Imported goods cripling local industries

January 13, 2003

Email

There must be some people who think global and buy local. An average urban middle class Pakistani behaves like a typical rational customer—he goes for the best deal in market. If there is a tilt, unfortunately, it is in favour of imported over local items.

In a country where senior government officials call ‘economic nationalism’ a ‘syndrome’ it is not surprising that markets are brimming with shelves full of imported goods. Our last commerce minister Razzak Dawood was reported to have said that ‘be Pakistani buy Pakistani’ mindset was obsolete. In his enthusiasm to support trade he was reported to have said that he would like to “see potatoes being unloaded from one berth and loaded on to the other”.

It is not a secret that manufacturing base in Pakistan is much narrower than required to support its size. If non-Pakistani manufacturers are allowed to capture even local markets how much scope does local manufacturer enjoy in this highly competitive world market?

Smuggling and other unofficial channels make it difficult to get some dependable numbers before proceeding to gauge the impact of imported consumer items on local industry. In the absence of the database, local market scene at best reveals the trend.

As more and more imported consumer items reach innumerable shopping malls and plazas, sprawling all over city, many local producers must be passing sleepless nights, in thinking of ways to keep their hold in the market place. A quick survey of shopping centers frequented by middle classes in Karachi brought to fore some amazing facts. Shopping places visited were located in middle class localities of North Nazimabad, Gulshan, Nazimabad, Tariq Road, Saddar and couple of those located in Posh locality of Clifton that attract customers from all over the city.

Shops with non-local stuff were not exception in all these markets. You can find imported items in abundance at several outlets. Retailers were not very open to discuss economics of such items in finer details. It would have demystified the phenomenon had shopkeepers not been so secretive. They were found to be reluctant to discuss modus-operandi of their trade, especially regarding imported items. Terms and conditions of supply and exact margin of profit individually to each category of people connected to such deals is for the reader to imagine. However, after talking to several retailers it was clear that much depends on total turnover, as profit margin per piece is fairly narrow. “Wholesalers or importers might be minting money as they buy the stuff in terms of containers”, said a desperate shop owner who also sits at his shop’s counter, “We hardly get Rs 20 to 25 per pair of shoe that we sell”. In his view there are products from all over the world that are sold in Karachi but nothing sells like Chinese items for their low prices. Many of such imported Chinese items, that this writer got to see, were not very classy but were put up for sale at prices that were sometimes only a qurter of the Pakistani items of almost same or slightly better quality.

A shopkeeper who displayed all kinds of ready-made garments, proudly pulled out a five-piece ready-made three years old boy’s suit complete with tie and waistcoat. You guessed it right! It was Chinese and was going as cheap as Rs220. Pakistani version of of the same child dress was available for nothing less than ten times that price: at Rs2200. The class that likes to dress baby boys in suits proper would in all probability prefer foreign over local even if Chinese material is not as fine as Pakistani for its price. In Pakistan even stitching of a pant, shirt and coat of boys costs many times more than the retail price of Chinese suits. How can they produce so cheap? What scope does Pakistani stuff have in this market situation?

A good quality girls formal dress frock of Indonesian or Thai origin is Rs300-400. Pakistani frocks, retailers claim is made of superior longer lasting material but they are no match in finish and style and still entail cost difference of Rs 200 to Rs 300.

The situation is even worse from manufacturers point of view in footwear market of ladies and children. Imported ladies formal sandals and children footwear is available in large varieties and cost about one-half of what local footwear of same category costs.

“Chinese toys fill at least 85 per cent of shelves in toyshops”, Eijaz, a businessman who deals in toys revealed. “Even Western brand makers get these toys manufactured in China”, he said. Branded toys, however, are out of reach of middle class in the country that cannot afford to spend Rs2000 on one toy. “Hardly 10 per cent toys market is with locals and that too in sports items like cricket bat or hockey stick or badminton rackets, etc”, said a gentleman who owns a huge toy shop in an upbeat market place.

Cloth business, again, is a sensitive area. Kabuli merchants with their merchandise tied in sheets, loaded on their backs, was a familiar sight even in pre-partition days. Now, however, many of these Pashtoons from either sides of Afghan border own or control quite a portion of fabric trade in the city. They mostly deal in nylon and pure and artificial silk. It is again difficult to quantify the ratio and proportion of demand for cotton fabric vis-a-vis others in the absence of formal figures. Situation seems to be tough but local cotton fabric commands the lion’s share in cloth market. Even in artificial and synthetic category Pakistani stuff is competitive.

There are several other household goods where imported material has pushed local manufacturers up against the wall. They are so low-priced that competition becomes impossible. Still the issue is not raised strongly enough to catch the attention of powers that be. What is keeping the aggrieved class of manufacturers to take the blow lying down is hard to comprehend?

In the interest of the economy it would not be a bad idea if the government could take some interest and check dumping to safeguard local interests. China is projected to be one of the fastest growing economies of the world. Pakistani consumers seem to be chipping in more than their due in demand-propelled growth there.

It would certainly be better if middle class generated market demand could be chanellised to energize our own dormant industry. With further movement towards free market regime, high utility costs would all but drive local players out of the field even before the game starts. Stabilization of macro indicators is good news, though, but that is not enough. Issues relating to widening disparity and rising poverty could only be addressed if and when real economy picks up growth. Be it industry- or agriculture- driven, one thing is for sure growth is not going to come about on its own. It will have to be carefully planned.