Optimism despite hurdles

Waqar Malik is the country representative and senior executive of the AkzoNobel Group - the largest global paints and coatings company - and the Chief Executive of ICI Pakistan Limited.
He has over 25 years of extensive experience with the Group in senior commercial, finance and strategy roles. He also holds a number of other prominent positions such as being a Director on the Central Board of Directors of the State Bank of Pakistan, and on the boards of some corporate and academic institutes.
An alumnus of Harvard Business School and INSEAD, Waqar is a Chartered Accountant by profession and a Fellow of the Institute of Chartered Accountants in England & Wales.
OPTIMISM DESPITE HURDLES In Pakistan, "there is an atmosphere of short-termism". But for Waqar A. Malik, CEO of ICI Pakistan Limited, a company involved in producing and selling a wide variety of industrial and consumer goods, it is "too large a country to fail".
"Yes, we have lost opportunities on the way but its not that we have no hope at all.....weve got an English-speaking population, the population is young, the location is strategic, the topography and weather are great," Waqar said in an interview with BR Research last month.
This optimism is self evident from his business plans. "I am absolutely bullish for both soda ash and fibre, because the per capita consumption of both is very low compared to the region. So the headroom of growth is tremendous since the population is expected to go up to 200 million in the next five years," he said.
Explaining his views, Waqar informed that soda ash consumption in Pakistan is 2 kilogram per head, whereas in China it is about 12 kilogram..."their (Chinas) GDP per capita may be higher than ours, but usually you see an inflexion after a GDP per capita of $1000 and the demand flies".
While ICI continues to invest in its soda ash business very aggressively at the moment, it is also pondering over plans to boost its polyester business - the companys biggest bread earning segment in terms of revenue.
"We currently have around 30 percent share in the PSF market...and we have remained a very credible number two player for several years. But we have plans in place; you will soon see us as a very large, credible PSF player in the market," said Waqar.
Similarly, Waqar sees lucrative opportunities in paints business, given the countrys low per capita consumption of paint.
"Currently, theres a market of 110 million litres. We are looking at a market of 600 million litres if the demographics continue this way. And if the regulatory side in the construction sector is set right, and talks of the REITs materialise, then you can imagine the extent of potential in this sector," he said.
Following the acquisition by AkzoNobel in 2008, ICI has been able to bring new products on the refinished market, where it entered into the marine business, powder coating and packaging, giving ICI a small, but profitable niche to capitalise on. "We will create a small platform - and when the opportunity comes, we will strike", he said.
Life sciences is another one of those segments which Waqar likes to call an "absolute growth area". "We do medicines for animals, and weve seen fantastic results. And let me tell you that its just the tip of the ice berg, theres still a lot of potential," he said.
"Every year we come up with new products. Weve launched hybrid vegetable seeds, and the results are amazing, absolutely export quality. So, we
e in a hyper expansion mode; I wish we could start exporting tomorrow," said Waqar, adding that cardiovascular generics are also good areas of growth.
HURDLES IN THE WAY Like any growth story in the country, ICIs isn without a series of hurdles that could easily be avoidable in any well planned economy.
After the energy crisis hit ICIs soda ash consumers, the demand for soda ash also took a hit. By 2009, the company expanded its plant capacity to cater to a growing demand, but that did not materialise due to the energy crisis, so it started looking for alternate markets abroad.
In the last two years, ICI has been able to establish some "very good export markets in the region". "In India we had very good success because of the freight and cost-base advantage," said Waqar, adding that his company has also been successful in establishing the product in the Middle East and Bangladesh.
But the issue remains sticky, as usual, since, in the absence of a clear energy policy, ICI ends up using furnace oil "which is more expensive - making it unfeasible to produce soda ash".
Gas consumption costs around 30 percent of the cost of soda ash production, and, troubled by gas shortages we are currently exploring alternate options.
Since soda ash caters to the paper, soap and detergents, construction, and more specifically for the glass, textiles, and packaging industries, any impediments, structural or operational, affect the demand for soda ash, says Waqar.
Like most businessmen, Waqar says the biggest hurdle is the inconsistency of policies. "Energy is not the only problem; more important is the consistency in macroeconomic framework, especially in the coordination between a policy and its implementation," he said, adding that the consolidation of industries and the fiscal deficit is equally important.
Explaining his position, Waqar, informed that soon after the industry sat down with the government to rationalise the tariff chain from PTA to textiles, the government said it will be reviewed every year. "This kind of switch-on, switch-off policy doesn give businesses the right trajectory," he lamented.
While Waqar does give due credit to the National Tariff Commission to amicably resolve the anti-dumping issue of PSF, he stresses on the importance "of the capacity building of our regulators to make sure there is a level-playing field".
For Waqar, the underlying solution to most problems, however, is the need to innovate and a stronger link between the industry and the academia to conduct research.
"The government has to make sure that the academic side gets the right framework, but equally the industry has to take an initiative to see what the market is like, and use the academia to research and come up with products that are apt for the market," he said.
He added that producers should understand that "Pakistan is a low-priced, mid-tier market", and therefore products should be made keeping that in mind. "Right now, we import different products from abroad for a different local market. Its like putting a square in a round. This doesn answer what the local population wants".
Interview by Sijal Fawad