Pakistan to sign FTA with China to bridge trade deficit

Pakistan’s federal cabinet on Tuesday approved a draft of Free Trade Agreement (FTA) to be signed with China during Imran Khan’s upcoming visit to Beijing. (Shutterstock)
Updated 23 April 2019

Pakistan to sign FTA with China to bridge trade deficit

  • Islamabad’s trade deficit with Beijing widened to $9.7 billion in fiscal year 18
  • China to provide market access to 90 percent of Pakistani commodities at zero rated duty

ISLAMABAD: Pakistan’s federal cabinet on Tuesday approved a draft of Free Trade Agreement (FTA) to be signed with China during Prime Minister Imran Khan’s upcoming four-day visit to Beijing, said the PM’s special assistant on information and broadcasting Dr. Firdous Ashiq Awan. 

The move is aimed at helping Islamabad bridge its trade deficit with China that has widened over $9 billion.

In recent years, China has emerged as the largest trade partner of Pakistan and pledged over $60 billion infrastructure development program in 2013, known as the China-Pakistan Economic Corridor (CPEC) – a network of roads, pipelines, power plants, industrial parks, and a port along the Arabian Sea.

“The FTA with China will help us protect our local industry, and bridge the gap between exports and imports of both the countries,” Awan said while terming it a “great achievement” of Pakistan.

Pakistan has been struggling to sign a second phase of the FTA with China for the last eight years to boost its exports to Beijing and this would now be inked on April 28 by the commerce ministers of both the countries.

Islamabad’s trade deficit with Beijing widened to $9.7 billion in the last fiscal year, according to State Bank of Pakistan, as Chinese imports to Pakistan increased to $11.458 billion against the exports of just $1.744 billion. The officials say the earlier FTA with China was in favour of Beijing and discouraged Pakistani exports.

“The new FTA will help bring trade parity with China,” she said.

Under the second phase of the FTA, China is expected to provide market access to 90 percent of Pakistani commodities at zero rated duty, while Pakistan would give China market access to 65 percent tariff lines. These incentives to Pakistan would be equivalent to the duty-free market share already enjoyed by the countries of Association of East Asian Nations (ASEAN) from China.

“China was initially reluctant to sign a new FTA with Pakistan, but Prime Minister Imran Khan’s successful diplomacy during his last visit to Beijing helped materialize it,” the prime minister’s special assistant said while briefing media after the cabinet’s meeting.

Prime Minister Khan is visiting China from April 25 to 28 to attend the 2nd Belt and Road Forum in Beijing, along with a ministerial delegation and 450 members of business community. In addition to participating in the Belt and Road Forum, the Prime Minister would also hold bilateral meetings with President Xi Jinping and Premier Li Keqiang.

“Our businessmen will interact with Chinese investors and corporate sector to bring investments in Pakistan,” she said, “if the economy gets strengthened, we will be able to provide jobs to our youth.”

To a question, she said the government has received financial support from friendly countries including Saudi Arabia, United Arab Emirates and China to stave off a balance of payments crisis. “This support also helped us negotiate a better loan deal with IMF,” said Awan.

About the proposed tax amnesty scheme for undeclared local and offshore assets, she said the government’s economic team has been fine tuning it to ensure the scheme’s effectiveness in strengthening the country’s fragile economy. “This will be a comprehensive document and unveiled soon,” she added.

Struggling Victoria’s Secret sold as women demand comfort

Updated 22 February 2020

Struggling Victoria’s Secret sold as women demand comfort

  • Chairman calls time following difficult year of Epstein links and controversy over chief marketing officer comments

NEW YORK: Victoria’s Secret has a new owner. Now, the big question is whether the once sought after but now struggling brand can be reinvented for a new generation of women demanding more comfortable styles.

The company’s owner, L Brands, said that the private-equity firm Sycamore Partners would buy 55 percent of Victoria’s Secret for about $525 million. The company, based in Columbus, Ohio, will keep the remaining 45 percent stake. After the sale, L Brands will be left with its Bath & Body Works chain and Victoria’s Secret will become a private company.

Les Wexner, 82, who founded the parent company in 1963, will step down as chairman and CEO after the transaction is completed, and become chairman emeritus. Wexner has faced seperate troubles, including questions over his ties to late financier Jeffrey Epstein, who was indicted on sex-trafficking charges.

