Shaukat Ellahis prescription for growth

Shaukat Ellahi Shaikh, Managing Director of the Nagina Group which has businesses in Textile, Power Generation and Trading, is an alumnus of the Columbia University, New York.
Shaikh has also served as Director of National Commodities Exchange Limited for three years, and is currently serving on the Managing Committee of All Pakistan Textile Mills Association (APTMA). He is also a Director of Punjab Industrial Estates Development & Management Company, which is a Government of Punjab-owned company formed with the purpose to establish industrial estates in the Punjab.
Shaukat Ellahis prescription for growth Shaukat Ellahi Shaikh has his hands full. Working as a Managing Director of Nagina Group -- one of Pakistans oldest business concerns - the man is eagerly eyeing opportunities to expand Naginas footprint in the country.
"We are mainly into textile spinning and weaving, and hopefully, in due course, we will be getting into finished products as well....as a group, we are also interested in getting deeper into the power sector," Ellahi said in an interview with BR Research.
The group - which already has a captive power plant to provide energy for its expansion -- with the excess being supplied to the national grid - is currently looking at pre-feasibilities of projects that develop indigenous resources for energy in Pakistan.
Elaborating on his energy plans, Ellahi said his group is especially considering bio-fuels, such as agricultural waste, which can allow several small scale projects of about 6-10 MW. "We have been advised by some experts that by-products like cotton stalks, rice husk etc are high heat-value items that can be used for electricity generation," he added.
In other avenues the group sees a lot of potential in housing, services to the rural sector and transportation. "There is nothing concrete on the table at the moment, but in the next few years we plan to expand our investments in the domestic economy," he said.
The group has already engaged experts in the transportation sector who report that the current model of transporting goods is one based on owner operating trailer, which is quite inefficient.
"It is possible that using the airline model, where the crew changes but the trailer keeps moving, we could reap efficiencies of nearly 300 percent," says Ellahi. Another potential area would be to provide a one-stop solution to international transportation "by building a seamless solution for exporters, from their factories to the destination anywhere in the world," he added.
While the group explores value addition in transportation business, like online tracking, cool chain amongst others on the one hand - on the other, it is also experimenting with corporate farming business in attempt to diversify its portfolio.
"The model of corporate farming is very interesting. And for the last three years we have been growing rice and wheat on a rotational basis on some surplus land next to our mill. We are trying to learn what this business is about and it seems very promising," Ellahi said.
But Ellahi isn just a man of action. A double major in Economics and Political Science from Columbia University, Ellahi holds strong views on how to unlock the potential of Pakistans economy.
LEVERAGING TEXTILE GROWTH With the decline in textile production in the West, says Ellahi, and the shifting of factories to the East, the international trade of textile is likely to increase to $800 billion, from estimated value of $350 billion.
"There is definitely room for growth and Pakistan has a competitive advantage in the form of abundant human capital and readily available resources for production of high quality fabric," he said.
For Ellahi, producing extra cotton for the textile sector is the answer to generate employment, especially through the garments sub-sector which is a labour intensive area. "Every million spindles could create direct employment of 78,000 people. Currently we are consuming about 1.5 bales per spindle. Increasing cotton production would increase consumption by that logic. So increasing the crop production from 12 to 20 billion bales would result in the creation of 150,000 to 200,000 jobs after import substitution is taken into account," he explains.
GROWTH REQUISITES One of Ellahis key propositions is to create China-like centres of regional growth.
"The investment in infrastructure required to develop districts is not being met," he said, adding that if there was an industrial estate in every town, supplemented by government services such as roads, schools and hospitals, there would be no need for people to move to big cities.
"These days, quality education is not readily available in smaller towns, so people move to larger cities for a better future for their children," Ellahi explained.
Ellahis is equally vocal about the role of private sector. Drawing lessons from Sialkot where "industrialists invested in infrastructure for the betterment of their own community" Ellahi urges other cities and districts to learn from the model.
But these ideas imply that different businesses come together and join hands with each other, which require a change of mindset, given that Pakistani industry players do not even wish to consolidate in many cases, despite knowing that consolidation will lead to efficiency gains.
"There is a cultural reason at play here. People look at their businesses not just as a separate business entity, but they also attach their honour with their business. The exit from owning an enterprise is looked down upon as some sort of dishonour," says Ellahi.
Another reason that hinders consolidation, according to Ellahi, is that "banks are relatively inflexible when it comes to reassessing the recoverable dues in the wake of a change of management".
However, for Ellahi the most important requisite for growth is optimism. "Positive thinking has led the creation of fantastic growth stories from modest means around the world. We must invest in the future of Pakistan........things may seem daunting but challenges can be overcome".
Interview by Ali Khizar Aslam