Profit E-Magazine Issue 52

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10 Weekly Roundup 14 021Disrupt: First step towards building a Silicon Gali in Pakistan?

18 18 Rabeel Warraich’s $30 million bet on Pakistani entrepreneurship 26 Interloop target’s Pakistan’s largest ever private sector IPO 32 Zanroo will allow Pakistani social media marketers to ‘listen’ to you

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36 Daronomics and its aftershocks Sayem Z. Ali 40 The global halal trade: Is Belgium the next frontier for Pakistani exports?

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

CONTENTS

welcome

ENCOURAGING ENTREPRENEURSHIP Why is Silicon Valley in California and not anywhere else in the world? Why was the world’s biggest hub of innovation founded foremost in the United States, and only later copied – with varying degrees of success – in other parts of the world? And what would it take Pakistan to develop its own version of Silicon Gali? The answer to many has been a combination of several tangible factors: money, mentorship, resources, etc. But we would argue that there is one bigger factor that overrides all of these: culture.

For entrepreneurship to truly flourish, it needs an ecosystem that nourishes it, as participants at this month’s 021Disrupt conference in Karachi repeatedly asserted. And while that ecosystem is indeed multifaceted, none of it would be of any use if entrepreneurs – young and old – are not encouraged by their families and friends to take risks, and to continue taking risks even after their first, second, and third failures.

This week’s issue of Profit examines how entrepreneurship is taking off in Pakistan. We covered the 021Disrupt conference that seeks to be Pakistan’s answer to the TechCrunch Disrupt conference in San Francisco. We take a look at how two Bramerz is navigating the social media marketing space in the country. And our cover story examines how Sarmayacar Ventures is creating the first professional venture capital fund dedicated to investing in Pakistan.

FROM THE MANAGING EDITOR

All of these are examples of how Pakistan’s startup culture is finally beginning to thrive and take off. And it is doing so in large part because we as a society are becoming marginally more tolerant of risk. Admittedly, it is easier for the wealthy to take more risks than the poor, and Pakistan as a whole is far from being a wealthy nation.

But just the small amount of risk Pakistani entrepreneurs have taken has borne considerable fruit in the form of some of the world’s most valuable companies, such as Careem, which is now valued at $1 billion and even the more purely local Pakistani companies like Zameen.com, which has raised tens of millions of dollars in capital. All of these companies represent opportunities and jobs for families throughout the country. And all of these are the result of the slight elevation in our risk tolerance levels over the past five years.

Imagine what could happen if we became even more tolerant.

Farooq Tirmizi Managing Editor

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Adviser to Prime Minister on Commerce Abdul Razzak Dawood

QUOTE

“It is expected that the cement industry will push its exports to $1b soon, which currently stand at $600m”

“Government lacks ability, capacity to manage economy” PML-N leader Miftah Ismail

Rs2m

fine was imposed by the National Electric Power Regulatory Authority (Nepra) on K-Electric for non-compliance of performance standards, particularly on its failure to restore power supply within the prescribed time frame and to ensure the safety of the public in Karachi. Quoting media reports, the power regulatory authority said large swathes of Karachi remained without electricity due to the tripping of almost 700 feeders during rainy weather in June last year, which resulted in long power blackouts ranging from 24 hours to 48 hours in almost 50 per cent areas of Karachi. Besides, there were also reports of fatal injuries to some people owing to electrocution. The NEPRA took notice of the situation in Karachi and directed the K-Electric to immediately provide a detailed report on the tripping of feeders and electrocution incidents along with preventive and corrective steps taken by K-Electric. The report submitted by K-Electric revealed that almost 600 feeders tripped on June 28, 2017, and 400 feeders on the next day for a longer duration due to 30mm rain. In view of the poor state of affairs on part of K-Electric, the power regulatory authority decided to initiate legal proceedings.

Following the due process of law, it passed a final order on Sept 30, 2018.

$22b

worth of remittances are expected for FY19, a record since the government has offered an incentive package to overseas workers to attract more money through official banking channels. Analysts said remittances from more than 8 million overseas Pakistanis are likely to post double-digit growth over $19.62 billion received in 2017-18. The country received remittances worth $19.91 billion, an all-time high, in 2015-16. According to a news report, latest data from the State Bank of Pakistan (central bank) showed that remittances rose 13.14 per cent in the first quarter of fiscal year 2018-19 as overseas workers remitted a record $5.42 billion during July-September 2018 compared to $4.79 billion in the same period last year. The country is expected to receive $22.19 billion worth of remittances if the similar trend continues in the remaining three quarters, experts said. Prime Minister Imran Khan in a recent tweet expressed his willingness to facilitate overseas Pakistanis to boost remittance inflows up to $40 billion in coming years. Meanwhile, the central bank’s latest data showed that overseas workers in the UAE remitted 10.95 per cent more in July-September 2018 quarter by sending $1.19 billion as against $1.07 billion in the same quarter last year.

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21pc

increase in exports of engineering products took place in FY18 as compared to the previous year of 2016-17.

Engineering goods worth $190.633 million were exported during the period 2017-18 as compared to the exports of $158.610 million in the same period last year, a senior official of the Ministry of Commerce and Textiles revealed. He said that during this period, auto parts and accessories worth $15.546 million were exported against $12.55 million in the same period last year. The official said electric fans worth $23.826 million were exported in FY18 as compared to the exports of fans worth $25.298 million in the last fiscal year. Replying to another question, he said the government had decided to revive the Engineering Development Board (EDB) to concentrate on engineering products for increasing exports in this sector.

“We have planned to evolve a new roadmap for the promotion of engineering industry,” he said, adding that it was the top priority of the government to increase engineering exports, besides the export of auto parts, motorcycles, air conditioners and other products. The government, he said, would give priority to promotion of export-led growth and would reduce dependence on imports.

“Pakistan Railways will bring a revolution by upgrading its existing network and improving services with China’s help” Minister for Railways Sheikh Rasheed Ahmed

QUOTE

27pc

decline in banking sector profits was witnessed during the third quarter of 2018, touching Rs31.6 billion. To recall, New York State Department of Financial Services had levied a penalty of Rs23.7 billion on HBL in 3Q2017. The decline in sector profits is primarily owed to Rs6.8 billion total provision charge, lower non-interest income and higher non-interest expense during the outgoing quarter. Net Interest Income (NII) of the banks improved by 9 percent YoY to Rs122 billion in 3Q2018, led by higher interest rates and better deposit mix. However, on a sequential basis, NII is down 2 per cent despite higher rates due to lower asset base, as well as differences in the repricing period of assets and liabilities, post the change in the policy rate.

Rs3.5b

have been invested by various oil and gas companies (leaseholders) in erstwhile Federally Administered Tribal Areas (Fata) in last one year, said an official of FATA Development Authority (FDA). He said 2,800 local tribesmen were attached with these oil & gas companies in their respective areas for on job services. Oil and Gas Development Corporation Limited (OGDCL), Al-Haj Enterprises Pvt Ltd, BGP (Pakistan), Xian Senshe, Geofysika Krakow and MOL (Pakistan) have established base camps in different agencies in erstwhile FATA. He said 15 blocks have been allotted to various national and multinational exploration and production companies in erstwhile FATA. While OGDCL has completed 2D seismic data acquisition in Latamber and Kohat Block. Likewise, Al-Hajj Enterprises (Private) Limited has completed 2D Seismic data acquisition in Baska North block and will commence drilling by the end of 2018. MOL has completed surface geological mapping & gravity survey in Tal Block (NWA, FR Bannu) and now planning for 2D Seismic Survey.

Rs6.8b

initial public offering (IPO) is being planned by Interloop Limited which will be the largest private sector listing after Pakistan Stock Exchange’s listing in 2016.

It wants to use the proceeds from the IPO to expand its sock manufacturing capacity by approximately 20% and enter the denim business, said its Chairman and co-founder Musadaq Zulqarnain. The IPO likely to take place in January next year will see the company offering 12.5% of its stake in the sale and is gearing to increase revenue by 77% over five years, said Mr Zulqarnain. The revenue for the last financial year till June 2018 was Rs31 billion, said Mr Zulqarnain. Interloop Limited was founded in 1992 and is based in Faisalabad, Pakistan. It employs over 16,000 people and manufactures over half a billion of a pair of socks a year.

Rs60b

losses may be incurred in the shape of reducing sales tax on petroleum products by the government during the first half (July-December) of FY19.

To shield the end consumer from the full impact of rising oil prices, the government has been reducing sales tax which according to tax authorities estimates a sharp decrease of 46 percent in revenue collection in November 2018. According to sources, the projections put forth by the Large Taxpayers Unit (LTU) Karachi showed the continuing decrease in sales tax on two main fuels, including motor and high-speed diesel (HSD) could bring the collection under its head down to Rs15.7 billion in November from Rs29 billion in the corresponding month of last year. Moreover, sources believe the decrease sales tax rates on petroleum oil and lubricant (POL) production were becoming a drag on revenue collection and LTU Karachi projected the likely revenue loss to touch a gigantic Rs60 billion during July-December of FY19.

46.4pc

plunge in foreign direct investment (FDI) was recorded during the first four months (July-October) of FY19, touching $600.7 million compared to $1.119 billion during the same period last year.

The total investments in the country during the first four months of Financial Year 2018-19 (FY19) stood at $331.3 million, registering a decline of 67.3 percent when compared to the same period last year, the data released by the State Bank of Pakistan (SBP). In October 2018, the country received only $161.2 million in the head of direct investment as compared to $354.6 million during the same month last year. Investments from China were recorded at $334.9 million, which was almost half of the total investment the country received during the last four months.

BRIEFING

Readers Say Sorry to say that the writer of this article didn’t conduct proper research and seems to have some kind of bias towards Agha Hasan Abedi as well as Arif Naqvi.

