Islamabad:Pakistan Institute of Development Economics (PIDE) has unveiled a ground-breaking report shedding light on the challenges faced by the engineering industry in Pakistan.
The study conducted by Dr Nadeem ul Haque, Dr Usman Qadir, Dr Abid Rehman and Mohammad Armughan delves into the realities faced by engineering firms and provides insights into the state of the industry. The report is based on an extensive survey of 328 engineering firms from Lahore, Gujrat and Gujranwala.
One of the foremost issues outlined in the report is the severe impact of electricity unavailability on daily production targets. A staggering 83% of surveyed firms expressed that the unavailability of electricity creates hurdles in achieving their production goals, resulting in a detrimental gap between demand and supply for the industry. Moreover, 78 per cent of these firms reported that electricity scarcity hinders their operational efficiency, a crucial factor where economies of scale need to be achieved. Load-shedding and voltage fluctuations further exacerbate the challenges by increasing the risk of machinery malfunctions and damage, affecting 68% of the firms. The financial strain of arranging alternate supply, amounting to Rs71,000 per unit annually, adds to the burden on firms’ operations, impacting 72% of the surveyed companies.
The report recommends that engineering firms adopt international and national quality standard certifications to maintain quality standards, a move endorsed by 89% of the surveyed firms. Moreover, the government is urged to focus on enhancing the electricity supply in industrial areas, with smaller firms exploring backup power options to ensure uninterrupted operations, a sentiment echoed by 76% of the respondents.
An interesting finding of the report is the lack of an online presence among Pakistani engineering enterprises. With a surprising 63% of surveyed firms lacking any online presence, there is an urgent need for businesses to establish themselves online to reach a wider customer base and enhance engagement. The study also reveals that while a significant portion of firms (63%) show no intent to expand in the coming years, a proactive minority plans to invest in advanced technology, machinery, land and skilled labour to boost their business prospects.
Another critical issue highlighted in the report is the lack of access to credit for the majority of firms. The majority of firms lack adequate collateral to secure loans due to their small size. This reduces their marketability to commercial lenders and resulted in only 5% of surveyed companies having loans or lines of credit. Limited access to finance this hampers the industry's growth potential. To address this, the report suggests that financial institutions introduce special credit schemes for small and medium-sized enterprises to encourage business expansion and development.
The research also explores the complex landscape of international trade for Pakistani engineering firms, revealing obstacles related to tax implications, product quality, branding and pricing. Most notably, a substantial 84% of firms source their raw materials domestically, emphasising a need to diversify suppliers and engage with international markets.
The report stresses the importance of a thriving relationship between businesses and the government for economic prosperity.