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11 Weekly Roundup 14 Post recovery, Byco set to become Pakistan’s largest fuel refiner 20 Habib Metro shows how (not) to compete against the big boys and still win 25 Why Sirajuddin Aziz book is a must-read

28 28 Not reliant on interest rates alone 32 IMF overblows external account concerns?




36 Monsanto’s strong suit: Higher harvests, lower resources 38 Huawei, postmodern China in microcosm

Managing Editor: Babar Nizami l Joint Editor: Yousaf Nizami l Contributing Editor: Farooq Tirmizi l Business Editor: Agha Akbar Reporters: Farooq Baloch l Kazim Alam l Aisha Arshad l Arshad Hussain l Bilal Hussain l Eleazar Bhatti l Syeda Masooma l Ghulam Abbass l Ahmad Ahmadani l Shehzad Paracha l Director Marketing: Zahid Ali l Regional Heads of Marketing: Muddasir Alam (Khi) l Zulfiqar Butt (Lhr) l Mudassir Iqbal (Isl) l Layout: Rizwan Ahmad l Illustrator: ZEB l Photographers: Zubair Mehfooz & Imran Gillani lPublishing Editor: Arif Nizami l Business, Economic & Financial news by 'Pakistan Today' Contact:


Readers Say Rather than assuring ourselves we'll come out of it unscathed, shouldn't we direct our efforts to eliminate the actual cause that is hurting us more internally as well as our reputation globally? We may fool ourselves hoping to come out unscathed from economic sanctions, but the terrorism threat is real. If an International consortium is telling us to do something about it, then our egos aside, let's do something about it. (Apropos: The FATF ‘grey list’ means more trouble for Pakistan than you think) Mubasher Pasha The best thing for Pakistan in the long run would be if no country would bail us out financially. Maybe then we will learn to stand on our own feet. (Apropos: The FATF ‘grey list’ means more trouble for Pakistan than you think) Hussein-El-Edroos, Technical advisor, Jaffar Brothers Pvt Ltd

How to ContaCt


Overall the article gives good insight into how the international trade works and theoretically what ‘can’ happen if Pakistan goes into blacklist, however on the other hand the writer seems clearly more impressed and supports the notion of American/Western media about Pakistan’s ‘double face’ in dealing with the counter terrorism agenda. Who defines terrorism and what is terrorism?? Simply put, the one who is powerful in this world defines this… not you me or our government.. and they define and twist it according to their preferences. So dear avoid to harp their tune or tone as it changes with the wind. Indeed Pakistan has made some blunders but squarely blaming Pakistan for all the ills without holistically taking into the complex circumstances surrounding within Pakistan and this region shows you are reading their side of the media stories far too much. (Apropos: The FATF ‘grey list’ means more trouble for Pakistan than you think) Vajih Scaremongering is the objective of this article. We Pakistanis only want to downplay Pakistan wherever we are able to. FATF is a political organisation and is used politically to pressurise countries in submitting to the whims of powerful countries. Pakistan will do what it takes to

manage this situation. We just have to go on with our lives and stop being so concerned about it as we are also needed by these powerful nations in their effort to stop terrorism and stability in the region. We have our own interests to protect against opposing objectives of our enemies. In the end things always work out and have worked out (Apropos: The FATF ‘grey list’ means more trouble for Pakistan than you think) Arif Increased cut-throat competition is bad for investors and businesses due to thin margins. However it will always be great for the consumers as prices are driven to the least possible levels. We should be thankful to Zong and other entrants to provide stiff competition in mobile sector due to which prices are lowest. On the contrary, less competition is good for businesses and bad for consumers. Biggest example is auto assembling industry of Pakistan (Honda Atlas, Toyota Indus and Pak Suzuki) that produces cars of junk quality and sells them at the most expensive rates anywhere in the world. (Apropos: Why ‘no profit’ still makes Zong happy) Khurram The Court’s judgment to ban high rise in Karachi has no logical base. Karachi has severe housing shortfall not just for poor, but middle to higher income categories as well. Due to this, the rents and prices of plots, houses, apartments in even shoddy areas are abnormally high. For example price of a 250 yard old house in Karachi is over 3 crores in a very mediocre housing society like Gulistan e Johar, and in far lesser price you can get a similar sized beautiful house in best phases of DHA Lahore. The housing shortage is so severe that price of land in Karachi is comparable to world’s biggest and most developed cities. Building high rises to accommodate the excess population is a major solution to this problem as the increase in supply side will reduce prices. The premise that banning high rises will lead to water shortage etc is stupid as that will have no effect on the city’s population or their daily water usage. ( Apropos: How high should a high-rise be) Khurram


“It is an ideal situation when import and export figures match; Pakistan needs some time to reach the ideal position” State Minister for Finance Rana Muhammad Afzal Khan



Govt is pursuing policies to diminish its role in the power sector and promote market forces” Federal Minister for Power Division Sardar Awais Ahmed Khan Leghari

plunge was recorded in Pakistan’s arm imports from 2008-2017 reported Stockholm International Research Peace Research Institute (SIPRI). Pakistan accounted for 2.7 percent of global arms imports during 2013-17. Arm imports from USA during the above-mentioned period slumped by 76 percent compared to 2008-2013. Pakistan remained the largest recipient of Chinese arms imports during 2013-17, SIPRI revealed. And Pakistan’s arch nemesis India was the largest importer of arms during 2013-17, accounting for 12 percent of global arm imports. Russian arm imports to India rose by 62 percent during 2013-17 but US arm imports surged 557 percent from 2008-2012 and 2013-2017. Indian arm imports clocked a 24 percent rise between 2008-2012 and 2013-2017, reported SIPRI. Global arm imports into the Middle East have doubled in the last decade, said SIPRI. Arm imports by nations in the Middle East surged 103 percent between 2008-12 and 201317, accounting for 32 percent of global arm imports during 2013-17.


would be required to transform Karachi over a period of a decade to meet its infrastructure and service delivery requirements, said a World Bank report. Despite being the largest metropolitan city of Pakistan, Karachi over the last decade has experienced a substantial decline in its living standards. Issues like non-delivery of basic services such as water, electricity, and sanitation are prevalent, along with non-existent or substandard public transport/infrastructure and the widespread problem of land contestation. The crime rate is also high in Karachi, with some parts of the city considered as no-go areas since decades. The WB report attempts to identify and quantify the requirements to bridge this service delivery gap and proposes policies and pathways to transform Karachi into a more liveable city. The agencies responsible for the governance of the city have unclear roles and poor coordination among themselves. Similarly, the local governments are not empowered enough to effectively carry out the municipal functions needed to run a city.



45pc stake in eDotco is being acquired by Dawood Hercules Corporation by selling its shareholding in Hubco. At end of August 2017, Dawood Hercules Corporation Limited (DHCL) in partnership with Edotco entered into an agreement with Veon Pakistan Limited to acquire its wireless tower business in Pakistan for $940 million. And in mid-January, Dawood Hercules in a notification sent to the Pakistan Stock Exchange had announced a plan of an equity injection of Rs17.453 billion in Edotco Pakistan (Pvt) Limited. The CEO of Dawood Hercules stated the company intended to purchase a 45 percent stake in Edotco Pakistan (Private) Limited owned by Malaysia’s biggest mobile operator Axiata Group. Mr. Rehman said disposal proceeds from transaction of divesting its stake in Hubco would be used for investing in Edotco. He added “Investment in Edotco’s business was the plan, and the timing of offloading Hub Power and investment in Edotco coincided.” In a stock exchange notification sent to PSX, Dawood Hercules’s board gave go-ahead for making equity investment and short-term loan in Edotco Pakistan.



“Experience shows that economies with better trade regimes grow faster” Federal Board of Revenue Chairman Tariq Mahmood Pasha



stake has been bought by Ant Financial Services Group in Telenor Microfinance Bank (TMB) for further development of mobile payment and digital financial services. The strategic partnership between Telenor Group and Ant Financial combines TMB’s knowledge and local market presence with more than 20 million customers, and Ant’s technology in Alipay, the world’s largest digital payments platform, and other financial services to bring mobile payment and inclusive financial services to individuals as well as small and micro businesses in Pakistan.

growth was recorded in value of e-banking transactions during October-December 2017, according to data released by the State Bank of Pakistan (SBP). The number and value of the transactions processed in the second quarter of 2017-18 were up by 8.6 per cent and 28 per cent from the preceding quarter, respectively. Major channels of digital banking, also known as e-banking, include real-time online branches (RTOBs), auto teller machines (ATMs), point-of-sale (POS) machines, mobile phone banking, internet banking, call centres/interactive voice response (IVR) banking and e-commerce. RTOBs processed 41.7 million transactions amounting to Rs9.8 trillion. Out of these transactions, online cash deposit transactions had the highest share of 47 per cent, with a value share of 19.6 per cent. In contrast, the share of real-time online intra-banks fund transfers was 32.3 per cent in volume and 73.2 per cent in value. Online cash withdrawals contributed 21 per cent and 7.2 per cent share in volume and value of transactions, respectively.


worth of agreements have been signed for 990 megawatt Thar Coal power projects. The 660 MW Lucky Electric Coal Project being developed by Lucky Electric Power Company Limited at Port Qasim has an investment of $1,080 million whereas 330 MW Siddiqsons Energy Coal Project by Siddiqsons Energy Limited located at Thar Block-II has an investment of $410 million. Both projects will utilise Thar coal supplied by Sindh Engro Coal Mining Company (SECMC) which is executing coal mining operations in the Thar coalfield, Block-II. Letters of Support have already been issued to both projects by PPIB which are currently at an advanced stages of achieving financial closure. It is anticipated that Lucky Electric Coal Project and Siddiqsons Energy Coal Project will start generation by March 2021 and June 2021, respectively. Latest advancements by both projects are very crucial in achieving future milestones which include financial closing and start of construction activities.


have been spent by Pakistan on food imports in the first half of present financial year 2017-18. According to the details issued by the State Bank of Pakistan (SBP) on Friday, a large proportion of the $21.3 billion imports in the first half of FY2018 include agricultural and dairy products. Such products are widely available in the country and such heavy spending on their imports could have been easily avoided. Imports of vegetable products in the period went up to $1.37 billion, showing an increase of 29 per cent compared to $1.067 billion of the corresponding period of the previous fiscal year. Similarly, imports of edible vegetables were valued at $424.7 million, witnessing a 51 per cent increase compared to same period of the previous fiscal year.

