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July 20, 2016

Import of used machines makes local industry incompetitive

Business

July 20, 2016

LAHORE: There is an urgent need to ban the import of used machinery in Pakistan that is badly impacting the competitiveness of the economy, and turning the country into a junkyard of obsolete equipment.

Most of the emerging economies have stopped importing used industrial machines to remain competitive globally. However, here there is almost no restriction on importing used and reconditioned machinery.

Almost every industrial sector, at one time or another has imported used machines, these include textile machinery, packaging plants, moulding machines, plastic machines, crushers, sliding and screw cutting machines, used wood working machines, cutting and drilling machines, CNC machining centres, CNC turning lathe, and even used industrial boilers and refurbished boilers.

Used and refurbished industrial machinery facilitated the industrialisation process in the country during the last three decades. This was the period when the developed economies were opting out of labour intensive low value-adding industries, and disposing their machineries at throw away prices to the developing countries.

Pakistan was among the beneficiaries of this process. Numerous refurbished engineering, textiles, plastic and few used sugar and cement plants were established during that period. These industries flourished for a while, but with the passage of time they lost competitiveness. The manufacturers faced problems in replacing the worn out parts because the original manufacturers had stopped producing spares.

The locally produced spares were substandard impacted the efficiency of the machines. But since trade was not liberalised until 1994, the local industry was protected from imports.

However, as trade liberalisation started, industries established on used machines started feeling the heat from imports. They pressurised successive governments to continue with protection. The duty protection was gradually withdrawn, forcing the industries to opt for better technology and efficiency. The textile industry operated without crutches for almost a decade from 2001 to 2010 as it was more efficient than the competing foreign producers (Pakistan imported most of the high tech textile machines that were closed in the United States after 9/11). It started losing its competitive edge thereafter as it failed to upgrade its technology, while competing economies shifted to latest and most efficient machines.

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