allotted plots in 1996, but since then no development whatsoever has taken place there and no civic amenities provided. As a consequence, the residential area still remains unconstructed.

Housing is the third most essential human need following food and clothing, still Pakistani governments remain unconcerned about it. This apathy of the powersthat-be has left the populace from middle and low income groups to suffer, for unlike the upper and upper middle classes they do not have the wherewithal to afford the vast sums to make builders do their bidding.

The poor leﬞ in the lurch or the urban poor, credit or mortgaging facilities are not available as credit is essentially tied to collateral, which excludes all those who do not possess any land title or proof of ownership.

Even in public sector entities like the HBFC offering such loans to the poor demand usurious interest on the long-term financing – usually two to three times the market rate. For instance, if one gets financing worth Rs500,000 from the HBFC for 10 years, one would have to return above Rs one million in return.

All the emphasis lies on house construction loans. Loans of small amounts are not granted by financial institutions like HBFC and others banking channels.

The HBFC needs to be overhauled to make it a potent and creative organization, as its services fall in the category of the most needed to support the housing sector, especially the poor. And it could boost the construction industry, adding thousands of jobs in the market.

It should be encouraged to venture into new avenues such as community mortgage programmes, housing credit assistance to public and corporate organization employees, support to bankable housing projects in the private sector and options of drawing funds from the public through permissible financial channels.

The way to go is builders and developers constructing 12-16 storey buildings on 400-500 square meters plots and selling the apartments to the general public on the HBFC loans – returnable in easy installments. n

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real esTaTe

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By Billal Hussain orking longer hours than the usual nine-tofive, her day starting at 9 am but extended up to 7 pm a little more than two-thirds of the minimum national wage, Rubina Ahmed*, a mother of three and the sole breadwinner for her family, works at a garments factory where she stitches buckram [hard fabric] in shirt collars and cuffs. Her work is an economic lifeline for the family, for Rubina’s husband, an expert bricklayer, has been out of work for three months on the go.

“I am happy with the job. They pay me Rs 10,000 a month and I also receive overtime when I work on Sundays. They also serve us a cup of tea twice a day,” said she.

Living in one-room house in Manzoor Colony, Rubina was a bit jittery on knowing that her interview may get published, for the fear she may get sacked when she was desperate to hold onto her job.

Rubina and other workers don’t even know who the clients were or what brands were they producing. “We are only told that the stuff belonged to this Bhai (literal meaning, brother) or that bhai.”

Though Rubina is illegally underpaid, the minimum national wage being Rs14,000 a month, the work is a lifeline for her, for if she didn’t have the job, her husband and children may have to face a crisis.

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Good, and not for women alone Participation of women in the workforce is not only good for women and their welfare but it also mostly relieves men of pressure, Rubina’s husband being a case in point.

Working women may not only help their families in financial crisis like Rubina, their participation is healthy for the country’s economy too.

The IMF research also reflects, where more women are part of the labour force, the country's GDP improves. Women also tend to

‘BY PROVIDING EQUAL OPPORTUNITY TO WOMEN, PAKISTAN HAS THE ABILITY TO PUSH ITS PER CAPITA INCOME TO $10,000 IN 30 YEARS Illangovan Patchamutha, World Bank Group Country Director in Pakistan spend more on their families and communities when they have disposable income.

According to McKinsey Global Institute (MGI) report – ‘The power of parity: How advancing women’s equality can add $12 trillion to global growth’ – as its title suggests, stressed at all countries to follow regional benchmark, citing the many gains of the female gender being part of the workforce.

The effects of disparity between men and women was quantified and its economic implications assessed and estimated. According to the study, if all countries of a region emulates ‘best-in-the-region’ scenario, i.e. the fastest-improving country, it could add as much as $12 trillion, or 11 percent, to the annual 2025 global GDP. The global annual GDP by 2025 could observe a growth of $28 trillion, or by 26 percent, in women’s participation in labor markets is identical to that of men, the report added. The European Union (EU) Commissioner-in-Charge of Justice and Gender Equality recently stated that…….