$1.37b 12

Rs7b investment is expected over the next three years by upcoming oil marketing companies (OMCs) for establishment of storage infrastructure. Increase in demand is fueling investor’s appetite to invest in Pakistan’s low oil inventory capacity. According to officials at Ministry of Energy, the Oil and Gas Regulatory Authority (Ogra) has provided 15 new companies provisional licenses for construction for establishment of local storage infrastructure across Pakistan. A ministry official declining to be named said all these new OMCs are stipulated to invest around Rs500 million for infrastructure development in three years from start of license. They emphasized on enhancement of oil storage facility across Pakistan, with mandatory for every new OMC to establish oil depots and installations location wise to meet 20 days fuel needs.



By Farooq Baloch

t is a breezy Friday afternoon in Mauza Kund, Hub (Balochistan), about 50 kilometers west of Karachi and a stone’s throw from the famous recreational spot, Charna Island. At the Hub Jetty, the air is filled with optimism and excitement as top management of Byco Petroleum is hosting journalists, members of Oil and Gas Regulatory Authority, federal ministry of Petroleum


including director general, and officials of other petroleum companies for a boat trip to their floating port – the first of its kind in the country. The sea is unseasonably rough for early March, and the choppy water makes embarking and disembarking from jetty to small boats and then to the larger one extremely difficult. After everyone is on the larger boat, we leave for Single Point Mooring (SPM) or the floating buoy, about 10 km away from the shore on the coast of Arabian Sea.

Sailing against the wind at 10 km an hour, the boat successfully negotiates with crests and troughs at times more than two meters apart, making many onboard a trifle uneasy. Some throw up, others take refuge in the basement or the living room to avoid sea sickness. In about an hour, we reach the SPM to witness 300,000 barrels of crude from Qatar Marine being offloaded. The SPM, we’re told, is anchored at a depth of 25 meters. Disregarding the rough sea, the operation continues unhindered, transferring the crude through a pipeline – running 10.5 km subsea and 3.5 km onshore – to the storage tanks back on the land at Byco’s refining complex, the largest in the country with installed capacity of 155,000 barrels per day (bpd). “Our SPM is a proven technology; it stood rough seas and monsoon [since its commencement in 2012], always functioning smoothly,” said Asad Siddiqui, Byco’s Vice-President Commercial with a hint of pride. While continuing to explain its working, he said: the vessel is tied to the floating port at one end and a tugboat at the other, meant to hold the ship steady – and circumvent the vessel to release the ropes of any tension that may result from strong winds.

pakistan’s only floating port trategically placed in the deep sea, the SPM technology enables large vessels carrying over 100,000 tons of cargo and requiring specific


‘This is The FuTure, since 50 percenT oF all crude imporTs To The counTry will come Through spms’ Asad Siddiqui, Vice-President Commercial, Byco

depth to offload petroleum products directly to the refinery without any delays, bypassing demurrage charges and other bottlenecks at the country’s conventional ports. Referring to it as Pakistan’s third port, prior to the SPM, Byco had to transport imported crude 100 km west from Port Qasim. In the fiscal ending June, 2017, Byco brought crude vessel of over 102,000 tons at its SPM, the largest ever to berth in any Pakistani port. On our way back to the jetty, talking candidly to Profit, Siddiqui said, it wasn’t an easy project. Recalling the whole exercise, the Byco VP said, laying the undersea pipe was a challenge. Floaters (balloons) were attached to the pipe to ensure it remains on the surface, then extended all the way to the SPM and later allowed to sink on its weight and imbedded at the seabed. A game changer for the industry in general and Byco in particular, the project was so special that Byco preserved these

moments in a series of pictures, now displayed in the corridor that leads to the control room in a containerized building at zero point. It is from this small building that Byco’s staff monitors SPM’s operations round-the-clock, using all available means: a satellite navigation system, coastal radar surveillance and a telescope. “This is the future, since 50 percent of all crude imports to the country will come through SPMs,” said Siddiqui. This SPM accounts for a quarter of total crude imports this fiscal year, according to the Oil Companies Advisory Council, an association of petroleum companies, up from 14% at the end of FY2017. Byco takes great pride in being the first to set up a floating port in Pakistan and its executives frequently boast about it in every press briefing, but the SPM, which is operational for over five years now, is not where the present optimism and excitement stems from.

‘spread over 1,000 acres, Byco’s reFining complex comprises oF Two crude processing uniTs... orc-1 wiTh a capaciTy oF 35,000 Bpd and orc-2, which can process 120,000 Bpd oF crude By design BuT currenTly handles only a Third oF iTs insTalled capaciTy… Byco is processing less Than halF oF whaT BoTh These uniTs are collecTively capaBle oF’

SPM drawing crude oil from a vessel


Control room Earlier in the day, Byco celebrated the inauguration of a catalytic reformer at its larger refinery (ORC-2). The reformer will give Byco the additional strategic advantage of producing significantly higher quality motor gasoline, said Byco’s vice-president of operations Mansoor Shafique Qureshi. Briefing the media at the facility, a visibly excited Qureshi said the reformer has enhanced Byco’s cumulative motor gasoline (petrol) production five-fold to 1,500 tons per day – the figure is based on the combined current level of crude processing at both of its refineries, which stands at 75,000 bpd. This reformer will enable the company to convert 24,000 bpd of heavy naphtha, a light product of crude oil, into premier motor gasoline (PMG) or petrol. This upgrade will bring further improvement in the company’s profitability simply because gasoline offers better profit margin than furnace oil (FO). Byco had already stated in its Director’s report for FY2017 that it is pursuing growth in higher margin products like PMG and diesel. In fact, Byco is planning to upgrade one of its refineries with fluid catalytic cracker (FCC) technology – a major conversion technology, which currently produces the majority of gasoline globally. The officials didn’t give an exact date

for the new plant, but stated that Byco will be the first company to go for the FCC technology and convert its FO to either gasoline or diesel. If the company goes for a new FCC plant, they are looking at $1 billion in investment. However, the officials also pointed towards the possibility of buying a refurbished plant that costs “a lot less”, about $600-700 million.

on the offensive ith the new reformer already online, recommissioning of an isomerization unit – another technology to convert naphtha into motor gasoline – to commence in April,


Zero Point and an FCC plant on its immediate to-do list, Byco is on the offensive. The company says it will increase its volumes from the current 75,000 bpd to more than 100,000 bpd by this summer. When it gets there, Byco will become the largest fuel producer in the country, surpassing market leader Pak-Arab Refinery (PARCO), which is producing 100,000 bpd of refined petroleum, oil and lubricants (POL) products and doesn’t have additional capacity. However, this is only a small part of a bigger, seven-year expansion plan. Spread over 1,000 acres, Byco’s refining complex comprises of two crude processing units, ORC-1 with a capacity of

power sector’s current mix Indigenous gas, FO, RLNG, and coal 23.2%, 20.4%, 20.1% and 14.3% respectively ORCM 1


35,000 bpd and ORC-2, which can process 120,000 bpd of crude by design but currently handles only a third of its installed capacity. In other words, Byco is processing less than half of what both these units are collectively capable of. “First, we would like to utilize our existing facilities and then gradually raise capacity,” said Qureshi. That is, Byco plans to increase production to 155,000 bpd or 100% of its installed capacity in the short term. And by 2025, it plans to raise storage and production capacity to 400,000 bpd and 4,50,000 bpd respectively. In fact, it has already sought permission from the government to setup two more SMPs by 2025 -Byco’s response to how it is going to finance the planned expansion was awaited when this report went into print. Pakistan's current consumption of refined petroleum products stands at 27 million tons per year, while the local refineries are currently producing only 10.8 million tons. This is much less than their installed capacity, which stands at 18.5 million tons. So the delta for existing and greenfield plants is still there, Byco says, adding, the industry would like to utilize existing capacity to 100% before installing more capacity. Byco's share in the locally refined products is 16%, up from less than 5% a decade ago. Their next target? To capture 38% of that market. “The existing property has enough space to install two more refineries,” said Byco’s Haroon Rashid pointing towards the vast open space in the premises. If it does install a new refinery of 100,000 bpd, it will entitle Byco to a 20-year tax waiver from the government encouraging new refineries along the coast of Balochistan. Setting up a refining complex of this kind today would require $20 billion in investment, said a company official with a sense of pride one wouldn’t expect from the

‘The reFormer will give Byco The addiTional sTraTegic advanTage oF producing signiFicanTly higher qualiTy moTor gasoline. iT has enhanced Byco’s cumulaTive moTor gasoline (peTrol) producTion Five-Fold To 1,500 Tons per day’ Mansoor Shafique Qureshi, Vice-president of operations, Byco company that has, on one pretext or another, remained in hot waters in the last few years. In half a dozen years until June 2017, Byco reported loses in the first three while trying to remove some of its debt off the balance sheet. Despite being hit hard by the slide in international oil prices starting in mid-2014 until January 2016 when it fell below $30 a barrel, in FY2015, the company still managed to report its first operating profit in four years. The jubilation though was short-lived as a crude charge heater at its larger 120,000 bpd refinery was burned only three months of its inauguration. Subsequently, the company laid off a third of its work force, and merged all its units into Byco Petroleum.The production at ORC-2 remained suspended for nearly two years before it was back online last August. Its recent troubled history kept Byco off investors’ radar. Even today Profit’s calls to security analysts were responded with lack of interest. “This is a troubled stock and investors (our clients) are not interested, so we don’t cover it,” said an analyst. Byco’s stock is trading at Rs15.03 per share, still a far cry from the peak of Rs27.10 per share on July 1, 2015. It didn’t pay any dividend in the last financial year.

