DEVELOPMENT OF AUTOMOBILE INDUSTRY IN BALOCHISTAN: ISSUES & CONSTRAINTS
Sep 14 - 20, 2009
Automobile is an export driven-industry providing lucrative investment opportunities for foreign investors. Presently, the declining sales and production volumes predict a bleak future for the country's auto industry, which is still waiting immediate remedial measures from the present government. Owing to the present slump in the industry, several companies are on the verge of bankruptcy and are feared to be closed down any time.
The improvement in performance of auto sector is subject to an economic turnaround in the country. The ongoing global financial crisis has had an adverse impact on the once booming auto industry. The increase in raw material prices has increased the input cost. Similarly, the severe deterioration of Pakistan's macro economic fundamentals has also crippled the growing industry over a period of past one year. Over 30 percent depreciation of local currency against the US dollar, widening trade deficit, rapid erosion of foreign exchange reserves, rising inflation and ballooning oil import bill have been the factors that adversely affected the country's booming auto industry.
Balochistan still lacks the essential infrastructure and skilled workforce for the development of automobile sector, though it has the potential to emerge as a strategic manufacturing and assembling hub for the country's automobile industry. Development of automobile industry would help diversifying the provincial economy. It would also create more employment opportunities to the people of the province. The government should create such conditions in the province that could attract over two dozens Pakistani manufacturers and assemblers, who have technical collaborations with Japanese and Korean manufacturers.
Unfortunately, the car-snatchers have taken advantage of Balochistan's geo-strategic position turning the province into a haven for hijacked vehicles. The presence of junkyards of stolen vehicles in the province is an established fact. Not only the stolen vehicles are dumped but their engine and chassis numbers are also tampered at these junkyards.
These vehicles are then sold out. The inter-provincial gangs of car lifters have been allegedly involved in snatching and transporting the vehicles to the province, which has been notorious as a haven for car thieves. A number of vehicles stolen in Karachi and other major cities of Pakistan were several times recovered by the police in Balochistan.
Serious efforts on the part of the government can start at least assembly operations in Balochistan. The assembling units in the country are already assembling most of the world leading brands and the government can facilitate the private sector to set up assembling units in Gwadar. The private sector should come forward and make investments for the development of automobile industry in the province. The Engineering Development Board (EDB) should also help the provincial government and private sector to develop auto sector in Balochistan.
Though Pakistan automobile market witnessed a rapid growth and hefty expansion over the past five years under former government, yet Balochistan could not see any development in auto and allied sector. The province was simply neglected and no plan was formulated for development of automobile industry.
What steps the present coalition government can take for the development of auto mobile sector in Balochistan?
Firstly, the Engineering Development Authority (EDA) should come forward and play its active role in this regard. EDA should help the provincial government and private sector to develop auto sector, as it can play a significant role for uplift and up-gradation of automotive parts and components industry under public-private partnership. The EDA has already taken a number of steps for improvement in production and design capabilities of the automobile industry in the country. It can also help in the establishing the technology up-gradation centres in different districts of the province.
Secondly, Balochistan government should announce incentives for the private sector to attract their investment for the growth of automobile market in the province. The provincial government should provide them land and other facilities and also offer incentive packages to attract the local and foreign investors. The major constraints in the industrial development of the province have been the lack or the absence of infrastructure, scattered nature of population, vastness of area, dearth of skilled labor, social structure, tribal feuds and lack of marketing facilities. The government can seek technical assistance in this regard from Technology Up-gradation and Skill Development Authority, which was established under the public-private partnership. The federal government may also provide technical and financial assistance to the province for developing essential infrastructure in this regard.
Thirdly, the economic managers should specially focused the development of automobile industry in the emerging port city of Gwadar, which is strategically located on the mouth of Persian Gulf, and steps should be taken to turn it as a strategic manufacturing and assembling hub for the country's automobile industry. Located at Karwat on Mekran coastal highway about 40 km from Gwadar port, the Gwadar Industrial Estate (GIE) is the first industrial estate of the emerging port city and the biggest one in Balochistan. Over 1,100 plots have been allotted to industrialists in the estate. About 3000 acres of land have been reserved for the purpose. Federal government has already decided to establish an export processing zone (EPZ) on a 1,000-acre plot of land in Gwadar for providing better import and export facilities. The EPZ has also been planned for assembling plants and other industries, which are to be set up by the prospective manufacturers for marketing in the region of Gulf and Central Asian republics.
The free zones in the port city of Gwadar would contribute to the harnessing of the province's potential in natural resources and development of heavy and large-scale industries, petrochemicals and manufacturing. The government can mobilize the private sector for setting up the manufacturing and assembling units in the new port city of Gwadar. It has already announced a 15-year tax holiday for the proposed EPZ that has been planned near the Gwadar port for local and foreign investors. Pakistan automobile market is dominated largely by Japanese and Korean manufactures like Suzuki, Honda, Toyota, Hino, Hyundai and Mazda. Many foreign manufacturers including Chinese are reportedly in negotiations with Pakistan to start assembly operations in the country. These manufacturers may be lured to establish the manufacturing and assembling units in the new port city of Gwadar.
Finally, the provincial government needs to develop human resources to provide a local workforce for the automobile industry. The government should establish technical institutes imparting training in different skills-related to auto and allied industry in different districts. The province presently lacks the essential infrastructure and skilled workforce for the development of automobile sector. Human and infrastructure development must go together in the province.