United Bank was established and owned

by Sehgal family and later run by Agha Hasan Abedi. When Sheikh Zayed became rich by oil money and Agha Hasan Abedi brought that money to UBL. When Bhutto nationalized the banking and financial institutions in Pakistan. Mr Abedi moved to Abu Dhabi and with the Sheikh Zayed’s money and patronage formed BCCI. There are many other glaring misstatements and I can go on and on.

(Apropos: The heir to Agha Hasan Abedi) Arif Ali

How to ContaCt

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

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In a short piece of comments, we can not analyse the true state of problems, the rule of international agencies and the cases of entrapment, encountered by the bank. International power-houses can destroy any financial institution, irrespective of its repute and health, by using a set of techniques. I hope that the persons having an understanding of international capital markets will understand this point more clearly than a layman. In a nutshell, it can be safely said that the Bank was closed as they wanted to. Definitely, the eagerness of management of the bank to become the lender of third world countries without taking into account ensuing competition with international financial players may have been a reason. But truth is that we Asians generally fail to understand the difference between doing and saying.

Numerous examples can be placed here to support this point. Whatever the set of reasons may be, one thing is certain that even to think on the lines of a legend like Abedi is hard to imagine. He was a pioneer, who opened the door of international banking to Asians. Time will come when true professionals will come forward to explore the field he opened for them. As a consultant in international capital market and finance , it is my humble opinion. My message is that please do not form an opinion by looking at some aspects and ignoring the whole picture. (Apropos: The heir to Agha Hasan Abedi) Imtiaz Hussain

Notwithstanding the veracity of the article contents, the main issue is the massive reputational damage suffered by and large honest Pakistani professionals. Pakistan already has enough issues to deal with and this kind of behaviour and the related adverse publicity doesn’t help – particularly as this helps Indians in the Middle East to climb ladders by portraying Pakistani professionals as crooks.

(Apropos: The heir to Agha Hasan Abedi) Naeem Sethi People will naturally defend their icons – Pakistanis who made it big – who they had always looked up to. Doesn’t really matter if they did some shady things along the way. That has become our national culture, a lot of tolerance as long as you have done some good stuff as well, such as making Pakistan’s name prominent in the highly competitive global financial sector. Cheating and lying are not that big an evil here as it is in other countries. The defenders do not realize the damage such successful people do to Pakistan’s image abroad. The fact that there are not many Pakistanis who made it to the top, and the ones who do, they are all proven to be tainted in one way or the other. This makes the world sceptical about all Pakistanis, however honest they are. Rather than making such people heroes, they should be castigated so much that others in that elite circle do not even think about doing some chicanery and thinking to get away with that. Blaming everything to conspiracy theories all the time doesn’t help either. (Apropos: The heir to Agha Hasan Abedi) Khurram As a Central Bank examiner, I have documentary proof to indicate that BCCI records were all fraudulently manipulated and this was detected by our team way back in 1982. People defending Abedi are simply ignorant of facts. In short frauds on a massive scale. BCCI’s capital was totally wiped off by huge losses. Asset quality was very poor and management was ineffective, poor and not professional. Earnings were inflated enormously with paper profits and liquidity was a big question mark.

(Apropos: The heir to Agha Hasan Abedi) Akbar Muhajir

Please get your facts right BCCI group operated in 73 jurisdictions and was regulated by multiple regulators across the globe including in the US. Further at the time of shutting down, BCCI Holdings was meeting its capital adequacy as Abu Dhabi government had injected sufficient funds so capital was a non-issue Also I might invite your attention to the 2008 global financial meltdown when some of the largest and leading international banking companies were found to be complicit in fudging books and disinformation and many were bailed out under this glaring contradiction of too big to fail Have you heard of any CEO or senior staff of such companies being indicted for criminal misconduct and subsequently punished and what about Lehman scandal? Fact is that our beloved nation or whatever has yet to produce an entrepreneur and international professional of Mr Abedi’s calibre Please let us share your insights if any about the great businessmen and their achievements since 1947 comparable to Agha Saheb. Grow up and learn to live in the real world and not in some distorted realities. Referring to remarks about the ex-BCCI staff and their performance after the closure of BCCI group, this statement is yet another reflection of ignorance and low calibre in Pakistan. Alone at one point of time as many seven CEOs of local banks in this geography were former BCCI employees and senior officers and guess what Alfalah Bank now amongst the top ten banks in Pakistan was built and grew under the leadership of former BCCI professionals. (Apropos: The heir to Agha Hasan Abedi) TJ

sides of the Atlantic? Bank with assets of $20 billion with virtually all depositors paid out and a PE firm managing at its peak $14 billion. The writer has for whatever reason not mentioned a word that the bailout of 2008 was over $1.5 trillion.

Just remember one thing – money has no colour and nationality and religion has nothing to do with frauds – analysing on racial lines is evil. (Apropos: The heir to Agha Hasan Abedi) John What is written about Mr Abedi and BCCI and comparing with Abraj appears to be the work of not only a heavily biased person but also a very ignorant individual. His understanding of facts, history and the world of finance and international banking is evidently based on a low-level bank clerk working for a large bank probably somewhere in the Middle East. It is surprising that local print media have decided to print such low-level coverage issues underlying the collapse of BCCI and Abraaj. The comparison to the least is absolutely ridiculous and needs to be trashed away. (Apropos: The heir to Agha Hasan Abedi) Tariq Jamil An article citing micro instances which says little about the overall picture.The language reeks of vengeance and it seems that the writer has a personal score to settle. An overview of their financial statements would have had been more forthcoming. (Apropos: The heir to Agha Hasan Abedi) Abdul Saboor

One thing is obvious from the reading the comments on the article is that we lack an understanding of the whole picture of International Finance at the time of the deliberate collapse of BCCI. They may have committed some mistakes but the regulators were hell- bent to close it down anyway. I request to all above commentators to please consider the whole picture while declaring someone of Abedi’s stature as a crook. Try to sound rationalist, please.

(Apropos: The heir to Agha Hasan Abedi) Imtiaz Hussain

Love what Mr. Aurangze did to online banking, efficient new interface, how the Telco’s are doing what banks had to do.. not seen a slightest possible of loging to my bank account and purchase cinema tickets for next 10 years.

On branch level, HBL can not afford photo copiers, they are the only bank left that still tells customer to go and get photocopy, never to return. (Apropos: Habib Bank makes the pivot towards FinTech) Husnain Raza

I really do not know who the writer is and why this racist analysis. Do we conclude that subprime and 2008 was a white Christian fraud as it was mainly institutions run by white Christians from both

Excellent initiative. This would be really informative for everyone. Just a couple of comments: There should also be a 4th list of only the Pakistani institutions, for students who cannot travel abroad

for any reason and are only looking at domestic options. The market is huge and the current list posted by HEC is just laughable, as their criteria is completely inappropriate. I fully agree that the biggest and foremost criteria to select a uni is not the quality of campus or the teacher or the course material but it is basically the future earning potential from a graduate of that uni, which can also be measured by the desperation among students to enroll in and prepare for their admission test. Secondly, between LUMS and IBA, I’d say LUMS is ahead on marketing and HR whereas IBA is ahead in Finance. So for a student looking to have career in Finance, it is better to go to IBA than LUMS. Also, it is far harder to pass IBA admission exam test for BBA, than it is to enter into LUMS – so difference between the two universities is just marginal. (Apropos: Global MBA rankings: a Pakistani perspective) Khurram This article serves mainly elite class of Pakistani students who can afford expensive local and foreign MBA Programs. The similar analysis could be more worthwhile for large number of Pakistani students with limited financial resources where HEC approved/recognized emerging local and world reputed online or distance learning MBA programs to be evaluated having less or budget tuition fee. Such analysis will be more beneficial for on-job working professionals of different fields based on bottom to top approach to serve nation more effectively with existing job experience (such as Engineers, Doctors, Artists). Furthermore there are many foreign universities apart from 100 listed universities which have budget tuition fee MBA Programs including combination of online cum on-campus MBA programs where program subjects are divided into fully online to on-campus class lectures. Why we always tend to compare and analyse programs which can not be approached or accessed by 95% of Pakistani students?? May be one possible reason could be research data is readily available due to better digital marketing of expensive universities ????

With all said above, there is no doubt, this article is written well attracting desired stakeholders. (Apropos: Global MBA rankings: a Pakistani perspective) Aamir Tanveer

COMMENTS

021DISRUPT: FIRST STEP A TOWARDS

By Haniya Javed

BUILDING A SILICON GALI IN PAKISTAN How one conference wants to help create an entrepreneurship ecosystem in the country that badly needs one

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bout a year and a half ago, Anusha Fatima decided to make a business out of environmental sustainability. Together with two other teammates, she created Trashit, a company that seeks to collect organic waste, process it through composting, and reselling it over the internet to third-party buyers. Six months ago, Trashit saw the light of day in Surjani Town in Karachi. The company collected ‘green waste’ from Sabzi Mandi (one of Karachi’s largest produce markets) and composted it to organic ingredients that can be used all over again in farming.

The three members had invested in the idea out of their own pocket and through collaboration with a local NGO. The team would go from event to event to activate the idea, attending workshops on the lookout for spaces where startups were being supported, mentored, and financed.

One such space that is rapidly acquiring importance is 021Disrupt, a technology and entrepreneurship conference in Karachi (021 is the telephone area code for the city) modelled after TechCrunch Disrupt, the annual conference held in San Francisco and widely considered to be the marquee event of Silicon Valley every year. The conference was held at the Movenpick Hotel on November 11 and 12 and attended by young entrepreneurs in large numbers.

While the TechCrunch Disrupt conference has become a mainstay of Silicon Valley’s calendar, like most things in the tech world, it is newer than it looks: the first one was held by TechCrunch, a technology news organisation, in 2011 in San Francisco, and has since been held in many locations around the world. The non-tech world gained a greater ap-

preciation of the conference’s place in the pantheon of Silicon Valley entrepreneurship through its depiction on the HBO show Silicon Valley.

In Pakistan, the concept is a new one and is in its very nascent stages.

