Trading difficulties: Hostile conditions sink another foreign entity

Canada-based clothing company abandons Pakistan business.

KARACHI:

After doing business in Pakistan for six years, Kanati Clothing Company – an apparel-maker and retailer based in Ontario, Canada – has decided to leave the country mainly due to the energy crisis and frequent disruption of the supply chain.

“There are numerous reasons that contributed to our inability to continue business in Pakistan,” said Kanati Co-founder Liam Massaubi, while talking to The Express Tribune. “We have to meet strict deadlines but energy issues, transportation issues and continuous supply chain disruptions were creating problems for us.”

The company was producing its label in Pakistan through its partners mainly in Lahore and Karachi. The entity also represents other small and medium-sized private labels that manufacture through it.



Kanati makes men’s t-shirts, caps, polo shirts, thermals, leather, jackets, shorts, skateboards, accessories and swimwear. It has its retail location in Waterloo, Canada.

“Pakistan has always been a great country for us to do business. We have developed some great partnerships over that time period but the ease of doing business has unfortunately been declining over the last year or so,” he said, while talking about current problems.

However, the problems for Kanati seem to be much more than just energy crisis and supply chain issues.

“Aside from the instability related to transportation and general issues, we have been specifically impacted by the behaviour of one of our partners in Pakistan,” said Massaubi. “He behaved in an unethical manner and embezzled our funds.”

Without disclosing his partner’s identity, he said, “when confronted with this he started threatening us online. Since we were not in Pakistan to better understand or deal with the situation, trying to deal with the authorities here did not help us get any protection.”

When asked about annual revenues, Massaubi avoided disclosing the figure but said that his company has set goals for annual spending and revenue, which are “substantial”.

The bigger story beyond Kanati is why companies are pulling out or avoiding to come to Pakistan for production. “I think it is because they face concerns or barriers related to such issues like transportation, energy, lack of legal protection and support, random or targeted violence and rising costs,” he said.

Pakistan Hosiery Manufacturers and Exporters Association Chairman Babar Khan commented that such issues do arise between foreign buyers and local manufacturers that may lead to a total breakdown in businesses.

“Sometimes buyers put undue pressure on the manufacturers and sometimes apparel-makers do not abide by the conditions of the contracts. In this particular case, we cannot say anything specifically unless we listen to both the parties,” he added.

Khan, who himself exports menswear apparels to the United States and Europe, said that most of the time local manufacturers are cautious about the problems of their foreign buyers. They know that they will not receive any future contracts if they are found creating unnecessary limitations to these buyers.

“Because of this inherent pressure, many of the disputes between foreign buyers and local manufacturers are resolved at the industry associations without these growing into a legal battle,” he concluded.

The writer is a staff correspondent

Published in The Express Tribune, February 2^nd,  2015.

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