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Nadeem Ahmad Siddiqui (Reg. # 21304) MBA-3 (Weekend Program - 2.

5 years) Current Business Affairs

Decline of Industry



Soccer or football is the most popular sport in the world. And for many, this means great economic opportunity. At one time, Pakistans export city of Sialkot was catering to 85 per cent of the total world demand for high-quality hand-stitched inflatable balls. A workforce of 85,000 was employed to produce 60 million balls per year worth $210 million. In FIFA World Cup years the demand for stitched balls rises by 70 per cent. Consecutive governments however, ignored this industry and failed to plan ahead to tackle the growing competition from China, India and Japan. For a long time this vital industry also faced criticism from European countries and especially from United States with allegations of using child labor. The Sialkot Chamber of Commerce and Industry took prompt measures to curb child labor from the soccer ball industry in accordance with the Atlanta Agreement signed with the International Labor Organization (ILO) and UNICEF in February 1997. It is estimated that some 93 per cent of child labor was progressively eradicated from this vital industry and necessary steps were taken to provide social protection to children and their families. The children who were associated with this industry were provided with good schooling. The vital steps taken by the soccer manufacturers and exporter were highly praised by the then United States President Bill Clinton in the address at the ILO convention at Geneva in June 1999. The Sialkot football industry has been contributing millions of export dollars to the national kitty but in the year 2006 the industrys share in the international market took a significant hit with the entry of new players in the market, notably China and India. Manufacturers from these countries were able to supply balls at a much cheaper rate.

While Pakistan failed to qualify for the last FIFA World Cup in Germany, it still made its presence felt in every match. The footballs used in the 2006 FIFA World Cup were hand-stitched in Sialkot, a city in the north-east of the Punjab province famous for manufacture of sports goods and surgical instruments. For the 2010 World Cup in South Africa, however, Adidas decided for the Jabulani footballs the official match ball -- to be machine-made in China.

Arshid Mehmood Mirza, executive director of Bedarie, a non-governmental organization working for the protection of womens rights, has been working for the rights of workers in the football trade for over 15 years. 'It is unfortunate the Pakistani football industry has not keep pace with the technological advancements,' he lamented. However, it is the use of child labor that has been cited as the major factor in bringing the footballproduction industry in Pakistan crumbling down. In 1996, the world learnt through an expos in Life magazine that Pakistani children were stitching soccer balls for six cents an hour. According to industry sources, local soccer ball manufacturers have been able to grab around 30 to 40 per cent of the total orders floated globally for the upcoming FIFA World Cup. This is a sharp decline from the 70-80 per cent bagged during the 1998 and 2002 World tournaments. The local football industry earned $164 million in export earnings in the financial year 09, as against an average of $221 million per annum earned during financial years 2005-08. Power and gas shortage are not making it any easier for the industry, and sources say that a number of business have failed to meet deadlines which has dented their reputation. Technology was also a major factor in tilting the balance against the local industry. The penetration of machine-made balls hit the Sialkot handmade stitched soccer industry. And in the present scenario of fast growing globalization hand-stitched balls will not be able to compete with machine-made footballs. It is important that the local industry moves forward and embraces new technology to meet the needs of the international market. Industry sources also say that China has received large export orders of footballs from a number of countries ahead of the June 2010 Football World Cup. Pakistan Sports Goods Manufacturers and Exporters Association is rightly concerned over this state of affairs. According to Arif Mehmood Sheikh, a former chairman (PSGMEA) the shift of a large number of orders to China should serve as an eye opener for

everyone. He said that the factors behind the diversion of export orders to China was a combination of rising cost of production and inability to meet deadlines, which in turn were caused by rising POL prices and unreliable power supply. This has made it difficult for Sialkot exporters to compete with manufacturers in China, India, Nepal and Thailand. In a report published just before the FIFA World Cup this year, the ILRF unveiled new research that pointed disturbingly to workers being paid about one to two U.S. dollars per ball they stitch. Each ball retails for one hundred dollars or more. In interviews with 218 workers in seven supply chains in Pakistan, the ILRF found that 70 percent of them were casual workers and 'almost all of them were paid below the legally required minimum wage'. The study also pointed to gender-based discrimination, where female home-based workers were paid the least. With the government looking for new avenues to bridge the fiscal deficit and the trade deficit, it is very important that measures be taken to build upon the advantages that Pakistan holds in the global market, and not allow others to encroach upon them. The Sialkot exporters have urged the government to come up with some sort of trade related package to stop the diversion of football export orders through the Trade Development Authority, likewise enforcing suitable measures to encourage the export of hand stitched footballs. Outdated manufacturing techniques still in use by the local industry are a major hurdle in enhancing exports. This industry for its survival is in dire need of advanced technology and early provisioning of skilled labor. The Sialkot manufacturers and exporters have realized that in the event of a change in the global trend from hand stitched balls to mechanically stitched balls they will also need to make the shift. Along with eliminating child labor and regularizing the casual workforce, Pakistans football-making industry will have to keep pace with newer technology to make a dent at the next World Cup. A government-funded Sports Industries Development Centre is soon to open up, says Khawaja. 'Once in place (in 2011), we will be in a position to produce over 3,000 balls in eight hours including volleyballs and basketballs,' he said. In order to cope with the menace of machine made balls, the Small and Medium Enterprise Development Authority has at put in place the final steps for the establishing of the Sports Industries Development Centre. It is expected that this project worth Rs435 million will enable the Sialkot sports manufacturing industry to adopt modern technology, without which there is no going forward.

References http://tribune.com.pk/story/17435/inflating-pakistans-football-industry/ http://www.globalissues.org/news/2010/06/30/6164