Better quality local products can help curb imports

LAHORE: It should be a matter of concern for the economic planners that imports are increasing primarily because of domestic consumers, who in this age of technology find similar Pakistani products sub-standard.

In developed economies, the upstarts disrupted the entrenched players through innovation, improved quality and reduced price. In emerging markets the consumers were the captive buyers of locally produced items.

The ever increasing middle class in all developing economies is technologically savvy and Pakistan is no exception. Its domestic industries are not fully geared to fulfil consumer demand that encourages importers to fill the supply gap.

We have some good tyres and tubes manufacturers, but barring motorcycle tyres, they lack the capacity to produce even 60 percent of the domestic needs of cars and trucks (buses). Our auto industry would be operating to its full capacities this year still it is unable to fulfil demand, resulting in backlog of orders or diversion of consumers towards three-year-old used imported cars.

Import of cosmetic is increasing because there are very few quality producers in the country and the regulators lack the capacity to stop substandard cosmetics.

We import both processed and powdered milk because domestic processors are unable to meet the consumer demand or standards. So much so that some health conscious consumers are buying imported vegetables and fruits because they doubt that farmers in Pakistan adopt best manufacturing practices to produce these items.

Prudent businesses meanwhile are booming in Pakistan. The story of branded lawn fabric is known to all.

It is interesting to note that all major Pakistani concerns in all fields are targeting the richest segment of the society. They are producing and marketing their products on Pareto rule which states that 20 percent of the consumers generate 80 percent profit of a business concern.

At the start of this century, branded lawns were few and their rates were one third than what they are now. Currently, the high priced brands sell more.

In the year 2000, the 800cc car was the largest selling vehicle in the country. Now 1300cc and above models sell two times more than the small car.

Those catering to the needs of 20 percent richest consumers are minting money while the businesses looking after the needs of the remaining 80 percent consumers are selling four times more, but generating profits that are four times less than the income generated from 20 percent richest consumers.

Looking at this trend, there is a dire need to encourage establishment of high-tech industries in the country. The consumptive imports would continue to rise till high-tech industries come into the country.

Our businesses are operating under stress because 20 percent of the richest consumers buy imported stuff which is evident from ever increasing imports. These consumers generate 80 percent of the revenues.

The remaining 20 percent of the revenue comes from the 80 percent poorer consumers.

Efforts required to market to the 20 percent richest consumers are much less than the efforts needed to sell to the 80 percent consumers with lower income level. If we could contain imports by establishing state of art production units; we might as well accelerate exports.

Because then we would be producing quality goods that would be accepted outside the country as well. The planners at the same time would have to act decisively to eliminate under-invoicing and smuggling.