By Hussain Ahmad Siddiqui
The government’s long-awaited package of incentives and facilities worth Rs 180 billion announced on January 9, 2017 has disappointed the industry and trade circles as it is basically for textile industry only, neglecting all other segments of national exports.
Having claimed as a “paradigm shift in government’s approach towards exports”, implementation of the export promotion package, which in essence is a subsidy of billions of rupees to traditional export items of textile sector, is not likely to achieve the desired breakthrough in exports that has been drastically declining, year-on-year.
Earlier, the measures adopted under Strategic Trade Policy Framework (STP) 2015-18, which was implemented vide Export Policy Order 2016, has not been able to check sluggish exports either, whereas annual exports were, ironically, targeted at $35 billion.
During six-month period (July-December) of the current financial year 2016-17, total exports registered $9.911 billion compared to $10.306 billion in 2015-16, and $12.058 billion in 2014-15 and $12.617 billion in 2013-14 in the corresponding six-month periods.
Instead of projected increase, a decline of 1.3 percent in textile exports was recorded during January 2017 over the same month of last fiscal year. The government, however, continues to depend fully on the traditional export items instead of promoting and developing non-traditional and value-addition items such as engineering and capital goods.
Globally, export of engineering and capital goods serves to significantly enhance volume of national exports, besides reducing dependence on imports of machinery and equipment.
Sadly, the successive governments have failed to accord due recognition to this vital segment and, resultantly, export of engineering goods could not be developed on a substantial basis and at substantive scale.
Export of engineering goods during the first seven-months (July-January) of 2016-17 was nominal at $99.97 million with a decrease of 22 percent compared to same period of last year. Likewise, export of engineering goods in the whole fiscal year 2015-16 was of $188 million compared to $224 million in 2014-15, constituting less than one percent of total exports. Categorised as Machinery and Transport Equipment, the products include transport equipment, electrical machinery, electric fans, auto-parts and others that are exported to various countries.
On the other hand, there exists significant potential for marketing a large variety of other engineering goods, which has not been properly explored. A large number of defense equipment worth millions of dollars is being exported to Saudi Arabia and other friendly countries. Strikingly, orders for agriculture farm tractors and implements have recently been concluded for export to the African and Middle East markets.
The comprehensive range of engineering goods made in Pakistan covers industrial plants (such as sugar mill, cement plant and chemical industry equipment), boilers, railway equipment, ships, small aircrafts, automobiles and its parts, components and sub-assemblies, transport equipment (including buses, tractors etc.), telecom equipment, power transformers, electrical motors and other electrical goods, road construction machinery (like road roller, stone crusher, asphalt mixing plant etc.), material handling equipment (including different type of cranes), machine tools, pumps, power generation equipment, domestic appliances and other items. These products conform to international standards of quality and are competitive commercially, despite higher cost of doing business in Pakistan.
In fact, engineering goods have already made a significant breakthrough in the export market. Pakistan commissioned two sugar mills in Bangladesh on turnkey basis—one in Natore in 1984-85 and another in Pabna in 1996-97, each with a capacity of 1,500 tons per day cane-crushing capacity (tcd).
These orders were secured on international competitive basis. These sugar mills, which are operating in public sector, have set new records of efficiency, performance and profits compared to other 13 sugar mills operated by the same client in Bangladesh.
Another sugar mill, of 3,000tcd, was commissioned in Indonesia in 1988 as Subang Sugar Factory producing premium sugar, while equipment and components have been supplied for Kenana Sugar Company, the world’s largest integrated sugar complex in Sudan. Another important and recent reference is supply of machinery for Al-Habasha Sugar Mills of 8,000tcd in Ethiopia.
A cement clinker grinding and packing plant, known as Mongla Cement Factory, has been supplied and commissioned in Bangladesh. In the past, ships were supplied to China, and a host of light engineering goods such as road rollers, overhead cranes, diesel engines, electric motors, industrial and irrigation pumps, electricity transmission towers, tractors and buses to other countries.
Though, there were demands for more sugar mills in Bangladesh and Indonesia, Pakistan was unable to secure additional orders due to its political expediencies. In 2011, soft-term credit facility was offered to Sri Lanka, a potential market for engineering goods, for importing Pakistani sugar mill and cement plant, but there was no follow-up, and thus the nation was deprived of the great export opportunity.
Likewise, Pakistan had received various enquiries from Kazakhstan, Uzbekistan, Kyrgyzstan and other Central Asian Republics, when the region was under economic transition, for supply of sugar mills, cement plants, oil & gas equipment, machine tools and other engineering goods but, unfortunately, without materializing any orders whatsoever. Once Pakistan Railways had supplied railway coaches to Bangladesh, but now India and Indonesia have taken over this lucrative market.
In this context, performance of Engineering Development Board (EDB) has also been dismal, which was mandated to create a large base for export of engineering goods through product diversification and latest technology acquisition by the industry, but failed. The closure of Pakistan Steel Mills at Karachi since June 2015 and non-operations of the modern Tuwaiqi Steel Mills since September 2013 is a sad reflection on the role of EDB.
The need of the times is therefore to develop a long-term vision and well-thought out plan in the direction of promoting export of engineering goods, with focus on regional and bilateral trade, in particular availing the concessions under existing Pak-Sri Lanka Free Trade Agreement, Pak-Indonesia Preferential Trade Agreement (PTA), Pak-Malaysia Trade Agreements, Pak-Iran PTA, Pak-Mauritius PTA, and Agreement on South Asian Free Trade Area.