Investment opportunities in component manufacturing sector

The first International Foundry Congress & Exhibition is being held at Lahore. This mega event for the first time in Pakistan will bring to our industry developments in the casting industry world-wide, providing local manufacturers an opportunity to go for technological advancement.
It will also highlight the investment opportunities available in manufacturing sector. Owing to the existing exciting economic scenario. Manufacturing is the second largest sector of Pakistan's economy in terms of output and employment. Pakistan's manufacturing industry is dominated by textile, food, apparel & leather industries. Textile sector in Pakistan is almost stagnant because the post quota scenario has dramatically altered the global partners.
Major global restructuring is on the move in manufacturing. There is a dire need to ensure sustainable growth in the manufacturing sector in a rapidly changing & challenging international competitive environment.
This requires a shift in production paradigm to technology and knowledge based industrialisation with a focus on the quantitative & qualitative growth of an integrated and competitive industry in the private sector. This is a high time for investment in the engineering industry particularly in the component manufacturing sector where a lot of opportunities are available for the private sector
Engineering sector accounts for 63% share in the world trade. The Korean & Malaysian economies have built their foundations on the engineering industry. The share of engineering goods in total exports is (55%) & (46%) respectively for Korea and Malaysia.
Increase in the engineering based products enabled them to capture a relatively large share of world exports, created large scale employment and improved their balance of payment position. In Pakistan, the share of engineering sector in manufacturing is (19%), while the share of engineering goods in country's total exports is about (4%).
The growth in domestic engineering sector has propelled the growth momentum of integrated sectors. In particular, auto sector of the country has shown unprecedented growth during last few years. Economic Survey of Pakistan depicts that the overall growth in automobile sector was 29.76% while basic metal industry grew by 58.6% during the FY 2005-06.
Home appliances sector has also shown an outstanding performance during 2001-02 to 2005-06. For instance, Air conditioners registered a remarkable growth of (64%) followed by Refrigerators (27%), Deep freezers (23%) and TV sets (21%). However, ample amount of potential still lies unutilised as there exist a huge demand-supply gap in the local consumer market.
The auto industry has become fast growing industry consists of 72 assembly plants and 600 component manufacturers. During 2005-06, 1 million units of cars, buses, trucks, LCVs, motorcycles, and tractors were manufactured in Pakistan. Cars production stood at 160,642 during last financial year is poised to touch the mark of 500,000 in 2010.
The Auto Industry products expressed compounded growth rate of 50%, during last five years, out of which the cars registered growth rate (41%), Motorcycles (58%), LCVs (37%), Trucks (41%), and Tractors (20%). Pakistan is an emerging market for auto sector, with potential to develop certain components. Enabling business environment such as zero duty on import of all kinds of inputs for parts manufacturing and availability of infrastructure including the human resources is an advantage.
The domestic engineering industry has reached to a point where component manufacturing has become viable. Auto industry due to its multiplier effect and strong backward (materials such as steel, copper, aluminium etc, plastics, glass, paint, electronics, capital equipment, trucking warehousing & logistics) and forward linkages (dealerships, credit & financing, advertising, repair & maintenance, petroleum products, goods stations, insurance, service parts) is considering a key industry world over.
Accordingly, Auto sector growth in Pakistan led to tremendous growth and investment in the down stream vendor industry. The local production of parts and accessories is adding manufacturing facilities as well as creating new employment opportunities and generating additional revenue for the government. Currently, about 192,000 million people are employed in Pakistan's automotive sector and it is expected that the sectoral employment would touch the figure of 250,000 in 2010.
The auto industry has the potential for development of entire engineering sector. It is responsible for increasing production in the other related industries including plastics & rubber, fabricated metals, auto parts, advertising, textile, aluminium, steel industry, painting & coating, glass, copper and brass.
Keeping in view the present growth scenario of automobile sector as well as projected plan to achieve 500,000 numbers of cars has called upon a need to investment in the component manufacturing sector.
Component manufacturing sector is the backbone to engineering industry as a whole. It facilitates both automobiles and home appliances sectors in terms of revenue & employment generation, human resource development and transfer of technology.
At the moment, the automobile sector is facing the problems of low productivity, high prices and under-utilisation. Hence opportunities have emerged for investment in the component manufacturing sector to utilise the uncapped potential of the component manufacturing sector.
Pakistan is on its way to develop two automotive clusters at Lahore and Karachi each to achieve 500,000 cars production target by 2011-12. Investment opportunities exist in the field of Casting, Forging, Plastics & Rubber, Fasteners, Sheet Metal, Machining, Brake Assemblies, Glass, Die & Mould, Gear Box, Suspension and Power Steering etc. Total annual requirement for different processes to produce 500,000 cars up to year 2010 is given in the following table.
The above requirement does not include after market demand or export potential of these sectors. Investors have a chance to avail the vast investment opportunities highlighted above. The demand is there, encouragement by right policy is also visible. The visionary and the bold among the business community will go for it!

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                  Annual Required                          Annual Required

Process                  Capacity    Process                      Capacity

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Casting                7,000 tons    Machining (Al.Parts)       5,000 tons

Interiors/trims        3,000 tons    Machining (casted parts)   6,000 tons

Forging                5,000 tons    Radiators                    150 tons

Plastic                1,500 tons    Lights                       800 tons

Rubber                 2,000 tons    Silencers                    400 tons

Fasteners         250 million nos.   Door Hardware                500 tons

Sheet metal            6,000 tons    Glass                      300,000 m2

AC                   50,000 units    Machining (Forged Parts)   6,000 tons

Wire Harness            1,000 ton    Batteries                 250,000 nos

Shock absorbers       500,000 pcs    Friction material          2,500 tons

Ball Bearing       15 million nos    Audio Systems           100,000 units

Aluminium Castings      1,000 tons    Speedometers              150,000 nos

Engine Manufacturers* 250,000 nos    Gear Box Transmission*    250,000 nos

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Total requirement for production of 0.5 million cars up to 2010

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