Pakistan’s competitive advantages in six key areas

It has already gained ground in some of them. But I think it can break even deeper ground globally if it invests into the talent/capital/regulations to build its competitive expertise further, and emerge as a country of initial-recall in them.

I have briefly touched upon the basic rationale and challenges for each. Some are with an export-orientation since the domestic market cannot always consume the entire capacity. Also, the importance of export earnings cannot be overemphasized for reducing deficits in public finances.

However, the country needs to remember it is not alone in competing for these sectors in the global arena. A number of countries are competing, and already have a head start. But that does not reduce the potential for Pakistan in any way, since the underlying rationale for it is strong enough. It just needs to work to bring the same value to the table at a competitive cost.

GLOBAL OFFSHORING

This is a new-age sector employing many in the 20s/30s age group in many emerging markets. Global offshoring typically operates in a value-chain evolution in any country.

It starts from business process outsourcing activities. This employs mass and the client’s main objective is cost reduction. Once the comfort factor deepens with the deliverable consistency and talent quality, it moves to the next stage of the value chain – knowledge process outsourcing activities.

This employs specialists and the client’s main objective is intellect replacement. India’s off-shoring sector has gone through this evolution, as have Chile and Poland. The Philippines has entered the business process outsourcing (BPO) space, and it evolves similarly.

Most South Asian countries have the ingredients for gaining global market share – English language command, a strong schooling/university system thanks to the British colonial legacy, intelligent graduates across disciplines who have done well globally and a very young population willing to adapt, learn and put in the long hours.

For the BPO segment specifically, the region’s location is such that it can pitch to global clients both in the east and in the west due to minimum time lapse with either. Offshoring has led to huge campuses for captive centers and third-party centers in India, Chile, etc. It is a large-scale employer of young population and the scale of investment made locally indicates long-term commitments.

A challenge to gain global market share is to showcase the capability of its local talent in the global arena, so that conviction builds in their quality. It needs to bring back some citizens from abroad, those who have experience working with the client firms, and hence can bring value to develop the sector back home.

Another is the stability, as absence of attrition management strategies creates roadblocks to gaining long-term contracts. Infrastructure demands are significant though, with the need to develop large properties around the talent-rich cities.

CEMENT PRODUCTION

Pakistan’s cement story is well-recognized. Output of leading cement makers is globally certified, and is comparably cheaper than most other producers. Cement is also a key sector on the Karachi Stock Exchange (KSE).

But exports have not picked to the fullest potential. The country has a supply of the key raw material,- limestone, to ensure production capacity. On the demand side, construction is going strong in most developing countries.

In India, it is estimated that about two-thirds of the buildings that will exist by 2030 are yet to be built. African nations like Ethiopia, Nigeria, Botswana and Kenya have seen construction activity pick up with improvement in their economies.

In the Middle East, large-scale towns are coming up. The key challenge here is to break into new export markets in both cement and clinker products. This might need continued engagement with stakeholders in those target countries through bilateral meetings, trade-shows or partnerships.

Cost competitiveness in the global market has to be maintained. There is not much one can do about tariff regulations on imports in other countries except bilateral negotiations/advocacy, given that most countries produce cement.

So the country has to concentrate disproportionately on at least keeping its local cost of production low, and reducing delivery turnaround by streamlining the corridors which transport the consignment to the ports.

PROCESSED/PACKAGED FOOD

Pakistan is already a key exporter in primary agro produce and some processed foods. Given the socio-economic evolution that typically happens in countries as their economies become larger, it can mean increasing demand for processed/packaged foods.

This is because as the economies become larger, they require an increase in workforce and longer working hours. If the experience of India and most other emerging markets shows anything, daily cooking is not practical with a working population comprising both men and women due to lack of time and lack of hands.

2 thoughts on “Pakistan’s competitive advantages in six key areas

  1. Sourajit Aiyer

    Dear Sir,
    Thank you for your comments. It was encouraging to note that my thought-process on the topic was more or less in the right direction. I had narrowed on these 6 areas based on initial research and reading and thereafter, some drill-down thinking and deliberation with ideas that get formed in the process. Perhaps you might have some advice on how to convey this article and its 6 areas across to Minister Ishaq Dar or Minister Khurram Dastagir. I had written a similar note on Bhutan as well, based on observations made during the personal visit in Jan. The Bhutan piece was also posted by Ms Antonia Oprita on http://www.marketmoving.info. You might find that piece interesting read as well. In fact, I have been researching on some preliminary points on Bangladesh market since early-May. Hopefully might be able to finalize it soon. Thanks again for your comments.
    best regards
    Sourajit Aiyer

  2. Mohsin Khan

    The focus of the Pakistan government has been exclusively on the current problems plaguing the economy–energy, public finances and external imbalances. As such, economic policies have been geared to these immediate problems and only limited attention has been paid to long-run economic development of the country.
    Determining Pakistan’s competitive advantage is exactly the way to design a long-term economic strategy. The areas identified by Sourajit Aiyer are the ones that the Government of Pakistan, and particularly the Planning Commission, should be looking at seriously. I would add in IT where there is a booming cottage industry that needs to move up in scale. Pakistan also has cost advantages in manufacturing because of low wages and a favorable exchange rate. It lacks raw materials and inputs, but hopefully opening up trade with India will result in cheaper inputs.
    I hope that policymakers and businessmen will see the long-run potential of Pakistan and act to realize that potential.

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