- A glimpse into Pakistan supply chain evolution
Pakistan is a land with a rich cultural heritage and a growing economy. The economic history of Pakistan ascendance with the fragile industrial base, agriculture dominance, and political instability. Pakistan’s economy is infested with structural issues such as excessive government interference in markets, existence of a large informal economy, insufficient investment in infrastructural and human resource development, inadequate tax revenue generation, and ineffectiveness of governance structures. These issues have led the country to slowed economic growth, high inflation, reduced investments, severe balance of payment crises, and rapidly diminishing foreign reserves.
The gross domestic product in current prices in Pakistan declined to$340.64 billion in 2023. Nevertheless, the last two years recorded a significant higher GDP than the preceding years. Pakistan’s GDP in 2022 amounted to $376.5 billion, an 8.13% increase from 2021. Currently, the country is at risk of default due to a gradually worsening balance of payment crisis over the years. In March 2023, its dwindling foreign reserves reached the rock bottom of $9.76 billion. Consequently, the Pakistani rupee crashed to $288.6 in April 2023, down from around $188 during the same time in the previous year.
The decreasing value of the rupee and the perceived risk of economic default have caused the Pakistani stock market to decline by 20% during the last year, and investors are not expecting their earnings to grow in the foreseeable future. According to a survey conducted by the Overseas Investment Chamber of Commerce and Industry, Pakistan’s Business Confidence Index has decreased by 21% since June 2022. With too high inflation we are having a staggering external debt of $126.07 billion.
Most large companies in Pakistan are government owned or multinationals. Comparing businesses in South Asian region, India have 2 companies/businesses of over hundred billion while Pakistan have no company/business over five billion. A broad overview explained reality that Pakistani companies growing at slower pace. Few top businesses have grown their consolidated sales 2-3 times, but others are still looking forward to grow. Businesses are running in an environment where business community is forced to take actions for their existence in the market not on growth. The un-thoughtful policies, environment of distrust and currently economy of Pakistan fall lowest in investment and maintaining the lowest credit to GDP ratio (Pakistan 18%, Bangladesh 47%, and India 50%). Comparing the FDI inflow in Asia; India has the leading role while Pakistan and Bangladesh stand lower. For Pakistan most of FDI inflow coming from Hong Kong and China, the power, finance and oil sector have almost 70% share of the total FDI in country.
Issues of Pakistani Brands:
- Infrastructure: Pakistan’s infrastructure, including roads, ports, and airports, is inadequate and outdated, which makes transportation slow and expensive. This can lead to delays and increased costs for businesses, especially those involved in importing or exporting goods.
- Limited access to financing: Many small and medium-sized businesses in Pakistan struggle to access financing, which can make it difficult for them to invest in their supply chains and expand their operations.
- Lack of standardisation: There is a lack of standardization in Pakistan’s supply chain, which can lead to confusion and delays in shipments. This can be especially problematic for businesses that need to adhere to strict timelines or quality standards.
- Poor communication: Communication between different parties in the supply chain can be poor in Pakistan, which can lead to misunderstandings and delays. This can be exacerbated by language barriers and cultural differences.
- Limited use of technology: The use of technology in Pakistan’s supply chain is limited, which can lead to inefficiencies and inaccuracies in inventory management and logistics.
- Lack of Innovation: This is one of the significant problems. Many of the local leading brands are traditional businesses that have been operating for quite a long time. The lack of innovation in products and services is hindering their growth potential. There is little to no investment in research and development
Addressing these issues will require a coordinated effort between the government and businesses to invest in infrastructure, improve access to financing, standardize processes, enhance communication, address security concerns, and increase the use of technology.
There is no formula that can determine whether or not a brand will become iconic. You may do a lot of things right and your brand may still end up being just another brand.
Impact of Palestine crises
The BDS — Boycott, Divest, and Sanction — movement is inherently a non-violent movement that calls for the boycott of corporations complicit in the oppression of Palestinians. Recently, McDonalds Pakistan found itself in the line of fire when the fast food chain’s Israeli franchise announced it was giving away thousands of free meals to the Israeli army, stirring debate on whether certain brands are culpable for the humanitarian catastrophe in Gaza. The BDS is a tactic more so than an organisation and works to end international support for Israel’s oppression of Palestinians and pressure Israel to comply with international law. Consumers in countries such as Saudi Arabia, Qatar, Turkey, Egypt, the UAE, Malaysia and Pakistan, among others, have spurned brands that are allegedly complicit in the oppression of Palestinians. In Pakistan, there have been calls to boycott various brands such as Dominos, Carrefour, McDonalds, Coca Cola and PepsiCo on social media. Certain retail stores, like the Imtiaz superstore chain in Karachi, have actively taken what were believed to be Israeli products or products by companies linked to Israeli conglomerates off their shelves. Local restaurant chain Kababjees took beverages such as Pepsi and Coca Cola off its menu. Celebrities have been increasingly vocal about the crisis and the importance of boycotting products that have been identified by the BDS movement.
For boycotts to be effective, they must fulfil these four factors:
- Customers care passionately
- The cost of participation is low
- The issues are easy to understand
- Mass media is correctly utilised
Boycotts are effective in other ways. These boycotts rarely hurt profits, they can damage a company’s name, especially by generating negative media attention which can ultimately lead to changes in corporate policies. The desire for people to do something, because in the present situation, the powerful international community and international organisations that are responsible for humanitarian law and human rights acting the way they are there is discontent across the globe.
Boycotts are useful when they are sustained and enough media coverage is given. Most large firms tend to lie low during such boycotts. Moreover, the reasons for why certain boycotts may not be as effective today is that corporations today have an intricate structure which is shrouded from the public eye. Consumers get confused about what to boycott, what company is complicit with Israel, and who exactly benefits from their money. It has become difficult to identify ownership of corporate structure now, unless they say they are an Israeli company. Today, anyone can be a shareholder of a company. So the notion of ownership and eventual culpability in capital is now a very grey area; it is difficult to determine. Pakistanis can boycott to their own disadvantage since such companies not only provide employment but also are the largest tax contributing sector to the economy. Another argument put forth by those in favour of boycotts is that if one were to use local products, it would even help the economy. The local products by and large lack the quality due to the non-existent certification and standards regimes involved in production. To rejoice at empty restaurants or products being taken off shelves would, therefore, be ill-advised. Hampering economic activity in one’s own country should not be seen as the end goal of boycotts, keeping in mind Pakistan’s own economic standing.
The end goal of boycotts should be to raise awareness about the growing crisis in the Middle-East. Our manufacturers are witnessing a phenomenal increase in their businesses due to the boycott. There are indeed challenges, but the impact is so huge and sudden that many weren’t prepared for it and lack a few things to handle it. But there’s an opportunity hidden in all these phenomena. We need to make it sustainable. For that, we have to learn from such events, fill gaps, and move towards local manufacturing. This also emerges as an opportunity for local companies, which have seen sudden jumps in their sales as an alternative to multinational products. In fact, helps our local companies capitalise on the opportunity and fill the gaps where they are lacking. They are as good in quality as the multinationals, but they face serious challenges of distribution, marketing, and availability of their products.
The author, Mr. Nazir Ahmed Shaikh, is a freelance writer, columnist, blogger and motivational speaker. He writes articles on diversified topics and can be contacted at firstname.lastname@example.org.