“Women are usually talented at longterm planning, crisis management and negotiations/compromise. This is necessary to counterbalance the way men approach business,” said Yasmin Hyder, head of Pakistan Women Entrepreneurs Network for Trade (We-NET) while speaking to Profit.

We-NET is a representative platform for women entrepreneurs in Pakistan engaged in trade of goods and services.

“According to global research, it is now an accepted fact that gender diversity positively affects businesses and the economy,”

‘WHERE MORE WOMEN ARE PART OF THE LABOR FORCE, THE COUNTRY'S GDP IMPROVES. WOMEN ALSO TEND TO SPEND MORE ON THEIR FAMILIES AND COMMUNITIES WHEN THEY HAVE DISPOSABLE INCOME’

Hyder added. “Women entrepreneurs play a critical role in economic development, by boosting growth and creating jobs. With changing demographics and digitization in Pakistan, it is imperative to recognize the future role of women in Pakistan’s overall economic growth”.

Diversity in thought, leadership yder further explained that diversity in the workforce also brings about diversity in thought and leadership.

Innovation has been made easier when there are different points of view being discussed and old stereotypes are being challenged.

“Organizations are thus becoming more dynamic with increasing number of women employees,” she added.

The participation of women in the workforce is low in Pakistan. For this reason alone, the competition level must also be lower for the present workforce, mainly consisting of men, due to scarce participation of women. Over the passage of time, it must have made the predominantly ‘men only’ workers away from accomplishing higher standards in a diverse number of fields.

“By providing equal opportunity to women, Pakistan has the ability to push its per capita income to 10,000 dollars in 30 years,” said Illangovan Patchamutha, the World Bank’s Group Country Director in Pakistan. “Women are more focused when they come at the place of work. It has a reason. Women have to go to work after having done loads of work at home and they have to get back to it,” Tania Aidrus, Google’s ‘Next Billion Users’ Chief of Staff, told Profit.

“But that could not only be attributed to

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WOMEN’S DAY SPECIAL

Pakistan. In fact, we have several women leaders in Pakistan – including a former prime minister. We have female top officials at Unilever Pakistan and the UBL,” said Aidrus, who is based in Singapore.

Sima Kamil is the CEO of UBL while the Unilever Pakistan is headed by Shazia Syed, who is the chairperson and CEO of the standout multinational company in Pakistan.

“I don’t see it as an issue. Women might leave their professional life because they want to give time to their families. Organizations have not been restricting it,” Aidrus said.

However, Aidrus confessed that her knowledge about Pakistan’s workforce was mostly confined to big organizations, which were generally MNCs.

Gender gap, leadership is the key eadership in an organization could easily reduce the gender gap, added Aidrus. “If the leadership is right, then I don’t think there would be any issue like gender inequality in the organization. The effects of a good leader trickle down to the bottom.

“Moreover, I don’t think there is a big difference in the number of male and female graduates. In fact we have more females studying medicine. Likewise, there is less female enrolment in engineering, but that’s a global trend,” she added.

Australian High Commissioner to Pakistan, Margaret Adamson said that gender equality was essential for economic and social development globally. “According to a study, I was told once that a loss of $12 trillion has been incurred globally by not having

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‘...WE HAVE SEVERAL WOMEN LEADERS IN PAKISTAN. WE ALSO HAD A FEMALE LEADER AS OUR PRIME MINISTER. WE HAVE FEMALE TOP OFFICIALS AT UNILEVER PAKISTAN AND THE UBL’ Tania Aidrus, Google’s ‘Next Billion Users’ Chief of Staff

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‘ACCORDING TO GLOBAL RESEARCH, IT IS NOW AN ACCEPTED FACT THAT GENDER DIVERSITY POSITIVELY AFFECTS BUSINESSES AND THE ECONOMY’ Yasmin Hyder, Head of Pakistan Women Entrepreneurs Network for Trade (We-NET) opportunity for women worldwide.”

Just as Hyder of We-NET said, Adamson also held the same opinion that the world has been enduring loss in innovation and invention due to lack of equal opportunities for women.

