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Third World trading vehicle – Existing structures – V

(This is the FIFTH in a series of articles that will attempt to analyse our present system of EXPORT TRADE and recommend suitable alterations).

Let us first consider the two organisations primarily concerned with general export trade, the TCP, which is a commercial entity and EPB, which is a non-commercial entity.

TCP was established in its earliest form as the Ministry of Commerce (MoC)’s commercial arm, to monitor the Barter trade with the COMECON countries in the early 60s. However, this function of TCP was superseded by the need to import bulk commodities on a MONOPOLY basis, e.g Palm oil, cement, MS billets, etc and the Barter trade’s supervision and monitoring was taken over by the MoC itself.

In a manner of speaking, it became a division of spoils because that is exactly what happened, accentuated after the PPP Government’s induction in late 1971. While agreeing basically with the PPP’s penchant and philosophy for sweeping nationalisation in order to curb the economic clout of the “robber barons”, one must note that the real beneficiaries were neither the PPP nor the people but the bureaucrats who had a field day in consolidating power and creating fiefdoms. On paper, it was the political appointees of PPP who were in charge of the MoC but in fact, the bureaucrats acted in a manner that would have put the Japanese Bureaucrats manipulation of Supreme Commander Allied Powers (SCAP) to shame. They took total control and fed the gullible politicians with praise, flattery and from time to time, a contract of some import commodity. This negated the very basis of PPP’s policy of nationalisation and instead of the common good that was envisaged for the masses a new commercial elite was created from among the bureaucrats while the poor workers became poorer. The Barter trade was handled by the MoC itself. In utter disregard to the norms of trade this took on a cloak of secrecy and untouchability, which exists even today, nobody knows why, least of all the present lot in the bureaucracy, saving a few die-hard veterans, who were part of the chicanery to start with and occupy lofty positions of eminence, strategically placed to disrupt any attempt to change in the status quo.

With the change in regimes in 1977, the bureaucratic players remained the same but moved into high gear making a 180 degrees turn in the tune and tone of their policies to that one of phased privatisation. The items of MONOPOLY import were lost one by one by the TCP till in 1983 TCP reached its lowest ebb, shorn of all its MONOPOLY of imports and devoid of exports. However, to the credit of the hard working rank and file of TCP and the then newly incumbent Chairman, TCP then made a strong effort to break out of its routine mould of an Import House and establish itself in the export trade. The long time employees of TCP were successful to a great extent in their efforts in TCP’s establishing itself as a leading national Export House, but then as Shaheen Sehbai wrote in DAWN on March 21, 1987 in the Economic and Business Review in a “FOCUS ON TCP”, things changed after the promotion and departure of the previous Chairman and the taking over of the new incumbent, the situation now being as the DAWN HEADLINE suggested, “A STRUGGLE TO STAND ON ITS OWN FEET.” The personality change imposed upon TCP a new management style and I quote, “The TCP was emerging as a leading export house, with a clear mandate from the ECC. Now more stress is being given to exports of guaranteed traditional items on a sustained basis — a strategy that it linked to the decisions of the bureaucrats in Islamabad,” a senior executive said.” Unquote.

According to Mr. Sehbai, the present Chairman, Mr. Habeeb Husain, maintains that TCP has not become ‘introvert’ under his charge and that he has made a number of proposals to the Ministry in the last few months hoping that once they are approved and no one would be able to say that TCP’s management was not forward looking. And, Mr Husain added, that before any achievements could be  made, there was no point in publicising things. Being fair to him, he may have a valid point in his stand and be justified in keeping things under wrap, but going by the trend over the past year it has been more talk, less action.

It was further noted that the shift in TCP’s emphasis away from exports was evident from the fact that in the last year or so no official had travelled abroad on an export promotion trip. Mr. Sehbai quotes a senior TCP official, “With exports taking the back seat, and imports not guaranteed, TCP finds itself in a dilemma as to what it should be doing to stay alive. If the government wants us to stay alive, it will have to take care of us, as it has done this year by asking us to import sugar and urea.” But these imports are seasonal and a one-time affair.

