Interloop’s hottest IPO has become the talk of the town. Anyone who knows even a tiny bit about stocks wants to take a bite at it. Few know about (let alone ascribe to) the visionary thoughts of its CEO Musadaq Zulqarnain.
At a recent event organised by Pakistan Business Council (PBC), Musadaq said something rather refreshingly strange – strange because business people hardly ever make such statements publicly. While being thankful to the government for subsidies and other endowments to enhance exports, Musadaq said: “it is not going to take us too far…Pakistani businesses are not competitive not just because energy rates are high, or subsidies are not being provided; it’s just that we are not efficient.”
The issue of inefficient production is not new. Nine years ago, former Secretary Finance Waqar Masood had written that labour productivity levels across the value chain in Pakistan were around 40 percent compared to international benchmarks. The then Advisor to Minister of Textile, Mirza Ikhtiar Baig, had also shared a similar nugget at a workshop held by the Institute of Business Management in January 2011.
Citing a cross country comparative study, Baig told the audience that ceteris paribus if a Pakistani worker made four jackets a day, a Chinese worker made 12 jackets in the same number of working hours. The study partly attributed this inefficiency to the frequency of intervals taken by a worker (“for ‘chai’, ‘sutta’, toilet, prayers, telephone calls, ‘gup shup’ and what not”).
And this is perhaps why the PBC moot was not the first time Musadaq urged the business community to look within and focus on how to modernise manufacturing capabilities. He is often found focusing his talks on labour productivity, the need to invest in training of workers, equipment efficiency, business ethics and other things such that most business people don’t want to talk about at public forums. If more and more business people talk about these issues, perhaps it will help change the governance mindset from fixing prices and subsidising expenses, to letting the market compete and find efficiency (thereof help lower prices) and subsidising or incentivising capital expenditure.
There are, however, two big questions that neither the business community at large, nor the likes of Musadaq usually focus on as an item on reform agenda.
The first relates to population. If businesses are betting on cheap labour as a result of big population to compete with their regional peers, then they are mistaken. Self-interest demands that they start advocating for reduction in population growth rate, which is critical for kicking off real per capita GDP growth, and accordingly higher savings and higher productivity.
Here are a few immortal truths. Unlike the popular perception talent is in short supply in Pakistan. In a country of 200 million plus, wage rates shoot up if a software house or restaurant wants to attract top talent staff of just 50 people in any given month. Meanwhile, the era of cheap labour as a key driver of global competition is on its ebb. Labour that can use tech and produce tech is what’s needed, whereas skilled labour is the one of the keys to increasing labour productivity.
Yet there is a limit to which businesses can invest in labour training when the baseline level of education and skills is poor. There is also a limit to which the state can provide the skills to the masses, where the poor and uneducated tend to produce more quantities of poor and uneducated people. Businesses therefore have to make population growth an item on their agenda if they want bet on productivity and skills in the long run.
The second major concern relates to the benchmarking of best practices, and case studies of leading Pakistani businesses. Isn’t it rather strange that despite a growing number of business schools and ‘PhD scholars’ in the country, Pakistan still does not have a vibrant body of business case studies? Case studies that, for example, shed light on how did Gul Ahmed Textile achieve productivity efficiency, on how did Nishat Mill achieve capital efficiency; on the details of Interloop’s labour training benchmarks and the returns on all those investments in human capital; or how did these firms successfully negotiate global contracts or developed international brands – and so on and so forth.
Is this gap because Pakistan has lazy academia – those brief case teachers who make one power point presentation for a lifetime - or is it because Pakistan’s mostly seth-owned companies do not want to share the secrets of their success with business students, new generation of entrepreneurs and the society at large? That question in itself requires a separate discussion.
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