TBY talks to Irteza Ali Qureshi, COO of Kansai Paint Iranian.
TBY Does Kansai Paint have any expansion plans in the near term for the Iranian market?
IRTEZA ALI QURESHI The Iranian market is so big that we believe that very shortly—in the next two or three years—we will have to increase our capacity and may even have to consider building a resin plant here so as to accommodate the size of the market. For Iran, I can give you an example in the automotive industry. Iran manufactures about 1.5 million vehicles each year. Now, you may want to compare this with its neighbors. Pakistan has a population of 180 million people, and most of the cars are produced locally. You have a Honda plant, a Suzuki plant, a Toyota plant, plus other companies are coming in now. Nissan also has a plant there. In Pakistan, the maximum number of cars they have produced in a year is 150,000 units for a population of 180 million. Then you come to Iran, where you see a population of 74 million people and production of 1.5 million cars, which is 10 times that of Pakistan. It is a very big market. Pakistan is a decent sized market, but Iran is a phenomenally large market. We are ready for this opportunity. We know that there is a lot of manufacturing, and we’ve obviously dealt with the car industry here. And the car industry claims that the growth will continue, and very soon we will see Iran producing 2 million cars per year. That’s the kind of opportunity we’re talking about here.
You have plans for growth in the Middle East. Which factors led to this strategy?
It’s about a four-year-old strategy. As you know, every multinational company wants to expand and be present in all parts of the world. Kansai had been operating via a joint-venture model in this region, and the joint venture ended four years back. That gave Kansai the opportunity to come in at full force in this area. The company started looking at opportunities, identifying which were the most critical areas where it needed to be in first. The strategy resulted in Iran being identified as the key market in this region. This is because in the entirety of Africa, all the Middle East, and right across South Asia, Iran is the biggest car manufacturer. And not many people know that.
Do you have plans to conduct exports from here to other Persian Gulf countries?
Yes, this is just a start up at the moment. We believe that Iran is geographically very well placed. From here we are looking to supply states in the CIS, and Iran would be the best place to start exports from. We would also like to ship to Iraq and other Middle Eastern countries from Iran, and cater to the Persian Gulf and CIS markets as well. Such will be the size of the surrounding populations that we would like to use Iran as a hub.
What makes your company so competitive internationally?
Well, we’re number seven in the world. In car manufacturing we are very much ahead of the competition, and in Asia we’re number two. Our product is the main source of our competitiveness, as its quality is unique. There is a lot of research behind our product and we constantly seek to improve its quality. Every year, the Japanese head company spends $50 million on research and development activities, bringing out new solutions and products to our clients, and improving the quality of our existing products. Another one of our strengths is in our technical services. When we provide our paints to a car manufacturer in Iran, we have a team stay at the factory full time while the application of the paint is taking place. If there is any paint that goes wrong, or anything about it that goes wrong, our team is there to immediately address the issue. It’s an added advantage for the customer; they get free technical services from us. Our experts do regular testing, and all of that to ensure our quality.
When you’re manufacturing a car you have automatic lines, and everything has to be done in a specific period of time. If anything goes wrong and you stop the process, the entire process gets stopped and that’s a huge cost to the customer. That is where we come in and help our customers. We’re not just providing them with paint. We’re working with them, providing them with solutions. We have our teams there in order to make the process more efficient. And secondly, our people from Japan come on regular visits. In just one month alone in 2010, we brought over some six or seven experts in different areas from Japan. They’ve come in and studied the customers’ production lines and advised our clients on how to make them more efficient.
Now with 1.5 million or 1.6 million cars being produced in Iran, very soon you will see that the car industry will need increased capacity. There are two ways of increasing capacity. One way is to invest more, bring in new machinery, or construct a new plant. The other way is to improve upon your existing set up so that productivity increases. If a line is producing 1,000 cars per day, by bringing in efficient measures you can have maybe 1,200 cars per day. That is again where we work with the customer in the car industry. We tell them, “These are the kinds of things that we know. If you are interested, we can work with you. We can help you bring in that technology.”
Geographical location and the domestic market were important in your decision to invest in Iran. Was human capital a factor in this decision?
I have worked in various industries, and am often amazed by how Iranians have developed technology by themselves. I don’t think the human factor is an issue here at all. I believe Iran has a very high literacy rate, and a strong higher education sector. I meet a lot of people here who have engineering backgrounds, and that makes Iran a very strong candidate for innovation, technology development, and for local capability. What we’re trying to do here is bring in our new technology. We’ve brought in the latest technology for CED paint, and we feel that by bringing our experts from abroad over the next six months to one year, they will help train the local people, and then the local teams can carry on working in these operations.
What is the future of the plant? What is the capacity, and how many employees do you have working in the plant?
We have a capacity of approximately 18,000 tons. At the moment we employ close to 90 people. We’re still in the start-up phase of production, but by the end of 2010 we will have doubled the workforce of the company.
How will the performance of the Iranian plant affect your decisions to start new plants elsewhere, such as in Egypt and Morocco?
Plants are decided upon for each country based on the dynamics of that particular market. For instance, when we decided to come to Iran and set up a plant, we had to first analyze our market potential and determine whether setting up a plant was feasible and practical. Otherwise, you could just do an import model, in which you bring in your materials from abroad. The decision to set up a plant in any country depends largely on that country’s ability and market size to justify investing.
Do you think Kansai’s operations in Iran could be a showcase for other foreign investors?
I think our message to other foreign investors would be to understand the market, and check the opportunities for yourself. Do not decide against coming here only according to hearsay. I think whoever comes here is amazed. This is an amazing country. You have to come to Iran to understand what this place is all about.
What do you think about Iran’s growing ties with other Asian economies, such as China and Japan?
It’s very strange. Some people say that Iran doesn’t have good relations with many countries. But with countries other than the US, I see Iran’s relations to be amazing. You keep hearing that an industry in a certain country is forming a joint venture with Iran. There is a fine line that we need to draw, and we need to accept the fact that Iran is very well placed within the international community. Most of the major countries we see either have operations in Iran, directly or indirectly, or they have the intention to work in partnership with Iran. It could be in the form of manufacturing, investment or technology. Whoever is not taking an interest in developing relations or investing in Iran is losing out. Slowly, I think the multinational companies around the world will realize that, and then they will piggyback on other companies or start to go in themselves, which I think is needed here. With globalization and international competitiveness, most companies around the world will soon realize that this is a place where they need to go next. Very soon you will see new plants being built and other multinationals coming here. And I think what the Foreign Investment Protection and Promotion Act (FIPPA) is doing is a wonderful job in supporting foreign investors. Kansai is planning further investments here and we have obtained great support from the Organization for Investment, Economic and Technical Assistance of Iran (OIETAI). Throughout this process we were never made to believe or understand that we needed a partner here, or that someone didn’t know how to work through a process. Everything was managed. OIETAI staff were very cooperative and helpful. They understood our issues and problems, which they continue to address. So it’s a very healthy relationship that we have with them.
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