Engineering : A Revolution Waiting to Happen

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Most South East Asian economies started growing with a textile and garments base. They quickly graduated to the engineering sector goods which constantly became more and more featured and hence more value added. In a sharp contrast,Pakistanhas continued to try to get more and more out of its textile base while for the most part ignoring opportunities to develop its own textile machinery as well as opening up other value added sectors for export.

How it Started? 

Engineering Vision

Mindful of the significance of engineering industry and the central role it has played in strengthening the economies of countries like Malaysia, Korea, China, India, Thailand and Indonesia, the Government of Pakistan, finally, supported and approved a ten-year ‘Growth Strategy for Engineering Industry to Achieve Rapid Industrialization and Economic Growth’ or more precisely the ‘Engineering Vision 2010’ on August 22, 2002. This historic decision from the highest level marked the beginning of government’s watchful shift from textile-based export growth to engineering-led export push. The ‘Engineering Vision 2012’ outlined policy guidelines for developing a cohesive engineering growth strategy. It envisioned a development strategy based on the broad parameters of Human Resource Development, maximum participation of local industry in engineering projects, technological up gradation, globalization of industry, rapid growth through market enhancement and institutional & regulatory framework.

Engineering Development Board (EDB) Re-organized

To pursue its mission and taking Engineering Vision 2012 to the next logical phase of implementation based on guidelines of EV 2012, EDB was restructured and mandated to internationalizePakistanengineering sector. The Chairman and CEO of the Board were inducted from the engineering manufacturing sector with proven track records of running profitable, export based, manufacturing businesses of their own.

The important task before an evolving EDB was putting in place a well knitted operational structure aiming at enhancing exports of engineering goods in global engineering goods trade and making engineering industry the main driver of economic growth and development.

Aware of the fact that without engineering goods exports,Pakistancould not achieve the desired breakthrough in exports, the immediate goal for EDB, therefore, was to embark on an effective export marketing strategy. To achieve these objectives, EDB adopted a market-led approach of exploring global markets for indigenously produced goods in all potential engineering sub-sectors, selecting and preparing champion companies within specific sub-sectors to exhibit their products and services at leading trade fairs like Hannover Messe , MIDEST  and EUROMOLD .

How was it Achieved?

Creation of Business Development Group in EDB

To embark on the important initiative of export promotion and market expansion for engineering goods, a Business Development Group (BDG) was created in EDB which was led from the front by the leading reputable private sector industrialists. The initiative was essentially driven under public-private partnership which proved highly successful. A large number of volunteer businessmen were invited to sit on the various committees established for creating an effective entry into the European trade fairs. This contributed greatly to the success of the Engineering Development Board in meeting its mandated goals.

Profiling and Selection of Champion Companies

The strategy to boost good engineering companies at leading international trade fairs consisted of careful selection and profiling of successful engineering companies having the potential and capability of becoming a part of the global supply chain. The companies thus selected had a track record of technology as well as reasonable management expertise needed for a cross border liaison.

The export development exercise was conducted in a thoroughly professional manner. A close coordination between the organizers and the participants was all along maintained in building up to the events. Minor detailing like e-mail addresses, website contents, brochure inspection, product selection for display etc. were looked at for almost each individual company selected. Valuable inputs were given for improvement in each / all aspects of participant’s offering, so as to field a winning team.

Market Expansion Verses Protection

For too long, Pakistani industry had existed behind high tariff walls. Protectionist policies always lead to complacency, if not made time bound. The striking feature of the export development initiative has been mentally empowering the companies to seek the course of market expansion for growth instead of taking recourse to surviving behind the tariff protection wall. Developing such a mindset enabled most of the companies to abandon the protection incentives mantra and focus on achieving competitiveness, taking the market expansion route.

 

The role of CBI in Pakistan Engineering Exports Development

Being an exporter himself, the CEO of EDB knew the shortcomings of Pakistani exporters which he had observed during participation at various trade fairs. The need for formal training of the shortlisted companies for being taken to trade fairs was recognized and a request was made to Mr. Cor Dieleman at the CBI for assistance with a brief two day training of participants selected for the Hannover Messe 2005.

The role of CBI (the Dutch agency for promoting imports from developing countries) has been instrumental in developing mindsets of Pakistani engineering companies towards exports and market expansion. The EDB joined hands with CBI in 2005 with initial focus on imparting training to Pakistani engineering companies participating in international trade fairs through their Effective Trade Fair Participation (ETFP) program. CBI experts Mr. Cor Willemse, Mr. Ton Willemse, Mr. Staff Henderieckx and Mr. Dick Vos were invited by EDB in 2005 to conduct ETFP training program in Lahore and Karachi. The program covered critical areas of stand behavior, product selection, brochure and website development, effective communication and negotiating trade enquiries.