She added that that to increase economic growth, women should also get equal opportunity just as men have.

World Economic Forum (WEF) has recently ranked almost 150 countries on gender equality as part of its annual Global Gender Gap Report.

Pakistan has made it to the second position, from the bottom, easily making it the worst in terms of gender equality!

With the MGI report in mind, one can safely assume that Pakistan has the potential to take a great leap forward – provided not only a promise of equal opportunity but also a multifaceted secure environment is ensured for the other half of the population.

Kaiser Bengali, a renowned economist, offered a divergent view. “If the work is avail-

able but the labor is short in the market then this assertion that inclusion of women in the workforce will add to GDP is understandable.

But in Pakistan’s case, where there is already unemployment for the present workforce, gender-based diversification of the labor force wouldn’t help,” he said.

Bengali said that from justice and equality perspective, women should have equal opportunities as compared to men. “But I at least don’t know if there’s any evidence that more women participation in the workforce would increase GDP here.”

He added that he also hasn’t seen any evidence that a diverse workforce is more productive or efficient.

“It may be true that a diverse labor force is more productive and efficient. But it may not be true too. There’s no evidence to prove this at the moment – as we have evidence that a literate workforce is more efficient and productive than an illiterate one,” he explained.

However, according to a research paper – ‘Gender Inequality and Its impact on Economy – A Case Study of Muslim Countries’ published in Pakistan Journal of Gender Studies, per capita income of Muslim countries increased with improving the well-being of women. After studying a cross-section data of 49 Muslim countries, apart from the oil-rich Saudi Arabia and Qatar, the rest showed a trend of negative relationship between per capita income and Gender Inequality Index number.

It means that countries exhibiting better gender equality profile have better per capita income. The study recommended that by observing gender equality, Muslim countries can have positive effects on their economies.

Name* changed on request of the woman.

WOMEN’S DAY SPECIAL

By Aisha Arshad

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‘A MAJOR REASON BEHIND WOMEN GETTING INTO THESE ONLINE BUSINESSES IS THE OPTIMISED OUTCOMES THEY PROVIDE. TODAY, OTHERWISE MODEST AND SUBMISSIVE HOUSEWIVES HAVE DISPLAYED THE CHUTZPAH TO RUN BUSINESSES THROUGH THEIR LAPTOP SCREENS’ Syed Raza, Social Media analyst aham Sohail runs a food delivery service page on Facebook, Home Bakers.

As the title suggests, she delivers homemade food items of everyday menu to her customers, operating from the comfort of her home.

“Due to personal reasons, after my graduation I was unable to pursue a career,” said Sohail. “Out of sheer boredom, my mother and I started a one-dish menu business. The venture flourished and our food became quite famous.”

Despite the stifling patriarchal pressure, at 30 percent in fiscal 2014, Pakistani women have still been a macro level workforce. Although the taboo attached to having a white-collar job, owning a business or prioritizing career is frowned upon, women in the present day and age have thrived

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immensely in all walks of life, including the corporate world.

A major reason behind the recent surge in the economic participation of women has been spawned by the commercial opportunities provided by the social media over the last decade – especially the last few years.

Women are now getting a

fair chance to establish a business with relative ease as social media now allows them to juggle between family and work seamlessly. This platform of contemporary media assists women to sustain a balanced family life and own a business and thrive economically at the same time. The prospect of running a home-based business and still being able to cater to a large number of clients are a major attraction for women with sous for entrepreneurship.

Facebook to the fore

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nitially, I created a WhatsApp group with my friends and relatives to tell them about my venture.

They then spread the word for me and I received numer-

‘THOUGH OTHER SOCIAL MEDIA PLATFORMS, SUCH AS INSTAGRAM, SNAPCHAT, WHATSAPP, AND TWITTER ARE ALSO IN THE RECKONING, FACEBOOK IS THE NUMBER ONE PLATFORM AIDING HOME-BASED BUSINESSES WITH ITS 1.94 BILLION MONTHLY ACTIVE USERS (AS OF MARCH 2017)’ WOMEN’S DAY SPECIAL

ous orders which encouraged me to create a Facebook page,” Sohail said of her business that gives her around six orders a day, and sometimes even more, up from one to two per day when she started it.