The 021Disrupt event this month was only the second one that has taken place in the country, but it is already been seen as an important cornerstone in the efforts by a small band of dedicated professionals to create an enabling ecosystem for entrepreneurship in Pakistan. The lack of that ecosystem is an urgent need felt and echoed by participants at the conference.

What was the event?

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ike Fatima, many had not approached the event to seek funding for expansion of their existing startups, but to pitch ideas. The common concern was not a lack of ideas, but the means for making them a reality. It was bridging that gap that the conference sought to provide, with everything from access to investors (there were venture capitalists from all over the world in attendance) to advice from successful entrepreneurs.

The single biggest piece of advice for the young entrepreneurs was to seek collaboration. “We tend to be very passionate about doing things on our own. Look for collaboration and partnerships on the technology bit of your idea,” advised Samar Hasan, co-founder of Epiphany, a social enterprise and impact consulting firm.

One got the impression from many of the entrepreneurs in attendance was that they felt lost and wanted guidance on how to move forward. A young man from the audience said that he had spent four years in getting a petroleum engineering degree and wondered if it was alright to forego his learning from

“IT IS TOO EARLY TO PREDICT WHAT CAME ABOUT FROM THE DISCUSSION AND NETWORKING SESSIONS. WE THINK THERE WILL BE MORE COLLABORATION IN THE COMING MONTHS. THIS IS ONLY THE STARTING POINT” Jehan Ara, President of Pakistan Software Houses Association (P@SHA) those years and start anew. “People who think they are experts in something just because they have a degree are at the highest risk,” said Jessica Berlin, founder of CoStruct, to the young man. Others on the panel, like Moonis Rahman of Rozee.pk and Saba Gul, an entrepreneur who left Silicon Valley to work in Pakistan, gave examples from their own careers where they gave up their flourishing careers with lucrative salaries and came back to Pakistan with only ideas in hand.

The very ideas of vulnerability and readiness to face failures were among the core issues being discussed. Jehan Ara of Nest i/o voiced that the first and still prevalent challenge for young people approaching her for guidance was really how to convince families in breaking the conventional employment route and letting them experiment with their own business ideas. Far from

societal ideals of doctors, engineers and lawyers, even those who pursue business degrees meet with a lack of support to do something new and be proud owners of a business, she said.

And then there was the issue of capital. There were a lot of references at the conference how 021Disrupt could be compared to Silicon Valley’s TechCrunch Disrupt or ‘’this is how it started in China too.” But is it really the case?

Well before the investors started turning their head towards smaller markets in United States with the likes of Miami, Chicago and Austin; Silicon Valley has been the go-to platform for start-up founders. To catch the eye of venture capitalists (VCs), entrepreneurs would make their way to San Francisco or the broader Silicon Valley area (just south of San Francisco) as it was the place to be in to be noticed and sell ideas, seek mentorship and benefit from networking often leading to partnerships. To get money, in other words, you had to be as close to Sand Hill Road (Palo Alto and Menlo Park, California) as possible.

In that sense, 021Disrupt did serve the purpose to some extent. While people networked and exchanged ideas, there were some tangible gains towards gaining financing at the end of the two days. Sasta Ticket, a Pakistani version of Expedia.com and Cheapflights.com earned investment from GOBI Partners, a Beijing-based venture capital firm.

Several announcements for future investment were called upon. For instance, Coca Cola invited solutions to managing plastic waste. Then there was a constant stream of feedback coming from VCs for those pitching ideas to them as the sessions advanced one

TECHNOLOGY

after the other. Show us a prototype of your idea, what you have achieved so far, and what you plan to do. Be precise, the VCs would announce in their talks.

Where are the gaps?

“I

n Silicon Valley you find investors approachable and more open to investing in start-ups. In Pakistan, it doesn’t seem the same way so far,” one attendee commented.

Silicon Valley offers capital at all stages of the entrepreneurial cycle.

Venture capital, angel investors, seed capital, exit grants, founder financing, bootstrapping; capital is available to be pumped in at different stages.

Then owing to the value system that has been groomed over the years – with the US government creating encouraging economic conditions for small companies – there is greater cultural acceptability of failure with more focus on long term gains as opposed to immediate profits.

In Pakistan, while the cliché has it that there is no dearth of talent, how much of it is groomed and channeled for long term gains? The answer is a no brainer.

The federal Planning Commission this year introduced a funding package of Rs2.3 billion for startups.

Of this Rs1.1 billion is to be used for investment in companies belonging to textiles, medical and IT sectors.

The 2017-18 federal budget also announced a three-year income tax break and exemption from sales tax for tech start-ups. While this is all good news, it still remains to be seen how these Rs2.3 billion will be best put to use. Will the government invest the funds with some local or foreign venture capital companies or would be directly injecting them in startups? This is yet to be seen under the new Pakistan Tehreek-i-Insaf (PTI) government.

While reluctance is also equally present in the private sector, Faraz Khan, a social entrepreneur and founder of SEED Ventures thinks the onus is also on the startup founders to evaluate if they have become too soft in their ambitions. “Have the skills or fervor softened now by having the support of (investment) structures at every stage? Models like debt or equity funding never existed and yet

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there were some amazing businesses that came into existence in the past decades,” he said.

While gaining traction and capital maybe the biggest challenge for start-up founders in Pakistan, what role can events like 021Disrupt offer?

In comparison to last year’s 105 startups, this year about 200 startups secured one-on-one office hours slots with mentors and investors from Japan, the United Kingdom, the United States, and Germany. “It is too early to predict what came about from the discussion and networking sessions.

We think there will be more collaboration in the coming months. This is only the starting point,” said Jehan Ara of Nest i/o.

Startup founders were flown in by sponsors from Peshawar and Lahore to attend the event in Karachi, the commercial hub of Pakistan. Will Karachi be the platform for entrepreneurs in future?

“Maybe not in the form of this annual giant event but in small, more quarterly distributed events spread through the year,” said Jehan Ara, speaking to Profit about the future of Karachi as a startup host. Apart from private entities like Nest i/o in Karachi, there doesn’t seem to be there a form of institutional support from universities, with the exception of Institute of Business Administration (IBA) and the recently inaugurated National Incubation Center at NED University, that we see in the likes of MIT and Stanford in sowing the seeds of an era of self-created businesses. And where support is present it is quite scattered. Beginning this year, PTCL announced that it will be supporting 25 startups each

year by providing digital services at reduced cost at its facility in Peshawar along with mentoring and business planning.

But it is worth knowing that Silicon Valley is also no longer being rendered the go-to-heaven for entrepreneurs. In TechCrunch 2018 San Francisco, there was a consensus among investors that startup-founders need not to be in Bay Area to win their chance. While reasons stemmed from rising cost of living in Northern California (46 percent of residents want to move out, according to a survey), there is a rising interest in venture capitalists in places like Boston (for automotive startups) with China attracting investors owing to their work ethics.

According to Shahjahan Chaudhry of National Incubation Center (NIC) Islamabad, regulation and legislation of social enterprises have been ongoing for the past one year.

“The idea is to take baby steps and see to what extent social enterprises and startups contribute in the GDP of Pakistan? We plan to present the first draft of legislation in 2019 once their contributions are demonstrated,” he said.

Legislation may or may not happen when it’s due, what is more needed from investors, startup founders and even government is to meet in the middle. “In Disrupts, the onus is on the participants as to what they really want out of these events.

They are not a means to an end but as entrepreneurs we should have a clear agenda as to what we want to seek from Disrupts,” said Fatima of co-founder of Trashit.

TECHNOLOGY

RABEEL WARRAICH’S

$30M BET ON PAKISTANI

ENTREPRENEURSHIP

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How a 33-year-old middle class Pindi boy became the first professional venture capitalist in Pakistani history

J

By Farooq Tirmizi

asim Haider will go down in history as the man who helped Pindi boys take pride in who there are like they never dared to before. Because the first thing that Rabeel Warraich told me was not that he is Pakistan’s first professional venture capitalist, nor that he graduated from MIT and worked as an investment banker at Morgan Stanley or the private equity direct investing arm of GIC, the sovereign wealth fund of Singapore, though all of these things are true and impressive credentials. No, the first thing he told me was that he was a proud Pindi boy.

Warraich’s story is not the kind we are used to reading about in Pakistan. A young man who grew up in a middle class family – comfortable, but nowhere near wealthy – and went to good schools, did well academically and otherwise, went off to an elite higher education institution abroad, worked in high-paying professional jobs in London, and then returned to Pakistan

VENTURE CAPITAL

“I WOULD START MY DAY AT 4 AM IN LONDON BECAUSE THAT WOULD BE WHEN THE BUSINESS DAY WOULD START IN PAKISTAN. I WOULD WORK ON SARMAYACAR UNTIL 9 AM, AT WHICH POINT, I WOULD GET INTO THE OFFICE AND WORK AT GIC. I’D STAY IN THE OFFICE FOR MY FULLTIME JOB UNTIL 8 PM OR SO, AND THEN I WOULD COME HOME AND RESUME WORKING ON SARMAYACAR UNTIL AT LEAST 1 AM EVERY NIGHT. SO I WASN’T GETTING MUCH SLEEP. AND I WAS MARRIED BY THEN AND HAD A YOUNG SON” Rabeel Warraich, CEO Sarmayacar Ventures as something the country has never seen before, but desperately needs: the founder of the nation’s first institutionalised venture capital firm.

On November 9, Warraich caused a stir by announcing that he and his partner – Austrian national and former investment banker Dr Bernhard Klemen – had raised $30 million from high net-worth individuals (HNWIs) and family offices for a venture capital fund dedicated to investing in Pakistani tech and tech-enabled startups.

While there is some global institutional venture capital investing in Pakistan, and Pakistani companies and wealthy individuals occasionally invest directly in local startups, an institutional fund dedicated solely to Pakistani companies has never been done before, particularly one that is designed to mimic the structure and institutionalised investing discipline of some of the world’s best venture capital funds.

