A leading textile company in Pakistan and specially known for its denim production, Rana Textile Mills Ltd (Rantex) has been in the textile market for the past 55 years and is a key player in the global industry. Chairman Rana Zahid Tauseef looks at how Pakistan has overcome some of its challenges to industry in recent years, his future plans for the company, and the importance of effective corporate social responsibility.
Since 2013, Pakistan has reversed the negative trend that was affecting its economy and finances. According to the World Bank and IMF, its GDP will grow a further 4.5% to 5% in 2016. How do you assess Pakistan’s economy in recent years and what is your outlook for 2016?
Pakistan, as a country, is one of the best for several reasons.
For 2016 and onwards, I see GDP growth reaching even higher than the given projections because we have a population of 200 million, which makes us one of the very few countries in the world with a tremendous workforce and a big market within itself.
Also, in comparison to 2014 and before, the law and order situation now is much better and terrorism is on the decline. The Pakistani forces have been very serious and active in an operation called Zarb-e-Azb against various terrorist organizations and trying to eliminate the root cause of all evils. Due to this joint military offensive working, the environment has become much better and the business community has regained the confidence of investors locally and internationally, hence many new projects are in the pipeline.
China is also working with us on the China-Pakistan Economic Corridor (CPEC), which is worth more than $45 billion, in which I see lots of economic activity with respect to the manufacturing and service industry.
We have also signed a recent contract with Qatar for the supply of LNG, which will give a lot of support to our industry in lowering our costs of production and continuity in supply.
Our textile industry is also growing due to various reasons, such as the GSP Plus facility granted by the EU, availability of the labor force, quality and price competitiveness with respect to other production markets in the world, and good R&D in products.
I’m a denim producer and have been supplying to H&M, Zara, Bershka, LF, Marks & Spencer, and many other brands. We have been doing business with them for a long time and consider ourselves good in quality and price competitive. We believe that our future in textiles will be good and bright.
Pakistani textile industries pay around double what Indian textiles do regarding the cost of energy. How do you manage to get an affordable energy supply?
That used to be the situation. But now, I am producing my own electricity from gas and my cost is 6 cents (per kilowatt). The Indian cost is 7 cents. So now, the business is feasible.
We are now operating at full capacity. We have no problems regarding gas and energy in our system. We now use energy 24 hours, 365 days a year. We produce electricity from gas and other resources.
Obviously, the government is trying to produce more energy and trying to provide it at subsidized rates. Again, this is an economic cycle. More people will come into the business and they will become rich, and some more industries will re-emerge.
Because we are in the corporate sector, we have our own resources and we produce our electricity from gas. We are on 6 cents. Other people don’t have gas engines, so they are getting electricity from the government at about 12 to 14 cents, which is very expensive. I believe this is the problem.
A lot of Pakistanis don’t want to follow Bangladesh’s path and lose the privileged GSP Plus status granted by the EU. Do you feel that Pakistan really deserves the GSP Plus status?
Bangladesh was in the garment business before us. They had a lot of tax-free opportunities in Europe. We were only granted GSP Plus two years ago and we have a lot of labor available. Garment and textile factories are coming up everywhere. We will now produce more garments and more fabric for export. Hence, our business is competitive now.
How do you think the GSP Plus status impacted employment generation and women employment?
Basically, we are a cotton-producing country. We make yarn and we send cotton to Bangladesh. Countries like India, America and China also buy cotton from us as they do not produce cotton. We will always be a cheaper option than Bangladesh. With time, we will be more competitive than Bangladesh since stability will bring more business for everyone.
One of the major objectives of the government is to add value to the production chain, to not only sell cotton, but also to sell finished products.
The government has now announced that there is only a 2.5% interest rate for bank loans for new machinery, which now will make it a lot easier to buy new machinery and go into expansion. This means growth in industry, more people will be employed, and we will have more exposure and improved margins.
We understand that in Faisalabad, there was a time when there were lots of industries closing because of the energy problems. Do you see interest from investors in settling industries in Faisalabad again?
Yes it used to be the case but now things are getting reversed. For example if you see my factory, I have a lot of construction going on and lots of incoming machinery. The future is looking fine.
How do you think Pakistan should enhance its image abroad?
