The engineering and capital goods industry play a pivotal role in shaping the trajectory of global economies, fostering innovation, and supporting infrastructural development. This sector encompasses a wide array of products and services, ranging from heavy machinery and equipment to technology-driven solutions. The engineering and capital goods industry serve as catalysts for economic growth worldwide, providing essential tools and machinery necessary for the establishment and expansion of various sectors, including manufacturing, construction, and technology. Investments in this industry often lead to increased productivity and efficiency, fostering economic development on a global scale. As the world continues to evolve, the role of the engineering and capital goods industry remains indispensable in shaping the future of nations.
The engineering and capital goods industry play a pivotal role in shaping the trajectory of global economies, fostering innovation, and supporting infrastructural development. This sector encompasses a wide array of products and services, ranging from heavy machinery and equipment to technology-driven solutions. The engineering and capital goods industry serve as catalysts for economic growth worldwide, providing essential tools and machinery necessary for the establishment and expansion of various sectors, including manufacturing, construction, and technology. Investments in this industry often lead to increased productivity and efficiency, fostering economic development on a global scale. As the world continues to evolve, the role of the engineering and capital goods industry remains indispensable in shaping the future of nations.
The industry is at the forefront of technological innovation, driving progress across diverse fields. From cutting-edge manufacturing processes to the development of sophisticated machinery, the engineering and capital goods sector fuel advancements with far-reaching implications for industries such as energy, transportation, and the promotion of the SMEs. Many countries heavily rely on the import and export of engineering and capital goods, fostering international trade and cooperation. This interconnectedness not only enhances global economic ties but also facilitates the transfer of technology and knowledge, contributing to a more interconnected and collaborative world.
In Pakistan, the engineering and capital goods industry play a crucial role in supporting the country’s infrastructure development. The construction of roads, bridges, industrial plants, and power-generating units relies heavily on heavy machinery and equipment, making the industry a cornerstone for progress in the nation. However, the significance of the sector lies in the strong bonds and services it provides to all sectors of the national economy, particularly to the manufacturing sector. The industry is concentrated in both formal and informal sectors, with the majority of operational units in the SME sector involved in low-value-added fabrication and assembly works. Major production clusters are located in Karachi, Lahore, Faisalabad, Gujranwala, and Gujrat. A highly diversified range of capital goods was being manufactured in Pakistan till recently.
The list includes complete industrial plants, such as chemical, sugar, and cement mills, machinery and equipment for pharmaceuticals, chemicals & food processing plants, agricultural machinery, construction equipment, textile machinery, boilers, industrial tools, electricity transmission towers, water treatment plants, electronics, and material handling equipment. Other products include machine tools, railway carriages, ships, and small aircrafts, besides a variety of defense equipment. Unfortunately, the once-strong engineering and capital goods industry has gradually weakened with the privatization and divestment of a large number of public sector industries during the last three decades. The list includes Pakistan Engineering Works Ltd (PECO), Lahore, manufacturers of machine tools and textile machinery, and Heavy Electrical Complex (HEC), Hattar, manufacturers of power transformers.
With the recent transfer of heavy engineering units to the Strategic Plan Division, Heavy Mechanical Complex (HMC) at Taxila, manufacturers of industrial plants and power generation equipment, and Pakistan Machine Tool Factory (PMTF) at Karachi have almost discontinued the manufacturing of commercial products. The closure of Pakistan Steel Mills for more than eight years, with no signs of its revival, has strongly impacted the growth of the engineering industry, in particular. The Engineering Development Board (EDB) was created to strengthen the engineering and capital goods industry, integrating it with the world market. However, it failed to achieve the goal and instead focused on facilitation for private sector activities primarily in the automobile sub sector only. One of the core functions of EDB is to integrate engineering sector development policies with other government policies, which has also been ignored in recent years.
Only a few entrepreneurs have ventured into setting up new engineering units. On the other hand, the existing industry has been marred by obsolescence of plant machinery, lack of modern process technology, and upgrading of products. Due to the limited production capacity and capability of capital goods machinery, Pakistan is unable to meet the growing domestic demand for machinery and equipment. During the first half-yearly period of 2022-23 (July-December 2022), imports of the machinery group amounted to $3.24 billion. The volume of export of capital goods has also drastically shrunk in recent years. A report prepared by industry experts identifies key products in the industrial sector that should be prioritized for indigenization and higher value-addition in the manufacturing subsector. The study emphasizes strengthening the engineering and capital goods industry, mainly machine tools manufacturing and steelmaking. It has proposed establishing in the private sector a machine tool factory under joint venture with a reputed global manufacturer and an integrated steel mill based on modern technology.
Investments in these industries will not only result in large-scale import substitution but will also help improve competitiveness for much-needed diversification and increase in national exports. This will allow Pakistan to enter into global value chains in machinery, thus complementing the existing engineering and capital goods manufacturing. Additional investments will cater to the needs of new industries in various fields. Given the challenges in the energy sector, particularly in terms of power generation and distribution, the engineering and capital goods industry in Pakistan can play a critical role. The development and maintenance of power plants, renewable energy infrastructure, and efficient distribution systems are pivotal for ensuring a stable energy supply for the nation. Then, there is a growing demand for construction and mining machinery, metallurgical equipment, textile machinery, automobiles, agricultural machinery, and domestic appliances. The growth in the capital goods industry in Pakistan has more merits, and it would be reflective of business confidence in dynamic economic performance.
In conclusion, the engineering and capital goods industry, often termed as the "mother of all manufacturing industries," stand as a linchpin for industrial progress in the country, with its impact reverberating across the economy and society. Therefore, recognizing the significance of this industry and strategically investing in its growth can pave the way for sustained economic development, technological advancement, and improved quality of life for its citizens.
The writer is retired chairman of the State Engineering Corporation
