Mr. Nadir Mohyuddin
A comparative analysis of input of the Engineering Goods Industry of regional countries like India, China, Bangladesh, and Vietnam with Pakistan, focusing on elements crucial for manufacturing cost and efficiency, is presented in Table 1.1
Pakistan's electricity tariff stands notably higher at 17-20 cents per kilowatt (KWT), compared to 8-9 cents of its regional counterparts, indicating a potential disadvantage for energy-intensive processes in its Engineering Goods Industry. This difference poses a challenge to the industry’s cost-effectiveness and competitiveness.
The minimum wage in Pakistan is competitive i.e. US$ 112.78 per month, lower than China (351.2) and Vietnam (171) but higher than India (72.67) and Bangladesh (63.26). This positions Pakistan favourably in labour cost, potentially attractive for labour-intensive manufacturing. Land leasing in Pakistan, costing US$ 20-40 per square meter, places Pakistan in an advantageous position for being cost-effective in comparison with India (US$ 80), China (US$ 40-80), Bangladesh and Vietnam (US$ 140), influencing the country's manufacturing cost positively and making it an attractive location for industrial setups.
Pakistan benefits from relatively lower utility expenses, with raw water costing US$ 18 per cubic meter and steam 1.1 cents per kilogram. These costs are lower than most of the regional counterparts, contributing to potential cost savings in manufacturing and enhancing competitiveness.
Pakistan's exchange rate against the US Dollar is higher than its regional counterparts. A weaker currency will likely make export competitiveness more challenging for Pakistan as it raises the cost of importing raw materials and machinery, affecting the industry’s cost dynamics.
The industry also grapples with employment challenges, including insufficient job opportunities and wage disparities, compounded by a shortage of skilled labour. This exacerbates the difficulties in expansion and further development of the sector.
Additionally, the engineering goods industry is burdened by various import duties, leading to higher production costs and reduced competitiveness. Higher input costs, such as raw materials and energy, further hurt the industry.
Pakistan's strategy to boost its indigenous engineering goods industry demands a holistic approach to reducing import reliance and enhancing self-reliance. This strategy necessitates a shift in the government's role from control to facilitation, creating an environment conducive to innovation, growth, and self-sufficiency in the engineering sector.
Vital strategic actions include the development of a comprehensive and long-term industrial policy involving stakeholders to avoid abrupt business disruptions. Taxation reforms are crucial to optimise the implementation of R&D tax benefits, accelerate tax refunds, and ensure integrated sales tax processes across the value chain. Strengthening intellectual property laws and their enforcement is essential to protect innovation and support industry growth.
Collectively, these measures can create a regulatory environment that promotes growth and sustainability in the engineering goods sector. Capitalising on identified opportunities within subsectors like automobiles and electric fans, Pakistan can transition from import dependence to a self-sustained market presence.
A significant aspect of this strategy is technology transfer, which encourages a shift to higher technological standards and aligns with the national goal of replacing imports with domestic production. Incentivising technology transfer projects, formulating policies for continuous technological enhancement, and efficiently utilising the Technology Development Fund (TDF), assessed by engineering universities, are vital components.
Enhancing engineering standards and reinforcing the role of the Pakistan Standards and Quality Control Authority (PSQCA) is also critical. Proactive human resource development aligning workforce skills with industry demands is essential. This includes allocating 1% of the total annual budget for technical education in the initial five years and advocating for the autonomous governance of engineering universities with industry representation on their boards.
Harnessing foreign expertise to improve operational efficiencies and elevating skills and technology for augmenting the human resource potential in the industry is also crucial. Expanding the industry's capabilities to support economic and defence sectors reinforces its role in national development and security.
Pakistan must adopt a strategic approach that aligns with global standards and domestic needs to drive meaningful progress in the engineering sector. The country can significantly advance its industrial capabilities by implementing key initiatives such as technology transfer, enhancing engineering standards, and fostering proactive human resource development. This approach centred on transitioning from import dependency to a self-reliant, innovative, and competitive engineering sector, bolstering economic growth and strengthening national security and development. It is a pathway to transforming the industry into a critical contributor to Pakistan's financial resilience and global competitiveness.