Running Scared

*Ex-PIA Chief Slams International Routes to Private Airlines.
*Auto Industry Considering Blocking Rs80 Billion Investment.
*Pakistan Quarantines Indian Potatoes.

Ladies and Gentlemen, these are headlines from a national daily on just one day, and they tell me that something is not quite right in corporate Pakistan. Since the inception of Pakistan, the government has heavily subsidized large industrial families to an extent that is barely imaginable by the average citizens.

The so-called 22 families were mollycoddled, given free land, huge loans were written off, and the government bent over backwards to keep them happy. While most of the 22 families are no longer the largest business groups in the country, they set the standard as to how "Big Business" would be treated in this country. Having grown up in a protected environment, most Pakistani businesses today are petrified of the real world and what it might mean for them.

Let’s start with the automobile sector in Pakistan, which is one of the most protected industries in the country and is making some of the largest profits in the corporate sector today. According to Salman Rashid, head of research at Taurus Securities, "The industry has been protected from its inception. With the WTO regime to which Pakistan is a signatory, this protection should be withdrawn though it hasn’t. Once the protection is removed the Industry will find itself struggling."

To give readers an idea of how this industry has been faring under government protection, I looked at the after tax profits for Honda Atlas. In the first quarter of the 2005-2006 financial year, Honda Atlas made 196 million rupees, while in the same period of the 2004-2005 financial year they made 103 million rupees -- a jump of 89%! The numbers and percentages are similar for Pak-Suzuki, Indus Motors, and every other car manufacturer in this country. Astounding numbers but would they be so astounding if they were competing against international manufacturers? I think not.

A year ago my cousin bought a 1999 BMW 3-series in Dubai for the equivalent of 315,000 rupees; in Pakistan for the same amount you can’t even buy a Suzuki Mehran with an air conditioner, not to mention the horrendous "on" money that consumers have to pay when they go to buy a car. I say open up imports so that us plebs can also drive decent cars at decent prices as our leaders do (with the exception that they don’t have to pay for them like we do!).

Most large businesses in this country spend more time lobbying the government to protect them from international competition, than they do trying to make their companies more competitive. The common cry is, "What about all the jobs we provide?" "It is in the interest of Pakistan that we develop these industries." But that couldn’t be further from the truth. All they’re doing is ensuring that they don’t have to change the way they do business, and want to ensure that they work on profit margins which are unheard of anywhere else in the world.

If Azerbaijan Airlines can fly from Karachi to London return for Rs. 28,000 then why can’t PIA? Incompetence or inefficiency? If private carriers have been allowed to fly on international routes then this means lower fares for the consumer and that is the most important thing -- not the protection of an inefficient corporation.

The recent "quarantine" of Indian potatoes is another case in point.

Are the mandarins in Islamabad really that balmy, or is it just another case of protecting "special interests"? Before 1947 I’m sure potatoes and other vegetables used to travel back and forth in the Indian Subcontinent. What was the purpose of this quarantine? Has some new potato-borne disease been discovered in the last 50 years which our extremely hygiene-conscious Health Ministry is aware of? If they have, then I’m sure the world at large is waiting with bated breath for the scientific explanation.

If they’re so worried about diseases affecting the food supply of this nation they might first want to take a look at how our own vegetables and meat are processed, stored, and transported.

The real reason behind the quarantine is actually the fact that certain vested interests in this country regularly hoard supplies of essentials: potatoes, wheat, garlic, onions, eggs -- you name it. With the import of food being opened up this means that their tight game of hoarding is being affected by external sources of supply. Hence, the quarantine. During the early years of Pakistan, hoarding was a serious issue and was punishable by jail time -- not much has changed over the last 50 years, with the difference that hoarders don’t get jail time anymore. And guess who bears the burden?

The pharmaceutical sector is another case in point. Several proposals have been sent to the Ministry of Health to allow the import of generic life-saving drugs from India, which cost a fraction of what branded ones do. In a poor country like Pakistan it is criminal that people have to dole out so much money for medicines when they can access cheaper drugs.

Guess what? Our government doesn’t think so and the plan has been shot down at the behest of the pharma sector. At the same time the treatment of our leaders’ parents will also be borne by us -- so while we may not be able to pay for our own treatment, it’s a treat to hear that a select few will be billing their parents’ treatment to us! The cardinal rule of business everywhere is, "survival of the fittest," while in Pakistan it is "survival of the fattest -- and the most connected."