India and Pakistan at the World Cup
One provides IT services, the other footballs. And so are their economic futures defined.
The two biggest South Asian countries share at least one thing: they both stink at football. But they have a presence at the South Africa World Cup. And the different way in which they are leaving their mark is a parable about their economic fortunes.
Pakistan is present in the form of footballs – five million of the round thingamajigs being kicked around South Africa will be made in the country’s sports good-making centre of Sialkot.
India will be present in the form of infotech management. Mahindra Satyam holds the contract for IT-enabled services for the international football federation, FIFA, for this and the next World Cup. But Pakistan’s soccer story is one of old economy stagnation.
Sialkot used to make two-thirds of the world’s footballs. Today it makes about half of the hand-made footballs and a small fraction of the machine-made ones. (Figures differ, but the drop in market share is acknowledged by everyone.) Even the stuff they are sending to South Africa, are not the Jabulanis being kicked around during the actual matches. Those are machine-made in China. Pakistani firms have the contracts for the Jabulani look-alikes used for promotional and training purposes. This is a demotion: Pakistan provided the real thing – the Telstar and Tango balls – in at least two previous World Cups.
India’s World Cup story is one of future opportunity. Mahindra Satyam has some 130 staff handling a variety of services, like media accreditation and tracking billions of dollars worth of FIFA equipment, as part of an $80 million contract. As useful is that it gets nine minutes of free advertising at every football match – watch the changing billboards next time a game is on.
I think it’s a safe bet that an Indian software firm will be doing FIFA’s logistics even after 2014.
But more importantly Mahindra Satyam has already learnt enough about managing such mega-events to have created its own sports division and has ambitions to nab contracts for other international events.
Pakistan’s football makers are suffering because of, what else, Chinese competition. China’s machine-made competitiveness has ensured it is by the far the world’s largest football exporter. It exports three times more in dollar terms to the US, for example, than Pakistan. Sialkot does produce machine-made footballs but a combination of the Taliban and endless power cuts ensures they will always trail Guangzhou and Shenzhen when it comes to costs.
Pakistan still dominates the traditional hand-made football market. But that’s a shrinking market. And the Jabulani is a sign that future soccer balls will be increasingly technology infused and, therefore, machine-made. And even here they face competition from India’s Jalandhar and Meerut-based football makers. India’s football industry is more informal than Pakistan’s and more prone to using child labour, family stitchers and so on. This makes its labour costs marginally cheaper and allows it to nibble away at Pakistani margins.
India’s football prowess is really about providing IT services to sporting events. This allows it to combine software, management skills and low labour costs. The profits are good, the skills learnt useful for capturing more markets, and there isn’t too much competition.
Pakistan’s football industry is stuck in a rut. It is unable to go up the value-addition ladder because the brands are Western and its domestic problems mean it can never challenge China.
India’s 130 strong team in South Africa will earn their country about $ 40 million. Extrapolating from the figure that 60,000 workers produce $ 210 million worth of high-end football exports in Pakistan, Pakistan’s 15,000 strong team in South Africa earned their country about $ 50 million.
So which country is more likely to see individual incomes rise faster over time and in which country will terrorism become an economically advantageous career?