A concession country

LAHORE: Private sector in Pakistan must promote best management practices and innovate instead of looking towards the government for doleouts and facilitations.

Facilitations and concessions offered by the government at any time would be more useful for those entrepreneurs that improved their efficiencies and management skills during the hard times. Those that expect to survive on doleouts would come under pressure again when the concessions are withdrawn. The lopsided development in every sector of our economy is because of the different ways companies are managed by the owners. There are companies that managed robust growth during deepest recessionary periods when the inefficient ones caved in.

The best managed companies enjoy huge advantages in our country where every sector looks towards the government for doleouts and succeed in getting some concessions to cover the efficiencies of the majority of entrepreneurs in all sectors.

The feasibility reports in each sector are based on the concessions that the state generally provides in that sector.

Prudent investors prepare the feasibility without any government doleouts. They consider it a folly to pin hopes on ever-changing government policies in Pakistan. They factor in the impact of bad governance in the country in their feasibility. They know at least in the midterm the power rates would remain high, the currency would remain under pressure and interest rates would remain volatile.

The concessions announced at one time could be withdrawn anytime in a badly governed country like Pakistan. They study the options to optimise efficiency while operating under these handicaps. These entrepreneurs innovate and upgrade technology to produce value-added products with maximum efficiency. Quality human resource treated fairly is a very important part of best management practices. The vision of the company must be owned by all workers. The companies that perform well under all circumstances have dedicated workforce.

There are companies in Pakistan in the manufacturing sectors that have been posting average growth of 25 percent for the last 30 years because of efficient operations.

They earn more as they produce better quality products at much less cost than their counterparts in that sector. They are beneficiary to the subsidies and concessions the state grants to cover the inefficiencies of that sector. These concessions are consumed by the inefficient operators to cover their inefficiencies but are a source of profit for the best managed companies.

In bad times though the government subsidies continue still the badly managed companies cave in. The best managed companies survive comfortably, though in recession the government subsidies come in handy for them. They increase their share in the market. When the companies under stress resort to pruning their workforce the best managed companies are busy hiring the best talent released by their competitors.

The deteriorating economic conditions in the country are taken as a challenge by these real entrepreneurs while the general investors look for cover. The workers in distressed companies operate with fear of losing their jobs.

The employees of best managed companies have no such fear. The management in fact rewards them with bonuses even during these hard times.

Instead of brooding over the high cost of doing business these opted to increase production to achieve economies of scale and at the same time controlled wastages as the sponsor directors remained on the manufacturing floors to ensure that all guidelines of the good management practices are fully adhered.

Best managed companies are few in Pakistan but they can be seen in every sector of the economy. We saw the largest car manufacturers posting huge losses last fiscal while one of their competitors posted reasonable profit. In every recession many auto parts vendors close for good while the best managed continue to grow. In textiles some groups continue to expand and post profits while almost 25 percent of the spinning industry has closed down. A smaller bank posts higher profit then the three largest banks because of innovation and better efficiency.

The success of these enterprises was possible due to stress on diversity of business, stress on quality and prudent marketing. These enterprises knew from their past experience that Pakistan’s economy is managed non-transparently through inconsistent policies and have subjected it to periodic ups and downs. The main emphasis of the enterprises had been on quality and efficiency through bringing in the best of technology. The companies have strengthened the human resource by engaging the best brains in the industry retrenched by failing companies due to economic crunch.