Arsalan Ali

The biscuit and confectionery industries in Pakistan have grown at a compound annual growth rate of 9.1% and 9.4%, respectively, during the last five years, WealthPK reports. However, the markets of North America, the Middle East and Africa have remained largely untapped for Pakistani baked goods exports. African countries have a $77.9 million export potential from Pakistan. According to a report recently released by the Pakistan Business Council, the biscuit market is still in the growth stage. Its growth is higher than the overall economy and the price elasticity of demand is inelastic. “Resultantly, when manufacturers face cost pressure, they are unable to transfer the cost to consumers,” it added. The report states that each province has its own food standard that is not in line with international standards, affecting the competitiveness of Pakistan’s baked goods in the global market.

Due to exchange rate volatility and restrictions on profit repatriation, the environment is not conducive to foreign direct investment in the sector. It says that Pakistani exporters of baked goods have not explored major markets like the Middle East, Africa and Europe. Non-tariff barriers such as lack of testing for banned ingredients, labelling requirements and packaging are significant impediments to entering the African and Eastern European markets. According to the report, the main ingredients used in biscuits are wheat, palm oil and sugar. Palm oil is available at international prices while the rates of wheat and sugar are higher in Pakistan as compared to the rest of the world.

It says that tax evasion is also a major issue in the industry due to the high tax rate including a 17% sales tax and a 29% corporate income tax, which prompt manufacturers to hide their production and sales. The report says the Pakistan Standards and Quality Control Authority (PSQCA) should set globally accepted industry standards, with provincial governments serving only as implementation bodies, to facilitate compliance. Pakistan’s biscuit industry should urge the government to establish accredited laboratories for compliance testing. Compliance with international standards could allow Pakistani products to enter more lucrative markets in the Far East and Europe.

The report says that companies should be given incentives to invest in research and development. An increase in allocation for research and development will result in the introduction of new and innovative products besides the expansion of product lines. It also suggests conducting a comprehensive study jointly funded by industry and the government to identify the opportunities and challenges of entering the African, European, and Central African markets as well as recommending a strategy to maximise the potential. “Export-oriented international joint ventures will not only increase exports but will also build the capacity of local suppliers by updating manufacturing and safety standards for baked goods,” according to the report available with WealthPK.

Credit : Independent News Pakistan-WealthPk