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INTERVIEW: Sadruddin Hashwani Chairman of Hashoo Group

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    Zila Nazim

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Today the Hashoo Group is one of the most diversified industrial groups in Pakistan with interests across tourism, travel, real-estate development, pharmaceuticals, IT, and oil and gas. Before we begin discussing some of these areas, please tell the readers how you began your career in the early sixties trading cotton and rice, and how you went on to become Pakistan's leading exporter.

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“The reputation of our world-class hotels has spread far”

Well thank you very much and I think the first question is very appropriate because although my forefathers had been in business, my parents wanted me to be a doctor. I was in a science college at the time and was a very keen sportsman who played cricket seven days a week. I also became involved in the college union. However, that took up a lot of time and unfortunately I did not do well in my exams and was a failure as a student. That is the time when I realized that I should not have been wasting my time with sports and union activities when I had not yet finished my education.

But that was a challenge. At the age of 18 I began as a salesman selling steel products, to various industries because I did not want to be a burden for my parents. In 1939 before the partition of the country, my family had built a big house, and both my father and grandfather had been in business. Our family had originally migrated from Iran nearly five generations back. My mother was born in Gwadar and my grandfather had migrated to Karachi. I started with steel, moved onto grain, and eventually in 1965 when I was 25 years old we got an opportunity to participate in the export of cotton. The first consignment we sold was to the Soviet Union. It was a very small quantity and the giants of the export business were all laughing at us then. The first year was a very difficult one but for me it was a challenge for them to be asking: "who are these new kids in the cotton trade"?

However, in five years we had achieved the position as the largest cotton exporter and we became known as "the king of cotton". I used to work 365 days a year from nine in the morning until midnight. We had low cost operations and the cotton business was not easy but God helped me and we were always ahead of our commitments.

The next opportunity was our involvement in the rice trade. When Pakistan separated from East Pakistan, which is present day Bangladesh, there was huge surplus of rice that used to go to East Pakistan. This rice was now available for export and I came into that business, and again within one year we had become the largest rice exporters in the country, and when the government decided to nationalize the trading companies involved in cotton, rice, barley, etc., I was in Toronto and became jobless due to the actions of the Government of Pakistan. My parents were living with me and I came back to Pakistan even though I had had many opportunities to go to New York or to continue my cotton trading in Liverpool or in London. But I decided to remain in Pakistan and spend time with my parents because I owed it to them and to my country. Then I began thinking about building hotels. While the government was nationalizing, I was purchasing real estate, and companies such as New Jubilee Insurance and everybody was laughing saying: "Nationalization is taking place and you are investing in Pakistan!"

But this is my country and I had and continue to have an abiding commitment to it. I decided that I would not halt my contribution, which meant continuing to build for the country. It was not a commercial decision, but rather an emotional decision. My goal was to be in Pakistan.

In the early seventies you expanded your business interests as a pioneer in Pakistan's hotel industry and real estate development. How did you seize the opportunity to build the Holiday Inn in Islamabad in 1978, and then again two years later in Karachi?

The Islamabad Holiday Inn was the first to be completed in 1978. In 1977 Prime Minister Benazir Bhutto was ousted from power and General Zia declared martial law. That was again a difficult time for Pakistan as it went through transformation to incorporate Islamic rules and regulations. Nevertheless, this did not prevent me from doing what I wanted to do. It was not for any political party or any government, but rather a project I had undertaken for my own country. We built another hotel in Karachi, which was again a Holiday Inn. The reason it was a Holiday Inn was that they allowed me to have a franchise whereas other hotel brands were not prepared to give me a franchise because they wanted to manage the hotel themselves. However I wanted to be in the driver's seat and to manage the hotels myself.

What do you believe your establishment of this international hotel chain contributed towards the development of your country's hotel and tourism industry at that time, and what was the vision that led you to undertake such a big project?

There were only five hotels available in Pakistan at that time. The Intercontinental was built with the help of President Ayub Khan. He had a vision that there should be hotels available. Thus Pakistan Services Limited, which we own today, was established by the Government of Pakistan, which held some of the shares. They were able to give free land to Pakistan Services Limited to build these hotels. The Intercontinental Group had also put its own money into the project. There were other investors such as the American company Pan Am and Prince Sadruddin Aga Khan. They all pooled their resources and the government came forward and gave the land for these five hotels to be built. One of them was in Dhaka, and the other four were in Karachi, Lahore, Rawalpindi, and Peshawar.

