Unfair competition: Pakistan’s top taxpayers fight to save business

Local products losing market to cheaper Chinese goods under cover of free trade, says Ibrahim Fibres CEO.

Saad Hasan July 31, 2014


For Mohammad Naeem Mukhtar having three members of his immediate family including himself in the list of top five taxpayers in Pakistan offers neither consolation nor pride. His key business continues to suffer and all government officials conveniently look the other way.

Mukhtar, Chief Executive Officer of Ibrahim Fibres, the country’s largest maker of man-made fibres, has been fighting a losing battle against Chinese exporters who have flooded local markets with cheaper products under the cover of free trade.

“We are no longer a textile country,” he told The Express Tribune in a recent interview over telephone.

“It is near impossible to export polyester staple fibre and textile made-ups to India. China and Bangladesh have made it equally difficult to import textiles like woven garments. But we have opened ourselves completely for everyone.”

In the nine months to March 2014, Ibrahim Fibres saw its net profit slide 75% to Rs1.1 billion. Excluding the income from its associate company – Allied Bank Limited – the artificial fibre maker actually suffered a loss of Rs493 million.

More than once, Ibrahim Fibres along with other polyester staple fibre producers have taken their case to the National Tariff Commission (NTC) and won. But after a few months, the dumping of foreign products starts again.

However, the embattled government caught up in political agitation from the opposition and the war on terror seems to be giving little attention to industrial issues.

“The NTC cannot proceed on our requests for anti-dumping investigations because the officials, who have to take the decision, are missing. I don’t know when the appointments will be made,” he said.

According to the Federal Board of Revenue (FBR), Naeem Mukhtar, Waseem Mukhtar and Sheikh Mukhtar Ahmed together paid Rs465 million in taxes as salaried individuals, ranking them as second, third and fifth respectively among top taxpayers.

Naeem says it is high time for the policymakers to give serious attention to the industry. His position as a main sponsor in one of the largest Pakistani banks gives him an opportunity to see what’s going wrong.

“Look at the fertiliser sector. Many plants remain shut most of the time because there is no gas. In six to seven years, the gas reserves will deplete further. Imported LNG will cost around $20 per mmbtu. That’s basically Rs2,000 per mmbtu. Do you think our fertiliser makers would be able to compete?”

Unfortunately, the sore point in the debate about giving protection to domestic businesses has been the intra-industry contradictions.

The All Pakistan Textile Mills Association (Aptma), the powerful body that represents textile spinners, had long argued in favour of import of synthetic fibres.

On the other hand, when it came to its own interest, the association put pressure and succeeded in making the government slap 9% duty on import of cotton yarn after foreigners started to eat into their margins.

Naeem says Ibrahim Fibres was able to remain in business despite running on just 60% capacity because of the company’s good debt profile. “Our cash flow is not negative. We generate around Rs2 to Rs2.5 billion (a year) but that should have been Rs8 billion.”

The latest round of synthetic fibre dumping in Pakistan started from January 2013, which has now reached around 10,000 tons a month. That’s primarily because of slower demand in China.

“It’s a 12 to 24-month-long cycle and we expect demand to go back up in China. Things will improve for us too,” says Naeem.

Published in The Express Tribune, August 1st, 2014.

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