Interesting article in today WSJ ( interactive )
UAE Group Bullish On Pakistan Despite Economic Woes
By KAMAL SIDDIQI
Dow Jones Newswires
KARACHI -- At a time when many foreign companies are turning their backs on Pakistan, the United Arab Emirates based Cupola Group is charting a different course.
The company, which specializes in trading, finance and franchise development, sees Pakistan as a promising market, despite a skewed tax structure and the looming danger of a default on its international debt.
Arshad Anis, the chief executive officer of Cupola's local subsidiary - Cupola Pakistan Ltd. - says the company's strategy is to introduce brands that cater to the higher end of the market. The company is confident that there are sufficient numbers of Pakistanis prepared to pay good money for these products and services, despite the country's economic crisis, Anis told Dow Jones Newswires in an interview.
And despite the decline in the value of the rupee, down over 18% against the dollar in 1998, Anis says his company will not be outpriced by local competition.
Cupola has acquired rights to several major international frnachises and is developing them in Pakistan and elsewhere in South Asia and the Arabian penninsula.
Last month, the company oversaw the launch of Color4Kids in Karachi, a children's furniture shop that Cupola owns and operates under a franchise deal with Denmark's Club 8 Mobler. Earlier this year, Cupola also developed and opened a outlet for TGI Friday's, an American casual dining restaurant in Karachi, under a franchise agreement with Carlson Cos. of the U.S.
Cupola plans to open four more TGI Friday's outlets in Pakistan.
Cupola has also brought in AlphaGraphics, a U.S. services and technology provider, and has plans to open outlets in Pakistan for Thomas Cook PLC, the British tour operator, and Estee Lauder Cos. (EL), the U.S. luxury goods company. It also plans to open Pizza restaurants franchised by Britain's PizzaExpress (U.SCG).
Cupola wants to focus on "introducing quality products and setting new standards in the region," Anis said.
Anis, who has headed Cupola Pakistan for a few months, says that there is nothing wrong in pumping investment in Pakistan at a time when other foreign investors are either putting their plans on hold or pulling out.
"It's a good time to come in," he argues, adding "when things get better, we will have an advantage over others."
Indeed, Cupola will also embark on a $50 million expansion plan in Pakistan in the next five years, involving the creation of new offices across the country.
Anis, a Pakistani national, says he can use his local expertise to ensure the success of the new ventures. He's confident that Cupola can find a market for the new products among Pakistanis.
"All they want is an opportunity to enjoy the products and services we are bringing," he says.
Despite a serious law and order problem in Karachi and a cash strapped government which was rescued from default by the International Monetary Fund, the Cupola Group sees a substantial target market for its products of about 32 million people - out of a population of 140 million.
In spite of corruption and bureaucratic delays, Anis says that doing business for foreign companies is much easier than it was a decade back. "And those who can take the initial strain, can make good money," he says.
Multinationals here say that they are over-taxed by a government that is reluctant to widen its tax base beyond the corporate sector for political reasons: in a country of 140 million, there are barely 1.5 million tax payers.
Local producers also say that smuggling is eating away at the country's narrow industrial base.
But Anis believes that the government will continue to lower its tax rates, as agreed with the IMF. While the government's track record has not been good on this count, alongwith its ability to widen the tax net, thinking in Cupola is that this time round things will be different - thanks to greater pressure from the IMF.
Anis says Cupola will also be less vulnerable to smuggling by bringing in products for the higher end of the market, which is less of a focus for smugglers. And by giving a service alongwith the product, the outlets should also gain some protection.
Cupola, founded in 1994, has offices in Dubai, Karachi, Geneva and London. It estimates its total assets at more than $150 million.
The group also has plans to invest more in information services over the next three years. So far, it has a software business in the Gulf and a share in a Karachi-based television company called Telebiz.
Cupola also plans to develop hotels in the Arab world, and has drawn up plans to float its Pakistan operating company on the Karachi Stock Exchange. Even so, a plan to float in 1998 was delayed because of the foreign exchange crisis that followed Pakistan's nuclear tests in May.
-By Kamal Siddiqi; 92-21-5892536; kamals@digicom.net.pk |