These initial projects laid the foundations of the modern tourism and hospitality industry in Pakistan. My vision has been to contribute towards developing this important sector of our economy on par with world standards.

A key development in the rapid expansion of your hotel assets was your acquisition of the controlling stake of Pakistan Services Limited in 1985. Their Intercontinental Hotels were suffering substantial losses. Please share with the readers how you turned these hotels around, renamed them Pearl Continental, and established them as Pakistan's largest, most highly sophisticated hotel chain in several major Pakistani cities.

I think this is a very important question because as I mentioned earlier, I built these Holiday Inns, which were not really Holiday Inn's but far superior hotels. However, at that time I did not have the hotel brand flag, but the Holiday Inn was prepared to give me the franchise and I needed a reservation system. There was no help sought from Holiday Inn or from Marriott in running these hotels. When Holiday Inn's 10-year contract expired, I changed it to Marriott. I personally met with Bill Marriott and suggested to him to give the franchise to our properties. He said he had never thought about it. One day I received a phone call saying that they were willing to give me the franchise. So these Holiday Inns were converted into Marriotts, which is definitely a better name.

But coming back to your question, when I built the Holiday Inn at Karachi and Islamabad, I took away most of the business from Intercontinental Karachi and Intercontinental Rawalpindi, because those hotels were in bad shape. They were built years ago, but were never refurbished and money was not put into improving the quality. Also the quality of service decreased. Naturally, this put a dent on the balance sheet of Pakistan Services Limited. They did not have the resources to improve these properties, which were in a deplorable condition. The government had to take a decision on whether it wanted to put in fresh money to improve these properties. The sums required were substantial.

PSL was a government-managed company and Intercontinental was managing the hotels. They had a problem between them because Pakistan Services Limited was not satisfied with the quality of services that were being provided by Intercontinental. This problem led to the Government of Pakistan's decision to privatize and they invited various people to participate. I was one of them and offered to pay the highest price. My record was exemplary as a hotelier who built first-class hotels and provided better services than Intercontinental. Therefore, the government decided to give me the opportunity to acquire the controlling interest of Intercontinental hotels through ownership of PSL.

Since Lahore is one of Pakistan's most historic cities and a cultural capital, what role does the Pearl Continental play today towards maximizing this city's tremendous tourist potential?

When the management contract of Intercontinental expired, I did not renew the contract. They wanted the contract to be renewed but I decided that there was no point in renewing it and rewarding the management, who did not manage these properties well. They were also charging a great deal of money in management, administration fees, and reservation commissions. Most of the money that the company used to make was now going to Intercontinental, towards the management contract. I decided that instead of giving it to Intercontinental it would be better to buy into the company and improve these properties.

Today, the PC in Karachi is a member of the leading hotel group in the world. I built a hotel in Bhurban, a beautiful hotel from which you can admire the mountains. There has been a major improvement in all of the properties. As far as your question about Lahore is concerned, I added 300 more rooms and a new atrium. The International Financial Corporation (IFC) and the Central Depository Company of Pakistan (CDC) financed the project and the hotel is doing extremely well. I then saw a big opportunity in Lahore and decided to build a 40-floor tower and add 600 more rooms. However, these 600 additional rooms will not be the same type of rooms than in the atrium; instead they will be far superior. In fact, they will be the kinds of rooms that you will not find even in places like Dubai. Thanks to my experience traveling and to my past mistakes, I have learned a great deal. Thanks to this I am able to deliver a product that will be the best in the world.

This 40-floor tower is going to be a beautiful hotel with some of the largest rooms, and each one will have a wonderful view of Lahore. It is going to have five fixture bathrooms, plasma televisions, and any other amenity you can name.

Lahore is also a very large city where demand for hotel rooms far exceeds available supply.

