Industries are shutting down, interest rates have made investments too expensive, and imported inputs are unaffordable. While most are stuck in the doom and gloom scenarios, others are sensing opportunities. Matco is one such company.

Known for rice, family-owned Matco is Pakistan’s largest basmati exporter. Recently, however, it turned its attention to corn.

“In 2021, Matco started its corn starch division as a greenfield project. Last year, in August, it became operational with a capacity of 200 tonnes per day,” said Syed Bilal Ali Ghori, Director at Matco, who is heading its corn division, in an interview with Dawn.

“Given the response to the first year of operations, we are reviewing plans to expand production by 50 per cent by 2024-25. New uses for corn-based products are coming out, which is why we have other modified products in mind after starch. The expansion plans are already drawn with the equipment and suppliers lined up, especially since the plant needs economies of scale to make us more efficient.”

Rupee’s depreciation has prompted a search for local alternatives, increasing the market for homegrown corn starch

Despite being among the top five crops in Pakistan, corn is surprisingly not as much in the public’s eye as its more contentious brethren, such as sugar, wheat and cotton. Versatile, its flour can be used to alleviate food security and its downstream product in the form of biofuel can reduce oil imports. Among its myriad uses is as feed for the poultry sector; a modified version of it is also used in oil well drilling.

“We work with farmers to purchase their corn and process it for value-added products such as starch that is an input for the industrial sector,” said Mr Ghori. “From 2001 to 2022, in a rough span of two decades, corn production has increased sixfold, from 1.6 million tonnes to over 10m tonnes. The increase has been driven by better yields through hybrid seeds, prompting farmers to turn from other crops like cotton to corn and thus increasing maise’s acreage.”

Given its nature, corn-based products can be used in recipes as people move away from chemicals and additives. Since crops grown in Pakistan are non-GMO [genetically modified organisms], it gives an edge internationally. Matco is working with farmers for certifications for organic and non-GMO since this enhances the value of locally grown corn and its value-added products.

In Pakistan, the biggest consumer of starches is textiles. ‘Sizing’ is a process through which different solutions are applied during weaving to strengthen yarn and reduce its hairiness. That strength is imparted by using starch. Corn starch as a raw material is easily accessible since its primary input is homegrown and it’s natural.

‘Organic’ is the buzzword globally, with companies emphasising sustainability. Internationally, customers want anything coming in contact with skin to be green and ‘label friendly’.

“We have the required textile certifications confirming that there are no harmful chemicals in our products. This helps the textile exporters to be able to compete successfully in overseas markets,” says Mr Ghori. Since it’s domestically produced and used in volumes, it is a better option for local industries than to use imported inputs.

“We expect the textile investments commissioned through the facilitation of Temporary Economic Refinance Facility (TERF) to start coming online next year,” said Mr Ghori. TERF, now discontinued, was a facility offered by the State Bank during the pandemic to support manufacturing.

Given the current economic crisis, as well as the lack of transparency in the allocation of TERF funds, it seems unlikely that the textile sector will revive sufficiently. However, Mr Ghori shed a different light on the turmoil that the businesses are suffering.

“Right now, textile units are operating at a lower capacity. However, we see opportunities in challenging situations. We are bullish on the chances of the economy, and the textile sector, rebounding by the next year.

“When TERF was launched, the textile units that were set up had newer machines and looms which are just waiting to come online, and that capacity will come online two to three years down the line,” he said.

The pandemic disrupted supply chains globally. Since Pakistan was one of the first economies to open up, there was an influx of orders. Delay in transit, as well as its exorbitant rates, led to international customers overstocking supplies. When conditions normalised, there was a slump in demand followed by recessionary trends stemming from the Ukraine-Russia war.

But the inflation numbers in the US and UK, two of Pakistan’s main markets for textiles, are coming down. “The current slump is more of a temporary downturn that we will overcome in a few years.”

However, even assuming that there is an upturn in the economy, is there enough space in the industry for an expansion in the near-term for starch production? Mr Ghori seemed to think so.

Various small units in the industry are operating under the radar, but the big players are few. Rafhan Maize Products Co. Limited, affiliated with US-based Ingredion, is well-established in corn and its value-added products. Packages is also planning on setting up a facility for corn-based products.

“With Matco, Rafhan, and Packages, the domestic market for corn starch will most likely be saturated, but there will be room for exports,” said the Matco’s director. “We see more potential for corn starch exports rather than raw corn,” he added. Currently, about 10-15pc of corn starch, roughly 30,000 tonnes, produced domestically is exported.

“Companies using imported raw materials are now looking for domestic alternatives across industries. The current crisis is teaching the industry how to cut down on imports, and I think that trend will continue,” said Mr Ghori optimistically.

Published in Dawn, The Business and Finance Weekly, September 11th, 2023