Thursday, December 13, 2018

Pakistan is the World's Biggest Importer of Used Clothes

Back in the winter of 1977 when I made preparations to travel to the United States to attend graduate school, my late mother took me to Karachi's "Landa Bazar" to help me pick out imported extra warm second hand clothing. The purchased item appeared to be brand new, especially after dry-cleaning. I would not have survived my first months in New York without the winter coats and jackets and accessories like caps, gloves and boots bought in Karachi, Pakistan. A recent look at the Statista stats portal's 2017 data revealed that Pakistan imported $240 million worth of used clothing making it the world's largest importer in this category.

Landa Bazars in Pakistan:

A Pakistani newspaper headline last week screamed "Sale Of Second Hand Warm Clothes Picks Up In Landa Bazars Hyderabad". Landa Bazars is the name of "flea markets" that specialize in selling used clothes and they do brisk business at the start of each winter. These markets are found in all major cities and cater to middle-class and poor customers looking for moderately priced warm clothing for a couple of weeks of cold weather. Pakistan has a huge domestic textile industry that meets the needs of the people with relatively cotton clothing for the rest of the year. Pakistan is also a big exporter of ready made garments.

Top Importers of Secondhand Clothing. Source: Statista

The second hand clothing that I used in my first few months in the United States in the winter of 1977-78 was purchased at Karachi's Landa Bazar. The purchased item appeared to be brand new, especially after dry-cleaning.  In the next winter season when a new batch of Indian and Pakistani students came to the campus, I passed these on to those who came unprepared my heavy winter coat and jacket.

Landa Bazar (Flea Market) in Pakistan


Second Hand Clothing Trade:

Used clothing exports added up to $3.67 billion in 2016, according to MIT's Observatory of Economic Complexity (OEC).

The top exporters of Used Clothing included the United States ($648M), Germany ($371M), the United Kingdom ($348M), China ($219M) and South Korea ($214M). The top importers in 2016 were Pakistan ($206M), Ukraine ($166M), Kenya ($131M), Malaysia ($129M) and Ghana ($126M).

Second Hand Clothing in United States:

Americans donate used clothes, including slightly used clothes hanging in their closets, to charities such as Goodwill and Salvation Army. These donations pick up during holidays when people clear out their closets to make room for new purchases. American tax law encourages such charitable donation which are tax-deductible. Some of these used clothes are sold by charities at stores like Goodwill stores and Salvation Army thrift stores and the rest are exported.

America's secondhand clothing business has been export-oriented since the introduction of mass-produced gar­ments. And by one estimate, used clothing is now the United States’ number one export by volume, according to Slate.com.

Summary:

Global trade of secondhand clothing is near $4 billion a year. United States is the biggest exporter and Pakistan is the biggest importer of used clothing.  The second hand clothing that I used in my first few months in the United States in the winter of 1977-78 was purchased at Karachi's Landa Bazar. The purchased item appeared to be brand new, especially after dry-cleaning.  In the next winter season when a new batch of Indian and Pakistani students came to the campus, I passed these on to those who came unprepared my heavy winter coat and jacket.  Landa Bazars is the name of "flea markets" that specialize in selling used clothes and they do brisk business at the start of each winter. These markets are found in all major cities and cater to middle-class and poor customers looking for moderately priced warm clothing for a couple of weeks of cold weather. Pakistan has a huge domestic textile industry that meets the needs of the people with relatively cotton clothing for the rest of the year.

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Sunday, December 9, 2018

Pakistan Media Crisis: Facts and Myths

Why are Pakistan media groups laying off employees and shutting down TV channels? Is it caused by Pakistan government cutbacks in advertising? Is it part of the PTI government's alleged efforts to censor media? Or part of the long overdue industry shake-out after almost two decades long un-interrupted media business expansion?

Pakistan Ad Spending. Source: Aurora/Dawn


How much was the Nawaz Sharif led PMLN government spending on advertising? Did Nawaz Sharif and Shahid Khaqan Abbasi increase media advertising budgets to buy favorable coverage at taxpayers' expense?

Are Pakistan government and national security establishment unique in wanting to manage media coverage? Do Western government manage media as well? If so, how? How do their media management techniques differ?

Global Advertising Growth 2016. Source: Magna

What is the future of media in Pakistan as the Internet penetration grows dramatically with 1-2 million more people coming online each month? Will greater spending on digital ads change journalism in Pakistan? Will more journalists take to social media and other online platforms as business?