The selling price for Victoria’s Secret signifies a marked decline for a brand with hundreds of stores that booked about $7 billion in revenue last year.

In a statement, Wexner said the deal would provide the best path to restoring Victoria’s Secret’s businesses to their “historical levels of profitability and growth.” The deal will also allow the company to reduce debt and Sycamore will bring a “fresh perspective and greater focus to the business,” he said.

To successfully turn around Victoria’s Secret, Sycamore will need to change up the corporate culture, reinvent fashions and redesign the stores to make them more contemporary, experts say. Sycamore manages a $10 billion portfolio including retailers as Belk, Hot Topic and Talbots.

The management team at Victoria’s Secret essentially was designing what men wanted, and not catering to women’s tastes, said Neil Saunders, managing director of GlobalData Retail.

“The brand is very embedded in the past,” said Saunders. “It was always about men feeling good. It should be about making women feel good about themselves.”

Victoria’s Secret has an unparalleled history of success. The brand was founded by the late Roy Larson Raymond in the 1970s after he felt embarrassed about purchasing lingerie for his wife. Wexner, the founder of the then Limited Stores Inc., purchased Victoria’s Secret in 1982 and turned it into a powerful retail force. By the mid-1990s, Victoria’s Secret lit up runways and later filled the internet with its supermodels and an annual television special that mixed fashion, beauty and music.

That glamor has faded and so have sales in the last few years. The show was canceled last year, and shares of Victoria Secret’s parent have gone from triple digits less than five years ago to a quarter of that today.

Victoria’s Secret struggled to keep up with competition and failed to respond to changing tastes among women who want more comfortable styles. Rivals like Adore Me and ThirdLove, which have sprouted up online and marketed themselves heavily on social media platforms like Instagram, have focused on fit and comfort while offering more options for different body types. Meanwhile, American Eagle’s Aerie lingerie chain, which partners with women activists like Manuela Baron, has also lured customers away from Victoria’s Secret.

And in the era of the “Me Too” movement, women are looking for brands that focus on positive reinforcement of their bodies.

“Victoria’s Secret will need to empower women, not make them spectacles,” said Jon Reily, senior vice president and global head of commerce strategy at digital consultancy Isobar.

Stacey Widlitz, president of SW Retail Advisers, a retail consultancy, said that Victoria’s Secret designs in the last few years had gone in the opposite direction to what women wanted, ever sexier and poorer in quality.

And while last year Victoria’s Secret started featuring more diverse models, including its first openly transgender model, the moves fell short.

Victoria’s Secret suffered a 12 percent drop in same-store sales during the most recent holiday season. L Brands said on Thursday that same-store sales declined 10 percent at Victoria’s Secret during the fourth quarter. Bath & Body Works, which has been a bright spot, enjoyed a 10 percent increase. The skincare chain represents more than 80 percent of L Brands’ operating profit.

“The (Victoria’s Secret) brand has lost its way, while the lingerie market is not large or high growth, and has become commoditized,” Randal Konik, an analyst at Jefferies, wrote Thursday. “Furthermore, with athleisure taking over, the need for regular bras continues to wane.”

The company has also been beset by allegations of a toxic work environment and its founder recently apologized for his ties to Epstein, who was found hanged in his cell after federal indictment for sex trafficking of minors. L Brands’ Chief Marketing Officer Ed Razek resigned last August after making controversial comments about why transgender models shouldn’t partake in its annual fashion event.

Epstein started managing Wexner’s money in the late 1980s and helped straighten out the finances for a real estate development backed by Wexner in a wealthy suburb of Columbus. Wexner has said he completely severed ties with Epstein nearly 12 years ago and accused him of misappropriating “vast sums” of his fortune.

Wexner offered an apology at the opening address of L Brands’ annual investor day last fall, saying he was “embarrassed” by his former ties with Epstein.

Wexner is the longest-serving CEO of an S&P 500 company. He founded what would eventually become L Brands in 1963 with The Limited retail chain, according to the company’s website. Wexner owns approximately 16.71 percent of L Brands, according to FactSet.

Mike Robbins, a San Francisco-based corporate culture expert who has advised chains including Gap and Sephora, said the team at Victoria’s Secret would have to retrain workers and hire more people with diverse voices.

“They have a lot of work to do — within the company and also outside with the customers,” Robbins said. “The companies that are able to have (a) great culture attract the best employees.”