By Naween Mangi for Bloomberg Businessweek
Muhammad Azhar Ali, factory manager for National Foods in Karachi, Pakistan, has a set work routine. At dawn he calls his production managers, who live in different parts of this sprawling city of 18 million on the Arabian Sea, to find out whether outbreaks of violence have rendered any areas dangerous.
If conditions seem especially risky, Ali slips two wallets into his pocket—one real and the other filled with expired credit cards and loose change, ready to hand over if bandits hold him up. He’s been held up once. He checks to make sure he isn’t riding in the same car as the day before, usually shunning his company-provided Toyota Corolla (a favorite vehicle for Pakistan’s upper-middle class) for his own less conspicuous Suzuki Cultus hatchback.
Finally, Ali and his driver head out to meet the 15 buses that have picked up employees at different collection points. Once all the buses have assembled at the rendezvous, Ali leads the convoy 50 kilometers from the city center to National Foods’ main plant. When the convoy arrives at 7:45 a.m. after a 90-minute drive, the workers line up outside a boundary wall topped with barbed wire and go through a body search as guards armed with shotguns look on. Ali monitors the security check on closed-circuit television from his office. The workday is about to begin. He has been up for more than three hours.
“Anyone else in my position in another country would have half the work I do,” says Ali, 49, who has worked at the company, Pakistan’s largest maker of spices and pickles, for over 25 years. “If I didn’t have to spend so much time figuring all this out, I would be looking at ways to enhance productivity.”
Companies across Pakistan’s industrial heartland are struggling to cope with rising insecurity, incessant power outages, and government corruption and inefficiency. Pakistan has lost 35,000 civilians in terrorist attacks since 2006. The war on the Taliban has cost $68 billion in destroyed infrastructure, higher security costs, lost foreign investment, and more.
Karachi has suffered retaliatory attacks from the Taliban such as the 16-hour siege at a naval air base in May that left 10 guards dead. Firefights erupt almost daily between the followers of Pakistan’s numerous political parties. Gunmen killed 664 people in the city between Jan. 1 and June 30, according to the Edhi Foundation, a charitable operator of ambulances. A Karachi resident is almost three times more likely to be killed by a bullet than in a road accident.
Gun battles lead to factory shutdowns in the city almost every month. The government hopes to boost economic growth from 2.4 percent in the last fiscal year to 4.2 percent this year. Growth needs to be 7 percent or more to accommodate all the young people joining the workforce. Large-scale manufacturing contracted 2.3 percent in May, vs. a year ago. Only 1.5 million of 180 million people pay taxes. Many of National Foods’ rivals pay no taxes as they sell unbranded spices bulked up with brick dust. “Working in Pakistan is like always being in a nightmare,” says Abid Muhammad Ganatra, director of finance for the nation’s biggest cement maker, Lucky Cement, in Karachi. “We have to work constantly to mitigate the pressures, to develop strategies to ensure growth. That’s why top management usually has sleeplessness.”
Some companies still manage to grow. At publicly traded National Foods, sales rose 23 percent to 7.4 billion rupees ($81 million) in the fiscal year ended June 30. In the company’s first year, in 1970, revenue was only 5,000 rupees. “Back then, it was a one-room operation where red chili, coriander, and turmeric were manually ground,” says Shakaib Arif, chief operating officer. “Now we make 60 million packets a year with 2,000 employees.”
Political violence is not National Foods’ worst problem. “The biggest challenge by far is energy,” says Arif, 38. Demand for electricity in Pakistan is three times supply. President Asif Ali Zardari is trying to attract independent power producers to Pakistan and has big plans to build hydroelectric plants.
Companies cannot wait. “We have created a mix of power we get from the grid, and what we can generate using our gas and diesel generators,” Ali says. “It costs three times as much to produce the power through generators.” Many factory floor, office, and bathroom lights are kept off to compensate. Ali often visits the powerhouse, a room at the plant that contains huge German-made diesel generators. Scarcity of fuel is a frequent worry. Bigger companies like Lucky Cement don’t rely on the national grid at all. It started generating its own power in 1996 and can produce 150 megawatts from its plants.
Karachi’s residents have taken to the streets this summer, burning tires and disrupting traffic to protest outages lasting days at a time. “In the morning I assess my workers,” says Sajjad Farooqi, who supervises National Foods’ weighing department. “If I find someone is stressed out because he hasn’t slept all night without electricity or that inflationary pressures are causing strain in his family, I have to change his shift and give him easier work.” Inflation averaged 15.5 percent over the last three years because of rising food and energy prices as well as record government borrowing.
National Foods tries to attend to the cultural and economic needs of its workers. A subsidized canteen sells a meal of curry and flatbread for as little as 25 rupees, while a prayer room accommodates 200. Separate working areas exist for women, an unusual perk in a Pakistani factory. Adult literacy classes are available. “We have to provide workers with incentives because they are facing a lot of pressures,” says Khalid Mahmud, who oversees 175 workers in the pickling operation. “Every month I give my most productive worker two T-shirts, 1,000 rupees, and take them to dinner. These prize winners are then keen to help us out when less workers show up and we need to meet production targets.”
The company joined 13 other factories earlier this year to hire a security patrol. A driver, a supervisor, and three armed agents patrol the streets from 7 p.m. to 7 a.m. in an open jeep, stopping at each factory to ensure the guards are not asleep. “We have to plan knowing we are in a war zone,’’ says National Foods Chairman Abdul Majeed. Last year the company was warned by the Karachi police that Taliban fighters had entered the city and were looking for factory jobs to support themselves and their families until they returned to battle. National Foods stepped up its screening and referral process.
The country’s lack of security takes its toll. “Every time I stop at a light, I look around me and think a gunman is about to come,” says Arif, who drives in a small car when visiting the Karachi factory. “I’ve already been held up three or four times.” Ali, the factory manager, has his own way of handling the tension. “When I get into the car in the morning, I close my eyes and rest. I don’t want to know if any gunman is coming. I let my driver take all the stress.”
The bottom line: Violence and energy shortages strain Pakistan’s economy, which is expected to grow 4 percent this year, well below India’s 8 percent rate.