Viewpoint From Overseas host Misbah Azam discusses these questions with panelists Sabahat Ashraf and Riaz Haq.


https://youtu.be/Nz1axuB5j-Q





Related Links:

Haq's Musings

FMCG Growth in Pakistan

Is Media Free?

Pakistan Retail Sales Growth

Advertising Revenue in Pakistan

Pakistan FMCG Market

The Other 99% of Pakistan Story

PSL Cricket League Revenue

E-Commerce in Pakistan

Fintech Revolution in Pakistan

Mobile Broadband Speed in Pakistan

Remittances From Pakistani Diaspora Soared 21X Since Year 2000

Remittance inflows from Pakistani diaspora have jumped 21-fold from about $1 billion in year 2000 to $21 billion in 2018, according to the World Bank. In terms of GDP, these inflows have soared nearly 7X from about 1% in year 2000 to 6.9% of GDP in 2018.

Meanwhile, Pakistan's exports have declined from 13.5% of GDP in year 2000 to 8.24% of GDP in 2017.  At the same time, the country's import bill has increased from 14.69% in year 2000 to 17.55% of GDP in 2017.  This growing trade imbalance has forced Pakistan to seek IMF bailouts four times since the year 2000.  It is further complicated by external debt service cost of over $6 billion (about 2% of GDP) in 2017. Foreign investment in the country has declined from a peak of $5.59 billion (about 4% of GDP) in 2007 to a mere $2.82 billion (less than 1% of GDP) in 2017. While the current account imbalance situation is bad, it would be far worse if Pakistani diaspora did not come to the rescue.

Diaspora Remittances:

Estimated inflows of $20.9 billion make Pakistan the world's 7th largest recipient of remittances for 2018, according data released by the World Bank in its latest "Migration and Remittances" report of December 2018.  In South Asia region, Pakistan is the second largest recipient of remittances of $20.9 billion after top-ranked India's $79.5 billion.

Pakistan Remittances in Millions of US Dollars. Source: World Bank

Remittances from Pakistani diaspora have grown nearly 21-fold since the year 2000.  Pakistanis sent home remittances adding up to 6.9% of the country's GDP in 2018, up from 1% back in year 2000.

Pakistan's Trade:

In 2017, Pakistan exported goods and services worth $22 billion while it imports amounted to $57 billion, a trade deficit of $35 billion for the year. This is a dramatic deterioration from about $2 billion trade deficit (2% of GDP) in year 2000 to $35 billion trade deficit (about 12 % of GDP) in year 2017.

Pakistan Trade Deficit in Billions of US$. Source: World Bank


Pakistan's exports have declined from 13.5% of GDP in year 2000 to 8.24% of GDP in 2017.  At the same time, the country's import bill has increased from 14.69% in year 2000 to 17.55% of GDP in 2017.

Pakistan FDI. Source: The Global Economy

Foreign Direct Investment:

Foreign direct investment (FDI) in Pakistan was a mere $2.82 billion (less than 1% of GDP) in 2017, down from a peak of $5.59 billion (4% of GDP) in 2007.  The lack of foreign investment has contributed to the country's dwindling reserves and balance of payments difficulties requiring it to seek yet another IMF bailout.

Pakistan's External Debt. Source: State Bank of Pakistan via Dr. Ishrat Husain

Pakistan's Debt:

Significant growth in remittances from Pakistani diaspora has clearly helped but the external accounts gap is too big for it. This has forced Pakistan to borrow heavily in recent years. It has raised debt service costs and put pressure on Pakistan's reserves.

Summary:

Remittances from Pakistani diaspora have jumped 21-fold from about $1 billion in year 2000 to $21 billion in 2018, according to the World Bank. In terms of GDP, these inflows have soared nearly 7X from about 1% in year 2000 to 6.9% of GDP in 2018.  Meanwhile, Pakistan's exports have declined from 13.5% of GDP in year 2000 to 8.24% of GDP in 2017.  Foreign investment in the country has declined from a peak of $5.59 billion (about 4% of GDP) in 2007 to a mere $2.82 billion (less than 1% of GDP) in 2017. At the same time, the country's import bill has increased from 14.69% in year 2000 to 17.55% of GDP in 2017. This growing trade imbalance has forced Pakistan to seek IMF bailouts four times since the year 2000.  It is further complicated by external debt service cost of over $6 billion (about 2% of GDP) in 2017. While the current account imbalance situation is bad, it would be far worse if Pakistani diaspora did not come to the rescue.

Related Links:

Haq's Musings

South Asia Investor Review

Can Pakistan Avoid Recurring Balance of Payment Crisis?