changing dynamic of pakistan’s energy mix nother not Byco-specific reason though of investors shying away from refineries was the changing dynamic of Pakistan’s energy mix and uncertainty about the government’s policy on furnace oil (FO). Accounting for 85% of the country’s FO consumption, Pakistan’s power sector is moving to cheaper fuels – coal and regasified liquefied natural gas (RLNG). This has put refineries processing FO in huge quantities under a lot of pressure, owing to the particular variety being 37% of the country’s consumption. The government policy to phase out furnace oil only added to their woes. Byco did away with FO imports in the last fiscal, but media reports suggest it still has about 40,000 tons of unsold stock -- FO is 35% of Byco’s volumes. “Owing to the government’s decision of shutting down furnace oil-based power plants, the last two months had been challenging for the refineries due to high inventories of furnace oil,” reads the director’s report for the quarter ending December 2017. “As a result, the company had to operate the refinery at a lower throughput during the period under review.” The government has since softened its stance and allowed local refineries to con-



tinue selling FO to the power sector. As per the current policy, power producers are asked to use coal and RLNG first and any shortfall have to be met through FO, which has to come from local refineries since the government has restricted imports of FO. Pakistan’s FO import is 6 million tons, with another 3 million tons produced locally. In other words, local refineries, which were hit by shutting of FO-based power plants, stand to gain the most of government’s policy since coal and RLNG can’t make up for the entire 6 million of imported FO and power producers will have to rely on local supplies. Once the import of FO is stopped, Byco will increase its production to ensure availability of local supplies to meet the shortfall in demand, said Siddiqui, noting that not all power plants are on coal or RLNG. With general elections scheduled for September, the government would like to ensure higher generation for which power producers will need FO. As things stand, Byco will continue to sell of FO stock and raise production in


high-margin PMG. In a couple of years, if not earlier, it will have installed its own FCC to replace FO with either gasoline or diesel, said a confident-sounding Siddiqui. Even if one ignores the sense of elation in Byco’s upper-tier management, the numbers suggest that unless something unforeseen happens, its worst days are behind it. Byco’s operating profit has been improving since 2015 and so has its net earnings. Shareholders’ equity now stands at Rs20.9 billion (end of FY2017), much improved from a negative Rs8.6 billion (end of FY2015).

Raising the retail footprint urrently, petrol and diesel collectively account for 56% of Byco’s production, but the company aims to raise it to further expand its retail footprint. Launching its first petrol pump in 2007, Byco has since expanded its retail network to 320 outlets in 80 cities across Pakistan – still far behind the state-owned petroleum giant PSO (3500 outlets), and other significant players; Shell (780 outlets), Parco (765 outlets), Attock (600 outlets), and Hascol (490 outlets) to name a few. Byco plans to add 25 outlets every year to increase its retail presence. “We want our retail outlet at the highest hill in the country,” said Siddiqui, referring to the CPEC route initiative by Beijing that has pledged upwards of $56 billion in foreign investment in this country. “Growth in the number of vehicles being produced locally as well as imported


‘STRATEGICALLY PLACED IN THE DEEP SEA, THE SPM TECHNOLOGY ENABLES LARGE VESSELS CARRYING OVER 100,000 TONS OF CARGO AND REQUIRING SPECIFIC DEPTH TO OFFLOAD PETROLEUM PRODUCTS DIRECTLY TO THE REFINERY WITHOUT ANY DELAYS…’ and development of infrastructure are the main factors contributing towards the increased consumption of oil in the country,” Byco noted in its report. It is pertinent to mention that the retail sector has witnessed a significant growth in recent years, with demand for motor spirit increasing by 25% in the last five years. The demand will increase further after containerized traffic starts moving along. “Pakistan’s fuel demand will grow by 7 percent to 10 percent between now and 2020,” Byco CEO Amir Abbassciy told Bloomberg in an interview last year. The country presently has one of the lowest per capita consumption of oil in the world. As the economy grows, the demand for POL products will increase by leaps and bounds, he added, forecasting Byco’s revenue will double to $2 billion in fiscal year ending June 2018. n



By Kazim Alam abib Metro is a boring, unexciting bank. It’s neither big nor small. Nobody uses its credit card. It won’t service you if you need a home loan or car financing. Its name – at least half of it – bears an uncanny resemblance to that of a train, bus or a large supermarket. Yet the bank is the single biggest player when it comes to trade finance, a type of banking that helps importers and exporters meet the ‘funding gap’ in trade cycle. “Habib Metro is primarily a trade finance bank,” says Sirajuddin Aziz, its outgoing president, in an interview with Profit. “Up to 16 per cent of the country’s total external trade is being handled by Habib Metro,” he adds. Set up in 1992, Habib Metro is a listed bank with 308 branches in 88 cities. Owned by the Habibs, a venerable business family with a banking legacy dating back to 1921, Habib Metro merged with Pakistan operations of Habib Bank AG Zurich, another group entity, in 2006. Banks don’t usually publish the exact size of their trade finance operations. But his claim was corroborated by two other, independent sources. “I believe our bank has the largest market share in trade finance,” he says. To put it in perspective, Habib Metro was the ninth largest bank in 2016 – the latest full year for which industrywide data is available – with net assets of nearly Rs40 billion. It was the 10th largest entity in terms of pre-tax earnings that year. A bank requires old, time-tested relationships with importers and exporters to grow its trade finance business steadily. For example, a tea importer based out of Jodia Bazaar is required by


I AM GOING TO UTILISE THIS PRESENCE FOR THE CHINA-PAKISTAN ECONOMIC CORRIDOR FOR CHINESE INVESTMENT AND TRADE’ SirajuddinAziz,Outgoing President, Habib Metro Bank his Kenyan counterpart to pay for the shipped merchandise in advance. So it takes a trade finance bank operating in Karachi to furnish a letter of credit (LC) to the Kenyan bank of the Nairobi-based exporter, promising that he will receive the payment on time even if the Pakistani importer is unable to pay it himself. “We’ve been very entrenched in the bazaar area right from the word go… We take the major share in Jodia Bazaar. I think we should be the No. 1 bank in Jodia Bazaar,” he says. But there are 30 banks in Pakistan and opening an LC should be a mundane, everyday business activity for nearly all of them. So what makes Habib Metro stand out? “Quick decision-making and fast turnaround are most important (in trade finance). The price of dana (polyester) will change tomorrow if you don’t lock the transaction at the going rate. So the client would demand the LC right away,” he says. According to mid-level employees


of Habib Metro, trade finance clients enjoy rare access to the bank’s back office. This is against the usual practice whereby clients never get to bypass the front office, i.e. the bank branch. But Aziz denies it, saying clients sometimes contact the back office for operational issues, such as a minor correction in documents that requires the trader’s stamp. But they have no influence over the centralised credit decision-making process, he says.

At the cost of consumer banking? oo much focus on trade finance seems to be at the cost of consumer banking, a segment that most other banks try to excel in. Selling credit cards and loaning funds for home and car purchases help a bank grow its bottomline far quicker than, say, financing external trade. That’s because consumer banking products tend to have a substantial spread, which is the difference between interest rates at which a bank accepts deposits and extends loans. Most banks enjoy a spread of 3-5 per cent on auto finance loans, for example. Some banks, like the six biggest players, do everything from consumer banking to corporate banking. Most of the smaller players – Islamic banks, in particular – are into consumer banking only.



But spreads are extremely competitive in trade finance. Even a 2 per cent spread is considered high, which means pricing is cutthroat and business is driven solely by the volume. Annual accounts of Habib Metro reveal that just 3.1 per cent of its net income in 2017 originated from retail banking – a segment that deals with small borrowers and includes loans, deposits

and other transactions with consumers, small and medium enterprises (SMEs) and agriculture sector. The rest of its net income came almost equally from the trade and sales segment, which includes treasury, money market and stock market activities, and commercial banking that caters to corporate and other big clients. Although Aziz helped the bank’s

Sirajuddin Aziz, in his own words y father was a bureaucrat. I couldn’t go abroad to study because he was an honest bureaucrat. “I did B.Com in 1977 with a distinction from Premier College, Karachi. I was 11th on the merit list. Then I did MBA in banking and finance over a period of time. I did some courses in Hong Kong, then completed the rest of the programme here in Karachi from a very fine institute that was affiliated with the University of Karachi. It was called the Institute of Banking Finance and Management. It was in the Federation House, Clifton. Unfortunately, they closed it down. “My father wanted me to join the Foreign Service. But I believed it would be difficult for me to get into it because I thought I was not that qabil (competent). Also I knew that wahan suni nahin jaegi (I would not have much say in matters there) . “My first job was with the Bank of Credit and Commerce International (BCCI). I remained with it till the bank was shut down. If BCCI was around today, I would still be working there.”



bottom line grow from Rs3.2 billion when he joined as president in 2011 to Rs5.5 billion at the end of 2017 – a compound annual growth rate of 9 per cent – the bank has shied away from expanding into the consumer segment. This has been in contrast with Aziz’s earlier stints as COO and CEO at Bank Alfalah from 2001 to 2011. He grew it into one of the six largest commercial banks with a dominant position in consumer banking. “This bank took a premeditated decision that it wouldn’t do that because that’s not its niche. Its niche is trade. We are not in consumer banking at all,” he says. According to Elixir Securities, overall banking profits for 2017 are expected to record a marginal decline of 1 per cent. However, net profit of Habib Metro remained Rs5.5 billion, down almost 10 percent from Rs6.1 billion a year ago. Net profit in 2015 was even higher at Rs7.6 billion. But Aziz wouldn’t call it a decline in earnings. To him, it represents the ‘rationalisation’ of profit.

“The peaking of our profit in 2015 was a result of capital gains,” he says while referring to Rs4.7 billion gains on the redemption of securities in that year. “It was an arbitrage opportunity. My interest rate reading was right. So I sold securities at the right time. But remember, that is not my primary responsibility,” he says, adding that his primary responsibility is financial intermediation i.e. taking money from those who possess it and giving it to those who can deploy and multiply it. Simply put, Aziz blames the drop in capital gains for a shrinking net income in 2017. “My core business income is climbing. It means I am lending money. My LC commission is going up. My export commission is growing, which means I am doing business. I am not just buying and selling securities,” he says. Total markup income of Habib Metro amounted to Rs13.9 billion in 2017, up 27.2 per cent from a year ago.

New role fter more than six years at the helm, Aziz will soon be elevated as CEO of the Group Financial Institutions in Habib Bank AG Zurich Group, which also controls 51 per cent shareholding in Habib Metro. He will be replaced by Mohsin Nathani who previously worked as CEO of Standard Chartered Bank in Pakistan and the United Arab Emirates. In his new role, Aziz will be responsible for developing trade corridors between the countries where the bank already operates. Habib Metro will try to take advantage of its foreign presence and appear to the marketplace as one global bank, he says. “There are some avenues to create new streams of business and revenue. It’s tying up transactions on both ends and to facilitate greater quantum growth. For example, we are sitting on the doorstep of China in Hong Kong with our presence. We’ve been there for decades. I am going to utilise its presence for the China-Pakistan Economic Corridor for Chinese investment and trade,” he says.



