Engineering goods potential

Different governments have at different times talked about promoting exports through non-traditional SME sectors such as light engineering. The latest in the line was Asad Umar’s statement, in a recent interview with BR Research, that light engineering was among priority sectors as part of their strategy to encourage small and medium export-oriented industrial units.

The sports goods and surgical goods have done well through clustering. But their success is more in terms of international reputation than contribution through exports given that together the two sectors combined barely touch the $1 billion mark. While it can be agreed that SMEs have been engines of growth for other countries, in Pakistan their performance has been lackluster.

Gujranwala is to light engineering what Sialkot is to sports goods. With nearly a thousand manufacturing units, the light engineering cluster provides machinery spare parts to all kind of industries, from kitchen sinks and fittings to auto and motorcycle parts.

Geared towards the domestic market, exports count for only about 10 percent of production. In recent years, export numbers are declining from a peak of about half a billion dollars in FY11 to about $250 million in FY18.

India’s light engineering industry emerged post 1991 with exports rising to nearly $3 billion by 2002 on the back of a significant unorganised market. Since then, India’s total engineering exports have climbed to over $70 billion in FY15, enjoying double digit growth rates over the years. Superior quality and compliance with international industry standards allow US and Europe to be its main markets, with exports to Japan and South Korea rising over the years.

While Pakistan’s engineering sector grew based on domestic requirements, FDI played a huge role in developing India’s sector. As per data from Department of Industries Policy and Promotion, FDI inflows were about $4 billion from 2000 to 2015.

Mom and pop set ups with a dozen workers dominate Pakistan’s sector whereas in India the light engineering industry is an organized sector dominated by large multinationals and top Indian companies employing over 4 million skilled and semi-skilled labour.

Comparing India’s light engineering sector to Pakistan is like comparing the sun to a lamp. While our neighbouring country is aiming to cross the $100 billion mark for exports and is part of international value chains, Pakistan has not come anywhere near 1 percent of India’s exports.