|
|
Importing latest gadgets, appliances and facilities cannot ensure technology
transfer. Were it so, some of the rich Middle East countries with
out-of-this-world buildings and gadgets supporting the ultramodern lifestyles,
would be counted amongst the most technologically advanced countries. But
this is not so. Technology is a state of mind and requires more than the nuts &
bolts of technology. Mr. Ahmad Jawad, in an exclusive interview to
TelecomPlus, spoke at length on the prerequisites of investment and
technology transfer. In this bleak economic gloom, his views give glimmers of
hope if right policies backed by conviction and political will are adopted. Meet
Mr. Ahmad Jawad, Managing Director Rohde & Schwarz
|
|
|
|
TelecomPlus: What is the investment potential of Pakistan market?
Ahmad Jawad: People are well aware of the potential of markets like telecom,
cellular mobile, Textile, etc. But there are some niche areas which can develop
into excellent markets if properly addressed with vision, policies and facilitation.
One such is the defense area. If we take the broader picture, Pakistan Army is
the 5th largest Army of the world. Combined with Pakistan Air force & Pakistan
Navy our Defense Forces must be in the top 10 in terms of size. Apart from the
size, our armed forces are among the very hi-tech defense outfits of the world.
How many countries for instance, have F-16 aircrafts? It calls for exceptional
expertise to fly and maintain such state-of-the-art machines. The JF-17 Thunder
developed in collaboration with China is a very hi-tech, multirole combat aircraft.
Similarly F-20C being developed jointly by China and Pakistan is a futuristic
combat aircraft. Agosta class submarines is also a very high tech platform.
Despite having such big and hi-tech defense forces, we don’t see any foreign
investment in the defense sector of Pakistan. The reason behind this massive
dearth of investment is that our business model in this space is not conducive to
investment in such activities.
Could you elaborate it a bit?
Typically, the foreign companies desirous of doing business in Pakistan hire
some local agent who facilitates the signing of contract. Equipment is sold and
there is some presence of the vendor in Pakistan for the duration of warranty
period after which the interaction ends. There is no long term relationship.
Companies find no reason to develop local expertise or have their labs in
Pakistan. We need to have the same business model for the defense market that
we have for the consumer market. Since there is public awareness regarding the
after sale support, availability of spares, etc, companies try to excel in meeting
such expectations. In markets where consumers are aware of their rights and are
assertive, companies go an extra mile to please consumers. In less developed
countries, where consumers are not assertive and are content with whatever
they get, vendors are happy selling substandard consumer products.
In several countries including India, the concept of offset is practiced very
effectively. It requires that any foreign company doing substantial business in the
host country invests part of its profit in the country. It can be in the form of
services, outsourcing, transfer of knowledge, transfer of technology or some
such arrangement. A few years ago the Ministry of Defense (MoD) tried to
implement this concept but it has not shown any real fruit. So there is no
pressure on the foreign companies to invest in this sector to get business.
Naturally, if the buyer is not really demanding, the vendor will feel less obliged to
invest in the country. Unless after sale support, transfer of knowledge,
development of local expertise, etc is a precondition for getting orders from the
MoD, foreign investment in this area will remain elusive. Our entire investment in
the defense sector is local, done mostly by the government. The MoD, Board of
Invetment or the Government of Pakistan, must deliberate on the implementation
of the offset model which is so successfully bringing investment, transfer of
knowledge and technology and after sale support in our neighboring country and
elsewhere. We have such a big defense industry and it’s a pity we have not been
able to make the vendors play their due role.
Rohde & Schwarz Pakistan is only such example where significant foreign
investment has been made in developing local infrastructure and expertise. Such
a trend is very much needed in our defense sector. But we need to promote it
through conducive environment and protection to foreign investors.
In this regard, we must not overlook another important aspect. Throughout the
world, the defense industry plays a leading role in the development of
technology, expertise and secondary industries. Internet is a prime example. It
was developed to cater to the communication needs of the US forces in the
aftermath of a war when most of the conventional communication infrastructure
stands destroyed. Radar is another defense application which is now
indispensible in civil aviation, traffic, etc. There are numerous technologies
especially in telecommunications, which were developed as a direct
consequence of defense needs.
In order to develop our defense industry and bring latest technologies and
trends, we have to attract foreign investment in the defense sector. For that we
should have a well defined regulatory regime binding the vendors to offset mode.
They should develop facilities which grow as their business grows in Pakistan.
With regard to foreign investment, the situation is not as bad in other sectors as
it is in the defense sector. Still the volume of technology transfer, skill
development, etc, is not as large as the volume of business would warrant. A
foreign company, whether in the defense sector or civil market, doing business in
Pakistan and earning profit must be made to invest part of its profit in the
country. With this trend, expertise begins to develop in the country under the
supervision of the foreign company which then permeates to other sectors of the
economy. That develops a technology-oriented ecosystem in the economy.
Singapore model is a splendid example. Little is produced there except services.
The second largest oil refinery after US is not in some Arab country, it is in
Singapore. That country is being run as a corporate entity. That’s why decision
making, procedures and practices over there are very efficient.