Philosopher banker ziz enjoys the reputation of a philosopher banker. He has written many books, is a sought-after public speaker on management and finance, and speaks flawless English and Urdu. A five-minute conversation with him is enough to reveal that he’s deeply religious. His junior associates say he urges them to respect their parents, show compassion and uphold moral values – lofty ideals that few corporate leaders seem to care about anymore.


Meet the New President/CEO

Mohsin Ali Nathani Work, sport, social responsibility, Nathani’s avowed passions Initially tipped off to lead the Habib Bank Limited in place of Nauman Dar, Mohsin Ali Nathani instead landed with another Habib, to become the numero uno in the Habib Metropolitan Bank. A seasoned corporate banker with about two decades and a half in a slew of prime positions with renowned banking entities – Standard Chartered, Barclays, Citigroup and ABN Amro among them – in East and South-East Asia, the Middle East, and the Levant, Mohsin Ali Nathani joins Habib Metropolitan Bank as its president and CEO at the start of the second quarter of the ongoing year, in place of Sirajuddin Aziz, who has been elevated to another, Far East-based assignment within the group. He is a post-graduate from the prestigious Institute of Business Administration, Karachi in the class of 1987. Now in his fifties, Nathani – with work, sport and social responsibility as his avowed passions – comes back to his home town after a fouryear interregnum, as the head of a strong-in-its-own-niche bank: Habib Metropolitan. Amongst top 10 on the leaderboard for leading national banks, the bulk of Habib Metropolitan’s profits come from trade finance. In an interview to a major UAE daily newspaper, The National, in 2015, Nathani had mentioned “passion as the secret to success”. Answering a question, he said: “It starts with passion. I think you have to like what you do, which I do… Within the workspace, what I’ve figured out is that people are the most important piece. You extract… more value and more productivity out of them by helping them and making it easier for them to work.” And what he can’t live without? “Work”, of course. He elaborated: “It’s not a good answer, but perhaps work. I enjoy work very much, but I am not someone who puts in 16 hours a day. I have a regimented routine and try to be as productive as possible with my time management.” If he wasn’t CEO of a bank, what else would he be doing? “Social responsibility is my passion, so I would give a significant amount of my time to that profession on a non-profit basis.” Given that passion, it is no surprise that Nathani is on the boards of Pakistan Council for Philanthropy, the British Oversees School, I-CARE and a trustee in his alma mater IBA’s Endowment Fund. –Agha Akbar


Yet it was under his leadership that – many current and former employees believe – Habib Metro underwent a ‘cultural shift’. It used to be a bank that few employees ever decided to part ways with. People would join it after graduation and leave it upon superannuation. But Aziz’s years at the bank saw an uptick in employee turnover, former staffers say. The bank was earlier known for giving heavy annual increments to employees, but the practice stopped after his ascent to the top, they claim. Aziz strongly disagrees with this view and insists that the increment rates at Habib Metro remained in double digits even though the average for the entire industry was just 2-3 per cent. “There were people who were in a certain age bracket that their productivity was going down. But we didn’t tell them to leave. Very respectfully, we told them to gradually hand over their responsibilities, and let us know the date when they would like to leave at their own convenience. That’s how people left. We didn’t fire a single employee,” he says. As a result of their resigning, he says, room was created for the next generation of bankers to grow into senior roles. “People were feeling stagnant. Opportunity was created at once for people to grow,” he adds. More recently, about one-quarter of the staff from the compliance department reportedly left Habib Metro for other, bigger banks. There was no attempt on part of the management to make them stay. Aziz says he can recall telling one such young banker that he should consider all factors before switching jobs. “As an elder, I told him that money is not everything. The bank that was offering him a job was hiring only three or four (people), which means it could pay whatever it had to. My hiring is of 40-50 people. It’s not possible for me to raise the

salary by 100 per cent for so many people. That’s against equity,” he says.

Easy money o discussion with a commercial banker is complete without the standard question about the banks’ incurable addiction to risk-free government securities at the cost of private-sector credit growth. After all, banks hold Rs6.85 trillion or almost 80 percent of outstanding stocks of government securities. In contrast, loans to private-sector businesses amount to Rs4.2 trillion, about 61 per cent of total bank holdings of government securities. “Please understand that banking is one industry that operates within a cluster of industries that make up the economy. To blame banks entirely for having put a large part of their liquidity in treasury assets will be incorrect,” he says while insisting that entrepreneurs are shy of putting up new businesses. “It’s other people’s money that I am carrying on my balance sheet. I want to play safe also. It can’t be all debt-financed. There has to be a fair combination of equity- and debt-based projects,” he adds. Responding to a question about CASA, a performance indicator that reflects the share of low-cost current and saving customer deposits in total deposits, Aziz says it should be viewed in an ‘entrepreneurial perspective’. Having a high CASA is like a feather in a bank CEO’s cap. It means the CEO is drawing in deposits at a minimal cost, which will then help generate a wider spread for the bank. “Deposits are raw material for the banking industry. Every entrepreneur wants to keep their cost of material minimal. Emphasising CASA means I am try-



RS13.9 BILLION IN 2017, UP 27.2 PER CENT FROM A YEAR AGO’ ing to minimise my cost of raw material,” he says. He pointed out that private-sector loans have registered growth since May 2017 when macro-economic fundamentals started improving. Loans to private-sector businesses grew almost 18 per cent in 12 months through January. Advances by Habib Metro at the end of September 2017 amounted to Rs167.3 billion, up 17 per cent from the beginning of the year. “Please don’t misinterpret raw material cost reduction.” However, Aziz believes some tapering is likely to take place in advances’ growth given that 2018 is the year of a general election. “If things go well, advances will climb back.”

Diplomacy failure s for Pakistan’s upcoming inclusion to the so-called grey list maintained by the multilateral Financial Action Task Force (FATF), Aziz says the government should’ve handled the issue with “more preparedness”. The mandate of the FATF is to counter global money laundering and terrorism financing. An indication from the Paris-based body that it doesn’t find Pakistan’s banking system sufficiently sound to counter money laundering and terror financing can spell disaster for entities like Habib Metro whose core business revolves around facilitating international trade. “They’re saying we don’t have mechanisms, we don’t have laws. But the law is there. We passed it last year,” he says, noting that Pakistan’s ambassadors and commercial councilors should have told the countries behind the FATF move about the steps that the government has taken to counter money laundering and terror financing. “Our legal framework with regards to anti-money laundering is one of the finest.” n



Emerging Dynamics of Management By Sirajuddin Aziz Paramount Books (Pvt) Limited 494 pp. Rs 995

WHY SIRAJUDDIN AZIZ BOOK IS A MUST-READ By Agha Akbar resently the President and CEO of Habib Metropolitan Bank, with extensive experience of working in China, Hong Kong, Nigeria, the UAE and the UK, and, of course, Pakistan, Sirajuddin Aziz is a banker's banker. If anything reflects that amply it is the author's acknowledgements by the score spread over three pages that reads like the Who's Who of banking and government in our neck of the woods, the Middle East and elsewhere. Yet, quite conspicuous by its absence is, the in-your-face hauteur of the successful in the corporate world that emanates from 'I've been there, done that'.



The banker extraordinaire shares his invaluable insights and experiences “Without leaving the apron-strings of idealism, I am a practical person,” writes the author in his acknowledgements note, further dilating, “This book is about ‘experience’ and so there are numerous persons who have helped me in understanding human behaviour and its impact on management.” At the fag-end of 2017, Paramount Books published Aziz's 494-page compendium – a compilation of his columns contributed to one of the frontline contemporary national English dailies over half a dozen years but in its essence traversing “four decades of professional journey” – under the title, 'Emerging Dynamics of

Management'. Browsing through the book – just to size it up for reading from delving into it or to put it aside in favour of something better – two things struck one immediately: the writer's having garnered experiences and insights worth sharing, and also that he has skills to communicate them in a manner highly lucid and readable – at places with exceptional eloquence. The manner in which some of the literary, business and banking luminaries and statesmen are weaved into various pieces through quotes and narration points to the author having imbibed deep on the well of literature out of love for finer things in life and not out of


OR THERE IS NEED TO DO SOME RIGHT-SIZING AND LET’S DO SOME RESTRUCTURING, THEN KNOW THAT THE DECLINE HAS SET IN…’ Sirajuddin Aziz, Outgoing President, Habib Metro Bank occupational requirement. Apart from the plethora of practical wisdom packed in tightly written pieces [See excerpts from several sections] that

sets one thinking, as also the tone and tenor and quality of language, the topicality of issues under discussion are most apt and illuminating.