Results and Achievements

Under the EDB’s Engineering Sector Export Development and Market Expansion initiative, a total of 116 companies from potential sectors of automotive, agricultural implements, plastic & rubber parts, electrical machinery, automation, engineering design and services, castings and forgings, home appliances and oil and gas equipment were identified and given international exposure by way of exhibiting their products, benchmark themselves against best international practices, study modern technologies and agile manufacturing techniques and explore business development opportunities to become part of the global sourcing chain.

Out of 116 companies, 30-35 companies entered into export business as a result of EDB’s initiative. Around 10 companies have been successful in forging alliances, establishing joint ventures or entering technical collaboration agreements with foreign companies for supply of parts/components/equipment.

As far as export development is concerned, exports worth US$ 25 million has been achieved (actual exports and in pipeline). Most of the exporting companies have undergone CBI’s Export Coaching Programs.

Some Star Performers

Given the opportunity to go global produced many stars in the process thus necessitating that many more good companies need to be explored and taken to the international market. Some star performers which made themselves conspicuous through their achievements are:

 

  1. Research and Development Engineering Company.
  2. Innovative Automation and Engineering Company (now AvanceonPakistan).
  3. RaviAutos
  4. Infinity Engineering
  5. Mecas Engineering
  6. Thermosole Industries
  7. Power Wheels
  8. Darson Industries
  9. Transmission Engineering
  10. AE Design
  11. SIMCON
  12. Alnoor Refractories
  13. Precision Forging
  14. SPEL

Looking into the Future

Pakistancan only achieve trade surplus by sensitizing and developing its engineering sector by offering it limited incentives for exploring global markets through trade fairs participation. There are many star performers awaiting one time opportunity to become part of the global sourcing chain. It is high time to search for these champion companies, support them through handholding and providing them the right guidelines and export orientation.

This is just the beginning and if the Government of Pakistan as well as the Chambers of Commerce & Industry, together with the relevant trade bodies give attention to key factors for growth of engineering sector exports, this sector will shortly outshine the hallowed textile sector ofPakistan.

Solving Economic Issues of Pakistan

Pakistanneeds to increase its exports to overcome the economic dilemma. For this we must increase our share in the engineering sector and focus less on non-engineering products like textile and agriculture. 65% of the world trade is composed of engineering based products whereas textile is only 6.5%. These percentages are in dollar values.  We are playing in only 6.5% of the total global market. This percentage is low value addition market.

Nations progress with the help of engineering based products and high exports. Engineering base products include cars, buses, planes, watches, pens, computers, electrical equipment, hardware etc. The exports ofTurkeyfor example used to be only 10 to 12 billion dollars but today their exports are approximately 450 billion dollars. This increase in exports occurred due to the increased content of engineering based products.

Engineering products have unlimited features and diversity which contribute greatly in the growth rate.  One can always make value additions in engineering products. On the other hand in non-engineering products like textile, agriculture etc. value addition is limited and hence the growth rates associated with these products are less than engineering products.

Initiatives Required

The Government tries to offer relief to the industries by protecting them from the international competitors which in the long run can prove wide of the mark.  Duties on imports should be reduced with the intention that more international products and companies enterPakistan. This will help the local entrepreneurs to appraise their products. If the government does not alter its actions, it will be harmful for the government itself as well as for the industry in the future.

The textile industry ofPakistanfor instance has shrunk in the last 2 or 3 years because the competition of international textile products has escalated and more of the textile factories have been shifted toBangladesh.

Competition with the International Market

There are many kinds of machineries which are being manufactured inPakistanon a small scale in various cities. Even high engineering machineries used in factories are being manufactured here.  Government should support these small scale manufactures to improve the quality of the products and provide funds which will help them to add value to their products and also to trade in international markets.

We need entrepreneurs who can invest in these businesses and take them to international markets. The differences between local and international products can be pointed out and filled very easily with the help of government and entrepreneurs.

Indiamanufacturers and exports lower quality engineering products thanPakistan. It will take some time to compete with giants of engineering products but investors can still make profits.Pakistan’s local manufacturers are producing better quality products compared to many Chinese products.

We need to promote each region in their expertise and support them to do it on a larger scale with more value additions. For example, inSargodha, tractor parts and electrical switches are being manufactured as a cottage industry. Similarly, every city ofPakistanhas a culture of making some specific products but most of them are working as cottage industries.

We have great examples of skilled workers who are uneducated but are running factories and producing products which are being exported. We have great potential in our country which we can utilize. We only need support from the government and entrepreneurs.

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