Rapid industrialisation and economic uplift of masses, which should be the cherished goal of any government, cannot be achieved without having a strong engineering base, particularly heavy engineering industry. The need for developing such industry is so vital that it received special attention of many developed and newly-industrialised countries. The notable examples are of Japan, China and South Korea, and of India, Malaysia, Thailand and Turkey, which have seen the fastest economic growth over recent years.
Despite being capital intensive and having lower profitability due to continuous technological improvements in methods, processes and products, and use of new and advanced materials, heavy engineering, also known as capital goods industry, has always received government support the world over. The value of heavy engineering industry can be determined through its linkages and services it provides to manufacturing and infrastructure sectors, in particular, and to the economy, in general. Other benefits of a strong heavy engineering base include self-reliance, large-scale employment, enhancement in defense capabilities, increase in export earnings etc.
The general pattern of the development of capital goods industry in any country is almost identical. Initially, the process industries are developed with simultaneous building-up of light engineering industry to provide services to the process industries. When the demand for process industries, like sugar, cement, chemical, fertiliser, paper and pulp plants, iron and steel industry, power plants and others, sufficiently develops, the requirement for self-reliance in plant manufacturing is compulsory. This leads to evolving heavy engineering industry for manufacturing of a variety of capital goods including heavy metal fabrication and machine industry for process plants and energy-related equipment, machine tools manufacturing, equipment for land development, road construction and material handling, machinery for power generation, oil and gas, textiles, automobiles and iron and steel industries. Pakistan followed the same strategy to develop heavy engineering industry.
After the emergence of Pakistan, the Pakistan Industrial Development Corporation (PIDC) created a self-sustained growth in industrial sector, having established over sixty industrial units across the country within a short span of less than two decades. These included cement, sugar, jute, chemicals, petrochemical, fertiliser, steel and other process industries. Looking back, the development of engineering industry in the early years was slow and unsatisfactory. Only a few light engineering units in the private sector, Railways Workshop and some facilities in defense area existed. Karachi Shipyard and Engineering Works was established by the PIDC in 1957, where manufacturing of equipment for material handling and machinery for sugar mills and cement plants was also undertaken, besides the ship-building.
The Second (1960-1965) Five-Year Plan placed highest priority to developing heavy engineering industry. In order to increase value-added content in the manufacturing, associated with transfer of technology and technical know-how, the PIDC was entrusted with developing capital goods industry in public sector with high technological level. Main reason for setting up heavy engineering units in public sector was the reluctance of the private investor as it requires long–gestation period, heavy capital investment, lower profits, and requirement of infrastructure. A Heavy Engineering Division was thus established at the PIDC with a nucleus of experts in metallurgical, mechanical and electrical engineering to plan setting up steel mills and capital goods industry.
Construction of the first steel mill was already on the cards. A number of capital goods manufacturing units were envisaged in public sector. But the plans were delayed due to political conditions and financial constraints. Thus, physical work on the capital goods industry projects was started in the Third (1965-1970) Five-Year Plan period when emphasis was shifted from consumer goods to capital goods industry.
Light and medium-size engineering sector grew in private sector, mainly during the 2nd and the 3rd Plan periods with lower technological levels. Pakistan Machine Tool Factory (PMTF) was established by the PIDC at Karachi in 1968 in collaboration with the Swiss to produce machine tools of international standards. Simultaneously, construction of two heavy engineering units namely Heavy Mechanical Complex (HMC) and Heavy Foundry & Forge (HFF) at Taxila was launched, during 1966-1970, with the Chinese technical and economic assistance.
Negotiations with the western sources for setting up the Heavy Electrical Complex in collaboration with the transformer manufacturer however did not materialise, and the project was delayed inordinately. In 1973, State Heavy Engineering & Machine Tool Corporation (later named as State Engineering Corporation) came into being as one of the successors of the PIDC.
The nationalised steel and engineering units also became part of the corporation that managed Pakistan Engineering Co Ltd, Pioneer Steel Mills at Lahore, Metropolitan Steel Corporation, Quality Steel Mills, Karachi Pipe Mills and People’s Steel Mills at Karachi. The strategy complimented heavy engineering and light engineering industry at national level to promote and strengthen the industrial base.
During this period, the heavy engineering units produced machine tools, sugar mills, cement plants, chemical plants, equipment for oil and gas industry, road rollers, asphalt mixing plants, crushers, overhead and gantry cranes, components for steel and mining projects, components for automobile industry, equipment for thermal and hydropower plants, power transformers, weapons and armaments for the defense industry, and other engineering goods. Pakistan exported sugar mills, cement plants, road construction machinery, armaments and a variety of other engineering goods to various countries in competition with the Chinese and other sources.
During the government of Prime Minister ZA Bhutto, the promotion of capital goods industry received the highest priority. Two units for the manufacturing of textile machinery were established---Textile Machinery Company at Karachi, and Spinning Machinery Company at Lahore. Both industrial units were completed in 1975 and commenced production of cone winders, high drafting system, ring spinning frames and spares for textile industry.
The base of heavy engineering over the years had developed to a degree that it could rightly be stated to be on threshold of technological breakthrough in many areas of its endeavour. Nonetheless, at a time when heavy engineering industry needed more pronounced attention so that it could enter into diversified and high-tech areas, the government decided to privatise these industrial units. During the first phase of privatisation, Karachi Pipe Mills, Pioneer Steel Mills, Metropolitan Steel Corporation, Pakistan Switchgear, Quality Steel Works and Textile Machinery Co were disinvested during 1992-1995. Unfortunately, all these industries, except Pioneer Steel Mills, ceased their production operations and were closed down by the new owners.
In the second phase, privatisation of Heavy Mechanical Complex, Heavy Electrical Complex and Pakistan Machine Tool Factory was announced. Plans for rehabilitation and replacement of old plant machinery, diversification of products and services, induction of new technology at heavy engineering units were therefore shelved.
As number of privatisation and divestment efforts for these units failed, primarily due to inept and myopic policies of the government, plant machinery at these units continued to dilapidate, and their competitive edge was eroded. During this period the orders dwindled and qualified and skilled engineers and technicians left the companies. Financially, these companies became a burden on the exchequer.
Today, Heavy Mechanical Complex (along Heavy Foundry & Forge) has been transferred to a strategic organisation. It is reported that Pakistan Machine Tool Factory, which was again on the privatisation list, has also been taken over by the same organisation. Heavy Electrical Complex is for sale once again, and is in shambles.
The writer is retired Chairman of the State Engineering Corporation