“PFMA targeting $1 billion exports in the next five years.”
Muhammad Imran Malik is the Chief Executive Officer of Bata Pakistan. He has been associated with Bata for 29 years. In addition, he is also the Chairman of Pakistan Footwear Manufacturer Association (PFMA) - an association dedicated to promoting and enhancing the growth and development of the footwear industry in Pakistan.
Following are the edited transcripts of a recent conversation BR Research had with Muhammad Imran Malik in his capacity as the CEO of Bata Pakistan as well as the Chairman of PFMA:
BR Research: Tell us about your long association with Bata Pakistan and now Pakistan Footwear Manufacturers Association?
Muhammad Imran Malik: My association with Bata started in 1991. I joined Bata as a management trainee. My career transitioned from District Manager to Brand Manager Bubble Gummers – the fun shoes for kids. I also worked as a Budget Control Officer and in 2000, I was made the Retail Manager, which is a very big portfolio of our company that incudes managing all the stores and operations of merchandising, collection, distribution and marketing. Four years later, I moved to South Africa as a Retail Director where I managed three countries: South Africa, Swaziland and Botswana. I became the Managing Director Bata Pakistan in 2008; Country Manager Bata Pakistan in 2012, and as President Director in Indonesia in 2013. In 2015, I was assigned a new responsibility as Group Managing Director for Asia-Pacific Region in Singapore before moving back to Pakistan in 2017 to join Bata Pakistan as the Managing Director and CEO. I am also Director in Bata Malaysia and Bata Thailand. And last year, I took the charge as the Chairman of Pakistan Footwear Manufacturer Association (PFMA)
BRR: As chairman of PFMA, how would you describe the performance of footwear manufacturing segment in recent times in terms of exports and growth?
MIM: Covid-19 has undoubtedly affected the manufacturing sector worldwide. In Pakistan as well, the sector including the footwear was affected as during the lockdown in early 2020, all factories were closed, which meant no production and hence no sales. For the manufacturing sector in Pakistan, Eid is the biggest event and with Covid-19, that opportunity was severely impacted. Though partial opening of stores was allowed close to Eid-ul-Fitr, manufacturing units were closed throughout the lockdown. From the retail and customer side, the footfall was reduced to 60-65 percent even after lockdown restrictions were relaxed after Eid. The domestic sector was also affected adversely due to high inventory and stock up for summers that was largely spent indoors. And with schools closed, the demand from that side was also eliminated. You must have witnessed that majority of the brands in apparel and footwear were offering discounts right after Eid due to unsold inventory as well as a decline in demand and purchasing power. Due to fixed cost, many companies went into losses.
However, the good news is that we are bouncing back. Pakistani people are very courageous and have managed to live with this virus. As the restrictions were relaxed, business activity resumed and school reopened, the footfall jumped up tremendously. The regulations imposed by the governemnt are being taken very seriously by the retail sector, and we are observing all vital SoPs such as wearing of a mask, social distancing, offering sanitizers to customers, and regularly disinfecting our stores and retail outlets.
On the exports side, things were better. With the efforts of the sector and companies, we are managing the same volume of export orders as we were before.
I am very hopeful that 2021 will be much better than last year especially with the start of vaccination.
BRR: Did you observe any changes in consumer buying patterns besides the declining purchasing power?
MIM: A key observation during this time is that the consumer behavior changed. People were mostly working from home, and they were too casual. Besides, there were restrictions on events and marriages, and schools were closed. Two categories emerged really strongly during this time. One was slipper category and the other one was the sneakers.
BRR: What is PFMA’s mandate and what are the association’s objectives for the new year?
MIM: We have certain goals for footwear sector at this moment. One is to achieve $1 billion exports in the next five years. Currently, the size of our exports is $130-140 million despite Pakistan being the 7th largest shoe manufacturer in the world.
Second is the enhancement of rebate for the footwear exports, which is also necessary if we have to achieve our $1 billion export goal as well as to compete in the international market.
We have also requested Ministry of Commerce for the extension of LTFF and duty drawback for the next 3 years, which is expiring this year.
We as an association are also asking for zero-rated custom duty on the import of raw material because Pakistan is not self-sufficient in the material used for the manufacturing of footwear. We have to import most of it. Then there are certain duties that we have asked to be withdrawn. There is a proposal from our side that any machinery imported should be zero-rated. The footwear sector was among the sectors that were zero-rated a few years back. And we propagate that the sector should be moved back to the zero-rated regime as it will not only boost export revenue from a footwear manufacturing market, but also there will be import substitution in the country. And eventually, the growth of the sector will generate employment.
We have also formed Pakistan-Italy technology center, which we wanted to make functional to impart trainings to our companies on design and international technology. The Ministry of Commerce Italy and Pakistan, and PFMA have jointly made this center located next to PFMA office in Lahore Gulberg. We wanted more space for our office and training center; and at the moment we are in negotiation with the Governemnt of Punjab (GoPb) for a location in some industrial park or special economic zone.
