Oct 26 - Nov 01, 2009

Including engineering sector in the list of focus sectors of the trade policy can induce exporting ability of the sector. Recently, government has set an ambitious target of pulling the share of engineering exports to five percent from the current 1.5 percent within three year by subsidizing light engineering sector, developing clusters for small units, supporting exports of motorcycles with research and development fund of $50 per unit. Indubitably, achieving this share requires timely and effective materialization of polices.

Pakistan is mainly exporter of textiles and foods and though these sectors generate vital foreign exchanges for the country, the monotonous focus on these sectors may have made the policy makers indifferent to developments of other non-traditional sectors. Industrial experts believe that developments of non-traditional sector especially engineering can multiply the exports from the country. They draw evidences for their beliefs from the growing manufacturing of engineering goods despite the internal and external economic pressures. Although the share of engineering goods in total exports of the country is negligible-that is below $0.5 billion annually-the due attention to industrial developments can pave the way for country to becoming major exporter of the engineering goods.

Engineering exports had registered 32 percent growth in financial year 2008-09. This rate was not ordinary in the midst of recessionary pressures from outside and inside the country. This trend of growth for some engineering goods continued in the three months of this financial year as well. Exports of some engineering goods recorded an impressive growth and indicate that exports of engineering goods can be increased manifold given the encouragement to manufacturers.

As per federal bureau of statistics, exports of transport equipments, electric fans, and electric machineries depicted a staggering growth of 200 percent, 41 percent, and 71 percent respectively in July-Sep, 2009 over corresponding period last year. For example, exports of transport equipments amounted $10 million in the quarter as against $3.3 million in the comparable period. Exports of electric fans brought $10.28 million in the country in contrast to $7.28 million previously. Showing the upward movement exports of electric machineries also increased to $17.26 million in 1QFY10 from $10 million in 1QFY09. However, overall exports of engineering goods including above three and auto parts accessories, etc. dropped 7.75 percent to $69.28 million from $75.10 million. Exports of auto parts declined 42 percent in the quarter.

Manufacturing of electric fans is a well-established industry of Pakistan. There are several manufacturers of ceiling, pedestal, louvre, exhaust, and other variety of fans in the country, manufacturing the exportable products by using most modern and hi-tech machineries like die casting machines, automatic armature winding machines, oven conveying containers, etc. The manufacturing is originally based in Gujranwala, a district of Punjab. The products are not supplied only in Pakistan but also to various countries that include Saudi Arabia, Qatar, Yemen, UAE, Sudan, Ghana, West Indies, Djibouti, Bangladesh, Nigeria, Kenya, Cameroon, Afghanistan, and Gulf countries.

The global economic recession and internal growth unfriendly environment have caused consistent decline in textile exports. The decrease in textile exports continued in the first quarter of this fiscal year. An expansion of basket of exporting products is imperative to insulate the economy against spill-over of sectoral downturn.

Government has announced a variety of incentives and special treatments for the engineering sector in the trade policy and on implementation of such policy would accelerate the progress of the sector. Specifically, government promised to compensate inland freight charges of different sectors including light engineering out of export investment support fund. It is a matter of great concern that many instruments related to medical, surgical, cutlery, etc. manufactured in Pakistan are sold in the market as foreign brands. The disbursal of 25 percent subsidy to local manufacturers for marketing and brand promotion would improve the exports of such items out of a special fund of Rs2.5 billion created for light engineering. In order to motivate exporting industry to concentrate on exports, the government announced special incentives for sector that has 100 percent exports outruns by giving them export oriented unit status. However the similar incentives are to be available for engineering units even if they export 50 percent of their production. Research and developments and training of workers are the weak areas of engineering sector. Government must take some concrete steps to cure weaknesses.

After seeing a long period of freefall, international prices of metals have started to inch up. The graphical representation of price trend in October depicts that international metal prices including aluminium price, which is lowest in comparison to that of copper, zinc, lead, nickel, tin, aluminium alloy, and nasaac (north American special aluminium alloy) have rebounded exactly in the mid of the month. Before October 15, 2009, prices of these metals experienced a nosedive. However, they started to recover onward, standing at $1864 per tonne (aluminium), $6160 per tonne (copper), $2008.5 per tonne (zinc), $2175 per tonne (lead), $18640 per tonne (nickel), $14900 per tonne (tin), $1670 per tonne (aluminium alloy), and $1695 per tonne (nasaac) as at October 16.

The rising trend of input prices may be a sign of disappointment for the engineering manufacturing industry, but high cost of production interweaves with the final price of goods. In addition, since it is an international development Pakistan's engineering industrial outputs might loss competitiveness in proportion to other foreign sellers'.