Sarmayacar Ventures, as the new fund is named, builds upon the investing Warraich has already been doing alongside his friends and colleagues in Pakistani tech startups under the Sarmayacar brand name. In December 2016, Rabeel and the consortium of friends – most of whom were Pakistanis working in finance in Europe and the United States – announced that they would be investing $200,000 in Patari, a music streaming service based out of Lahore. That was followed by a $250,000 investment in ProCheck, a company that works to ensure the integrity of the pharmaceutical supply chain, announced in April 2017. And in

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February 2018, they invested $225,000 in a company called PublishEx, which allows app developers and digital content publishers to collect payments online and through cellular networks.

With these three investments, the Sarmayacar name was already known among Pakistan’s startups as a serious consortium of investors. The new fund takes that lead in Pakistani tech investing to the next level.

So how did this 33-year-old self-confessed Pindi boy pull this off?

Well, it helps to be exceptionally intelligent and motivated.

Determined beginnings

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arraich was born to an upper middle-class family in Rawalpindi in 1985.

“My mother taught home economics at Federal Government Girls College in F-7/2 Islamabad for decades, and my father had a small travel agency in Islamabad,” he said, in an interview with Profit.

His father leveraged his travel agency business to take the family on extended vacations most years when Rabeel was growing up, often spending a month every year with relatives abroad, giving him and his siblings a more global outlook on life than their peers.

That more global outlook – and the ambition it bred in him – was not always appreciated by Rabeel’s peers. At age 13, having spent his early schooling years at St Mary’s Academy in Rawalpindi, his parents encouraged

him to attend Cadet College Hasan Abdal. Needless to say, when you send a bunch of boys from traditional middle-class households all over Pakistan to a boarding school in Attock, things can get a little out of hand, and they can be a little unnerving for the faint of heart.

For Rabeel, the fateful day came during the first few days at Hasan Abdal, when the traditional hazing rituals began. A senior student came up to Rabeel and asked him what he wanted to do after he graduated from the Cadet College, and Rabeel, either out of naivete or gumption, replied: “I want to go to MIT.” Now, if you said that line at Karachi Grammar School or Aitchison College (and a handful of other schools), you would get looks of admiration and respect, or at least acknowledgment of the validity of that ambition. At Hasan Abdal, however, where the highest ambition of many of the students was a slot at the Pakistan Military Academy at Kakul, saying “MIT” was akin to putting a mark on one’s own back. Needless to say, Rabeel was not spared the worst of the hazing. “And for the entire time he was at Hasan Abdal, his nickname to all his classmates, and to everyone else, was ‘MIT’,” said Saad Duraiz, a management consultant at Deloitte in the United States, one of Rabeel’s oldest friends, and one of the initial consortium investors in Patari.

Some people might have let that experience get to them, but Rabeel did not let his ambition waver one bit. He particularly had a talent for physics,

Sarmayacar Ventures - MIT campus which kept honing and eventually it allowed him to gain admission into the university of his dreams: the Massachusetts Institute of Technology, where he enrolled in the autumn of 2004.

“My family is somewhat unusual in that even me graduating from MIT still makes me the black sheep of the family,” says Warraich. “My sister has a postdoc in neurobiology from Stanford University and currently works at a biotech startup in Silicon Valley, and my brother is a philosopher and photojournalist. I stand out as the capitalist in the family.”

Following his graduation from MIT in 2008 (he started before the Lehman Brothers bankruptcy), Warraich began working as an investment banker at Morgan Stanley in London, working with the mergers and acquisitions group, typically considered the most prestigious even within the already rarified world of high finance. That stint as an M&A banker allowed him to get a job in 2011 at GIC, a $359 billion sovereign wealth fund owned by the Government of Singapore to manage and

invest their foreign exchange reserves.

It was at GIC that Warraich got a taste of investing in private companies, although his job typically involved companies that were much further along their lifecycle than startups.

GIC and the investing bug

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ne of Rabeel Warraich’s defining characteristics is that he is a workaholic. Investment banking is an industry that is notorious for its long working hours (100-hour workweeks are completely normal), but even by investment banker standards, Rabeel is a workaholic, frequently working 20-22 hours a day, often to the point of collapsing out of exhaustion.

Why is that relevant? Because when he moved to the relatively more relaxed work environment of private equity at GIC (only 12 hours a day!), he began exploring other interests, specifically investing in high growth startups.

Warraich began exploring how to begin investing in private companies and buy meaningful amounts of shares in some of the most promising startups

in the world. His job at GIC had taught him how to evaluate companies from an investor’s perspective, and he applied that to his own personal investing strategy as well. Yet while he was a well-compensated professional, he did not yet have the kind of capital that would allow him to purchase a large enough block of shares on his own, and so he put together his first investing consortium of likeminded young professionals working in the world of finance who were also interested in investing in startups.

Their first investment was in Spotify, the Sweden-based global music streaming app, and they bought a block of shares from former employees of the company through a platform called Microventures that allows for the trading of shares in private companies between accredited investors.

But as interesting as the experience of investing in pre-initial public offering (IPO) shares of Spotify was, Warraich was obsessed with trying to find a way to invest in Pakistan. Indeed, when he was interviewing for the job at

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GIC, he said in his interview: “If, in ten years, I am not back in Pakistan, something has gone wrong.”

And thus began the long quest for investing in Pakistani startups, which saw Warraich spending years developing an understanding of the market before he was finally ready to take the plunge.

Waiting on the market to mature

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hile some of Pakistan’s leading startups have been around for a long time (Zameen.com was founded in 2006), the broader culture of entrepreneurship in Pakistan did not take off until 2012 or so, largely in anticipation of the boom on mobile internet connectivity that would come with the auctions of 3G and 4G spectrum to the cellular telecommunications companies.

When those licences were actually auctioned off in April 2014, Pakistan’s entrepreneurial cycle began to take off. Soon thereafter, Rabeel Warraich

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began his foray into understanding the world of Pakistani startups.

“In 2015, I started exploring early stage businesses in Pakistan,” said Warraich. “I would spend every single vacation in Pakistan. I would go and sit in English Tea House and have 30-45 minute meetings with entrepreneurs and others to learn about Pakistan’s startup ecosystem. I used to send my father-in-law a list of names before every trip, and he would help me arrange meetings with people I wanted to see on my Pakistan trips.”

“It was exhausting to do this. My colleagues started noticing that I would be more tired after my vacations than before them.”

Over the course of that year, he met with dozens of entrepreneurs and other professionals and learnt as much as he could about Pakistan’s startup environment. Meanwhile, he was putting together one more consortium of likeminded friends who would be willing to put together investments in Pakistani startups should he find one that he liked.

It was during one of these visits that he heard about Patari.

The Patari investment

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t was August 2016, and Warraich was towards the end of his visit to Pakistan when he heard about Patari, a music streaming app focused on Pakistani content.

Just two days before he was about to leave Rawalpindi to go back to London, Warraich sent an e-mail at 11 pm to Ahmer Naqvi, then the chief operating officer (COO) of Patari, asking if there was a chance they might be able to meet him. He did not think much of it. Most people in Pakistan are not very prompt about responding to e-mails and this was not Warraich’s most enthusiastic outreach effort to begin with.

But Naqvi wrote back almost immediately saying: “We’ll see you tomorrow morning in Islamabad.”

It turned out, however, that Naqvi had been optimistic about the ability of the Patari team to be able to get to Islamabad from Lahore by the morning.

They were not able to get to Islamabad

until late that evening.

At 7 pm, that day in August, Warraich made his way to Chaaye Khana in F-6 Markaz Islamabad with his brother, brother-in-law, and one of his closest friends, where the four of them met with the five core members of Patari’s team. What followed was a conversation that absolutely mesmerised Warraich and his team. There was an almost immediate chemistry between the Patari team and Warraich’s group.

Over the next five hours, they sat across from each other, getting to know one another, talking about their perspectives about Pakistan’s tech entrepreneurship ecosystem, the Patari team’s vision for where to take the company, and Warraich’s vision for wanting to invest in Pakistani startups.

At midnight, they had to be asked to leave Chaaye Khana because it was closing down (because Islamabad is not a real city… sorry, old Karachiite habits die hard). And so, they moved over to Hotspot, to continue the conversation.

This was the kind of conversation that one reads about in the legendary stories of venture capitalists meeting budding entrepreneurs. This was how it went when Arthur Rock met Steve Jobs, or when Masayoshi Son met Jack Ma. There was just one problem: Patari needed $200,000 in growth capital, and Warraich could only put together $120,000 between himself and his group of friends. He wracked his brains to think about what he could do, where he could get the money, and who he could call to put together the financing package. And that is when he called an old Morgan Stanley friend: Bernhard Klemen.

Warraich called Klemen that day from Rawalpindi, explaining that he had found a Pakistani startup that he wanted to invest in and needed to raise an additional $80,000. Klemen said, “yes, count me in.” To which Warraich responded: “That sounds great. Now would you like to know what the company does?”

“It’s a reflection of the high level of trust that Bernhard and I have with each other,” said Warraich, reflecting on that conversation. “We trust each other’s judgment about investments, and in each other’s integrity.”

Having thus secured the funding, Warraich then began putting together the paperwork that would govern not

just his relationship with his co-investors, but also the relationship between what was now being called Sarmayacar and the companies it was investing in.

On December 30, 2016, amid much fanfare in Lahore at the headquarters of the Punjab Information Technology Board (PITB), Sarmayacar signed its investment agreement with Patari. Sarmayacar would invest $200,000 into Patari, and would get a seat on its board of directors. At age 31, Rabeel Warraich became chairman of the board of directors of a company in which he had led a round of venture capital investment.

The growth of Sarmayacar

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he buzz created by the Patari investment meant that Warraich’s phone blew up. “When you start waving cash around, people will obviously want to talk to you to get money. But surprisingly, we also started getting calls from people who wanted to invest their money with us,” he said. “Many of them were Pakistani professionals living and working outside the country who saw us as a curated equity crowdfunding platform. The reality is that it wasn’t that. And so we did not take people up on their offers.”