Shaheen Sehbai further writes, I quote, “TCP has some ideas to put new life into Countertrade, provided the Ministry softens down its opposition to the concept. We have proposed that import of tea be linked to our exports to Sri Lanka, Kenya and Bangladesh. Likewise Palm oil imports be tied under Countertrade with Malaysia,” an insider said,” unquote.

But a senior executive lamented, “Instead of asking Malaysia to increase imports from Pakistan against its Palm oil, Pakistan has allowed socialist countries to export Palm oil to Pakistan under their Barter pacts.” unquote. (I may like to amend that to read that Pakistan is not to blame for the cloaking of Countertrade under the guise of Barter but this is the handiwork of a few paid gnomes of the Barter parties in the right place).

These quotes from Mr. Sehbai’s article speak volumes of TCP’s present imperilled status, with no clear direction or firm guideline. Therefore the final lament and I quote “Whatever these decisions at the top level may mean for the future of TCP, senior officials are convinced that unless TCP makes a hard push in exports, on its own, its future will not remain bright. Why don’t they give us something to live like the CEC or RECP? one official complained. If not, let them merge all trading corporations of the government so that each can subsidise the other. The alternative is to make TCP a part of EPB and send its workers home.” Unquote.

That is damning epitaph for an organisation meant to be in the forefront of the export battle, but very true in the present context. To the hardworking rank and file of TCP, it may be the unkindest cut of all, accentuated primarily by the fact that its own Chief Executive has only a several months to go before retirement and should not be expected to have an abiding interest in TCP’s survival, though in all fairness to the old gentleman, his experience in commercial dealings has been very limited and he should not have been given this job in the first place.

And what about the Export Promotion Bureau (EPB)?

This is an organization which has logical meaning but makes no business sense. How can you take a non-commercial organisation and expect it to promote commercial functions? This is a non-starter, counter-productive in principle, since there is no real yardstick for performance and their reason for existence is based on providing routinely favourable statistics which they naturally design to retain their own perpetuity.

Technically speaking, the EPB has the following functions.

(1)  Promote exports of Pakistani goods and commodities.
(2)  As a part of export sales promotion, arrange fairs, seminars, training, in-country and abroad.
(3) Run a market information service.
(4) Coordinate with commercial attaches abroad in the execution of its export promotion role.
(5) Control and monitor textile quotas.

Needless to say, within its parameters, it performs its function well but these fall a short of commercial necessities. There is no reason for EPB in the presence of a commercial entity like TCP.

Unless a definite financial relationship exists between its efforts to promote exports as well as its other functions vis-a-vis the exporters of Pakistan and the importers abroad, this effort is consigned to failure. At the same time an effective check on the quality of exports is required.

While Hamid D. Habib was the Chairman EPB there was some innovation and expertise in the system, but without the power to conclude commercial deals he was rendered toothless. The same gentleman was probably making good commercial profit as a businessman, so why was he not given the same freedom to promote similar profit earning aims and objectives for EPB?

Consider the EPB’s regional offices. The major manufacturers and commercial exporters from Pakistan seldom pay any attention to them and their offices are mostly frequented by the smaller exporters. However, these potential exporters get extremely delayed information, if any, from the EPB’s offices and not much else, so more often than not they just indulge in futile correspondence. However, if the EPB office had a commercial entity abroad and the powers to do commercial deals, they could very easily be an effective conduit for small businesses who would necessarily pay them a commission for their efforts. But this leads us back to the Catch-22 of the scenario, EPB’s charter does not allow this.

Both the TCP and EPB are staffed by fine management executives and an honest, hardworking rank and file but commercial attributes cannot be inculcated into them overnight especially without giving them incentive, better working conditions and the authority to take risks in commercial dealings. If this is beyond the average Pakistani capability why has BCIC expanded so reasonably successfully in many parts of the world? There is going to be a profit/loss situation in every commercial deal but that should be an acceptable risk. To check corruption one may consider the appointment of a full time Commercial Ombudsman who can render swift, sure justice at the Corporation level. The Commercial Ombudsman could be a senior businessman even having good commercial experience and must come under the direction of the Federal Ombudsman himself, who should have complete powers to review cases on appeal, if necessary, or enhance the punishment, when required. One of the greatest achievements of the Zia Era has been the establishment of the office of the Federal Ombudsman and Justice Sardar Iqbal has really given great credence to the post by inculcating a system of swift, sure justice.