EXCERPTS ‘I have seen many brilliant initiatives; die a natural death by sheer lack of follow up. The easiest thing to do is to assign a task to an individual or a department but the tougher part is to give it some shape in terms of achieving a practical solution within the pre-agreed time lines. Following the arrangement of any given task over a time line, it now becomes significantly prudent, to track it accordingly by asking for regular progress reports.’ Follow-up and Feedback (In Section, ‘Communication’) ‘Retaliation is a word with negative connotation, but in the context of responding to conflict, I would say that managers may retaliate with no impious intention through ‘silence’ for as GBS had said, silence is the most perfect expression of scorn. Disagreements do not have to be expressed in a shouting match or contest.’ The Power of Silence (In Section, ‘Communication’) ‘When in the corporate corridors you hear whispers about how good golden handshake is to protect the institution; or there is need to do some right-sizing and let’s do some restructuring, then know that the decline has set in… ‘If success, breeds success, then we should as managers never forget that emotional states are as infectious and endemic as diseases are. A depressed colleague can produce in a very quick time, the largest army of despondent… ‘When the workforce fails to respond to the promise of heaven (carrot) or the threat of hell (stick), it is a clear sign that the organisation is dying a slow death. Like the dreaded diseases, that medical science discovers only in its last stage, when it is most certainly fatal, so is the case with ‘management lethargy’, it takes time to emerge with full fury.’ The Bane of Lethargy (In Section, ‘Strategy and Organizational Structure’) ‘J.F. Kennedy, who in my personal estimation was the last president of USA who said or did something profound, remarked a few months before his assassination to an Irish public gathering in Ireland, “The problems of the world cannot possibly be solved by skeptics or cynics whose horizons are limited by the obvious realities. We need men who can dream of things that never were.” Where JFK left, Martin Luther King Junior prompted the US nation with, “I have a dream…” Wake up to your dream as a leader and get into action.’ Dreaming Big (In Section, ‘Leadership’)


A must-read ivided in seven sections and containing 122 columns, to remain abreast of ever-evolving business and management techniques, the book is a must-read not just for the aspiring and even established bankers but also the middle and upper tier managers in the vast corporate world for its variety of topics. For who would not want to draw from this volume insight into traditional and contemporary topics, with each dilated upon from various angles in several columns, such as: ‘Communication’, ‘Strategy and Organisational Structure’, ‘Leadership’, ‘Personal Development’, ‘Human Resource Management’, ‘Board Rooms and Committees’, and ‘Manager’s Tool Box.’ Dr Ishrat Hussain, a leading economist and a former governor of the State Bank of Pakistan, in his appraisal writes that the book does not come to him as a surprise. “He is one of the few banking professionals who has always devoted time to reading, reflecting and writing, and using those insights and knowledge for articulating and disseminating fresh ways of thinking and doing things. Dr Hussain, calling it a ‘must read’ for business schools, also recommends it “to those going through mid-career and executive education training.” Amir Zia, a leading media person, holds says on the book’s flap: “In Pakistan’s corporate world there are scores of champion leaders and gurus, but hardly few of them share and transfer their experiences, management insights and career lessons in writing, let alone in the form of a book.” n



INTERVIEW Zafar Masud, Director General, National Savings

By Ghulam Abbas afar Masud is a career banker and finance expert of proven credentials in top positions in corporate and investment banking and cash management in Pakistan and foreign banks. Among other prominent positions, among other as former director of the SBP and regional managing director and CEO of the Barclays Bank, Masud presently is director general of National Savings – an organisation meant to serve the small savers and at the same time obtaining financing for the federal government. In this assignment, Zafar Masud’s focus, in a rather difficult period with interest rates at the lowest ebb for decades, has been on digitisation, introducing new services and computerisation of savings centres. National Savings is indeed a behemoth with an investor base of 7 million and a portfolio of USD 30 billion. In conversation with Profit, Zafar Masud gives a low-down on National Savings, the initiatives taken under him and also in the direction the

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organisation is headed. The following are the excerpts. Profit: How far has NS been successful in promoting the savings culture in Pakistan, with saving rates here still unfavorable as compared to the neighbouring South Asian nations, including India, Bangladesh and Sri Lanka? Zafar Masud: In terms of mobilising savings in the country, NS is Pakistan’s leading institution but promoting the savings rate in the country is the collective responsibility of the entire financial sector, in particular the banks – and their failure has resulted in reduction in the savings rate in the country. Despite lower interest rate regime in Pakistan, National Savings has been meeting its targets regularly. National Savings is making efforts to mobilise savings by enhancing its customer services through introducing technological initiatives instead of relying on interest rate hike only. New products are in the pipeline to complement this endeavour. Profit: Domestic savings have declined to

less than 9 percent in recent years, despite its importance for sustainable growth. What measures has NS taken to increase domestic savings since foreign inflows are uncertain? ZM: To enhance the savings mobilisation, National Savings has adapted a three-pronged strategy: First, access points, second, product portfolio and, third, product marketing and awareness. Through access point initiatives, NS has expanded into the digital and key alternative delivery channels (ADCs) are being introduced to enhance the outreach and ensure the easy availability of its products. As for the product portfolio is concerned, NS is expanding its products base keeping in view both the financial inclusion and social safety net aspects. The products being introduced to ensure social safety net for specific segments are the extension of Behbood Certificates to the Persons with Disability and the launch of a separate scheme for the kin of the martyrs, including those from the security forces as well as the civilians. The welfare product designed in this regard is the Shuhada Family

Welfare Account (SFWA). As for financial inclusion aspect is concerned, National Savings has designed products for two major sectors. These products for Overseas Pakistanis Savings Certificates (OPSCs) and Sarwa Islamic Savings Account (SISA), for those who desire to invest only in the Sharia-compliant schemes. Lastly, NS has stretched its marketing awareness initiatives and made its presence felt in the market through an effective use of the social and print media, and also digital channels . Profit: Given the rate of inflation and returns, what saving rates do you anticipate in the next few years? ZM: The NS rates are market based and directly linked with the T-Bills and PIB rates. As these rates increase, ours too would go up accordingly. Profit: Of the products introduced by NS so far, which one are success stories? From a savings perspective, how four years of this government are different from that of the previous one? ZM: As for the key success story, National Savings has emerged as an effective tool in [providing the] social safety net over the last decade. In 2003, National Savings introduced Behbood Savings Certificates and Pensioners’ Benefit Account (PBA) for specific segments of the society, including widows, seniors citizens and retired government servants. Both the schemes have grown tremendously over the last decade and currently contribute to about 30% in the total National Savings portfolio. Through these schemes, additional profit rate of about 2% is offered to support the most neglected and deserving sections of the society. The incumbent government has played a vital role in increasing the limit of investment from Rs3 to Rs5 million through its budgetary initiatives. This has helped not only fetch more investment but also supported the deserving sectors. Further, since the technological upgradation is the focus of the current government, it has helped National Savings at all levels to reform it from a manually operated organization to a financial institution having its own financial switches and payment gateways. The NS’ transformation and refashioning programme began in mid-2000 and is still continuing. Profit: What are the challenges ahead to

Zafar Masud, Director General, National Savings promote the savings culture in urban and rural areas alike? ZM: Savings is a complicated subject. It has many moving parts and qualitative features including cultural aspects. The savings can’t be enhanced overnight. It’s a long drawn process which takes years of continuous effort to yield optimum results. The important element is that the realisation to harness savings exists both at the government level and otherwise. In my opinion, savings is a habit which can mainly be inculcated in childhood. Therefore, there is need to develop specific school curriculum to promote savings, making financial markets bound to promote thrift and celebrating along with celebrating related events at national level. Profit: Is the foreign investment coming in the wake of China Pakistan Economic Corridor (CPEC) likely to affect savings positively? ZM: Well, there is no direct link as such, but with growth in the GDP and disposable income, the savings are bound to jump. Profit: How can the banks help in unlocking household savings parked in real estate and precious metals and channelise them into investment? ZM: People usually invest into different instruments based on the return and also safety of the principal. The foremost point is the regularisation and imposition of windfall tax in the real estate sector. This will provide a level

playing field in the first place. In such an environment, banks would be in a position to diversify products, provide competitive returns and do marketing aggressively in the target areas to unlock household savings placed in other, under-utilised sectors. The focus on mobilisation of savings is lacking in the banking sector. They merely focus on promoting current account, thus losing sight on promoting savings. This situation must change to improve the savings to GDP ratio in the country. Profit: As suggested by SBP, should private sector come up with attractive savings schemes in the areas of pensions, provident funds, gratuity, old age benefit schemes, especially in rural areas? ZM: The private sector can only jump on the bandwagon when there is attraction in the market for it. In this, a tax rebate on these schemes by FBR might help the private sector to promote mobilisation. The aggressive participation of private sector to promote savings is the way to meet the optimal level in due course. Profit: In the contemporary world of information technology, what measures have been taken so far to digitalise the national savings system? ZM: As discussed earlier, National Savings’ current focus is the technology and digitisation. Over the period of last one and a half years, National Saving has achieved considerable progress in innovative and IT-based initiatives to transform the organization with the


use of latest technology and through introduction of new products. National Savings has computerised and centralized its 223 National Savings Centers (NSCs) out of 376 total NSCs. A year before, there were only 48 computerized branches and none was connected to any centralised system. National Savings has recently established a computerised complaint resolution system through which complaints are monitored till their final resolution. Along with this, a state of the art Call Center has been established through which customers can register their complaints. Moving further into the digital era, National Savings has launched a non-financial version of mobile application called ‘Qoumi Bachat Digital’. National Savings is also launching a financial version of the mobile application along with card management system and mobile wallets. National Savings hired the services of various consultancy and technology firms for development, upgradation and improvement of its operations in order to deliver quality services to its valued clients. The services of PaySys Labs (Pvt.) Ltd/Access Consulting (Pvt.) Ltd were hired for upgradation of its main application system. With the help of Karandaaz Pakistan, the services A&M Consultants, LLC have been hired by Karandaaz, Pakistan for alternate delivery channels (ADCs). The World Bank is extending US$9.4 million financial support as part of the Financial Inclusion and Infrastructure Project to procure state-of-the art Core Banking System, ERP, Business Intelligence, etc. over a 5-year period. Profit: What is the progress on automation of National Savings branches? ZM: National Savings has successfully automated its 60% branches through its Automation Phases 1 and 2. It will soon automate its remaining branches in the Phase 3, which will lead to automation of all the branches. In this way, the whole system of the National Savings will be a click away with the help of its digitization initiatives by 2020. Profit: How are you attracting people towards your products keeping in view the low interest rates and weakening rupee turning investors away to more lucrative avenues? ZM: National Savings provides 100% security to the investors, and new interest rate, in spite of the downward trend, does not affect old investments maintained at the higher


rates. Furthermore, National Savings is moving fast from a manually operated organisation towards serving the investors through digital channels. On the product offering side too, National Savings is expanding its investment base by attracting overseas Pakistanis into its fold of investors. The proposed OPSCs will only be offered for overseas/nonresident Pakistanis and there will be no point in onshore investors ‘hoarding foreign currency’ in anticipation of the issuance of the proposed OPSCs. Profit: As the data of first five months of this financial year shows, withdrawal from almost all categories of savings accounts has increased. How can the pace of withdrawal be controlled? ZM: Over the last few months, the main exit in investments has been witnessed in 3 and 5 year tenure schemes since the profit rates of NSS are linked to the primary auctions of Pakistan Investment Bonds (‘PIBs’) and Treasury Bills (T-Bills) and in the last six months consécutive auctions, PIBs have been rejected. Due to this phenomenon, rates of NSS have remained unchanged for the last one year (last revised in February 2017) while the interest rates in the market, including the secondary market rates for PIBs, have increased. Thus, this temporary rate anomaly in the market and exodus of institutional investors from National Savings. National Savings through enhanced customer service delivery, use of technology based initiatives and new products will manage the outflow of investments. National Savings is making profound efforts to compete on the basis of customer service delivery instead of the profit rates only. National Savings has recently established a Computerized Complaint Resolution System through which complaints are monitored till their final resolution through a system generated tracking ID. Along with this, a state of the art Call Center has been established through which customers can register their complaints. Moving further into the digital era, National Savings has launched a non-financial version of mobile application called ‘Qoumi Bachat Digital’ which has enabled customers to view their profits, investments in the certificates and accounts, get notifications on the transactions, view transaction history and also save prize bond numbers to be searched in the Prize Bond draws. National Savings is

