August 11, 2003	Monday	Jumadi-us-Sani 12, 1424

Commerce Minister Humayun Akhtar announced this year’s trade policy on July 19. The policy envisages crossing the figure of $10 billion in export earnings. However, there are at least two areas which the policy fails to cover although there is a good deal of potential on both counts.

This article only aims to draw the policy makers’ attention with the hope that people in the ministry and the Export Promotion Bureau (EPB) might think of applying some mid-course corrections and may consider these points for full fledged incorporation in next year’s policy.

The two potential areas missed this year, as also in all this past half century, are:one, engineering services (both of consulting engineers and contractors) and engineering goods including machinery, plants, products needed for executing projects and consumer durables; and two, the Hajj and Umra during Ramzan.

Pakistan has a great deal of untapped potential by way of its engineering skills and products for a market of trillions of dollars. The potential of ‘Hajj market’ too is not slim. According to my observations both are wholly neglected. Though Pakistan’s ability to service the two is not frail by any means. First the engineering sector.

This year’s policy does include a long awaited ‘facility’ for the contractors by way of a pool to help banks tackle the issue of bonds and guarantees. But this step alone is not much of a move as compared to the potential before us. The market is large and our skills do match the target.

The engineering sector has great potential to earn from both consultancy and contracting, by designing as well as constructing infrastructure and development projects. Pakistan’s engineering goods sub-sector can also target at exporting quite a bit of its output.

This sub-sector covers industrial plants (ranging from heavy plants like cement plants and lighter plants like the ones needed by pharmaceutical industry), industrial machinery, parts (auto parts, for one), and consumer durables.

The types of engineering projects already in Pakistan’s portfolio include: consultancy and designing of dams (as in Malaysia, Indonesia and Iran); construction of high tension power transmission lines (as in Saudi Arabia, Kuwait); construction of highways (as in Nepal, Guinea Bassao); construction and consultancy for buildings including designing and installation of air-conditioning systems and supplying parts of AC plants (as in UAE, Saudi Arabia); consultancy and planning, partly, for bulk water transmission (as in Libya’s man-made river); consultancy and construction of airport terminals and runways (as in Oman and Saudi Arabia); laying of large dia oil/gas pipeline (as in Nigeria) and, countless smaller projects. This is no mean a track record. That Pakistan itself keeps hiring foreign consultants and contractors for even the pettiest of projects should not detract readers from the fact that Pakistan does have such a pool— a large pool — of skills. With not much work in the domestic market to keep them fully occupied, the communities of consultants and contractors can take up work anywhere in the world. Good marketing and good ‘packaging’ of our expertise can generate large volumes of work for Pakistan’s engineering sector, specially in the consulting segment.

However, contractors are not as well placed, though their deficiency is not entirely because of lack of skills. Generally it is the non-technical blockages which obstruct construction contractors from winning overseas projects commensurate with their expertise. The obstructions are primarily in the shape of extremely difficult conditions for obtaining various bonds and performance guarantees. Hopefully the facility regarding bonds and guarantees promised in this year’s policy will be installed quickly.

Another difficulty is small pools of machinery and equipment with Pakistani contractors. This is mostly due to their less than ‘full’ use in the base country. To cut short, none of the blockades are insurmountable. A little bit of sympathy, some understanding of the issues and a willingness to change things for the better can pave the way for Pakistani contractors to meaningfully large ventures abroad.

This is where the need to arrange brain storming sessions with the consultants and construction companies comes in. It is suggested that associations of consulting engineers and contractors be involved in holding such sessions so that Pak-engineers friendly rules and regulations are evolved and enforced at the earliest.

In the meantime the EPB should send out ‘scouts’ to about 10-15 strategically placed countries in Africa, Central Asia and South East Asia. The scouts must be by way of large consulting companies and should be supported by something like US AID, Japan’s JICA and Canada’s CIDA.

Once a consultant wins a project in a target market, contractors and products will follow easily, as always happens in the case of aid from the above named funds.

Estimates of the size of the market in various regions of the world:

Even a 1 per cent slice of the smallest of markets (Africa) means a potential of $600 million for contractors and at the usual 2 per cent as consultants fees Pakistan can aim at earning another $28 million. Similar figures can be worked out for TCD-PAP countries, should we decide to focus at one or more of them.

While Pakistani consultants can be trusted to muster capacity for their share of the cake (2 per cent of the projects’ costs), the contractors may not be in a position to take up big projects, specially if some come in a lump. They will, at least, have to form joint ventures and pool their hardware. They will also have to learn to form and operate consortia. (There are signs of hope on this count too.) And of course the government (EPB) will have to act to undo the shackles that hold them back.

Apart from skills, Pakistan also has large (spare) capacity in its engineering or durables industry. When a combination of Pak consultants and contractors wins a project, ensuring supplies of goods would be the obvious next step. Things like cement (specially for countries not far away from Pakistan) and steel, cables and electrical fixtures, fans, lights, air-conditioning plants, motors and pumps, pipes and conduits, doors, windows, building paints etc should be easy to sell. The same is true of industrial plants where Pakistan’s fabrication industry has meaningful capacity.

It is suggested that two national seminars be convened - one in Karachi for engineering services (consultancy and contracting), and the other in Lahore or Gujranwala for engineering goods.

Delegates to the moots should be asked to suggest policies and regulations that would best help attain the goal of high engineering exports.