Certainly, but I think that the government is heavily taxing the visitor who comes to Pakistan. There is an 8% bed tax and a 15% central excise duty that add up to 23%. Then if you add a service charge, you reach 33%. Who wants to pay 33%? I think the government has to come forward and do away with the bed tax as well as reduce the taxes in general because the customer who is paying it is definitely feeling the pinch.

Furthermore, I am not expanding the infrastructure in Lahore alone. In Karachi I am also adding 400 more rooms in the Karachi Pearl Continental and am in the process of finalizing a 30-floor tower. This will be very beneficial because Karachi is also experiencing a room shortage.

Today there are 10 five-star hotels in Pakistan but we have over 150 million people. Nobody has been building hotels in any of the cities and the reason people have not built is that there is much more money in industries other than the hotel business, where the returns are really marginal. The cost of building a hotel in Pakistan, Dubai, or London is almost always the same. It is very high, at over $200,000 a room. So if you invest $200,000 on each room, then you have to charge at least 200 dollars per day, and there are rooms available in the $60 to $80 dollar range. Today Islamabad has one of the highest rates in Pakistan with $110 a night.

What do you think have been the essential factors behind the success of the Pearl Continental network?

We had to find a local name for ourselves, such as the Taj Group in India. I decided that we must have a hotel chain that is well known in Pakistan and that we would eventually go overseas with it. Pearl Continental is the name that, after some research, we decided to introduce in Pakistan. In Lahore everybody calls it the PC and it is the meeting place for people in the city. It is easily pronounced and widely recognized. A leading hotel was available and we have renovated the entire hotel. We have totally refurbished what was there in the lobby and have provided a variety of new facilities. So I think that has basically given a fresh look to the hotel and the other new hotels we are building will have larger rooms with more facilities.

When you started using the Marriott name it was one of the first times in the history of the corporation that they had given a franchise to a hotel that was not directly under their management control. So how much satisfaction do you get from this and what kind of a challenge did it represent?

It was a great satisfaction because when I met Bill Marriott he had never thought about the franchise. Then they sent their people to inspect these hotels before offering the franchise. As a matter of fact, the franchise agreement of the Marriott was made based on our hotel contract and drafted here in Pakistan. Today the format of franchise agreements has been initiated by the Hashoo Group and we are very satisfied that Marriott decided to recognize the product and lend it their name.

How would you define the main ways that your ability to attract a major, premium international brand benefits the growth, development, and image of Pakistan's hotels?

In everything you do today there is a component of image. What you wear, how you groom, and how you speak are all of the individual efforts that you do to create your own image. Similarly in the service industry you have to make sure that you are in best shape in order to provide the best possible service and to keep on spending money in order to improve the product. Today in the Marriott we have a 27-year old property but we have been investing money every day. The entire hotel is being equipped with plasma televisions. There are computer systems available in the rooms and you can do your airline bookings directly from them. This is our own software, we have researched and developed it ourselves. Nobody has it anywhere else in the world. Our IT department has top class professionals, dedicated to research. We are putting new furniture in the rooms, and the only thing we cannot increase is the size of the rooms because I do not have the land. Otherwise, I would have built another hotel with 400 rooms and with maybe the quality of the Ritz Carlton. It is very important to invest in quality and in building up the product and its image.

The reputation of our world-class hotels has spread far and brought new business and leisure travelers to our cities as destination cities. This is a big boost to the domestic hospitality and tourism industry.

Prime Minister Shaukat Aziz has stated that Pakistan has enormous opportunities in housing, construction, tourism, and the hotel industry. Do you agree with this assessment, and what more needs to be done in order to fully maximize Pakistan's vast potential in these areas?

We have a beautiful country and we have not even begun to reach our potential in the tourism industry. On the Makran Coast I am building a hotel in Gwadar, which has a deep-sea port that is one of President General Musharraf's dreams and is going to connect Pakistan to the Central Asian States. I received a phone call saying that the government had decided to develop Gwadar as a port. I immediately said that I would build a hotel. A beautiful Pearl Continental Gwadar Hotel is under construction.

I have also applied for a convention center in Islamabad and have a letter of commitment from Hyatt Regency to lend their name to the new product. I will be building a new hotel with other facilities near the convention center and hopefully if the government responds positively, I will be doing everything possible where the land is available. My philosophy is that the day you don't grow, you shrink.

