Pakistan News And Discussion-12

[Naresh]

[center]<b><span style='font-size:21pt;line-height:100%'>Foreign engineering firms may capture Pak market</span></b>[/center]

<b>LAHORE : With a contribution of less than three per cent to exports, the local engineering sector mainly comprising small and medium enterprises is likely to surrender the domestic market to foreign companies as the economy further opens up.</b>

Engineering experts have urged entrepreneurs and government planners to coordinate in facilitating the local engineering industry by lowering the cost of doing business, providing increased access to funds, capacity-building to connect globally and improving global marketing.

They pointed out that the exports of engineering goods had not increased in line with the increase in total exports during the past one decade. The share of engineering goods’ exports, they added, was still less than three per cent of the total exports. The engineering sector has been the real growth promoter and accounted for over 60 per cent of the total global trade.

They said exports from the engineering sector in Pakistan were limited to the electrical and mechanical industry only and pointed out that engineering and construction services, engineering design services, energy and telecom were also part of the engineering sector, besides light engineering (for example fans), home appliances and auto part sub-sectors, which should lead growth in exports.

Engineering experts considered high interest rates as a small component in the cost of doing business in Pakistan and said that the cost of engineering goods increased due to wastages that occurred owing to unscheduled and frequent electricity breakdowns.

Also, closure of industries for long periods due to official holidays pushed up the cost and they cited the example of four straight holidays announced on the occasion of Eid this year.

They said no local construction company had the capability to build a 70-storey building, encouraging construction companies from Bosnia, Turkey, Dubai and Malaysia to start mega residential and commercial projects. They said these companies were likely to stay on after the completion of projects and grab a share from local construction companies for smaller projects as well.

They said the construction industry in Pakistan would have to gear up to thwart the challenges posed by the foreign construction companies in the future.

They said the situation in the automobile industry was not as bright as was being propagated by the planners. Pakistan is saving just 30-40 per cent of foreign exchange on locally-produced cars as indigenisation has not been carried out on a rational basis.

<b>They pointed out that although the government claimed that the local car industry had indigenised 53 to 73 per cent of auto-parts, their value was too small even for cars with 73 per cent deleted parts when compared to the cost of 27 per cent parts that had to be imported.

In other words, even for the highest deleted car models the country has to pay over 50 per cent in foreign exchange.</b>

Engineering experts also blamed entrepreneurs for their failure to raise funds through secondary markets. No engineering concern in Pakistan has the capacity to meet even 25 per cent requirement of any component required by any leading global car-maker. They said the inability to reach global markets also increased the cost of production.

The engineering experts, however, appreciated the government’s policy of entrusting the responsibility of engineering sector development to the private sector. They said the former chief executive officer of the Engineering Development Board, who belonged to the private sector, took bold steps to encourage local entrepreneurs to participate in international engineering fairs and broaden their horizon.

However, the EDB has been working without a head for eight months as the private sector CEO was forced to resign due to a non-cooperative bureaucracy. The government has once again appointed a private sector entrepreneur as the EDB head who would again need compliance from the bureaucracy which should be ensured.

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