Ministry of Commerce, under the auspices of the caretaker government, has formulated a five-year strategy aimed at bolstering Pakistan’s exports from its current level of less than $30 billion to $100 billion by the fiscal year 2027-28. The primary focus is on revitalizing the exports of clothing & textiles, with a target set at $50 billion, followed by $25 billion earmarked for agriculture & food, and another $25 billion allocated for engineering goods & pharmaceuticals. However, achieving more than threefold growth in export volume within five years presents significant challenges, given the prevailing economic conditions, stagnation in the industrial and agricultural sectors, and escalating production costs due to increased energy, transportation, and other overheads and raw materials. Unless the government swiftly implements drastic policy measures prioritizing ease of doing business, such ambitious targets may remain elusive.
Ministry of Commerce, under the auspices of the caretaker government, has formulated a five-year strategy aimed at bolstering Pakistan’s exports from its current level of less than $30 billion to $100 billion by the fiscal year 2027-28. The primary focus is on revitalizing the exports of clothing & textiles, with a target set at $50 billion, followed by $25 billion earmarked for agriculture & food, and another $25 billion allocated for engineering goods & pharmaceuticals. However, achieving more than threefold growth in export volume within five years presents significant challenges, given the prevailing economic conditions, stagnation in the industrial and agricultural sectors, and escalating production costs due to increased energy, transportation, and other overheads and raw materials. Unless the government swiftly implements drastic policy measures prioritizing ease of doing business, such ambitious targets may remain elusive.
Engineering goods, recognized globally as a catalyst for augmenting national exports, hold considerable promise among non-traditional export items. Despite possessing the requisite capacity, capability, and, generally, international competitiveness, an analysis of export performance over the past five years reveals a meager average annual export value of approximately $200 million for Pakistan's engineering goods. This growth trajectory falls far short of expectations, significantly lagging behind its true potential. This is notwithstanding Pakistan’s emphasis on regional trade and its existing free trade agreements with various nations.
Pakistan's Look Africa Policy is poised to bolster trade ties with African nations, particularly in the export of engineering goods where significant opportunities abound. In January 2024, Pakistan hosted the fourth Pakistan-Africa Trade Development Conference in Cairo, Egypt, alongside a single-country exhibition, aimed at fostering trade relations, particularly with Egypt. Despite these efforts, bilateral trade volumes remain stagnant, in the range of $ 400 million annually, with exports from Pakistan totaling $107 million and imports amounting to $245 million in 2022.
There have been numerous instances where Pakistan failed to capitalize on opportunities to export machinery and equipment to African countries, primarily due to vested interests. Export of engineering goods has always been a cherished goal of successive governments. Until the early 2000s, Pakistan's export of machinery & equipment remained robust, but in recent years, its share in total exports has drastically declined, primarily due to a lack of policy support. In the past, Pakistan exported a variety of engineering goods, including sugar mills, cement plants, chemical plants, industrial boilers, construction machinery, machine tools, electric motors, and railway equipment to various countries.
Reflecting on my tenure as Chairman of the SEC, efforts were made in 1999 to penetrate the Egyptian market for the export of engineering goods. Regrettably, bureaucratic hurdles thwarted these endeavors. Despite the Heavy Mechanical Complex (HMC) emerging as the lowest bidder and technically qualified to supply six industrial boilers valued at millions of dollars, we were unable to finalise the deal. Just before finalizing the contract, the client invited HMC for technical clarifications regarding quality standards and tests, particularly in accordance with ASME standards, an area in which HMC had significant expertise. Despite this, the Prime Minister’s office did not approve the business visit that halted progress. This missed opportunity underscored the potential for significant breakthroughs in engineering goods exports. Despite decades-long relations with Egypt, Pakistan has failed to export any engineering goods, instead relying on exports of textiles, chemical products, and plastics & rubbers.
K.M. Farooq, the visionary Managing Director of HMC, played a pivotal role in placing Pakistan on the global export map for capital goods. His efforts secured the first export order for a sugar mill in Indonesia, which followed successful ventures in other countries. While exploring the African market, HMC successfully secured an opportunity to supply a sugar mill in Nigeria in 1984. The government sent a delegation to Nigeria led by the Minister for Production to negotiate details of the deal. In the first-day meeting with the Nigerian Minster for Industries, our minister candidly offered the host, to the great embarrassment of other members including Pakistan High Commissioner, a sugar mill from India instead, at a much lower cost compared to the Pakistani product through his family-owned trading house. The minister had an exclusive dinner the same night in Abuja with an Indian Sikh, in the absence of the high commissioner and HMC team. The following day, the two ministers had the business meeting without associating any other member of the Pakistan delegation or even the high commissioner.
High Commissioner Akram Zaki sent a strong note to the Foreign Office in Islamabad apprising it of the situation, but the matter was not brought to the knowledge of President Zia-ul-Haq, presumably because the minister was known to be very close to the President, who had served as a staff officer to the minister—a retired Lieutenant General. It was known in the power circles that the President had directed his staff to always put the President first on the phone line rather than the minister. It so happened that after a couple of months, President Zia visited HMC along with a foreign dignitary, and K. M. Farooq got a chance to talk to the President about the Nigerian episode. Upon return to Islamabad, the President reportedly called the Foreign Office to verify the story, which was confirmed. The Minister for Production was replaced, but his successor, also a retired general, sacked the managing director. Not only HMC lost the contract for the supply of a sugar mill and a major breakthrough in the export market but also lost a competent and dedicated person.
Notably, in 2000, a similar scenario unfolded during negotiations for a sugar mill project in Nigeria, highlighting systemic challenges impeding Pakistan’s engineering goods exports. HMC had initialed a draft contract with the Nigerians for setting up a sugar mill in Jigawa state during the visit of the Nigerian delegation to Pakistan. The contract was to be signed in Nigeria for which a ceremony in Jigawa state was organized where the Governor was the chief guest. Formal approval for the visit was delayed somehow, and HMC had to change reservation of flights several times. Finally, the writer, with the understanding that the President’s secretariat had given permission to travel, allowed the managing director of HMC and his team to go to Nigeria on the prefixed date with the Nigerians.
While the HMC team was in the lounge at the Islamabad airport after check-in, the Minister for Industries and Production, a businessman with a strong interest in the export of plant machinery, came there as he was leaving on a domestic flight and directed the off-loading of the HMC team. High Commissioner Zafar Hilali, who had taken a keen interest all along in finalizing the deal and visit program, was embarrassed and sent a message to the Foreign Office with a copy to the President. It may be added that High Commissioner Zafar Hilali, while posted as the counselor/minister in the Pakistan embassy in Jakarta, was of immense help to secure a contract for establishing the sugar mill in Indonesia and its subsequent commissioning.
In conclusion, owing to the unique nature of engineering or capital goods, which are not subject to employing the usual methods of sales for consumer items, their marketing necessitates institutional support. However, this may not be possible within the existing setup of the Trade Development Authority of Pakistan (TDAP). Therefore, it would be prudent to establish an autonomous body for the export promotion of engineering goods and services, following the successful model of the Defence Export Promotion Organisation (DEPO). Such an initiative would enable a more focused approach towards increasing the share of engineering goods exports and greatly facilitate the achievement of the set target by 2027-28.
The writer is a retired chairman of the State Engineering Corporation.