For the next few months, however, Warraich kept it strictly focused on his own group of friends. But it was becoming more and more of a fulltime job on its own.

“I would start my day at 4 am in London because that would be when the business day would start in Pakistan. I would work on Sarmayacar until 9 am, at which point, I would get into the office and work at GIC. I’d stay in the office for my fulltime job until 8 pm or so, and then I would come home and resume working on Sarmayacar until at least 1 am every night. So I wasn’t getting much sleep. And I was married by then and had a young son.”

Rabeel Warraich with international partner Dr Bernhard Klemen During the month of January 2017, Warraich spoke to 100 companies about possible investments. Two things became clear. First, that he wanted his second investment to be in ProCheck, the company that works on pharmaceutical supply chain integrity. And secondly, that managing investments in Pakistani startups could become a viable fulltime career, though if wanted to be any good at it (and not be quite so absent from his family life), he would have to move back to Pakistan.

It was time to move back home.

The move back to Pakistan, and the launch of the fund

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ven for someone as dedicated to Pakistan as Warraich, the decision to move back is not easy. He and his wife had spent considerable time in London, and bought a home there. And while Warraich never revealed how much his salary was, people in his position at his firm routinely make north of $500,000 a year.

Giving that up is a huge challenge.

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“We had a very comfortable life in London. We bought a house, we could buy whatever we wanted, and had a lifestyle that I could never match in Pakistan. Every year, I was making more, which meant that it was harder to come back. The honey trap, it’s called.

But on the decision to move back, I owe the clarity of thought to my wife.

She would ask me: ‘Will you regret it if you don’t move back?’ And my answer was always yes.”

By May 2017, Warraich made the decision: he was moving back home to Pakistan.

He handed in his notice to GIC, and said that he would stay on for another three months to wind up his work. In the meantime, he started travelling all over the world to begin raising money for the fund. As his partner, he enlisted the help of his friend Bernhard Klemen, who at the time was working for JPMorgan in Austria.

Klemen had also been making VC investments on the side, though unlike Warraich, he had already hit some big home runs, including one investments where his unrealised capital gains were already 150 times his initial investment.

Klemen was keen to enter the venture capital space more formally and on a fulltime basis, but realised that he needed differentiation in order to succeed.

“He could either launch the 30th venture capital fund focused on Central Europe, or he could help launch the first one dedicated to Pakistan. So I started taking him with me to Pakistan to meet entrepreneurs and investors,” said Warraich.

As their anchor investor, Klemen was able to get Jan Bolz, the 57-yearold founder and CEO of Tipico Sportwetten, a European sports betting operator. Klemen had helped manage the sale of that company to European

private equity giant CVC, in addition to having previously co-invested with Bolz in some of his venture capital investments, including the one that saw the massive capital gains. So Klemen was coming to Bolz at a time when he had just made him a lot of money, and established his credibility as an investment advisor.

After a five-day trip to Pakistan to get Bolz comfortable with the concept of investing in Pakistan, Bolz committed to putting in $2.5 million in the fund in November 2017. That anchor investment meant that Warraich and Klemen were off to the races.

Next began a mad dash around the world by Warraich and Klemen as they darted to every major financial center in the world to meet prospective investors, all while Warraich was still helping manage the permanent move of his family from London to Lahore.

“I have done day trips to Singapore, and day trips from Singapore to Hong Kong,” he said.

And it did not help that he was trying to raise capital at a time when Abraaj Capital, then the largest alternative investment manager operated by a Pakistan CEO, was imploding. It was the worst possible time to be a Pakistani professional seeking to raise capital in a blind pool of funds to invest in Pakistani startups, selling essentially nothing but your own personal credibility and the prospects of growth in Pakistan’s economy.

Some European family offices and high net-worth individuals (HNWIs) invested in the fund, but the bulk came from Pakistani HNWIs based outside the country. One hedge fund manager in New York who invested in Sarmayacar told Warraich: “If I was 20 years younger, I wouldn’t be investing in this fund. I would pack up and move myself

BUT AS INTERESTING AS THE EXPERIENCE OF INVESTING IN PRE-INITIAL PUBLIC OFFERING (IPO) SHARES OF SPOTIFY WAS, WARRAICH WAS OBSESSED WITH TRYING TO FIND A WAY TO INVEST IN PAKISTAN. INDEED, WHEN HE WAS INTERVIEWING FOR THE JOB AT GIC, HE SAID IN HIS INTERVIEW: “IF, IN TEN YEARS, I AM NOT BACK IN PAKISTAN, SOMETHING HAS GONE WRONG” 24

to do what you are doing.”

He also tapped some wealthier Pakistani families that wanted to invest in his fund, including one of the wealthiest families in Lahore, and another family in Karachi. He also turned down some investors whom he felt would not be amenable to his desire to keep everything transparent and above board.

By mid-2018, Warraich had enough commitments to close the fund at $30 million, which formally closed on October 29 of this year.

The structure of the fund at the strategy

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armayacar Ventures has a structure that is very common in the United States and Europe, but unprecedented in Pakistan. The company has incorporated both the general partner that manages the fund (Warraich and Klemen) and the limited partnership that actually holds its investors’ funds in the Netherlands, owing to its flexible corporate structure, favourable tax treatments, and the fact that Pakistani lawyers and accountants are familiar with Dutch law because many multinational companies operate their Pakistani subsidiaries using holding companies in the Netherlands.

The fee structure is the standard 2/20: a 2% annual management fee on the amount of funds invested, and 20% of the profits earned above a specified hurdle internal rate of return. The hurdle rate is 4%.

The firm’s investment strategy involves investing in startups that offer scalable consumer-facing business models, ideally concepts that work in developed markets and have been localised for the Pakistani market. In addition, they are willing to consider companies that sell outsourced services to developed markets, provided they can demonstrate a cost advantage.

They are also not interested in investing in companies that do not already generate at least some revenue.

The investment committee consists entirely of just Warraich and Klemen, though they are willing to allow their investors to sit on the boards of the companies that they will be investing in so that there is transparency in how the money is being managed.

But all of these rules and protocols still do not account for the curveballs that lie can throw.

The Bajaness problem

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n April 2018, in the midst of Sarmayacar’s fundraising drive, there was a bombshell coming out of the nascent firm’s signature investment: Patari founder and CEO Khalid Bajwa was credibly accused of sexual harassment by a former employee of the company, who also stated that Bajwa created a hostile work environment for female employees at the company.

Despite the advances made by the Me Too movement across the world, Pakistan had not yet seen a man in the corporate sector be held accountable for his actions. This was Warraich’s moment to decide: which direction would

he take this. The precedent he would set would affect not just his own firm’s investment, but also potentially impact the broader Pakistani startup culture.

Warraich chose to be decisive: as chairman of the Patari board of directors, he had the power to fire Bajwa as CEO and he took it. Bajwa was summarily removed from his position at the company he founded, and Warraich stepped in as interim CEO while beginning the search for a permanent success to Bajwa.

Had he ended his actions there, it could have been argued that Warraich had done more than most investors might have done in his shoes, but Warraich went one step further: he

THIS WAS THE KIND OF CONVERSATION THAT ONE READS ABOUT IN THE LEGENDARY STORIES OF VENTURE CAPITALISTS MEETING BUDDING ENTREPRENEURS. THIS WAS HOW IT WENT WHEN ARTHUR ROCK MET STEVE JOBS, OR WHEN MASAYOSHI SON MET JACK MA. THERE WAS JUST ONE PROBLEM: PATARI NEEDED $200,000 IN GROWTH CAPITAL, AND WARRAICH COULD ONLY PUT TOGETHER $120,000 BETWEEN HIMSELF AND HIS GROUP OF FRIENDS

hired a law firm to conduct a “cultural audit” of Patari, to assess the scale of the problem over and above what had been revealed by the allegations against Bajwa.

That audit revealed a corporate culture beset with problems, and several female employees stating that they felt uncomfortable around the CEO. Firing Bajwa might have helped solve the problem, though there was one big issue: he was still a major shareholder and a member of the board of directors. This is where Warraich’s foresight in having a solid legal structure and legal agreements in place came in handy: Sarmayacar has been able to leverage the terms of its agreements to remove Bajwa not just from his position as CEO but also from its board of directors, his aborted attempt at returning to his position in July notwithstanding.

In the meantime, the hunt for Bajwa’s successor continues.

While he juggles the role of serving as interim CEO of Patari while also setting up Sarmayacar Ventures, Warraich can at least say one thing: he has already demonstrated the kind of “adult supervision” over his portfolio companies that sophisticated investors would want to see in the kind of money managers they entrust their money with.

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INTERLOOP

TARGET’S PAKISTAN’S LARGEST EVER PRIVATE SECTOR IPO The nation’s 7th largest exporter is keen to get listed on the Pakistan Stock Exchange

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By Mujtaba Jawad

ormal listings and initial publish offerings [IPOs] in Pakistan are a rare sight these days, given the volatile capital market situation and the political uncertainty; many firms reviewed their decision of listing and postponed their formal listing plans.

However, given the recent devaluation of the rupee, which is expected to help exporters become more globally competitive, this seems the perfect time to seek a listing if you are a company like Interloop, the seventh largest exporter in Pakistan.

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“FOR THE LAST FEW YEARS, WE HAVE BEEN ENGAGED IN AN EXTENSIVE PROGRAM USING EX-TOYOTA EMPLOYEES FROM JAPAN AND USA AND THROUGH COLLABORATION WITH TOYOTA ENGINEERING CORPORATION. WE ARE CREATING INTERLOOP WAY ON LINES SIMILAR TO TOYOTA WAY. THIS COVERS SEVERAL TECHNIQUES AND PROCESS IMPROVEMENTS TO TRANSFORM INTERLOOP INTO THE MOST EFFICIENT MANUFACTURER” Musadaq Zulqarnain, chairman of the board of directors at Interloop Ltd Interloop is a company that sells hosiery products to some of the world’s biggest brands, and is seeking to raise at least Rs4.9 billion by listing 12.5% of its shares on the Pakistan Stock Exchange.