PFMA is also starting a quarterly magazine on footwear sector which will be shared with all the stakeholders, exporters, embassies and governemnt offices. The magazine would highlight the trends and challenges in the footwear sector, and global and domestic developments in the sector. We have also started a testing lab with Footwear Association and are looking to associate ourselves with international companies.
We are also setting up a footwear design hub. PFMA has recently signed an initiative with Governemnt of Punjab (GoPb) to start a design hub at Lahore to give training to the designers in the country and make them at par with international designers. Embassy of Italy has participated in this initiative with the Ministry of Commerce.
And finally, we are also working on a paper to start a Pakistan Footwear Institute and all the different kinds of trainings and studies would be part of it.
BRR: What are the key segments within footwear esports and what are the key markets the industry exports to?
MIM: Pakistan’s average export size is $130 million mostly in leather footwear. We also have a small quantity of canvas footwear. The main export markets for Pakistan’s footwear are the European countries such as, France, Italy, UK, and the Middle East.
BRR: How much of a challenge is the import as well as the smuggling of footwear to the manufacturing sector?
MIM: This is one of the key challenges for us. We aligned ourselves with the Governemnt of Pakistan’s and Ministry of Commerce’s Made in Pakistan initiative. We are not only aiming to increase exports but also create import substitution in the country. This means that instead of importing, we can manufacture in Pakistan and market it as Made-in-Pakistan. However, the real challenge is that when we are producing in Pakistan, there is a lot of smuggling.
Another major hindrance for us in under-invoicing. But I must say that from last year and half, smuggling has reduced and for that reason we have already proposed to the government that fixed ITP values of footwear exports have to be increased to control smuggling and saving of duties by under-invoicing, which will boost the sales of manufacturing units of footwear in Pakistan.
BRR: What other challenges - besides the regulatory measures that you’ve already mention does the sector face?
MIM: Other than those I’ve already mentioned, there are two other challenges that the sector faces. Availability of raw material is a challenge as we have to import a lot of raw material that includes paying import duty and additional regulatory duty and for which we are in negotiation with the tariff commission and the commerce ministry.
Second is the availability of trained manpower. There is a lack of skilled workforce, and many companies are imparting training and knowledge on their own. And it is this reason why we have made alliance with Commerce ministry of Italy for a technology center and a design hub to train our technicians, workers and industry personnel.
BRR: Pivoting to Bata Pakistan; being a leading company how has the company performed in the current challenging environment?
MIM: Like I mentioned in the industry overview, we were equally affected by the Covid-19 pandemic and the ensuing lockdown. After the restrictions were lifted, we recovered very fast. We did good business when schools reopened, and economy trotted towards normalcy. In 2021, we are bouncing back both in retail and manufacturing as the consumer confidence is improving; retail footfall is increasing; and also, SoPs being implemented in our stores makes them a safe place to visit. We have been giving training to our retail staff to adhere to all standard SoPs. Every crisis also brings a set of opportunity. We took it very positively and are heading towards growth.
BRR: How much of Bata’s production is sourced locally and internationally?
MIM: At present, we are producing more than 95 percent locally, because we have two factories at Batapur and Maraka Multan Road and heavily have investment in machinery and technology. Only the allied industries attached to us which we call APU that are providing us some services such as stitching and assembling etc. is outsourced locally. We are importing only in case of some international brands and some items not locally available. Our slogan is ‘Proudly Made in Pakistan’.
BRR: What are Bata’s plans going forward especially in terms of going into other categories?
MIM: We have already started women partywear through a fashion brand called Marie Claire, which is focused in urban areas in very selective markets. Our new entry and focus are the sneakers market. One new initiative is that Bata Pakistan is the destination for sneakers. We took a step during Covid-19 period last year and made a very nice collection of sneakers and unveiled it in October 2020. It was very well-received. We will have another launch with a sneaker campaign from February 15. 2021.
The second category that we will focus on is the stay-home collection with comfortability and affordability as the main promise.
And the third is our comfortable yet attractive kids’ collection under Bubble Gummers brand.
BRR: Bata and other retail brands also have online stores now, and there were campaigns during last year to shop online due to COVID-19 pandemic. Will ecommerce be your focus of attention in 2021 and beyond?
MIM: We started our ecommerce business very aggressively last year because there are no big third parties and ecommerce engines. So, we started Bata.com.pk. we have received great success, and now we are building the right tech infrastructure, logistics and will be aggressively marketing to push our ecommerce business this year further. It is a key objective of Bata Pakistan to push ecommerce sales in 2021. It’s a global trend and people especially younger generation is shifting to online shopping. It’s the new way of retailing.