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May 16, 2019

PepsiCo finds obstacles in taxation, regulations to grow to next level

Business

May 16, 2019

LAHORE: Mike Spanos, chief executive officer of Asia, Middle East and North Africa at PepsiCo, Inc. discussed the investment plans, government policies and regulations with The News during his recent visit to Pakistan.

Q: How do you see the taxation system and regulations with regards to food and beverages sector?

A: Taxes in Pakistan are still higher compared to a number of other countries and that just makes it harder for us to grow and to reinvest in the business. A company is able to bring in products that have low tax rates and similarly companies will have incentives to bring in partners when the tax rates are reasonable. So what we have shared with the government is that we would like to see continued improvement in the tax system. This can be cut in a few ways. Pakistan needs consistency of regulations. So whether it’s food safety regulations and taxes, they need to be consistent across Pakistan because your supply chains and your whole business model pivots across the whole country. Today there is still fragmentation in the policies here in Pakistan so we look and ask for more continued support to harmonise the policies.

Q: How much are food authorities supportive to the sector?

A: We appreciate the work that has been done here but we seek for more improvement in two ways. The first is we can be more collaborative partner in food safety regulations, bringing the best of PepsiCo capability to the table. Means globally, we think that’s a good thing for Pakistan from a science and capability standpoint. The second area we would ask for improvement is harmonisation. Because we are still dealing with some fragmented policies, it is very challenging for us on a supply chain front.

Q: Will the new government’s policies attract foreign investors?

A: It is very important that how government of Pakistan will continue to ease doing business in the country. We at PepsiCo have seen a big improvement in the ease of doing business in Pakistan. It is very important to see that do you have a stable environment, do you have a predictable environment or do you have a transparent environment that is consistent. Companies are looking at long term investments and return of those long term investments. So for us, the more you have that stability, consistency, transparency the more you are going to have long term investments in Pakistan.

But we feel right about the country. Pakistan is a very vibrant country. You have young population and I think two third of the population is under the age of 35 along with rapidly growing advancements and socioeconomics. The government is focused on education that tells us that you are going to see Pakistan’s continued growth in household incomes. This means Pakistan is going to have more advancement in the society, which means that people are going to have more disposable incomes to spend across the board. And that’s a really positive thing for the prosperity of Pakistan.

Q: Is the company planning to increase exports from Pakistan and what are the prospects?

A: Yes we want to. Today we export to Malaysia and Afghanistan and we are very open and would like to continue exports and as the government works with us to help us localise and bring down the costs of the many ingredients and components of our food products that allows us to be even more competitive export market Pakistan owns. Today, hundred percent of our corn and potatoes are grown in Pakistan. We are very willing and open and want to increase our exports.

Q: Does the company have expansion plan for the beverages segment?

A: PepsiCo has a very strong position in both food and beverages in Pakistan. We have a very strong partnership with our buyers in Pakistan. They made a 50 million dollar investment in Lahore. Specific to beverage plan, we want to continue to ramp up our low end products like Tropicana juice and will continue to move into all parts of liquid refreshment beverages. We’ll give Pakistani consumers a full range of products from zero calories to other types of products.

We feel good about long term investments in Pakistan. We really like the work government is doing on improving the ease of doing business here. The business environment really facilitates long term foreign direct investment which requires consistency, transparency, and stability. We are seeing continued progression and big improvements in those areas. As the ease of doing business in Pakistan improves we want to continue to increase our investments.

We see Pakistan as a PepsiCo priority. We have approximately invested $800 million in the last 5 years, and when I met Prime Minister Imran Khan in November last year we announced that we would like to invest approximately a billion dollar over the next 5 years.

Inauguration of Multan snacks plant is another proof point of actual commitment in that direction. The company invested $63 million in the state of the art technology, class safety and food quality, and the employment plan of more than 1,500 employees.

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