launching a financial version of the mobile application along with Card Management System and Mobile Wallets for their esteemed investors within the next six months. National Savings introduced Centralized Clearing House facility in January 2017 to the investors through which the cheque clearing time has been reduced from 7-10 days to only 1-3 days, and has allowed thirdparty payments from saving accounts in October 2017 using them as operating accounts like commercial banks which will help in retaining investments with CDNS and enhancing deposits in savings accounts (where outflow was Rs125 billion in CFY 2017-18). There are at least four new products, including a Sharia Compliant product, Overseas Pakistanis Savings Certificates (‘OPSCs’) which are being launched in the next five months to help compensate for the reduction in existing interest rate sensitive schemes. The rate of return on the proposed certificates has not been finalised as yet. The products will only be issued once structure, launch plan and rules of the proposed certificates are formally approved by the finance division and the federal cabinet. Shuhadah Families Welfare Account and BSC for Persons with Disabilities were announced in the federal budget 2017-18 and are being launched in a record time. Profit: What is the progress on planned Diaspora bond, which is being launched for attracting investments from the overseas Pakistanis? ZM: OPSCs product of National Savings has travelled a long way in the shortest possible time. National Savings aim to launch OPSC,s in May 2018. In this regard, National Savings expedited the efforts and got the relevant documents prepared with the financial advisors. The OPSCs preliminary market research and product features report has been prepared, while the RFP for hiring the services of manager to the issue of OPSCs is also ready to be floated after certain internal approvals with the finance division. Profit: What measures in your view could be the game changer for national savings in the next five years? ZM: In my opinion, the game changer for National Savings over the next five years will be its digitisation. Because, visiting branches for financial transactions is becoming a thing of the past. Digitisation is the future, only. n



By Kazim Alam he International Monetary Fund (IMF) came up with a dire warning for our policymakers last week: Pakistan’s gross foreign currency reserves may drop to $9.37 billion by June 2018, from $12.8 billion on Feb 14, if it fails to bring in sufficient foreign capital inflows. Simply put, the IMF has set alarm bells ringing for the economy. With the current level of foreign exchange reserves sufficient for just 2.2 months of imports, the country seems to be back on the verge of another balance-ofpayments crisis within 18 months of completing a three-year IMF programme worth $6.6 billion. Although a majority of analysts seem to agree with the IMF’s economic assessment, a few of them have voiced a note of dissent. “Pakistan always faces external account issues in years that see a sudden spike in the growth rate. Supplyside constraints become noticeable whenever GDP growth rate accelerates,” according to Najam Ali, CEO of Next Capital, a Karachi-based brokerage house. Pakistan recorded a growth rate of 5.3 percent in 2016-17, which is the highest in a decade. Ali says the industrial base of the country doesn’t have the capacity to respond to increased demand, which is created as a result of sudden economic expansion. Imports grow as a consequence, bringing the trade imbalance under further pressure. “It’s a pattern. High growth leads to increased imports because the industrial capacity is replete with supply-side constraints.” Pakistan’s imports of merchandise in the first seven months of 2017-18 amounted to $31 billion, up 18 per cent from a year ago. This hurt the current account, which tracks a country’s foreign transactions, as its deficit grew 48 per cent to $9.1 billion over the seven-month period. But Ali says imports are also rising because of the massive infrastructure projects under the China-Pakistan Economic Corridor. “A cash-flow mismatch will be there for some time. The external account issue has been blown out of proportion,” he says. The funding gap is invariably resulting in higher borrowing to pay for rising imports. But Ali seems to be look-

T Striking a divergent note: Since spike in growth offsets government borrowing, so be it


ing at the whole situation through a Keynesian point of view that favours borrowing to achieve economic growth. “If growth is taking place and the government is resorting to borrowing, then so be it. Yes, exports should be increased and unnecessary imports curbed. But economic growth shouldn’t stop,” he says. After accounting for IMF liabilities of $6.3 billion, currency swaps of $5.39 billion, Chinese currency swap of $1.03 billion and liabilities to other commercial banks of $700 million, the IMF says the country’s net international reserves amount to minus $724 million. In contrast, net international reserves were $7.47 billion at the conclusion of the IMF programme just 18 months ago.

Fall in stocks nvestors at the Pakistan Stock Exchange (PSX) have suffered major losses as newspaper headlines scream about the deterioration in economic indicators. From its peak of 52,876 points last May, the benchmark index of the PSX now hovers around 43,480 points, down almost 18 percent. Many analysts attribute this fall to emerging weaknesses in the economy. According to Ali, however, the assessment isn’t entirely correct. “The kind of economy we have today is more or less the same we had six to eight months back. The same external account problems existed back then. They were even worse, in fact. But the market didn’t collapse,” he says, adding that the main reason for the index decline is political uncertainty. Another major reason was that foreign investors at the PSX came to believe that the rupee was overvalued, he says. They resorted to profit-taking and started exiting in droves, he added. “There’s still no clarity. Although the Senate elections are over, uncertainty still exists. The market will stay in the same mood as long as that sentiment prevails,” he says.


Gaining strength n recent years, Next Capital has significantly grown its investment banking division, which deals with raising new capital for companies. Ali says his house is “consultant to the issue” in as many as five initial public offerings (IPOs) planned for 2018. This is noteworthy because the total number of IPOs at the PSX in 2017 was only three. Digital services provider Inbox Business Technologies, ethanol producer Unicol Ltd


Najam Ali, CEO, Next Capital

‘PAKISTAN ALWAYS FACES EXTERNAL ACCOUNT ISSUES IN YEARS THAT SEE A SUDDEN SPIKE IN THE GROWTH RATE. SUPPLY-SIDE CONSTRAINTS BECOME NOTICEABLE WHENEVER GDP GROWTH RATE ACCELERATES’ Najam Ali, CEO, Next Capital and TPL Life Insurance are among the five companies whose IPOs his house is involved in. He didn’t disclose the names of the other two firms, which are from construction and power sectors, because of regulatory restrictions. Next Capital earned a net profit of Rs103 million in 2016-17 against a net loss of Rs16.1 million a year ago. Having grown at an annualised rate of 64 percent since 201213, Next Capital’s operating revenue for the last fiscal year was Rs353.7 million, up 116 percent from 2015-16. Although the claim cannot be verified independently, Ali says his house is now among the top four players in investment banking. “My operating revenue should tell you how big Next Capital has grown over the years,” he says. But an industry-wide compar-

ison is difficult to conduct because few brokerage houses are listed on the exchange. Its latest financial accounts show almost 30 percent of the company’s operating revenue originated from consultancy fee (investment banking) last year. The brokerage segment contributed 70 per cent to the top line with an inflow of Rs249.4 million. More than 62 percent of brokerage income originated from institutional clients, such as banks, mutual funds and insurance companies, while the rest came from retail investors. Commending the PSX for its plan to introduce derivative products like exchange traded funds, Ali says the regulator should also resolve fundamental issues. For example, he says, risk management systems with regard to margin regimes, eligible securities and net capital balance calculation method are outdated and should be revised. “Brokers lack capacity to deal in bigger volumes,” he says. As an example, he cites the regulation that requires a broker to submit 20 percent margin on behalf of his foreign investor. This means that a broker has to give up $2 million for two days if his foreign client has bought equities worth $10 million through his house. “How should I arrange that much cash? Banks lend only against assets like factories and land, which I don’t possess,” he says, adding that the regulator should develop a mechanism in which foreign investors finance their own margins without hurting brokers’ liquidity. n



Aamir Mahmood Mirza, Monsanto Pakistan’s Country Lead explains how modern agriculture helps make farming more sustainable onsanto Company recently released its 2017 Sustainability Report, titled ‘Growing Better Together’. The report demonstrates Monsanto’s commitment to sustainability and details the company’s progress against all its goals, including improving irrigation water efficiency, which has the potential to save up to 80 billion gallons of water each year. Monsanto has set a target of improving irrigation water efficiency of global seed production by 25 percent by 2020 and is more than halfway to that goal. This represents just one of the many advancements the company made on its environmental and social commitments for the year 2017. On the occasion of the report’s publication, Mr Aamir Mahmood Mirza, Monsanto Pakistan’s country lead, explained in detail the ethos that drives this commitment towards sustainable agriculture and

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talked us through some of the most exciting technological developments that underpin the progress thus far. Profit: Tell us a little bit about Monsanto as a company? Aamir Mahmood Mirza: As an agriculture technology company, Monsanto is committed to bringing a broad range of solutions to help nourish our growing world. We produce seeds for fruits, vegetables, and key crops – such as corn, soybeans, and cotton – that help farmers have better harvests while using water and other important resources more efficiently. We work to find sustainable solutions for soil health, help farmers use data to improve farming practices and conserve natural resources and provide crop protection products to minimise damage from pests and disease. Through programs and partnerships, we collaborate with farmers, researchers, non-profit organisations,

universities, and others to help tackle some of the world’s biggest challenges. Profit: What do you see as the greatest challenge to the future of agriculture? AM: Food security is going to be the foremost challenge faced across the world in the coming years. According to the UN estimates, the global population will increase by over 50 percent by the year 2050. That is an additional 3 billion mouths to feed. Back in 1960, there was 1 acre of farmland available per person. By 2050, the ratio will be down to one-third. Changes in climatic conditions further challenge our capacity. Furthermore, demand for water continues to grow at an average 2% per annum, threatening existing agriculture practices. These times call for a smarter, more technologically advanced approach to agriculture, allowing us to produce food for a growing population in a sustainable way.

