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Confectionery industry
By Ismat Sabir
The processed food industry consists of dairy plants, sea food/fisheries, livestock and poultry, fruits and vegetables, beverages, confectionery and biscuits and breads. In the present article we have confined ourselves to only two sectors, i.e., confectionery and biscuits.
According to the official categorization, sweets, toffees, candies and gums fall in the category of confectionery while biscuits, wafers, white and brown bread and rusks are in the category of biscuits and bread.
The processed food and beverage industry is considered to be one of the largest industrial sectors in Pakistan. It accounts for approximately 27 percent of total production and 16 percent of total employment in the manufacturing sector. The total value of production was over 46 billion rupees, 2000-01. Some of the details are given table-I.
TABLE-I
Biscuits & Bread 42 units
Capacity 46,830
Production (80%) 37,464 M/tons
Confectionery (Regd.) 23
Capacity 54,300 M/tons
Production 33,000 M/tons
Small units 5,000 M/tons
Medium sized 12,000 M/tons
Total confectionery 50,000 M/tons
TABLE-II: IMPORTS
(Rs/Mln)
Year Confectionary & Confectionary Chocolates & Total
other food items other food items
1990-91 5.1 5.9 7.8 17.8
1991-92 11.3 4.4 13.6 29.3
1992-93 24.9 9.9 11.1 45.9
1993-94 14.4 5.3 16.8 36.5
1994-95 22.8 6.2 73.4 102.4
1995-96 45.3 26.4 111.3 183.0
1996-97 39.4 16.7 80.6 136.7
1997-98 49.9 22.7 95.5 168.1
1998-99 32.8 8.1 76.3 117.2
1999-00 29.4 21.4 72.8 123.6
The production is not only meeting local demand but items are also being exported. The exports of sugar confectionery, chocolates and biscuits have shown a rapid
growth during the last 10 years. This sector has vast opportunities to expand export especially to Europe and Middle East. Therefore, there exist tremendous scope of setting confectionery and food processing units to utilize indigenous raw materials and by exporting these products foreign exchange can be earned.
Pakistan is also importing substantial quantity of confectionery, chocolates including other food items. If production of quality products is increased and prices are lowered the import of these items may be curtailed to a reasonable level.
The combined export of food and beverages has increased from 3,890 million rupees, 1989-90, to 13,336 million rupees in 1998-99. During the same period imports increased from 6,880 million rupees to 24,729 million rupees. This shows that import is about double of exports. It also indicates that both imports and exports increased at the same rate, that is, increased four times in ten years.
TABLE-III: EXPORT OF SUGAR
CONFECTIONARY AND CHOCOLATES
Value in Million Rs.
Year Confectionary Chocolates
1990-91 53.8 37.2
1991-92 128.7 39.8
1992-93 255.6 44.3
1993-94 224.3 62.8
1994-95 257.3 53.8
1995-96 221.8 54.6
1996-97 246.5 51.3
1997-98 260.1 46
1998-99 319.2 38.2
1999-00 425.7 31.4
As said earlier, the export can be increased many fold if the Government takes immediate measures to solve the problems of the industry like prompt payment of rebate, decrease in the prices of utilities and raw material and licensing problems.
To know the problems of the confectionery industry, which are hampering growth of export, we contacted the chairman of Pakistan Biscuits and Confectionery Manufacturers Group, M. Zubair Habib, which is being given here.
The confectionery items, the non-traditional items, has great scope of export but the industry is facing numerous problems, which are hampering export led growth of confectionery, said Zubair Habib in an exclusive interview.
The Chairman said the manufacturers of biscuits and wafers have to take license for their products from Pakistan Standard Institute (PSI). Initially the requirement was to obtain license for biscuits and wafers separately. But the PSI changed this system arbitrarily and now requires a license for each and every brand and also for each flavor of every product. While for exportable items, foreign buyers do not recognize this license. In fact, due to this change they are not happy because of delay in their consignments, in case of a new brand or flavor they have ordered.
We, the exporters, have made several presentations in this regard before Export Promotion Bureau and the Ministry of Commerce, but the problem has not been solved. He demanded that the PSI licensing requirement for exports of biscuits and wafers should be waived, if possible, or the time should be curtailed to a minimum level.
Exports to Central Asian Republics
Export facility to Central Asian Republics through land route was allowed without duty draw back and Sales Tax refunds even where the payment is received in foreign exchange. But this facility was misused in the past and has deceived the exports from Pakistan of this big market. Mr. Zubair suggested that export of biscuits and confectionery, through land route, again be allowed with duty draw back facility to enable the exporters of Pakistan to compete with other exporters, especially with India.
Duty draw back
The government has reduced duty draw back on biscuits from an average of 10.67 percent to 7.53 percent of FOB value, which depriving the exporter to quote competitive prices. He said the reduction in duty drawback on biscuits and wafers be restored to the previous level, so that export could be increased.
Duty draw back on Bubble Gums
The policy of the government is that duty drawback claim on export of bubble gum is not allowed without laboratory test, which is causing delay in payment of the claims and the exporters are facing serious financial problems. He suggested that the genuine exporters must be treated respectfully and their duty draw back claims must not be held merely for laboratory test, as this delay seriously affecting their cash flow. Moreover, while importers do not require this test.
Declaration of shelf life
Mr. Zubair Habib said the other problem is that in some countries, importers do not require declaration of shelf life on the packaging, whereas the custom officials insist to print declaration of shelf life. Thus, the custom officials should be advised not to ask for the shelf life and the declaration of manufacturing and expiry dates, if the importers do not require the same.
Export of fake products
There are continuous complaints from some of the buyers that fake products of reputed manufacturers are exported from Pakistan, which is creating a very embarrassing situation for reputable manufacturers as well as for the country. Commenting on this situation he said it is annoying buyers and creating poor impression of the country. It is also destroying markets, which were captured over a along period of time by supplying quality products. Most of these goods are passing either from the Lahore Dry Port or the Faisalabad Dry Port, therefore, custom authorities must be directed to be vigilant in this regard.
Instability in price of raw materials
Mr. Zubair has just returned from Dubai where he has done a comprehensive survey of confectionery items. Taking about his findings, he said the industry faces serious problems due to abrupt and tremendous increase in price of sugar, vegetable ghee and cooking oils and wheat etc., which are major ingredients used in the production of goods. We have to compete with India in the international markets, where prices of raw materials are far less than Pakistan. Therefore, to compensate, government should increase the rate of duty draw back to 10.67 percent, as the committed prices with the buyers, cannot be increased.
Freight
Sea fright charges from Pakistan are higher compared to the neighboring countries like India. This affects confectionery export, as due to the freight cost becomes high and affects prices. The government may consider bringing down freight charges by negotiating with the shipping lines or subsidizing the charges. Further, Government should give freight subsidy to all the confectionery items, which is presently permissible on certain items only. He, however, appreciated present the rate of export refinance.
In the end, the chairman of the Confectionery Group said Export Promotion Bureau should not confine its role to organize trade fairs and sending delegations. It should identity new markets where confectionery items can be exported.