Its client list includes major global athletic wear brands like Nike, Reebok, Adidas, and Puma, as well as other major clothing brands like H&M, Uniqlo, Target, and Levi’s. And the company has seen strong revenue and profitability growth in recent years, which its management claims is a testament to its culture.

“We have always tried to be the best in the class, to be ethical in our dealings, invest in latest equipment and technology, train our people and prepare highly professional middle and top management cadres,” said Musadaq Zulqarnain, chairman of the board of directors at Interloop Ltd, in an e-mailed response to questions submitted by Profit.

And market analysts are bullish on both the stock and the prospects of economic growth in the country. “This may be a good time [for an IPO] as market is expected to regain some of its past losses on the back of government’s resolve to address the country’s economic concerns. With Saudi Arabia already given a bailout, China is also expected to do the same coupled with entry into the IMF. With strong statement from the government for providing incentives for the export industry, it looks like a good time for Interloop to get listed,” said Saad Hashemy, chief economist and head of research at Topline Securities, in a note issued to clients ahead of the listing.

But is it enough to capture attention of the individual and institutional

investors? A lot depends on the stock market situation and the competitive textile industry.

The beginnings of the company

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nterloop was established in 1992 as a company that operates in the hosiery sector, focusing on manufacturing socks and leggings for major global brands. The company established itself as a trusted partner to the likes of Nike and Adidas. After eight years, a second production unit with 400 knitting machines was installed.

Since inception, the management focused on keeping costs down through innovation. In 2003, Interloop opened its first vertically integrated hosiery plant in Faisalabad in order to make its supply chain management more efficient. In 2005, with production consistently on the rise, the company opened their second hosiery plant, and launched a yarn dying division a year later.

With over a decade in the hosiery business, Interloop had made a mark in their particular niche. In 2009, the company collaborated with Eurosox Plus, a Netherlands-based firm to provide marketing intelligence, design, sales and distribution services to clients in Europe.

In the next few years, the company made a global leap by venturing into Bangladesh and Sri Lanka. Interloop also set up a China office to source raw material supplies to shorten lead times.

Major raw material sourced were yarns, chemicals, dyes, etc.

In more recent years, the company has diversified away from being a pure

textile manufacturer, and like many other larger businesses in the country, ventured into the dairy farming business.

The core of the company, however, remains textiles, and between 2014 and 2017, the company kept investing heavily in its production capacity, opening spinning units, vertical sampling facilities, tights and legging production plants, a new distribution center, and a new power plant to produce its own energy.

The company had revenues of Rs31.1 billion for the financial year ending June 30, 2018, a 17% growth over the previous year. Over the past five years, the company’s profits have growth at an average rate of 8.3% per year. The company’s net income grew to Rs3.9 billion for fiscal year 2018, a 12.5% increase over the previous year. Over the past five years, net income has growth at a compound annualised growth rate (CAGR) of 15.7% per year.

Part of the way the company has been able to grow its business is by investing in its human capital. “We have a structured program to train and nurture talent,” said Zulqarnain. “We induct fresh graduates which include 50% females, from top universities, based on an extensive selection process and then train them for one year, thus creating the best suited professionals as per our needs and corporate values.”

A challenging textile environment

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he textile sector of Pakistan is the most competitive business sector in the country. Pakistan ranks as the fourth largest producer of cotton globally and contributes a total of 8.5% to total economic output of the country. According to the Pakistan Bureau of Statistics, the textile sec-

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tor contributes to 60% of the export revenues of Pakistan. It provides 40% of the employment in the manufacturing labor force of Pakistan.According to the company’s prospectus, expansion into hosiery is necessary as fashion trends are changing. In the next three years, the hosiery segment is expected to expand by an average annual growth rate of 3.6% per year. Increasing disposable income and changing lifestyles, including ordering through the internet are all indicators of expected increase in demand in the near future.

When asked whether this is the only reason Interloop expects increase in demand, Zulqarnain said: “Lifestyle changes have increased the demand for casual and active lifestyle which increased the demand for our products but this is not the main reason for growth in demand for Interloop. The major reason is availability of quality product in huge quantity from an ethical and responsible supplier. These factors, which are unmatched in the world, have attracted top retailers and brands to Interloop.”

Analysing the IPO

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nterloop is looking to raise at least Rs4.9 billion from its initial public offering, for which it has set a floor price of Rs45 per share, which comes out to a price to earnings (P/E) multiple of 8.8x its net income over the latest 12 months for which financial data is available. That puts the company in the middle of the range as far as typical Pakistani textile company valuations go.

There are two main objectives for the IPO. First, the company wants to expand hosiery production by opening a new plant. Simultaneously, the company wants to enter into the apparel business by opening a denim plant in Lahore, for which land has already been acquired.

“Pakistan is one of the major countries of origin for denim. We are also expanding in hosiery (socks and leggings) while already being one of the top manufacturers of this category in the world. Denim has a huge potential and will complement our overall sales,” said Zulqarnain.

The European market holds the largest share of global hosiery sales, which is estimated to stand at 35.3% by the end of 2024. As Interloop has collaborated with Eurosox in Europe, it has strong distribution channels which will be beneficial as production increases.

However, the highest growth potential

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is seen in Asia Pacific region, which is expected to have a cumulative average growth rate (CAGR) of 5.6%.

The company’s management expects that entering into the denim apparel business will increase profitability for the company, since the denim business has higher margins than hosiery.

Zulqarnain said: “The denim plant is expected to go into commercial production during fourth quarter of 2019 and we expect the plant to reach optimum capacity utilization in 24-36 months from commercial production.”

The global market for denim is expected to increase at a staggering 6.4% annually, from $57 billion to $75 billion by 2021. In emerging markets, the rising disposable incomes and changing fashion trends, coupled with Pakistan becoming a denim hub in the past decade has made denim business a profitable venture, with competitors such as China, Bangladesh, Vietnam and Turkey, Pakistan could also profit from the increasing demand.

On the other hand, there are around 40 firms operating in the denim industry locally. Major local players include Classic Denim, Rajby Industries, Soorty Enterprises, Al Ameen denim mills and Artistic Milliner Pvt Ltd. All these competitors combined are producing approximately 50 million square meters of finished denim fabrics monthly. But, things are not as simple as they seem. Adnan Sheikh, AVP at Pak Kuwait Investment Company explains: “The denim apparel segment is a competitive segment. It will be very difficult to penetrate the industry. Also, the market is highly volatile these days, which may make it difficult to list the company.”

When asked about volatility in the stock market, Zulqarnain remarked: “Volatility is inherent to all capital markets.

Our focus is to continue to deliver stellar financial performance and create value for all our stakeholders on a sustainable basis.”

And there may be the potential for government support of the textile sector boosting Interloop’s earnings. “If the government provides incentives to the export industry, every major player will benefit. The thing that can differentiate Interloop and others is that Interloop is a trusted supplier to international brands such as Nike, Tommy Hilfiger, JCPenney and Adidas,” said Adnan Sheikh, a research analyst at Topline Securities, a brokerage firm.

“THE DENIM APPAREL SEGMENT IS A COMPETITIVE SEGMENT. IT WILL BE VERY DIFFICULT TO PENETRATE THE INDUSTRY. ALSO, THE MARKET IS HIGHLY VOLATILE THESE DAYS, WHICH MAY MAKE IT DIFFICULT TO LIST THE COMPANY” Adnan Sheikh, AVP at Pak-Kuwait Investment Company As the quality of local cotton crop has considerably decreased, firms are importing cotton for manufacturing purposes. This adds a toll on profits as costs increase especially when the Pakistani rupee is consistently being devalued.

When asked about economic impact of devaluation, Zulqarnain said: “As an exporter, our risks are hedged. The inflationary impact of devaluation is neutralized by increase in our export proceeds.

If PKR is rightly valued, we can compete with regional countries by overcoming the inflationary impacts which is definitely an opportunity to increase our share without losing profitability.”

What comes next?

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nterloop looks like a company that will make an impact in the segments it is operating in. Not many firms in Pakistan are incorporating modern production techniques to make production more efficient and reduce costs.

Zulqarnain said: “For the last few years, we have been engaged in an extensive program using ex-Toyota employees from Japan and USA and through collaboration with Toyota Engineering Corporation. We are creating Interloop Way on lines similar to Toyota Way. This covers several techniques and process improvements to transform Interloop into the most efficient manufacturer.”

Given that this formal listing would be largest private sector IPO in the history of Pakistan Stock Exchange. The stakes will be huge, both for the investors as well as the company.

CAPITAL MARKETS

ZANROO WILL ALLOW

PAKISTANI SOCIAL MEDIA

MARKETERS TO ‘LISTEN’ TO YOU Thai social media platform is launching its multilingual social listening tool in Pakistan

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By Taimoor Hassan

ith the digital space expanding at breathtaking speed and the number of users on social media increasing exponentially, digital media marketers have turned to another form of gathering data on potential customers – a practice called “social listening”.

Social listening is progressively becoming an important facet of social media marketing, because users are generating tons of data that strategies like these can help monetize. According to several estimates, social media users around the globe post about 500 million tweets, five billion Facebook likes and 95 million new Instagram photos and videos daily. Seventy-two percent of all internet users are active on social media and 81% of the consumers’ purchasing decisions are influenced by their friends’ social media posts.

McKinsey Global estimates that companies can unlock a massive $200 billion in annual value through social media technologies as over 50% of consumers are more likely to buy a product from a company that they can contact via social media. Such cosmic rise in social media activity means that brands need to understand customer’s needs as well as how to engage with them. This is where social listening comes in.

What exactly is social listening?

Recall the many times you were startled to see an ad appear on Instagram or Facebook about a product you’ve been thinking about. How do they know you want it or are interested in it?

They are “listening”.

Hootsuite, one of the world’s most popular social media management platform, defines social listening as “the process of monitoring social media channels for mentions of your brand, competitors, product, and any other ideas or themes that are relevant to your business.”