Profit: Which technological advancement has the greatest promise? AM: Monsanto is a world leader in agriculture technology. Though we are mostly associated with advances in GM or biotech crops, we actually boast of a very diversified portfolio of technology platforms, including plant breeding, biotechnology, precision agriculture, biologicals, and crop protection. Our precision agriculture platform is perhaps the most exciting of them all. It combines mobile technologies and sensors with advanced data analytic capabilities to deliver tremendous value to the farmer. Imagine a farmer receiving a crop ‘prescription’ customised with precise instructions directing unmanned and GPS-enabled farm machinery to optimally plant the seed, apply fertiliser, and irrigate the crop. All of this while drawing from its predictive climatic models, anticipating rain, heat, and storms.


Profit: How successful have you been in introducing these exciting new technologies and innovation in Pakistan? AM: Presently, Monsanto markets its highperformance hybrid corn seed, vegetable seed, and a non-selective herbicide in Pakistan. Our hybrid seeds are brought to the farmer through an extensive breeding programme and rigorous in-country adaptability trialling. At Monsanto, we have taken conventional plant breeding to the next level, combining our global repository of germplasm with precision breeding apparatus to reduce seed development timelines. In the future, we will be looking to integrate other technology platforms into our business. The introduction of high-yield hybrid corn some 15 years ago has brought about a phenomenal change in Punjab’s agriculture landscape. Average per acre yields have almost tripled, subsequently leading to over 95% of the corn crop area in the province now planting the hybrid seed. The added productivity continues to add to the rural economy and favourably impacts farmer livelihood. The crop value chain has now emerged as far more dynamic, adding value to downstream industries, such as poultry and livestock. In fact, more than 65% maize grain produced is now consumed by the poultry industry as the primary ingredient in feed. This sustained

Aamir Mahmood Mirza, Monsanto Pakistan’s Country Lead supply of locally produced grain has been a key driver in fuelling the double-digit growth of the poultry industry over the past few years. Profit: Why is sustainability central to the future of agriculture? AM: Modern agriculture helps make farming more sustainable by giving farmers digital tools and other advancements to grow crops using fewer natural resources. At Monsanto, our sustainability strategy is all about ‘Growing Better Together’ on a foundation of principled business and human rights across three main focus areas: Better Planet, Better Lives, and Better Partner. Each focus area includes specific goals against which we measure our progress and report the progress in our annual sustainability report. Our sustainability approach is informed by our own global materiality assessment and globally agreed upon agendas and accords like the 2030 Development Agenda of the United Nations and its 17 Sustainable Development Goals (SDGs), and the UN Global Compact, amongst others. Though Monsanto’s

work contributes to each of the 17 SDGs, through an extensive mapping process, we have identified six SDGs that are particularly relevant to Monsanto’s business and three that are significant to how we work. Just to highlight some of these achievements: we pledged to reduce greenhouse gas emissions intensity from our crop protection operations by 22% by 2020. We have now achieved 92% of our goal. We have improved our overall irrigation water application efficiency to77%, and this year again we continued to help farmers use 1/3 fewer resources per unit of corn (72% achieved), soybeans (54% achieved) and Cotton (101% achieved) by 2030. Our goal of helping farmers double yields of our target crops by the year 2030 also progresses well, with over 30% of the goal achieved till date. Monsanto has helped improve the lives of 4.5 million resource-poor farmers out of our goal of 5 million by 2020. In addition, we trained 2.5 million small-hold farmers on sustainable farming practices in 2017 and awarded US$6 million in grants from the Monsanto Fund to rural communities for the year. n


By Agha Akbar oinciding with Deng Xiaoping’s inspired new modernization design to transform People’s Republic of China around 13 years post the Cultural Revolution turmoil, the first of the Special Economic Zones was established at Shenzhen nearly 40 years ago at the very fag end of the 1970s. Shenzhen then was an insignificant fishing village, in close proximity to Hong Kong – the geographical attribute perhaps tilting the scales in its favour to become the trendsetter. At the vibrant epicenter of China’s phenomenal growth in manufacturing, Shenzhen in around three decades and a bit today matches top metropolises in the world, the size of its GDP even surpassing those envious exemplars of economic growth in the Far East, Hong Kong, and Singapore.

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At the heart of that dazzling expansion are many a successful enterprise, in the process turning Shenzhen into China’s answer to the famed Silicon Valley, its business district presenting high-rises galore, with glass, aluminum and steel structures providing the gleam and sparkle that are symbols of freshly-minted, albeit hardearned wealth and a technological quantum leap. Out of a bunch of leading high-tech entities that have driven Shenzhen’s rapid development, Huawei is amongst the topmost. Founded in 1987, by Ren Zhengfei – a former deputy director in the People’s Liberation Army engineering corps – with an investment of $3,500, Huawei has well and truly been transformed into a colossus. It is now a telecom giant with a global outreach, specializing in cutting-edge technologies, among others in telecom equipment, including smartphone manufacturing, broadband, cloud computing, streamlining enormous data, and what in postmodern parlance is called ‘the internet of things’. And there is still much more to it! othing gives an individual or an enterprise the kind of sense of arrival than when it begins to inspire awe and fear in equal measure in its competitors. And if those entities happen to be global leaders, brands like Samsung and Apple, with the United States government going out on a limb to thwart you to boot – even if it has to find excuses that the American critics too at best consider lame and wishy-washy – then you have not just arrived, you have indeed gatecrashed into a very select club. Going by the aforementioned yardstick, Huawei has definitely arrived, and it has in the process created a world-class, cutting-edge product in Huawei Mate Pro 10 that makes market leaders worldwide, Samsung and Apple, green with envy. With its sleek glass-finish look, obtained through its association with Porsche, and innovations – Huawei-developed Kirin 970 processor, a hyper-fast chip which offers the first-ever advanced artificial intelligence one ever, EMUI (emotional-user-interface), and powerful Leica cameras that afford dazzling photos and videography – a bargain at under $1,000 apiece, while its features are infinitely better than Samsung and Apple topof-the-line brands.


‘AT THE VIBRANT EPICENTER OF CHINA’S PHENOMENAL GROWTH IN MANUFACTURING, SHENZHEN IN AROUND THREE DECADES AND A BIT TODAY MATCHES METROPOLISES IN THE WORLD, THE SIZE OF ITS GDP EVEN SURPASSING THOSE ENVIOUS EXEMPLARS OF ECONOMIC GROWTH IN THE FAR EAST, HONG KONG, AND SINGAPORE’ And wary of the most potent challenge to the domestic duopoly of Samsung and Apple that has predominated since 2011, the United States government and its vast and fearsome intelligence network have already made several interventions to keep the Chinese giant out of large scale, unfettered access to the American consumers – after blocking its advanced telecom networking equipment that has found itself a market in 170 countries, including the leading European nations, making it leapfrog over Sweden’s Ericcson as a global market leader. The pretext: Huawei founder Ren Zhenfei was once, several decades ago, part of the Peoples’ Liberation Army – as an engineer. Hence, the insinuation and innuendo: the potential ‘for the presence of spyware’ and ‘spying for the Chinese government’, ‘eavesdropping in times of peace’ and ‘disabling communication’ in case of a war. A US-based industry web portal, Android Central’s analysis in a recent post hit the nail right on its head. Under the title, ‘The U.S. government's beef with Huawei isn't really about phones’, the expert analyst said: “There are ‘rules’ in place when a foreign country wants to sell electronic or connected products inside the U.S. and UK. The public isn't privy to the exact details, but there is a rigorous inspection when a device is able to transmit encrypted data to make sure these rules are followed. Huawei has apparently been found to be following them as you can buy their products both here in the States and in the UK’. For its part, Huawei’s typically Chinese calm riposte, expressed by many amongst its top management, but to Profit by David-Dohyung Kim, Huawei’s director, Global Brand Management [see the accompanying interview]: “We have gained the trust of over 150 million customers in the past year alone, and now sell our devices

through more than 45 of the top 50 global carriers.” This self-assurance is indeed reflected in the numbers. With 154 million handsets shipped out in 2017 alone, compared to 136 million the year before, Huawei is a force to reckon where smartphones are concerned. Its flagship Mate 10 Pro, powered by innovations indigenous to the company [in 2014 Huawei filed more international patents than any other company in the world] is indeed top of the line, outperforming the brace of more established Samsung and Apple in advanced user-friendly technology. And come to think of it, Huawei had gotten into the smartphones business barely eight years ago when in 2009 it unleashed its first rather ungainly-looking Android handset. Its foray into the high-end luxury variety is a much more recent happening. And yet at home, it rules the roost, ahead of its domestic competitor Xiaomi and Apple, on the back of its large lineup of smartphones priced modestly but in terms of specifications rivalling high-end phones without the buyer having to break a bank to possess one. (In China, as one witnessed first-hand quite recently, a cellular phone is much more than a communication tool, for it is extensively used for all sorts of payments big and small, banking and shopping included, as well as hail-ride services – from renting a bike to calling over a cab.) While in Europe too, Huawei has made huge inroads. In Norway, the Nokia country, Huawei sells 10 times more than the once-phenomenal ‘home’ brand. The latest so-obviously US government inspired attempt to obstruct came in early-January 2018, when Huawei’s planned signing of a deal with AT&T was called off a day before its public signing. For the uninitiated, the US market is dominated by carriers, with upwards of 90 percent purchasing their phones through the networks.


