Feeling the pinch: As trade liberalises, large players look forward, while small players unsure

Businessmen want govt to initiate a cost-benefit analysis before opening doors to India.

KARACHI:

It happened slowly without anyone realising it. The influx of Chinese motorcycles that started in 1990s was a boon for customers and allied industry, that made accessories and spare parts for the bikes. But in a matter of years everything changed. Along with the two-wheelers came pistons, gearboxes, plugs, wheels and literally every other part.

Along Karachi’s busiest thoroughfare of MA Jinnah road, hundreds of motorcycle parts’ shops in Akbar Market are crammed with customers. From ‘genuine’ made-in-Taiwan parts to those made locally, all are available here. And the Chinese are the cheapest.

“No one cares about quality. Customer wants a good price and that’s all,” said a long-time trader. “Chinese have completely taken over the market.”

Having advantage of economies of scale, lax labour laws and the ability to mobilise resources for making various products in record time gives the Chinese bike assemblers an edge over Pakistani counterparts.



Industry people say that size does matter! And now with government officials talking about easing trade ties with India, some local manufacturers have become uneasy.

Notwithstanding the absence of direct banking links between New Delhi and Islamabad and all the other trade barriers, Pakistani businessmen insist that the government needs to initiate a cost-benefit analysis immediately.

This would mean strengthening regulatory bodies especially the National Tariff Commission and revisiting the taxation regime for the local industry.

One reason why all the hue and cry surrounding the units, which were succumbing to trade competition, was never noticed is because large industry particularly textiles, chemicals and its raw material makers remained immune.



Same is the case for farm products and agricultural input manufacturers.

The real hit was taken by small businessmen who ran one-room workshops with the help of half a dozen semi-skilled workers.

From Karachi to Gujranwala, thousands of them vanished when things like toys, pencils, cigarette lighters and steel goods landed at the ports in thousands.

President of Union of Small and Medium Enterprise Zulfikar Thaver said it is time for the government to take remedial steps instead of liberalising trade any further. “When a country like ours starts importing bread and cakes, then it should be a wake up call for everyone.”

He said that the small and medium enterprises have been “brutally crushed” by unbridled competition with stronger foreign competitors. “We have to realise that there are multiple problems in Pakistan that are not faced by our competitors.”



For instance, he said that poor law and order has become a major deterrent for small-scale businessmen in Karachi. “My factory is located in Hawksbay and I go there from different routes because of threats from criminals.”

In many cases, cheaper imports have stopped growth of industry if they have not destroyed it. None of the 400 workshops in Wazirabad where kitchen-use items are made closed in the face of competition from Chinese imports, says Attiqur Rehman, chairman of Pakistan Cutlery and Stainless Utensils Manufacturers and Exporters Association.



“We probably survived because we stuck to a particular trade, which had been done in our families for generations,” he said. “When you have made spoons and knives for so long, you kind of find a way to survive.”

Imports might have brought variety but some customers never compromise on quality, he says. “If imports did anything, it actually helped us review our processes to bring down cost.”

Unfortunately, the state has never helped the cottage industry. “I can’t recall any special fiscal package or low-interest financing scheme for this sector.”



There is another reason that Rehman believes has stunted their growth. “There is lack of drive among our businessmen. If they make spoons, they’ll keep on making them. No one will try expanding into other kitchen items. I don’t know what it takes to break this lethargy.”

Published in The Express Tribune, July 22^nd, 2013.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.