April 18 ,2014 | by Hari Sri

Disney Asian Operations Exit to Cost Pakistan $200m

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Disney’s decision to decamp from Pakistan to India and China could cost Pakistan millions. Why has the decision been taken?

It may have been rumoured for several months, but now that Disney has gone through with its plans to pull all sourcing operations out of Pakistan, the country is concerned about the damage that has been done to its reputation and finances alike.

 

In a statement released last year when the move was agreed, the Walt Disney Company said that it was updating its list of “permitted sourcing countries”. The intention was to remove 44 countries from the list where it does not believe appropriate measures are being taken to ensure the safety of workers producing the company’s products.

Of those, just five were currently producing goods for the corporation, prompting the company to immediately pull out of Pakistan, Bangladesh, Belarus, Ecuador and Venezuela.

Disney said that it planned to ensure the transition ran smoothly to limit the impact on businesses and employees, which may mean that it takes longer to cease operations in some facilities.

 

But whenever the company has finally ended all of its operations there, the damage could be considerable. The most pressing concern is that 16 companies across the nation stand to lose as much as $150 million in exports, with some reports saying the losses could be as high as $200 million.

Pakistan’s businesses are understandably deeply unhappy that the decision has been taken, since it will see valuable contracts move away from the nation’s firms and instead handed to suppliers in India and China.

 

Whatever the truth of these accusations, the decision to leave the country followed a factory fire in Pakistan which killed more than 250 textile workers in September 2012, which indicates that Disney is paying close attention to local events.

Similarly, it is pulling out of Bangladesh in the wake of a number of industrial accidents, most famously the Rana Plaza factory collapse which killed more than 1,000 people.

Disney isn’t the only company to have at least considered pulling out of countries where these well-known accidents have taken place, and for now it seems that the biggest concern for Pakistani officials is to make sure that other brands do not follow Disney’s lead. With one of the world’s biggest companies now having left the country, Pakistan will have to work hard to retain its other major clients.

Hari Sri

Hari is the LSBF Blog's News Editor. He manages the editorial content on the blog and writes about current affairs, SME, entrepreneurship, energy, education and emerging market news.

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