As far as the business is concerned, you have to first of all have a commitment, then conviction and guts. You cannot look at profit and loss all of the time. You have to take decisions. That is what I have learned in the cotton trade. At times I lost everything but then had the opportunity to come back through the rice trade, and in six months I had made up all of my losses of cotton and made a profit. So this is part of the business cycle because you must learn how to take on risk and be prepared to have losses. For example, the oil and gas business, which is one of our main businesses today, started for us in 1995 when I bought Occidental of Pakistan, because I looked for opportunity and took the risk.

Another essential component of your tourism assets is Pearl Tours and Travels. Please share tell us about the leading role of your experienced staff in providing travel services, itineraries, and tours for both domestic and incoming international tourists.

Within our hospitality services, we have also integrated travel, itinerary booking, tours and rent-a-car services. We have the "Destinations of the World" franchise for Pakistan so people can do their booking for travel all over the world. The Pearl Tours and Travels as well as our company Transair provide the best services in every hotel so that the guests do not have any inconvenience or the hassle of making a booking. We are not in this business to make money, but rather to provide added value and comfort to our customers. When I began in the hotel business there were many problems with the car rental services. We had outsourced it to some people and they were charging abnormal rates from the clients. We decided that the clients should not suffer at the hand of somebody who wanted to make money because of the traveler not knowing local rates. Today we have about 200 cars throughout the hotels and Pearl Tours is our own company.

As you mentioned earlier, in 1995 you also diversified the Hashoo Group's holdings into the oil and gas sector through your stake in today's Orient Petroleum. What potential do you anticipate in Pakistan's energy sector?
Pakistan has a net deficiency in energy resources. There are two major issues in our country's natural resources sector: one of them is the water situation; the other is oil and gas. Old discoveries such as the Sui gas field are depleting and each day we are running shorter on proven reserves with increasing consumption. It will definitely be a challenge to meet the day-to-day requirements of the country. Pakistan has a deficit in terms of oil. We import over 80% and are not producing enough to offset our consumption. As a child I had the desire to be in the oil and gas exploration business because I like to take risks. I am a very adventurous man by nature. When I began my career I used to be the handling and transport contractor in Balochistan supplying rice, wheat, and sugar on behalf of the government. That used to allow me to travel by sea, by road, by truck, and by rail.

My life has been hard at times. I am a self-made man and have never depended on my parents. I took it as a challenge, touch wood and thank God because it has been a success. I am very satisfied that I have achieved many of my goals.

Coming back to oil and gas, it is definitely something where you can make money.

When I bought Occidental Petroleum it had all of the infrastructure, the trained people, and the entire data room with all the facilities. Accordingly, I paid a premium price for the company and it has been a good investment. After that I took over a large acreage from the government and in the last two years we drilled 20 wells. This is something that nobody had ever done in Pakistan in such a short time span. We made seven discoveries and we are in the process of bringing them into production. Pipelines do not take the gas straight from the well, so you have to clean and process the gas before bringing it to the main pipeline of Sui Southern Gas Company Limited or Sui Northern Gas Pipeline Company Limited, in order to give them the quality they require. Right now we are producing 100 million cubic feet per day of gas and hopefully will be producing approximately 200 million cubic feet by July of this year.

We have also been very fortunate in our joint ventures. We have majority shareholders of Zaver Petroleum, which is named after my mother. Zaver has a large discovery in Chanda field near Kohat where we are a 10.5% partner with OGDCL. Unfortunately it took five years to bring the field to commercial production.

We had seven discoveries with OGDCL in another block, which was ours, but we had given it to OGDCL to operate. But so far they have not come into actual production. If I were in their place, they would be producing by now. But they are the operators so we depend on them in that respect. We have also applied for another block in Punjab, which we will hopefully be drilling by the end of this year. We recognize the urgent need for increasing our country's oil and gas production and we are doing our utmost as a company to achieve that.

So overall have you had a fairly aggressive exploration and production strategy?

Exactly, we have taken a very dynamic approach.

Other important assets include your high-tech ceramics Cera-e-Noor Plant in Balochistan. What will be its contribution towards the future expansion and profitability of the Hashoo Group?