The local data regarding womenowned Facebook pages is not available but Facebook insights released in February 2017 reveals the number of business pages has reached 65 million globally, a large chunk of which is owned by women.

Though other social media platforms, such as Instagram, Snapchat, WhatsApp, and Twitter are also in the race, Facebook is the number one platform aiding home-based businesses with its 1.94 billion monthly active users (as of March 2017).

On the national front, as per data available from September 2015, more than 30 percent of Pakistan’s 32 million internet users preferred to use Facebook.

A breakdown of Pakistan’s Facebook users indicates that nearly one-fifth of these are women. According to a Facebook insights tool (2017), Pakistanis have crossed the benchmark of 25 million users, with the number of men anywhere between 15-20 million while the rest are women.

With an overwhelming majority being homemakers, our women still took advantage of the advent of social media and decided to make a living out of it.

“The reason I started my business on social media is because more and more people are joining the internet and I can reach out to a larger audience through this,” said Samra Sheikh, a 22-year-old

‘THE REASON I STARTED MY BUSINESS ON SOCIAL MEDIA IS BECAUSE MORE AND MORE PEOPLE ARE JOINING THE INTERNET AND I CAN REACH OUT TO A LARGER AUDIENCE THROUGH THIS’ Samra Sheikh, running an online handmade card business, Cartolina

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‘INITIALLY, I CREATED A WHATSAPP GROUP WITH MY FRIENDS AND RELATIVES TO TELL THEM ABOUT MY VENTURE. THEY THEN SPREAD THE WORD FOR ME AND I RECEIVED NUMEROUS ORDERS WHICH ENCOURAGED ME TO CREATE A FACEBOOK PAGE’ Maham Sohail, Owner of a home-cooked food delivery service, Home Bakers student running an online handmade card business, Cartolina.

Card stalls, the conventional way of selling cards, only work well if it’s a major show like Crafter’s Expo, ElanWot or the like, Sheikh said explaining why she preferred the social media path over the conventional mode of business.

“My biggest sales occur during festivals like the Eids, the Ramadan, and the Valentines. Who would want to spare the time to come out and buy cards on such occasions? People like to be with their families at these times,” she added.

Launch of 3G coincides with the invasion of new users ince the launch of 3G service in Pakistan, more than 1 million people on an average have been joining the internet each month. This invasion of new internet users provided an opportunity to Sohail, Sheikh, and many others to build a career which otherwise would have been extremely difficult.

It might be true that self-conscious females may be as keen as their male

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counterparts in their enthusiasm to post a selfie every other hour, but it is undeniable that women have been quick to recognize and grab the many advantages a social media based business has to offer – something well explained by the fact that 76 out of every 100 women are social media users, compared to men with a ratio of 72.

“A major reason behind women getting into these online businesses is the optimised outcomes they provide. Today, otherwise modest and submissive housewives have displayed the chutzpah to run businesses through their laptop screens,” said social media analyst Syed Raza.

“People start businesses on Facebook because it’s just an easy way. You don’t need a lot of capital, you don’t have to pay rent or utilities, you already have a room that you’re operating out of,” said Jahan Ara, Chief Executive Officer of Nest i/o – a technology incubator of Pakistan Software Houses Association for IT and IT-enabled services. “Also, your family and friends can help spread the word.”

These businesses, says Jahan Ara, always have a possibility of growing out of homes and turning into full-fledged office-based ones, in the process raising investment to expand further.

Undoubtedly, the tool of new media has enabled women to not only work from home but also to stay in touch with their clientele. It is now easier to receive first-hand feedback instantly through social media. Today, not only home-based but also conventional business owners are using social media to remain visible to their consumers.

“It is okay if you do not have a huge investment or big budgets. Just put immense effort and with time you’ll be successful,” said Sohail – a good case study for women who want to venture into entrepreneurship, from the comfort of their homes. n

WOMEN’S DAY SPECIAL