Another social media management platform Sprout Social explains that “social listening goes beyond monitoring and replying to incoming questions or comments about your brand. It’s about extracting key insights from social conversations that you can

“OUR SOCIAL LISTENING TOOL HAS BEEN TRAINED TO LISTEN AND ANALYSE URDU AND MINGLISH (ROMAN ENGLISH), INCLUDING THE DIFFERENT WRITING STYLES OF THE LOCAL LANGUAGE. THIS PLATFORM IS THE FIRST OF ITS KIND. EVERYTHING HAS BEEN CONSOLIDATED INTO A SINGLE PLATFORM TO COLLECT DIGITAL DATA WHICH CAN BE REVIEWED ON ONE PLATFORM.” Tai Shiru, Zanroo’s Managing Director for the region

apply to your overall strategy.”

Through social listening, businesses are able to listen out for every mention of their brands on popular social media platforms and filter out noise to gain a thorough understanding of brand relevant conversations in social channels. Simply put, businesses use social listening to track what people are saying about a brand – negative or positive — that helps to analyse the overall sentiment that is prevailing about that brand and monitor trends around it.

These valuable insights are then utilised to formulate effective marketing strategies to improve the overall health of the brand and improve customer experience.

Pakistan has over 60 million online users with a penetration rate of 27%, which highlights the fact that the country has a fast-growing online population. With the rapid increase in social media usage in the country, consumers are expressing and sharing their opinions about products, providing companies the opportunity to “listen” to their

preferences.

With this in mind, Thailand-born marketing technology (MarTech) company Zanroo is bringing its coveted platform and social listening tool to Pakistan in a partnership with leading Pakistani digital agency Bramerz.

Launched in 2013, Zanroo is being used globaly by a variety of brands that span the industries of banking, automotive, telecom, e-commerce, aviation, and consumer goods sectors.

But its biggest leverage point is that it understands Pakistan’s native language, Urdu.

“Our social listening tool has been trained to listen and analyse Urdu and Minglish (roman English), including the different writing styles of the local language,” Tai Shiru, Zanroo’s managing director for the region, told Profit.

“This platform is the first of its kind.

Everything has been consolidated into a single platform to collect digital data which can be reviewed on one platform.”

Bramerz co-founder and Vice President of Growth Badar Khushnood concurred, asserting that Zanroo’s platform is a complete tool with a number of features and that no such tool is available in the market. Due to its unique nature, however, the product is only available to businesses and its introductory price is US$2,000 per month.

Is the Pakistani market ready?

According to a representative of a leading digital marketing agency based in Lahore, social listening in Pakistan is in the nascent stages and hardly anyone

DIGITAL MARKETING

is aware of this technique. “At present, social listening is famous in developed countries and they have created tools that can listen to conversations in their native language. In Pakistan, it is yet to begin,” the representative told Profit, agreeing that Zanroo’s appeal would lie in its localization. “As the trend is just starting out, social listening tools currently available are not local and therefore unable to monitor conversations in the local language.”

According to Zanroo, their tools will provide an holistic view of how consumers view a specific brand and/ or business along with how they perceive its competitors. With the presence of a multilingual localised dictionary, it will become easier for brands to listen to the conversations, as people make use of more than one language in their conversations as is common in Pakistan. Moreover, the tool will also provide an insight into what people are talking about on any trending issue or event, providing cutting-edge and near real-time crisis management.

Using its tool, Zanroo ensures that brand marketing managers can tap into conversations on social media that might directly or indirectly influence the success of products or services offered by a business. The platform allows to continually listen, monitor individual mentions, and analyse all conversations to get market intelligence, capture online conversations based on specific keywords, phrases or brands

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USING ITS TOOL, ZANROO ENSURES THAT BRAND MARKETING MANAGERS CAN TAP INTO CONVERSATIONS ON SOCIAL MEDIA THAT MIGHT DIRECTLY OR INDIRECTLY INFLUENCE THE SUCCESS OF PRODUCTS OR SERVICES OFFERED BY A BUSINESS. THE PLATFORM ALLOWS TO CONTINUALLY LISTEN, MONITOR INDIVIDUAL MENTIONS, AND ANALYSE ALL CONVERSATIONS TO GET MARKET INTELLIGENCE, CAPTURE ONLINE CONVERSATIONS BASED ON SPECIFIC KEYWORDS, PHRASES OR BRANDS AND BETTER UNDERSTAND AND ANALYSE TRENDS IN THE INDUSTRY and better understand and analyse trends in the industry.

On the other hand, Bramerz plans to use the platform to gain valuable insights required to expand and optimize different brands’ marketing strategies and perceptions. They are also interested in using data gathered to Zanroo’s platform to conduct real-time competitive analysis and online market research instead of having to conduct faceto-face focus groups and traditional surveys.

As a pioneer in the field, Bramerz has to its credit projects like Pakistan Super League (PSL) and Uber Pakistan and has served multinational giants like Nestlé, Unilever, Levi’s, Samsung, and PepsiCo.

Zanroo knows marketing, but does it know the internet?

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he internet is a tricky space. Millions of bots automated to do a task repeatedly have infested the internet as quickly as it has expanded. Social media hasn’t been able to fend off this digital epidemic either.

Take Twitter, for example. A 2017 study suggested that anywhere between nine to 15% of active Twitter accounts are bots. That translates into approximately 48 million bots per month posting tweets without any direct human involvement. To lessen the flow of disinformation on the platform, in May and June alone this year, Twitter suspended as many as 70 million accounts – more than 1 million accounts in a day – that were deemed to be fake. The purge was initiated after Russia was alleged to have influenced the 2016 US presidential elections through social media channels.

Similar actions were taken at Facebook. In a report, Facebook revealed that it deleted 865.8 million posts in the first quarter of 2018, besides removing 583 million fake accounts in the same period. That is more than a quarter of Facebook’s 2.2 billion monthly active users.

Unfortunately, this tool developed

by Zanroo is unable to monitor fake social media accounts and bots. “There is no way for us to know if an account is real or not. However, if an account is posting them same thing repeatedly, we can mark it as spam and discard it,” Tai Shiru said.

DIGITAL MARKETING

OPINION

sayem z. ali

Daronomics and its aﬞershocks A familiar mess that the PTI has inherited

PerhaPs FM Dar Feels that the crisis coulD have been averteD iF the elections haD been helD in 2017 Following PM nawaz shariF’s DisqualiFication by the sc

year of the PML-N government, the economy would not be racing towards another financial crisis.

In this narrative, poor Miftah Ismail comes out as he Former FM (Finance Minister) Ishaq the inexperienced, incompetent replacement FM Dar has finally come out to share his side holding the smoking gun. In particular, FM Dar took of the story on what went wrong with the strong exception to the reversal in the key policy aneconomy. This is probably the first time a chor of his regime, i.e. the USD / PKR fixed peg. former FM has taken responsibility of his Under Miftah’s regime this policy was reversed and government’s failures. His article pubrupee depreciated 23% to 128 (from 104) ahead of lished in The News on 29th October titled the 25th July 2018 General Elections. The rupee de‘Facts about Public Debt’ states that ‘PM preciation added significantly to the external debt Abbasi and his economic team were faced with huge obligations as a percentage of Government revenues. unbudgeted financial demands’ in the lead up to the Perhaps FM Dar feels that the crisis could have 2018 elections and consequently ‘economic discipline been averted if the elections had been held in 2017 could no longer be maintained’. following PM Nawaz Sharif’s disqualification by the The ‘huge’ financial demands could be seen in the SC. However, it is unfair to lay the blame squarely on ‘unfortunate’ build up in debt according to FM Dar. the shoulders of Miftah Ismail. Most independent exTotal public debt during the year FY18 increased by a perts had been warning about the looming financial record Rs. 3.4 trillion, out of which Rs 2 trillion was forcrisis much before Miftah took office. eign loans. This does not include the debt piled on by The financial crunch is felt most severely in three the loss making public sector enterprises. According to key areas of the economy. First and most severe is FM Dar, if this slippage had not taken place in the last the Balance of Payment crisis with Pakistan running out of FX reserves to cover its imports and to pay back the external loans. The second and equally severe is the inability of the Government to fund its unsustainable fiscal spending with tax collection barely covering loan sayem z. ali repayments and running of government. The third crisis that has resurfaced is The writer is part of the the record losses of the Power companies and the build-up of the large circuvisiting faculty at IBA lar debt in the energy supply chain.

Pakistan and a senior The source of the balance of payment crisis this time round is the colBanker. He can be reached lapse in exports and large debt repayments due in the next one years. Under at sayem.ali@gmail.com the PML-N government, exports had collapsed to $20bn by 2016, down from $25bn in 2013. This was the longest and sharpest decline in exports recorded in Pakistan’s history. During the same time period exports from Bangladesh jumped from $26bn to $35bn. The decline in Exports was a direct result of rising cost of doing business, with Pakistan’s ranking plummeting to 147 in 2018

t

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(from 107 in 2013).

Alarm bells had started ringing and Dr Hafiz Pasha’s article titled ‘Balance of Payment Emergency’ in September 2017 stated that ‘SBP FX reserves are now below safe levels’ of 3 months of import cover. The gap between foreign income (exports + remittances) and the import bill was an ‘unsustainable $1bn a month’ according to Dr Pasha. In its first post program monitoring report the IMF staff warned that SBP FX reserves (net of short term liabilities) at the end of 2017 had declined to a negative $724 million, down from $7.5 billion at the end of the IMF program in September 2016.

This was also visible in the panic in the markets. KSE 100 index fell 29% to 37,919 points by 19th December 2017, from peak of 52,876 points in May 2017.

Urgent economic measures were needed to stabilize the economy and calm the markets. In December 2017, SBP started to raise interest rates and allow the rupee to depreciate in an attempt to reduce the rising trade deficit.

