Consumer-centric policy only way to survive competition

LAHORE: Consumer-centric quality standards, better services and marketing will determine which companies will remain in the Pakistani market a decade later. Consumers in Pakistan have started giving premium to better quality and better services in Pakistan.

For instance, the craze for three-year-old used cars is not because of price, which is higher than the prices of a similar brand new version produced in Pakistan. The consumers in fact pay for the extra gadgets installed in imported used cars.

The air bags give them a sense of security; the rear view camera makes reversing easier and safer for the drivers. Similarly, consumers find that electronic gadgets and automatic transmission reduce a lot of burden on the driver.

Domestic manufacturers of cars have not added these features for a long time, fearing that the consumers may not be able to bear the additional cost. When they realised that the chunk of the market had been lost, these gadgets were added in some of their high end versions.

However, they still do not dare to introduce these features in small cars. This perhaps is the reason that the import of below 1000cc used cars has increased in the country.

Our first industrial policy was based on import substitution. This meant we established small manufacturing units of same products that were being imported in the country.

In order to ensure use of locally manufactured goods, we slapped high tariff on the imports of similar items. The domestic industries, based on import substitution minted money off that protection. Most of the large corporate sector flourished on that protection.

The huge protection or total ban on imports of protected products ensured heavy profits and monopoly for them. Absence of foreign competition also meant that they could enjoy the luxury of compromising on quality and service.

These entrepreneurs were caught by surprise when the Pakistani market was opened to foreign products at very low tariffs. The quality of the imported products naturally was better than the similar products produced in Pakistan.

Consumers paid higher price for better quality. The domestic industries started losing their grip on the market. However, even this did not prompt local manufacturers to make better products, up to the global standards.  Today, we even find imported products like shampoo and toilet soaps cheaper than similar products made in Pakistan. The same is the case in ceramic tiles.

Manufacturers allege that tiles are imported at very low rates and importers save huge sales tax, making their products cheaper. However, Italian tiles, even after under-invoicing pay the same sales tax as the local producers pay.

The difference is in quality. The Italian tiles are sold at three times the price of Pakistani or Chinese tiles. We could have competed globally had we improved the quality of our tiles to Italian standards.

When quality is produced, it is not possible for under-invoiced items to grab the local market.  The motorcycle tyre market in Pakistan is dominated by locally produced tyres. Indian under-invoiced tyres are occasionally imported but they lack quality.

Pakistan in fact is exporting motorcycle tyres to dozens of destinations in Europe, Africa, and Asia on the strength of quality. Industries first produce top quality for home market and then scale up to venture into foreign destinations.

About a decade back, imported televisions from Japan dominated the Pakistani market. Today 90 percent of television market is in the hands of domestic producers.

Some of them have ventured into exports as well. They have well developed service centres to address the complaints of the consumers.  In textiles, we concentrated on exports only and neglected the domestic market. The result of this policy was that 85 percent of textiles produced in the country were exported and only 15 percent consumed in Pakistan.

This is the reason our textiles sector is sick. The downwards trend in global textiles means they have to survive only on their 15 percent local market share, which is insufficient.  

We only make expensive cotton-based products that are in great demand in developed economies. Low cost blended products and fabrics are imported. Without a solid home base we cannot expect to grab a huge share in the global textile market.