Unlocking management gains

CEO of Ibrahim Fibres Limited and Chairman of Allied Bank Limited, Mohammad Naeem Mukhtar, has written various papers on textile spinning technologies for the National Textile College of Engineering, Faisalabad. Hes also serving on the boards of illustrious academic institutions in Pakistan.
Unlocking management gains
Naeem Mukhtar wants to revolutionise business management in Pakistan. A keen follower of global business thinkers, notably Peter Drucker and Michael Porter, Mukhtar calls for a paradigm shift in the way businesses are conducted by Pakistani entrepreneurs.
"In the last fifteen years, the global economy has been totally revamped.....companies around the world have moved with times. But in Pakistan we are finding it difficult to progress from the registers and khathaas," says Mukhtar, who oversees the conglomerate comprising Ibrahim Fibres and Allied Bank amongst other business ventures.
Supply chain management has a pivotal role to play in modern day economics, he says, but "we are too late in appreciating this".
Mukhtar, 45, who is a staunch advocate of the corporatisation of industries, a process which, he agrees, could take decades in Pakistan, is very critical of the rampant short-sightedness in the country.
"As a nation, we have a myopic view of the future and that limits our ability to take timely decisions," he says, adding that we jump at short-term return opportunities, and do not make investments in the long-term strategies that help develop businesses.
When asked to substantiate, Mukhtar quickly points out the tendency of Pakistani textile exporters to "chase bargains instead of making sure their contracts would be fulfilled in time". "Fortunately, people are waking up to this realisation because this malice is now hurting their businesses and hitting profits."
Similarly, since it takes at least 10-15 years to develop a name that customers can relate to, Mukhtar says Pakistani manufacturers do not have "the foresight and stamina to take the long-term view, thus.....working for other brands seems like an easier solution".
COOPERATIVE COMPETITION For Mukhtar, it is of paramount importance to take cues from best international practises, especially the relatively new business phenomenon called cooperative competition.
Elucidating this apparent oxymoron, Mukhtar shares the example of the global automotive sector, where, traditionally, the players closely guarded their engineering and design know-how. "But in the last 15 years they have realised that by cooperating they can realise better prices from their suppliers, who are largely the same".
Another lesson that needs to be drawn from global peers is the focus on human capital.
"Textile engineers and experts in supply chain management are essential inputs into a successful business enterprise in this industry. There is a huge shortage of experts for textile in Pakistan, and I feel many entrepreneurs don even understand this," said Mukhtar.
Arguing that buyers in international markets have become very savvy, he calls for the need to employ people who can deploy and operate ERP systems that give the managers a clear picture of the production and delivery status of a particular shipment at any given time.
"The terms of international buyers are very specific and the old ways of running business simply will not work anymore.....once your sales tops $50 million you need professional management," he said.
BANKING One of Mukhtar businesses is Allied Bank, which is the countrys fifth largest lender. Talking to BR Research, Mukhtar said the bank "will be adding another 50 branches to its network in the next five years", and that ABLs branchless operations will start functioning in six months time.
Mukhtar says, his team is also working to find opportunities in Islamic banking sector.
When asked if he is looking at the prospect of venture capital, Mukhtar acknowledged the need to encourage young educated people with entrepreneurial flair and sound ideas to be provided with the opportunities and enabling environment.
"Im studying the area with great interest but it will take some time before this idea is actualised".
RESTRUCTURING TEXTILES Expressing his disappointment over the fragmented and unstructured state of textile industry in the country, Mukhtar stresses on the need to create clusters of manufacturers and focus on sub-sector specialisation.
"Vertical integration by keeping the various stages of development close to each other is necessary -- otherwise, we will continue spending something like 30 percent of our cost as transportation of inputs," says Mukhtar.
Similarly, the industry has been very fragmented. "Officially there are 400 manufacturers but unofficially there are probably more than 4000", he says, adding that most of the manufacturers are catering to domestic markets and regional undocumented markets like Afghanistan.
"In developing markets, like Bangladesh and Vietnam, manufacturers have started specialising, since it results in better products and more streamlined operations," he says, but in Pakistan, it is still in its infancy.
Obviously then, there is a case of economies of scale. "There are standard factories in Bangladesh that have 30,000 women working in knitting units so they are able to sell to EU at very competitive rates. But our factories employ about 3000-7000 people on average," he said.
As far as exporters are concerned, over the last ten or fifteen years, their strategic advantage vis-à-vis cost, delivery and quality is eroding. Many companies are exporting at as little as 20 percent of capacity due to shortages of energy and low technology machinery.
Unlike many of his peers, however, Mukhtar doesn put the responsibility of the failure on governments shoulders.
While recognising that bureaucrats are detached from the industry, and therefore are unable to draft the most efficient policies, Mukhtar says the industrys major failing has been its inability to direct the policy of their businesses.
"In Pakistan, we expect the government to do a lot more than it can. And while governance can go miles in improving, you can expect the government to be the experts. None of the trade bodies and industry leaders in the last two decades have been able to visualise the future of the economy," says Mukhtar.
Interview by Ali Khizar Aslam