October 1, 2007	Monday	Ramazan 18, 1428

Pakistan offers promising prospects for export of engineering goods. The indigenous industry has requisite capacity and capability and, in general, international competitiveness too.

Still, the export potential of machinery and equipment remains untapped.

The recently announced Trade Policy 2007-08 has not brought any relief either to the light or heavy engineering industry. No concrete and substantive measures have been adopted for promoting the vital sector. The only measure the trade policy incorporates is to allow inland freight subsidy for the transportation of engineering goods destined for exports. This however is of no significance to the industry, which is overburdened at present with very high production cost.

The proposed measure therefore may not result in enhancing exports of various engineering goods. Federal budget 2007-08 has also not come up with any incentives for the growth of industrial engineering sector either. In fact, the engineering sector has been neglected.

On October 31, 2002, Commerce Minister Abdul Razak Dawood had said: “A roadmap-- Engineering Vision 2010--- is in place and I hope now the country’s exports in this sector will increase to $500 million to $1 billion per annum in coming years.” Actually, exports of engineering goods during 2005-06 were valued $280 million. The Engineering Vision had projected export of engineering goods worth one billion dollars by fiscal 2007.Only $280 million were earned that year.
Commerce Minister Humayun Akhtar Khan promised on December 23, 2003, that, “ the manufacturing and export of engineering goods are being diversified under the localisation policy of the government.” This did not happen.

Sluggish export growth: An analysis of the export performance of the engineering industry during the last four years shows that the annual export of engineering goods were in the range of average less than $ 200 million. Though increasing amount-wise, the share of engineering goods in the total exports, in effect, did not increase during the period under review.

The export of traditional items like cutlery and surgical instruments, however, has risen substantially. Nonetheless, the share of engineering goods in the total annual exports declined from over six per cent in 2003-04 to less than three per cent in 2006-07.

Unfortunately, nothing is being done to achieve export targets set for the year 2007-08. The table shows that a nominal increase of over one-per cent is projected in export of engineering group. There is no increase in cutlery goods, whereas export target for surgical instruments for the current year has been kept even lower than that achieved during the previous year.

There have been repeated commitments by the president and the prime minister to strengthen the engineering sector, but nothing practical has been done in this direction so far. The apathetic attitude of the government towards the sector is evident from the fact that the Engineering Development Board (EDB), the apex body, to look after the manufacturing engineering sector, is functioning without a chairman since November 2006, and without its full-time chief executive since April this year.
Complete sugar mills have been exported to Bangladesh and Indonesia and ships to China in recent past. Likewise, equipment, parts and accessories for sugar, cement and textile industries, buses, tractors and a number of light engineering goods have been supplied to many countries. These products conform to international standards of specifications, quality and workmanship.

Currently, the top four countries importing Pakistan-made machinery and other engineering goods are, in order of ranking, the UAE, Afghanistan, Bangladesh and Saudi Arabia. Other markets for machinery and components manufactured in the country are, in the same order, USA, UK, Germany, Kuwait, Sri Lanka, Qatar, Iran and Canada.

The national companies have also provided technical and engineering consultancy services to various industrial and infrastructure projects abroad. As a result of changed policies, the industry was unable to export, both in terms of volume and value, on a sustained basis in subsequent years. In the highly competitive and fast moving export environments, the engineering industry could not operate effectively in export markets, primarily due to lack of support by the government.
Marketing mechanism: Unlike the usual methods of sales for consumer items, the marketing of engineering products requires institutional support. This however is simply not possible to achieve under the existing set up of the Trade Development Authority of Pakistan (TDAP). The centralised export development strategy adopted by the TDAP has not, and will not, promote the non-traditional products like engineering goods.

An autonomous body is needed exclusively for export promotion of engineering goods and services, on the pattern of Defence Export Promotion Organisation (DEPO). The defence products’ exports have increased, within few years, to the present level of more than $40 million in 2006-07. The proposed engineering body may be mandated to institutionalise public-private collaboration to substantially enhance engineering exports.

While it is desirable to develop a long-term vision for balanced promotion of exports, it is essential to first establish the products in domestic market for achieving economy of scale and assimilation of technology. Pakistan has developed a fairly wide base for production of engineering goods including capital machinery, which saves the country $3.75 billion annually through import substitution. The range of engineering goods covers industrial plants, ships, railway equipment, small aircraft, electrical goods, transport equipment, domestic appliances, telecommunication equipment etc.

Exports target: Capital machinery, light engineering goods and engineering consultancy services offer great opportunities for export mainly in the Middle Eastern, African and neighboring countries. Nonetheless, it presents numerous challenges and difficulties too, given the present national and international environments.

To bring about a real change, major steps have to be taken with well-thought-out and coordinated focus on export promotion of engineering goods and services. It is time to develop a long-term perspective, The government should continue tariff rationalisation to provide level playing field to local engineering industry and to extend attractive export financing scheme and long-term financing facility to encourage additional investment.

The writer is a former chairman of the State Engineering Corporation.