At this moment we are only producing 10,000 pieces a day but are adding more machinery and hopefully will soon reach 20,000 pieces. The reason we went to this factory was practical one there is no factory in Pakistan that could meet our requirements for all the crockery and ceramics we need for our hotels. Since we have our own designs, whenever breakage occurs at the hotels, we can avoid paying substantial money for replacements, the way we would if we outsourced this activity. This allows us not to be dependent on any manufacturer. This is the reason why I bought this factory. We are meeting all of our requirements and are even supplying our competitors, such as the Avari Hotel, and companies such as Pakistan International Airlines. Even some of the embassies and the government are using our ceramics.

Another industry of the Hashoo Group is "Gelcaps Limited" which makes hard gelatine capsules manufactured locally which are halal and used for medications. It is a plus from a religious point of view but we have not been exploiting this in our marketing strategy. We are adding two new machines for this factory and expect to be producing two billion capsules by the end of this year.

You were awarded the Outstanding Professional Contribution Award for your distinguished services to the tourism industry of Pakistan. What did this award mean to you on a personal and professional level?
It does not satisfy me. My satisfaction is my own personal satisfaction. I am not looking for any award or recognition. What I do is what drives me, and my satisfaction is not making money in business, but rather providing 9,000 jobs today. I want to provide more jobs and to contribute to my country's economic growth. My goal is to play a positive role.

Please tell us about the philanthropic Hashoo Foundation, and Umeed-e-Noor, which provides special education for children.

The Hashoo Foundation has built 18 schools in Pakistan so far. It has a program to build another 40 schools with ten in each province of Pakistan. We are taking in children from working class families and providing them a free education, books, uniforms, making sure that once we pick up a child, we can make him a graduate so that they can play a positive role in the building process of Pakistan. The Hashoo Foundation was established to provide scholarships and to build schools.

The Hashoo Group also has two other foundations: the HOAP Foundation and Umeed-e-Noor Foundation.

My wife is running the Umeed-e-Noor Foundation, which helps handicapped children. They are looking after 75 children and we are trying to get land from the Capital Development Authority to build a permanent home which would then allow us to have a facility for 300 children to be boarded there. Some of the children come from rich families but it is hard for them to look after them properly. It is essential for Pakistan to be able to take care of the people who need help. Umeed-e-Noor is committed to this cause and I have been financing whatever I can and my wife organizes fundraising functions a few times a year.

The HOAP Foundation is run by my daughter Sarah. She graduated from Saint Thomas University in Houston with five honors and made the Dean's list. She came back with one year of experience and then she did her Master's. I have put her in this foundation and she works there from morning until nightfall. When you see these children she is working with you are moved to tears, because they are beautiful children, but they have no means to gain education because nobody helps them. The parents are poor and this is a major challenge for Pakistan.

Finally, what would you like to tell the readers regarding your vision for the future of the Hashoo Group and the opportunities in Pakistan?

Pakistan is a very big country with over 150 million people. It has a very strategic location neighboring China, the Central Asian Republics, and Iran. I believe that Pakistan has unfortunately been neglected in terms of getting support from the superpowers and developed countries, which need to bring more investment into Pakistan. For example, today if you go to the North of Pakistan, you will see that 90% of the fruit is given to the inhabitants. It could be processed to add value and people need to be encouraged to export it, increase their activities, and grow more fruit.

Pakistan is a beautiful country from the point of view of agriculture and tourism. The coastline is spectacular and the ancient city of Taxila is the birthplace of Lord Buddha. Our country is the birthplace of the Indus civilization. Lahore is the twin city of Delhi but people go to Delhi and do not come to Lahore. So it is clear that we have not projected Pakistan sufficiently on the international map. But my message to the readers is that Pakistan is a very beautiful country with many opportunities in the tourism industry, and in the oil and gas sector, for example. It is also the second largest cotton producer in the world. The mining sector also has tremendous potential. There have been many opportunities for individual investors, but first they must be encouraged by their own countries. If they are willing to go and invest money in China, for example, why not do so in Pakistan? My message is for people to help Pakistan because God has given them a position to be able to help the country and in this way we can all benefit.

The NY Times

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