Image building is very important at the international level. Just as you came, other people are coming and they can see everything is now normal in Pakistan. It will take time. For many years, there was mismanagement by the previous governments. Things are now getting better and I believe the international perception of Pakistan will improve in a short space of time; our products and commitment stand for our image.
We are present in many international exhibitions. Recently, we were in Paris and had a very good experience at Texworld. We’ve also been to Hemtex, Germany. We Pakistani manufacturers are also participating in various exhibitions around the globe and has been providing a soft image of Pakistan
Rantex, as a major player, supplies to the most important clients around the world, who trust and do business with you. What is the story of Rantex and how did you reach this point?
When Pakistan was established, my father had the business in India. He migrated to Pakistan in 1947. And in 1948, he established a very small-scale business in Lahore. In 1954, in Gujranwala, and here in 1956.
Our motto is: “Quality, Consciousness, and Commitment.” When I came into the business in 1974, I learned from my father; we now have a professional management team. My two sons are both in business with me and they were educated in the UK. We have professional people and we believe in quality and commitment.
In 1990, we established a new mill and we started exports to the USA. And then, in time, we built others. We are now major exporters all over the world.
We made a good plan to establish our offices around the world and reach out to the right people.
We are now trying to open offices in Bangladesh and the UK. In the US we will open a new one in San Francisco.
Do you feel the global perception on Pakistan as a brand in textiles is accurate?
We are confident. We are already very visible, and other brands are also approaching us. And we are approaching some other brands telling them about our clients. If you have credibility, then everybody welcomes you.
So Rantex is getting the latest technologies with the machinery and is also having access to finance opportunities to get them?
Yes. We are not being static and we do not have any liabilities. No finance, no loans. Just a free company, and growth from the company – organically.
Secondly, we are focusing on people in the right direction. We have a new human resources department with highly skilled people who are making sure every person in the company is able to see whether he/she can have a future with us or not.
Human capital development is very important for the GSP Plus status; the EU and most of the customers are looking at how Pakistan is raising working standards.
We are following compliance very aggressively. We are focusing very much on human rights, on labor rights and on 100% compliance, plus areas like water treatment and waste discharge, and a better cotton initiative (BCI) and recycling cotton products (post-consumer waste – PCW).
Our goal is to make sure our factory is 100% green and our products are not damaging the environment, and all our labor force must be well treated. We are taking extra efforts in taking care of our world and making processes that even the smoke from the boiler will be reused and treated so nothing goes into the environment.
We will be 100% green and we will be the first one to this. The next thing is going to be the lubes and the fiber link. So we will use natural energy sources to produce most of the power. This is on the agenda at the moment. We are also focusing on the branding machinery – minimum power and maximum productivity.
To be sure we can manage all these things and we bring in the corporate social responsibility – removing our waste and making the fabric operation environmentally friendly – this is also on the agenda.
We are also making sure that we are, at least, giving back something to society. We are making sure charity donations are part of our corporate picture. We will be a public-responsibility kind of firm. When we go to our customers and tell them we are doing this, they are very happy and they want to promote us. Because, obviously, Western people are a very “social welfare” kind of people and they like this, so I think it’s very good for our business.
What message do you want to address to our audience about Pakistan?
The Pakistani government has to settle their priorities. Terrorism was the number one priority and it is now almost solved. Another thing was the energy crisis, which again has almost been solved; but we do need cheap energy. We need dams – the basic line of survival of any country. So firstly, cheap energy – electricity.
Secondly, we have a lot of land available in Pakistan, but because of a lack of water we are wasting it. If we had reservoirs to stock the water and we supplied water to the lands, we would have a lot of cotton, wheat, rice and vegetables; prices would be lower.
The third priority is education. Everybody in every village should have a free and quality education. We now have four types of education: one is in English, second is Urdu, thirdly we have the Madrasah system, and fourthly millions of children are not in school right now. Every child should be in school and there should be one standard for everybody. One nation, one mind-set for everybody.
The fourth priority must be health. We need hospitals, especially in villages. There are no medical facilities or doctors available in many villages.
Our company sent mobile hospitals to the villages at our expense. In a village with 500-700 people, five doctors go in a mobile hospital and provide testing and treatment. That is part of our corporate social responsibility. God has given us some money. So why don’t we share with the poor people?
We have also built mineral water plants centrally in villages and people take it free.
Rantex is basically providing these facilities for the locals.