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Automobile industry can develop export-oriented engineering sector.

The engineering industry accounts for about 2 per cent of GNP, and 10 per cent of manufacturing value-added. However, the employment level is around 250,000 with investment of Rs. 100 billion. Of the above, the automotive industry and the mechanical equipment sectors contribute to 70 per cent of employment, and about 80 per cent of investment, GNP and value-added.

From a non-existing industry at the time of creation of Pakistan in 1947, our automobile industry is now producing around 50,000 cars and commercial vehicles, 12,000 tractors and over 70,000 motorcycles annually. The local content of the vehicles produced ranges from 40 per cent to 60 per cent in cars and commercial vehicles, over 80 per cent in tractors and around 55 per cent in motorcycles.

Rapid industrialisation mainly aims at achieving self-reliance and self-sufficiency. For attaining this goal, we should not restrict ourselves to converting agricultural produce into saleable goods, but must establish the facilities to manufacture capital goods and consumer durables, requiring acquisition of modern technology.

The automobile is one single product the manufacture of which encompasses a wide spectrum of manufacturing facilities and technologies. At the upstream level, these include manufacture of high grade alloy steels, aluminium and non-ferrous alloys, plactice raw materials, glass, chemicals, including paints and lubricants and capital goods such as machine tools. On the ancillary industry side, these include modern foundries and forge shops, pressure die-casting, precision machinery sheet-metal presses, plastic moulding, rubber products, electrical and electronics, hydraulics and pneumatics and miscellaneous other facilities required for the production of fitments and accessories.

Thus, the automobile with its 10,000 parts and ever increasing complexity remains one of the most challenging products to manufacture and a telling measure of an industrial society's capabilities. It requires: (1) a sizeable investment per unit (both foreign and local currency); (2) long gestation period for attaining technological and production efficiency; (3) comparatively lower margin of return and expected losses in the initial years of operation; (4) high pace of technological development in the world creating short life cycles of products/processes necessitating technical tie-ups; (5) requirements of infrastructure l (6) non-acceptable of second quality goods.

Despite these limitations, if adequate backing is provided to the automotive industry it can do wonders. Pakistan has no dearth of talent, and it can develop an export-oriented engineering industry, in a conducive atmosphere.

Pakistan has made some progress in the establishment and promotion of large, medium and small scale, automotive units in both public and private sectors. However, much more has to be done in this field. If we are to enter the twenty-fist century and we target for one vehicle per fifty persons by the year 2015 (presently one per 200 persons), the market must grown at the rate of ten per cent per annum and be over half a million per year by then. The table depicts the performance of this sector, which is definitely showing an increase but it is still far from required. The domestic component manufacturing industry, however, is still in the process of development and therefore, most of the local demand is met through imports. Presently, 40 per cent of domestic requirement is met through imports. In 1985-86, Pakistan was importing auto-parts worth Rs. 409 million and the import increased to Rs. 785 million in 1989-90, showing an average increase of 18 per cent per annum. These components are generally imported from Japan, UK, Italy, USA and the Federal Republic of Germany. Small quantities of autoparts are also exported from Pakistan.

Exports of motor vehicles parts have increased from 334 thousands tons worth Rs. 3.3 million in 1986-87 to 380 thousand tons worth Rs. 11.2 million in 1989-90 - an average increase of 60 per cent per annum. The main markets are Afghanistan, Bangladesh, Sri Lanka and Cyprus.

The automobile industry has a capacity of serving multipurpose goals. Some of them can be summarized as: (i) provide vehicles at much lower cost of about the same quality as imported ones, (ii) employment to about another 100,000 persons at least, (iii) substantial increase in GDP and GNP, (iv) export of about Rs. 1 billion annually in the short term and it could be much more promising in the long run, (v) foreign exchange saving of billions of rupees; even now, at current level of deletion, it is savings Rs. 5 billion annual market of around 60,000 automotive vehicles including agricultural tractors, (vi) development of aviation and defence industries, (vii) development of skilful manpower, (viii) harnessing of wide ranging technologies, as of metals, plastics, rubbers, electrical, metallurgical, pneumatics, etc.

The attainment of these objectives needs realistic assessment of the problems and potential of the automobile and engineering industries as also all the various upstream and ancillary industries connected with them. The solution of the problems needs an umbrella, which can be provided only by the establishment of a separate ministry of engineering, which must chalk out a long-term irrevocable industrial policy in order to build confidence of businessmen and industrialists. The suggestive approach in the light of the problems being faced by the automobile industry needs detailed discussion.
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Author:Ashraf, Mian Mohammad
Publication:Economic Review
Date:Oct 1, 1991
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