CHALLENGES IN DEVELOPING AUTO SECTOR IN BALOCHISTAN
June 7 - 13, 2010
Development of auto and allied sector faces enormous challenges in Balochistan which lacks proper infrastructure and skilled work force. The strategically located province has however the potential to emerge as a strategic manufacturing and assembling hub for the country's automobile industry. 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. The present economic managers should take some practical measures to exploit the geo-strategic position of the province for developing a robust automobile market for the region.
Development of automobile industry in Balochistan would help diversify 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. A number of vehicles stolen in Karachi and other major cities of Pakistan were several times recovered by the police in the province. The vehicle-snatching has been a lucrative business in Karachi, as criminals with the collaboration of security officials smuggle the vehicles to Afghanistan via Hub-Balochistan route and get a good amount for it. The inter-provincial gangs have been involved in snatching, theft and transporting of vehicles to Balochistan. The presence of a junkyard for the stolen vehicles in Chaman, a city near Pak-Afghan border, facilitated the purchase and replacement of the engines of new cars at throwaway prices and many people have benefited from this option.
Automobile is an export driven-industry providing lucrative investment opportunities for foreign investors. 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. 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 focus 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.
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.
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.
Pakistan may seek help from China, its closest friend in order to develop automobile industry in Balochistan. China's vehicle market is the world's third-largest behind the United States and Japan, but the after-market segment is in its relative infancy. In the United States and Europe, after-market sales account for roughly 70 per cent of the auto industry. According to an estimate, after-market sales accounted for one-third of the total industry in 2002 in China. It totalled roughly $23.7 billion in 2004. The sector has been growing at 8 per cent a year and is on track to reach $31 billion this year. China's auto market has gone into overdrive in the last five years as millions of Chinese bought their first cars. Now, the market for replacement parts and service centres is racing to catch up.
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 mobilise 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.