Domestic sales of personal computer (PC) and communication equipment are on increase and it is estimated that sale of PC may reach more than two million by the year 2010. This was indicated in a report of Japan International Co-operation Agency (Jica). The number of PCs sold in Pakistan was 700,000 in 2003-04.
Out of them a total of 300,000 were used systems and 150,000 were locally assembled by small assemblers across the country. There is a great demand for low cost PC models for widespread use in schools, indicating further expansion of the market.
As middle class becomes affluent and Internet usage increases, the market will further expand and the unit price would increase. The market for communication equipment also expands due to deregulation. Telephone density was 2.8 percent in 2005, which is nearly 4.2 million land lines, will reach to 8 million land lies by the end of 2007.
Economic turnaround after 2002 and introduction of new financial credit policy has stimulated market demands for home appliances, communication equipment and computers. The annual growth rates for electronic, electric machinery industry between 2002 and 2005 were 30-40 percent. The production of TV sets and refrigerator also increased dramatically.
Production of TV set increased from 754.6 thousands in 2002-03 to 730.2 thousands in 2005-06 whereas production of refrigerators increased from 375.8 thousands to 569.7 thousands during the same period. In the supply side, foreign manufacturers such as Harer (China) and Samsung (Korea) have established their assembly lines, while domestic manufactures such as Dawlance, Waves, PEL are expanding their production capacity.
Factor behind this rapid expansion of the industry is reduction in custom on imported components that provided investors with opportunities to import low cost components from China and assemble, sell them domestically.
Except for multinational companies, small enterprises who assemble imported components dominate the industry. Therefore it has not succeeded to exploit the economy of scale and thus the quality of products still low. Technical management is also shaky. Most business and companies operate as family business and thus lack professional management.
The biggest threat for Pakistani electronics, electric machinery industry is competition from China or India. Although there is a gap of duty rates between finished products and components at present The report fear that if there is some change which causes influx of cheap imports, damage to the local industries would be detrimental.
It was suggested that the most effective way of enhancing competitiveness is collaboration with foreign companies. However, Foreign Direct Investment (FDI) in electronics industry is significantly lower than that in automobile industry that is also expanding to market.
FDI in automobile sector increased from $35.2 million in 2001-02 to $1,041.8 million in 2005-07. Whereas in electronics FDI increased was to the tune $15.9 million in 2001-02 and it was $15.8 million in 2005-06.
This low level of foreign investment indicates that the industry does not have foreign support that is the most effective toll to improve quality and strengthen competitiveness amid increasing competition with imported goods and raid expansion of markets. This in turn may hinder favourable development of the industry in future.
Behind this low level of foreign investment, there is widely shared perception of Pakistan among potential investors, such as insufficient copy right protection and consequent prevalent copy products, no incentive available for electronics investment, high production cost and inconsistent government economic policies.
The world market size of electronics is 1,500 billion dollars in 2004, which is biggest than automobile of 600 billion dollars. Due to its lightweight compared with automobile, foreign investment in electronics responds more to production cost than to make size. This indicates that investment in electronics sector would flow elsewhere if cost advantage diminishes. In view of developing domestic industry, development of vendor industry is vital.
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