Tuesday, November 17, 2015

The Detriments of Incoherence in Export Policy

The authors of 'The Coherence Premium' suggest that rather than formulating strategy primarily on the basis of external market signals, companies need to first look inwards, identifying the core strengths of the company which must then be molded into a set of mutually reinforcing capabilities. These capabilities when applied to the right set of market opportunities will greatly bolster market performance and profitability. In short, internal organizational coherence should guide external strategy.

Pakistan, a country that produces arguably the best mango in the world, has long desired to establish a market position for its fresh mangoes in premium markets like Europe, North America and Japan. Challenging Pakistan's mango export ambitions are the high barriers to agricultural imports in said markets, especially the stringent sanitary, technical and packaging requirements for fruit being imported, and India's predominance in the world market. Pakistan's federal government set about conquering these challenges but in the most haphazard manner imaginable. First, it was learnt in the 2000's that vapor-heat treatment (VHT) of outgoing mangoes would qualify them for the Japanese market. With Japanese aid, a multi-million dollar VHT plant was procured from a Japanese firm that arrived in Pakistan's premier port city of Karachi in 2010. However, owing to corruption in the federal bureaucracy and a political tug-of-war among special interests over whether the plant should be installed at the port in Karachi or in the mango growing hub of Pakistan (1000 miles away), the equipment was left to rust at the port. Pakistan still does not have a public or privately owned VHT plant.

In the late 2000's, strategy broadened to envision having state-of-the-art packaging and hot water treatment facilities that would qualify the Pakistani mango for European and American markets. With the help of the USAID and government bodies, a few leading mango growers installed such facilities at their farms and graduated to being mango exporters. In 2011, the first Pakistani mango shipment was well-received in Chicago. However, freight costs proved prohibitive to further trade and the need was realized then for a state-of-the-art airport within the mango-growing regions of central Pakistan, rather than making shipments from the far-away metropolises of Lahore and Karachi. This need was further strengthened by the fact that the mango is a delicate product and should ideally be transported from farm to market as soon as possible, thus rendering sea freight unfeasible. This factor contributed to the authorization of large-scale expansion and addition of freight and cold storage facilities to the airport of Multan, Pakistan's mango hub. Ideally, this need for an airport should have been recognized and fulfilled before export to the US began, rather than exporting in 2011 and then telling a receptive market in 2012 that Pakistan lacked freight efficiency and capacity.

In 2013, an insect called 'fruit fly' was discovered in nicely-packaged Pakistani mango shipments to the UK. Extremely conscious of health, safety and environmental risks caused by invasive pests, Europe dumped the entire Pakistani shipment in the sea, banned further import and that market dried up. By the time the new airport came online in 2015, the fortunes of the Pakistani mango had so sharply declined that there were no shipments to be made to the premier markets. Only the traditional mango exporters of Karachi reveled in this development as they have established market access in the Middle East and East Africa. What could have saved the Pakistani mango from the 'fruit fly' debacle? Ironically, vapor-heat treatment!!!

In conclusion, the Pakistani government failed to convert the country's comparative advantages in mango production into a global competitive advantage. The incoherence in policy and action prevented large investments in capital, machinery and site development to be meaningfully coordinated towards maximum export potential. Top-notch capabilities in mango farming and production failed to be 'interlocked' and mutually reinforcing with newer capabilities that were erratically acquired and never fully utilized. As a result, Pakistan has lost out in the global mango market for the foreseeable future.

Muhammed H Haider


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