This move should have been complemented by measures to contain the

government’s fiscal deficit. However, unfortunately the PML-N government was desperate to win the 2018 elections regardless of the cost to the economy.

We saw a significant increase in preelection spending that led to a record fiscal deficit of Rs2.3 trillion (6.8% of GDP) in FY18.

The third crisis on the PSEs has also become severe with the entire energy supply chain clogged due to the circular debt. During the same period as expensive new power projects set up by the PML-N government started to come online in 2017, power generation picked up but the cost of production started to escalate. With no improvement in Transmission & Distribution losses, the circular debt in the energy supply chain spiraled out of control. By end of June 2018, the circular debt had sky rocketed to Rs 1.2 trillion, compared to Rs 480 billion when the PML-N government took office in 2013.

The financial crisis inherited by Prime Minister Imran Khan led PTI government is severe and the aftershocks of the crisis will stay in the economy for

THE FINANCIAL CRISIS INHERITED BY PRIME MINISTER IMRAN KHAN LED PTI GOVERNMENT IS SEVERE AND THE AFTERSHOCKS OF THE CRISIS WILL STAY IN THE ECONOMY FOR A LONG TIME a long time. There is no one better qualified to talk of this crisis than FM Dar, whose policies have brought the economy to the edge. And this is not the first time too. His previous PML-N government of 1999 also left Pakistan in a similar mess. Back then Pakistan was forced to restructure debt (technical default) and freeze foreign currency accounts. Forward to 2018 and once again Pakistan is forced to seek extraordinary financial assistance from Saudi Arabia and other friendly countries to avoid a default.

ECONOMY

Aamer Ejaz Chief Digital Officer at Jazz Amber Shamsi on the Stage with Omar Javaid

Aisha Sarwari Head of Corporate Comms and Sustainability at Jazz

Ali Naseer Chief Corporate Regulatory Affairs Officer at Jazz

JAZZ CORPORATE LUNCHEON Jazz hosted a corporate luncheon in Islamabad for leading figures from private corporations and media fraternity.

Asif Aziz, CCO at Jazz (L standing)

Female student from IMSG, Islamabad

Startup DeafTawk

Startup Chefling Tales

THE GLOBAL HALAL TRADE:

BELGIUM THE NEXTFRONTIER FOR PAKISTANI EXPORTS?

IS

A growing Muslim population and rising non-Muslim interest in halal products is a market waiting to be captured

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By Muhammad Faran Bukhari

he global halal trade, standing at $3 trillion, seems to be a lucrative market place for international investors, with non-Muslim majority countries increasingly expressing willingness to play a more active role in the trade that has remained limited in scope to the Islamic world.

According to a report published by the Thomson Reuters Foundation on the global Islamic economy, Muslim consumers spent $1.2 trillion on halal food and beverages in 2016, a figure that is expected to reach $1.9 trillion by 2022. However, even though the halal food trade is primarily aimed at the Muslim market, the major exporters of halal products are interestingly countries that are not majority Muslim. In 2016, Brazil exported $5.2 billion worth of halal food and beverages – the highest by any country in the world – followed by Australia at $2.4 billion, India at $2.3 billion, and France at $0.8 billion.

In Europe alone, the halal market driven by a growing Muslim population is expanding at an estimated annual rate of 10 to 20%. Europe’s Muslim population is expected to grow from 5.9% in 2010 to 6.8% in 2020 and 10.2% in 2050, another sign of good things to come for the global halal trade.

On the other hand, Pakistan lags behind despite being a Muslim-majority country and has a miniscule share of around 0.25% of the global halal market.

The ‘Halal Club’

I

n 2011, the Halal Club Brussels was created in Belgium, dedicated to helping its members in their efforts to penetrate halal markets. The club

“HALAL IS BECOMING A UNIVERSAL SIGN FOR QUALITY ASSURANCE AND STANDARD OF LIVING. THE WORLD MARKET FOR HALAL GOODS AND SERVICES IS CONSTANTLY ON THE RISE AND INFLUENCING WORLD COMMERCE AND FINANCE. HALAL PRODUCTS AND ISLAMIC FINANCIAL SERVICES HAVE A MARKET SHARE OF ALMOST $1 TRILLION ANNUALLY” Pascale Delcomminette, CEO at Wallonia Export-Investment Agency (AWEX) brings together nearly 100 European companies located in Wallonia, Belgium, that are producing and exporting halal products and services.

“Halal is becoming a universal sign for quality assurance and standard of living. The world market for halal goods and services is constantly on the rise and influencing world commerce and finance,” says Pascale Delcomminette, Chief Executive Officer at Wallonia Export-Investment Agency (AWEX), a public sector organisation

PERHAPS EVEN MORE INTERESTINGLY, THE DEMAND FOR HALAL PRODUCTS DOES NOT NECESSARILY COME FROM MUSLIMS ALONE – A LARGE NUMBER OF NON-MUSLIMS IS ALSO BECOMING MORE WILLING TO TRY HALAL OR SHARIAH-COMPLIANT PRODUCTS. A CASE IN POINT IS BRITAIN WHERE MUSLIM MIGRANTS HAVE ESTABLISHED HALAL RESTAURANTS THAT ENJOY ALMOST EQUAL POPULARITY AMONG THE NON-MUSLIM POPULATION

working to enhance Belgium’s international trade. “Halal products and Islamic Financial Services have a market share of almost $1 trillion annually.”

Delcomminette said that the club was initially composed of agribusiness companies, but these pioneers have been joined by more members who are producing pharmaceuticals, cosmetics and textile products as well as by service companies in logistics and technology.

When asked her views on how a country like Pakistan can become more involved in this growing market, Delcomminette said that Belgium can be of great help to Pakistan in this sector. “Pakistani exporters have a huge market for delivering their halal products. In today’s business environment, companies are seeking to find the key to remain competitive. Combining their technology and expertise, Pakistani and Walloon entrepreneurs can forge successful partnerships and mutually benefit from the $1.8 billion-strong Muslim consumer market that represents a fifth of the world population,” she said.

And there is a clear connection between entrepreneurs in Wallonia and in Punjab, Delcomminette believes.

“In Wallonia, the Southern part of Belgium, we have developed a very strong logistics industry. Its main objective is to improve the long-term performance of both individual companies and the supply chain as a whole. The halal supply chain approach is important to guarantee the halal integrity at the point of consumption. With this view, logistics service providers are progressively offering a halal supply chain service to meet the demand from

EXPORTS

halal industries throughout the world,” she explained. Similarly, in Pakistan’s region of Punjab, the Punjab Halal Development Agency (PHDA) has been established in a bid to formalize the halal sector. The agency works on halal certifications, capacity building and compliance regime of halal food safety standards.

It also seeks to brand Pakistan as the “Halal Hub” of the world and open new avenues for the country to expand into the global halal market. Currently, the halal market in the country is expanding rapidly under diverse areas of trade, including Islamic financing, food items, oil seeds, pharmaceuticals, cosmetics, tourism and hoteling.

“An MoU was recently signed between Northport in Selangor, Malaysia, and Logistics in Wallonia, for a project to establish a Halal logistics route between Malaysia and Europe and thereby create a Halal Hub-to-Hub concept that will progressively be extended at both ends, from Malaysia to China and from Europe to Africa,” Delcomminette said. “Pakistan is ideally located on this new Halal Silk Road. The overarching objective is to optimize access to the global halal market.”

The high potential of halal products

A

ccording to a report published in 2017, food items consist 43% of the global halal trade, followed by media products at 23%, clothing at 23%, tourism at 8%, pharmaceuticals at 7% and cosmetics at 5%.

So what has led to such high demand for these products? First, the market for halal products is growing due to a huge Muslim global population that has reached almost 1.84 billion. This figure is expected to reach 2.2 billion by 2030.

Secondly, the market is still largely untapped. The global halal food market was worth $1.2 trillion in 2016 and is expected to reach $1.93 trillion by 2022. Similarly, the modest fashion market which was valued in 2016 at $254 billion is expected to reach $373 billion in 2022, and the halal travel and cosmetics markets that were valued at $169 billion and $57 billion respectively are expected to reached $283 billion and $82 billion in 2022.

Thirdly, a large chunk of the

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MoU signing ceremony between SIndh Board of Investment and Wallonia Foreign Trade and Investment Agency of Belgium market share for halal products comes from Asia Pacific where the Muslim middle class is becoming an area of opportunity not just in numbers but also in terms of income. As disposable incomes in Indonesia, Pakistan, and India for example have increased over several decades, their Muslim populations have also increased in tandem by almost 257%.

Popularity of halal products among non-Muslims

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erhaps even more interestingly, the demand for halal products does not necessarily come from Muslims alone – a large number of non-Muslims is also becoming more willing to try halal or Shariah-compliant products. A case in point is Britain where Muslim migrants have established halal restaurants that enjoy almost equal popularity among the non-Muslim population.

But the most interest has been seen in Islamic banking. One in three customers at Al-Rayan Bank, one of the largest Shariah-compliant retail banks in Britain, is a non-Muslim. Last year alone, 90% of fixed-term depos-

it accounts opened with the bank belonged to non-Muslims. The 2008 global financial crisis has made Islamic finance a far more appealing option to non-Muslim borrowers and investors who see the Islamic system as less volatile compared to conventional banking. This is because the Islamic system is based on profit sharing and prohibits investing in “speculative” businesses in favor of things like real assets.

Picking up on this trend, Singapore was one of the first non-Muslim countries to start selling Islamic sukuk bonds, followed by Hong Kong, the United Kingdom, and Luxembourg who entered the sukuk market in 2014.

Top corporations like General Electric’s GE Capital and Goldman Sachs have also ventured into Islamic bonds Islamic finance is also thriving in Belgium and the country offers a good opportunity for Pakistani banks.

Pakistan’s Habib Bank Limited (HBL) already has branches in the country along with other Islamic banks of mainly of Lebanese origin. Delcomminette firmly believes that other Pakistani banks will also be welcomed in Belgium should they consider entering the Belgian market.

EXPORTS