Takeaways for BGR MBA Class of 2015

BGR - Session 8
Case:Report of the Commission appointed by the Honourable Supreme Court of
Pakistan, through Order dated 2-10-2009 -- to determine the Cost of
Production and Profit Margins in the Sugar Sector
Supplementary Reading:
Unpublished paper on Sugar and Political Power by Dr Adeel Malik
Takeaways
1. The sugar industry in Pakistan represents the perverse aspect of
business-government relations. Other than a few units, the industry is
primarily the result of political largesse sustained by state patronage
and protection from competition, both domestic and foreign. The wave
of liberalization that also engulfed the sugar industry has been
countered by anti-competitive collusive behavior at the PSMA level and
an insidious use of political clout.
2. Exposing the sugar industry to free market forces and strengthening
the Competition Commission to enable it to take strong action, as
necessary, is the obvious answer but this may not be feasible given the
industrys power and influence.
3. It would be best for a non-political new entrant to adopt the
progressive JDW route and set up a most modern and competentlyrun facility with largely tied sources of raw material (i.e. cane). This
enterprise should also be extensively engaged in the production and
sale of profitable by-products (substantively reducing the significance
of the main product, i.e. sugar, in the achievement of corporate
performance goals). Although risky, membership of PSMA cannot be
avoided but it is important to carefully distance the new entity from
PSMAs decisions and actions in order to prevent being held culpable
under the competition law.

BGR MBA Class of 2015 (Semester IIIB Nov 5 Dec 27, 2014)