Pakistan Economy Hobbled By Underinvestment

Pakistan's IT Exports Surging

Can Indian Economy Survive Without Western Capital Inflows?

Pakistan-China-Russia Vs India-Japan-US

Chinese Yuan to Replace US $ as Reserve Currency?

Remittances From Overseas Pakistanis

Can Imran Khan Lead Pakistan to the Next Level?

China to Expand Manufacturing in Special Economic Zones

Sunday, December 2, 2018

Pakistan Media Industry Shakeout Underway

Pakistan's 88 billion rupee media industry is in the midst of a major shakeout after a long period of rapid double-digit growth since the turn of the century. Hundreds of journalists and other staff have lost their jobs. At least one TV channel, Waqt News, has closed while several others are downsizing. While such consolidation was long overdue after nearly two-decade long period of explosive growth, the PTI government's decision to reduce advertising budget, which constitutes nearly a quarter of all ad spending in the country, appears to be the main trigger. Those affected by consolidation are accusing the government of exercising press censorship by cutting its ad spending.

Pakistan Ad Spending. Source: Aurora/Dawn

Rapid Growth:

Rising buying power of rapidly expanding middle class in Pakistan drove the nation's media advertising revenue up 14% to a record Rs. 76.2 billion 2016 and another 12% to Rs. 88 billion in 2017, making the country's media market among the world's fastest growing media markets.

Global Advertising Growth 2016. Source: Magna

Industry Shakeout:

Massive commercial media growth in Pakistan has been most apparent in terms of private TV channels growing from just one in Year 2000 to over 100 today after President Musharraf's deregulation of electronic and other media.

Explosive growth with many new entrants is the fundamental business reason for the recent wave of consolidation and shakeout. Shakeout is a business term used to describe the consolidation of an industry or sector after it has experienced a period of rapid growth in demand followed by oversupply.

At least one TV channel, Waqt News owned by Nawai-Waqt Media Group, has closed while several others are downsizing.  “We are trying to compile exact figures of the affected media persons. So far, we can say that around 1,000-1,500 workers have lost their jobs or faced cuts in salaries in the past few weeks,” Muhammad Afzal Butt, president of one the main factions of Pakistan Federal Union of Journalists (PFUJ) told  The News Sunday (TNS) this week.

Government Spending:

About a quarter of Rs. 80 billion ad revenue comes from federal and provincial government ads in the media. Some of the TV channels receive as much as 50% of their revenue from the government.

"The government has cut its media spend by more than 70% and companies by almost 50%", according to a leading advertising agency owner who spoke to Dawn.

"The (federal) government used to spend some Rs. 10 billion on advertisements annually, which was increased up to Rs35 billion in the last years of the (Nawaz Sharif's PMLN) government," Fawad Chaudhry,  federal minister of information,  told The News Sunday (TNS).  This tax-payers’ money, says the minister, was used by the previous government to bribe the media for favorable coverage.

Digital Adverstising:

Growing slice of the media ad spend is being claimed by online advertising with accelerating broadband penetration in Pakistan. Most recent data from Pakistan Telecommunications Authority shows that 62 million Pakistanis now subscribe to mobile broadband and this number is increasing by one to two million new subscribers each month.

Digital media spending rose 27% in 2015-16 over prior year, the fastest of all the media platforms. It was followed by 20% increase in radio, 13% in television, 12% in print and 6% in outdoor advertising, according to data published by Aurora media market research.

Summary:

Significant reduction in government spending on advertising has triggered a long-overdue shakeout after almost two decades of rapid media growth in Pakistan. About a quarter of Rs. 80 billion ad revenue comes from federal and provincial government ads in the media. Some of the TV channels receive as much as 50% of their revenue from the government.  Hundreds of journalists and other staff have lost their jobs. At least one TV channel, Waqt, has closed while several others are downsizing. Those affected by consolidation are accusing the government of exercising press censorship by cutting its ad spending.


Here's a video discussion on Pakistani media business with Misbah Azam, Sabahat Ashraf and Riaz Haq.


https://youtu.be/Nz1axuB5j-Q





Related Links:

Haq's Musings

FMCG Growth in Pakistan

Is Media Free?

Pakistan Retail Sales Growth

Advertising Revenue in Pakistan

Pakistan FMCG Market

The Other 99% of Pakistan Story

PSL Cricket League Revenue

E-Commerce in Pakistan

Fintech Revolution in Pakistan

Mobile Broadband Speed in Pakistan