This brings one to the question the influential Forbes magazine had asked almost to date a year earlier: “…to challenge Samsung and Apple, the world’s number three phone-maker needs to figure out how to reach the American consumers – or how to live without them.” For its part, Huawei’s rejoinder to that for now is to continue doing what it does best: expand in the markets where it can. hen one visited Huawei’s manufacturing and R&D facilities in Shenzhen, even to a non-cognoscenti the scale seemed huge but smoothly-run, efficiently combining human endeavour with robotic proficiency and precision. The R&D part included elaborate and thorough testing of the handsets, in particular, the capacity to survive the most taxing of circumstances and accidents. One actually didn’t know from how many angles a cell phone can crash into the ground until one saw a slew of machines putting it through this and other rigours. While its Shenzhen headquarters and production and R&D facilities are indeed top-of-the-line, in consonance with all Chinese tech giants having positioned themselves in swank, architecturally unique buildings, Huawei is building itself a completely self-contained city in Dongguan that would outdo most small or medium-sized towns in the developed world. Shanghai, the most populous cosmopolitan in the world, has since the 19th century been a financial, economic and commercial hub. With its waterfront skyscrapers that sit cheek by jowl with the colonial structures, it remains one of the most happening of Chinese cities. Huawei’s swank and vast network of offices and research centre ensures quality control. In this centre, cell phones go through rigorous final tests. Such as, chargers inserted and reinserted into handsets thousands of times, and bumped and thrown inside automated testing machines, and dozens of automated computers install and reinstall software to make sure that hardware as well as software


‘AND WARY OF THE MOST POTENT CHALLENGE TO THE DOMESTIC DUOPOLY OF SAMSUNG AND APPLE THAT HAS DOMINATED SINCE 2011, THE UNITED STATES GOVERNMENT AND ITS VAST AND FEARSOME INTELLIGENCE NETWORK HAVE ALREADY MADE SEVERAL INTERVENTIONS TO KEEP THE CHINESE GIANT OUT OF LARGE SCALE, UNFETTERED ACCESS TO THE AMERICAN MARKET’ quality remains consistent even after years of use. uawei’s corporate philosophy of laying emphasis on ever expanding the boundaries of cutting edge invention and innovation, not just in smartphones but across-the-board in all of its myriad products, means that it would continue to add to consumer comfort – which in turn shall have direct bearing on increase in sales and market share. With China so keen to become the tech superpower, this penchant for science-based research and development is not exclusive to Huawei, the futuristic drive is indeed national in scale. According to China Daily, the second-ranked economy in the world is spending 2.1 percent of its GDP on research and development. Huawei has really upped the ante by spending five times that: 10 percent, and occasionally more, of its overall sales revenue, around $75-80 billion in 2017 (which makes it almost equal to Microsoft in size), but it keeps on increasing year-on-year on the basis of mostly doubledigit growth. In the last 10 years alone, Huawei devoted $45 billion to R&D. Impressive statistics these, and, you talk to any Huawei employee – in top-tier management or even a guide or a hostess, and with a measure of unalloyed pride, you would find them flaunting these, with figures rolling off their tongues. Let’s put them in perspective: of its 180,000 employees worldwide, nearly half – 80,000 to be precise – are devoted to R&D at 19 strategically-located centres worldwide, with each of them focusing on one specific strong



points of the milieu. For instance, the centre in London, devotes itself entirely to design while the one in India to software development. There are, among others, R&D centres in the US, Sweden, France and China itself – giving it a global tinge. nd Huawei is not limited to producing and marketing handsets and allied consumer stuff. In reality, this aspect is rather new to it, with only less than one third of its revenues generated through the segment. That said, while it remains intent on producing state-of-theart telecom equipment, it is attempting to conquer new worlds by developing systems that could run safe and efficient cities and services – in totality, with everything that is in it. And, already having come a long way in establishing itself as a brand synonymous with high-tech invention-based innovation, it is at the same time intent on increasing its consumer footprint across the globe. Back home in China, the world’s most enormous consumer market, the satisfied citizens and the government itself, take pride in many brands developing worldwide presence – Huawei the foremost amongst them, its status in Pakistan’s context much akin to PIA of a bygone era, when it indeed was, as the late Omar Kureishi’s famous tagline claimed it to be, “A great people to fly with’. Whether Huawei benefits from any out-of-the-way government assistance remains a point of conjecture, but this ‘pride factor’ makes Huawei Mate Pro 10 the Chinese president’s favourite giveaway gift to visiting heads of state and other dignitaries. For a nation, that has hankered for a popular global brand of its own all these years, Huawei may have just provided something to own with pride.



David-Dohyung Kim

Director, Global Brand Management

HUAWEI, CONSTANTLY REDEFINING THE FUTURE OF TECHNOLOGY Ushering in new waves of technological development By Agha Akbar Profit: What has taken Huawei so long to become the brand it has? What is your take on Huawei? Kindly acquaint us in broad brushstrokes the phenomenon beyond handsets? David Kim: Huawei’s humble foundations were laid down by Ren Zhenfei – a 44-year old Chinese technology veteran in 1987 in the telecom equipment market. Over the years, the company grew and went from one strength to another making inroads in the fields of consumer, enterprise and carrier technology. Huawei ventured into research and development in 1990 and strived to transform fully into a technology company. Within two years, Huawei had created its first SPC Digital Switch product, C&C08, a milestone in the company’s history which turned around the small-scale development dilemma, paving the way for the large-scale development it sees today. Huawei has been, is, and will always be committed to building a better-connected world. Talking of consumer technology, Huawei is on its way to become a leading global technology company. On the handsets front, the company prides itself in producing innovative, premium and reliable products that have led us to climbing ranks in Interbrand's 2016 Best Global Brands Report, moving up from its ranking in 2015 and standing at 72.

It also ranks 49th on the latest BrandZ list of Top 100 Most Valuable Global Brands with brand awareness increasing from 76% to 81%, meaning at least eight out of 10 consumers in the world know and recognize Huawei, while it is ranked at 88 in the Forbes world’s most valuable brands. According to an Ipsos survey, Huawei products come out on top in Net Promoter Score (NPS) rating in the Greater China Region and its NPS rating outside China has also improved significantly. The brand is becoming more widely known and loved. From top 500 to top 100 corporations worldwide, Huawei keeps challenging itself and promoting the progress of communication for all mankind. Our target is to survive in the long run. Profit: Was Huawei’s planned signing with AT&T being aborted a kind of setback in having its say in the US market? DK: As announced during CES, Huawei‘s latest flagship smartphone, the Huawei Mate 10 Pro, will be sold in the US through open retail channels. The product will be available via major electronics retailers including B&H, Amazon, Best Buy, the Microsoft Store and Newegg. In the few months since its official launch, the Huawei Mate 10 Series has gained the love of global consumers outside the U.S. market. With its superior speed, long-lasting battery and phenomenal dual camera, the Mate 10 Series is redefining

what consumers expect from a smartphone, and has been highly lauded by tech experts and media outlets both in the US and around the world. We have the strongest confidence in our products and will continue to innovate and break new ground. At the same time, we believe that US consumers deserve equal opportunities to enjoy the best technology and more smartphone options through more channels, just like other satisfied HUAWEI users around the world. At Huawei, privacy and security are always our first priority. We are compliant with the world's most stringent privacy protection frameworks, including all GAPP and GDPR privacy protection requirements. We have gained the trust of over 150 million customers in the past year alone, and now sell our devices through more than 45 of the top 50 global carriers. Profit: Huawei has always produced quality phones – at par with flagships of other brands, but only way cheaper. That meant the ability was there, yet, in the mould of a wide array of Chinese products, it did not gun for establishing its own persona, its own brand. Why not, and why now? DK: Huawei under the garb of an important carrier partner, forayed into the mobile phone industry in 2003 in the production of OEM mobile phones. The initial model was quite simple as HUAWEI provided prod-


ucts according to the demand of the carrier and the consumers, and sold products via carrier channels. This model was a great success at the initial stage, which generated high volume shipments along with handsome profits compared with the early stage of carrier business. However, because of the low threshold to entry, more manufacturers rushed into the market. Manufacturing without brand and cooperating with carriers drove down the price, while product specification continued to rise, resulting in meagre profit. This resulted in the need for transformation, and from then on HUAWEI launched its selfowned brand development route. Profit: With the slick Mate 10 and Mate 10 Pro, loaded with new features and AI technology, Huawei is entering Apple and Samsung territory. Would it be a success? DK: The Huawei Mate 10 and Huawei Mate 10 Pro are powered by Kirin 970 – the first-ever smartphone processor designed with Artificial Intelligence capabilities at its heart. It has a neural processing unit (NPU) dedicated for AI tasks and computing. With the launch of the series, Huawei setup an industry benchmark, thereby redefining smartphones for all its competitors. We also foresee a smart revolution, it is around the corner. In a smart society, with substantial acceleration of digitalization, human sensing and cognition will reach a new level, and man-machine interaction will be more human-centered. AI will bring unprecedented improvement in experience and upgrade smartphones to intelligent phones. By 2025, around 90% of device users will benefit from personalized and intelligent services of intelligent phones. Considering AI will come true one day, Huawei’s consumer business will work on intelligent products and provide full-scenario intelligent life experience for consumers through its advantage of device, cloud, and chip coordination – thereby ensuring success. Profit: How long do you think it would take Huawei to overtake first Apple and then Samsung? Can Huawei do it without capturing the US market? DK: We are confident of our ability and focus on innovative, consumer-centric ap-


David-Dohyung Kim Director, Global Brand Management

‘FROM TOP 500 TO TOP 100 CORPORATIONS WORLDWIDE, HUAWEI KEEPS CHALLENGING ITSELF AND PROMOTING THE PROGRESS OF COMMUNICATION FOR ALL MANKIND. OUR TARGET IS TO SURVIVE IN THE LONG RUN’ proach to technology. This market position is also obtained by keeping innovation and a customer-centric approach at its heart and to deliver its promise to stay focused on making brilliant smartphones. Behind Huawei’s rapid growth and expansion stands its long-term investment in R&D. As a leading technology company, Huawei invests 10% of its sales revenue in research and development, which is much higher than industry standards. During the last 10 years, we have spent $45BN in R&D. As a result, our phones are state-ofthe-art, and we are always incorporating pioneering technology like our Leica dual lens camera and Kirin chipsets, which guar-

antee that consumers will keep coming back to us for a premium experience. Amidst today’s challenging digital world, Huawei continues to grow because it never stops listening to its customers – their voice enabling to perfect a quality system that is by them, for them. Profit: Does it give Huawei energy and impetus to be cherished and celebrated by the Chinese people and government alike? DK: Every brand has its own distinctive signature, which reflect the users’ first impressions, and also the priority of that brand. Huawei’s signature is its quality and we remain committed to delivering meaningful innovations that cater to consumers’ needs while enriching their experience to a higher level. Believing that today’s intelligent world requires more advanced technologies, as well as daring innovations and products, Huawei has constantly been redefining the future of technology to usher in new waves of technological development. Huawei’s vision is to become a global iconic tech brand and our most important corporate value is to be customer centric. With this as one of Huawei’s founding principles, we are committed to innovation and providing our customers with the latest technological solutions that enriches and brings comfort to their lives. n


Profit E-Magazine Issue 35  
Profit E-Magazine Issue 35