Passing mention must be made about CECP and RECP. The CECP has been rocked by scandal recently but that is no reason to terminate state control. Both cotton and rice remain our economic lifeblood and with all the drawbacks inherent in such a system we must persevere with it while trying to improve the working of the Corporations. We cannot allow the goodwill and market credibility of our cotton and rice built up over the years of acting as single entities to be eroded by free market enterprise which will result in a “Turkey shoot” on the remaining portion of our economy. This becomes especially important in the context of Countertrade where a portion of the export list has to have a “sweetener” in the form of traditional items. When a Corporation is run well, it is run really well, as is the RECP, both by the present incumbent and his predecessor. But in the same organisation, a year or so ago, one of the directors of RECP declared Bangladesh a non-traditional market for rice. Luckily the Chairman was a saner person. That particular gentleman’s expertise was acknowledged by the “powers that be” and he was kicked upstairs a couple of months ago to a better post as a “suitable reward” — such are the vagaries of life! The RECP is a fine example of a Corporation taking on the odds, combating a deteriorating “demand” compared to “surplus” stocks and surviving. Maybe the CECP was trying to do just that (offload surplus stocks) but got stuck on a low price at the short end of an unpredicted upward price swing — and grievously has a fine, upstanding experienced technocrat like Mr Abid Hussain answered for it.

In the context of today’s commercial kaleidoscope one organisation has to go and all factors point to the dissolution of EPB in its present form and its re-constitution primarily as a holding company for the three major trading entities. This holding company must have broad powers and must be staffed by the hardworking staff presently employed but in a new elite “Trade Service” with above par working conditions.

To survive in the international market place, we have to create a trading vehicle with the advantages enjoyed by the great multi-national (MNC) trading houses as regards finance and expertise, from our own resources but in their corporate image. The objective has to be a National Company with different specialist constituent entities, conducting international operations both nationally and internationally on the pattern of a Multi-National Company (MNC). As an example, we may take a closer look at the Japanese or S. Korean Companies because they come nearer to the image of what we want to emulate. Both Japan and S. Korea have a number of big industrial combines with large trading houses, which though mostly owned by the Japanese or S. Korean Banks respectively, function primarily as MNCs having commercial offices in all parts of the world. While these trading houses are not owned by the public sector, their respective governments do finance them when necessary and support their activities to the fullest. The major difference is that they are managed by private sector interests totally whereas we have a large public sector which can support the proposed trading vehicle. We do not enjoy the fundamental advantages that these vast industrial combines have but certainly have the advantages of state control over rice, cotton and heavy industries which can be converted into an asset instead of being dismissed as a liability if we chose to make it as such. This conversion necessarily requires that private sector manpower and expertise be inducted into the system.

Fortunately for this country we have a man now at the helm of the Ministry for Commerce who has a reputation for (a) analysing a situation dispassionately (b) accepting good advice (c) taking difficult decisions promptly (d) sticking to a decision once made. He must now find the courage to change the entire concept of Pakistan’s trade but he will be hampered without a good management team, starting from the job of the Federal Secretary for Commerce the present incumbent has already rid himself of two previous Federal Commerce Ministers who were the previous incumbents in succession, both of them elected representatives and good men. Maybe the good doctor is lucky the third time around! The present incumbent is due to retire in June and his replacement must be a sound choice and if not, why should the Minister for Commerce be limited to advice and expertise at the top level from the public sector only? We have a fair amount of progressive businessmen like Rafiq Habib, Mian Rafique Saigol, Iqbal Adamjee, Shahbaz Sharif, Yusuf Zia etc. etc. who can be asked to sacrifice two/three years of their lives in a spirit of doing something positive for the export/import trade of Pakistan in the form of a regular Advisory Council on Export meeting weekly. The Minister of State for Commerce, Begum Kulsoom Saifullah, has a strong business background beside being a political person and that is as fair a start as any. If we can only carry on from there without diversion due to vested interest, the Junejo Government may yet foster an era of economic largesse which would be a tremendous achievement in improving the economic lot of the people and also a lasting legacy.

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