How can we encourage entrepreneurship in Pakistan?
I was reading a report by UN which states that overseas Pakistanis own more
than $500 billion. Since there are no investment opportunities in the country, that
huge wealth is not available for investment. Even within the country there is a
large number of very rich people. But they are investing their money mostly in
real estate because industrial opportunities are scarce or unsafe for a number of
reasons. Investment in real state can also be productive if people are building
houses, offices, godowns, etc. It generates employment and demand for services
and material in addition to building infrastructure. Even this is not happening at
the desired level. Resourceful people are only buying and selling plots. It is just
change of ownership without any value addition. The negative fallout is that
either the prices of plots rise exorbitantly, or come tumbling down like it
happened when a massive earthquake hit the country a few years back.
Psychological factors also play havoc with the prices of real estate causing
extraordinary hike or slump. Such unpredictable fluctuations are unhealthy for
the economy.
If there is conducive environment for industrial growth, people invest in industry.
It generates employment, goods and services and skilled workforce. Whatever
the investment we see is because there is a huge vacuum. The scarcity of
business environment motivates some companies to take risk and invest. They
flourish in the vacuum because they become the best as others choose to stay
away. In such less competitive environs, those who took risk despite unfavorable
circumstances and survived, exploit their good fortune at the expense of the
consumers. In my opinion, this vacuum is the only investment potential in the
Pakistani market at present. Not an enviable state of affair.
Under the circumstances, how can private sector help rectify the anomalies?
A company, especially a foreign company, cannot do much directly in this space.
Long and short term monetary and fiscal policies are the right instruments to
deal with market distortions. But a company like Rohde & Schwarz can give a
role model. We have four fields namely Radio Communications, Radio
Monitoring, Test & Measurement and Broadcasting. We are the only company in
the country which has established local facilities and created local expertise in
these areas. We have set a trend. But we also see that other companies are
doing business through their local agents and getting the same treatment from
the government without injecting any extra effort and money. It naturally
discourages the trend setters. The government should recognize and encourage
the efforts of such companies. If for instance, rules and regulations bind the
vendors to provide after sale support through local services, it would force all the
participants in a tender to develop local support facilities. This will increase the
local presence of the vendors and help transfer technology and expertise. In the
absence of such regulations, not only that foreign companies would be content
with selling boxes and walking away, but the ones extending local support would
be forced to abandon such good practices.
To what extent law and order situation in Pakistan is discouraging
foreign investment?
Poor law & order situation is definitely a de-motivator for any investment, let
alone foreign investment. But our misfortune is that the international media has
created very strong negative perceptions by blowing the situation out of all
proportions. It consumes lots of effort to neutralize such perceptions. Rohde &
Schwarz is firmly established in Pakistan. But we have to do lots of convincing to
bring experts to Pakistan from Germany. However, once they are here and begin
to see the reality, they are totally changed. Working with the local team,
travelling between cities and interacting with people, they find that things are not
really that bad after all. So, it is not law & order as such, but the overall business
environment which is not as supportive as it should be. Despite sincere
commitment at higher level, the state apparatus is not geared to facilitating
investment. There are so many hurdles, over regulation in some areas and a
total lack of regulation in certain others. Just take Qatar or Dubai in our
neighborhood. The moment a businessman lands there, he gets friendly
treatment, one-window-operation and total facilitation. Forty years ago Dubai
was just like Gwadar and look where they are now. In 60 plus years, we could
have transformed Gwadar into our version of Dubai. It did not happen because
vision and political will was not there.
How could economy grow without gas, power, etc?
Again it is a question of vision. We did not foresee our energy requirements and
now we are in deep deep trouble. Industry flourishes when it works day and
night, fully utilizing its potential. In a situation where you have huge load-
shedding which also does not stick to its schedule, industrial growth is out of
question. Our only hope is services where you can carry on using generators or
UPSs. Alongside conventional resources, we should work on renewable energy
solutions on war footing. There are many places in every province where we can
harvest wind energy. Costal areas of Karachi and Baluchistan are most suitable
for wind and tidal energy. Though work is going on for such projects but
progress is too slow.
Where do you place the private sector in the growth of an economy?
The private sector can turn the fate of a country around. The private sector was
the engine of growth behind the industrial revolution of the US. In Japan,
Malaysia, Germany, UK, India, etc. it is the same story. Private sector is the
backbone of modern economy. But unlike the public sector, the private sector is
profit-driven and it is very cautious about its investment. At the end of the day, it
is the bottom line that matters. The private sector thrives on enabling
environment, consistent policies, confidence on political leadership, etc. In the
prevailing conditions, organizations and individuals are shifting capital to
countries like Dubai, Qatar, Malaysia or wherever they find promising environs.
You cannot attract investment into the country, or arrest flight of the capital from
the country, through sermon, preaching, pleading and passionate appeals.
Concrete steps need to be taken. Our situation warrants that even long term
initiatives should be tackled on short term basis because we do not have much
time left. The ongoing devastation by natural disasters has made the system
even more vulnerable to destabilizing forces. All stakeholders should take stock
of the situation and act in a balanced and mature manner.
|
|
|
|
|
