Engineering Development Board (EDB) has been without a full-time chairman as well as a regular chief executive officer for the last one year.

EDB chairman Waseem Haqqie resigned in December 2006. Likewise, Chief Executive Officer Imtiaz Rastgar relinquished the charge in March 2007. Since then, the EDB is being run on ad hoc arrangements.

This has further marred the EDB’s performance that had remained lacklustre in the previous years. The is explained by lack of government’s commitment. As an apex body, the EDB was set up in 1995, to create favourable environment for the development of engineering sector, in particular steel and heavy engineering.

Initially as part of the Board of Investment, the EDB was transferred, in its infancy, to the Planning Commission but without any resources. It thus remained a constituent of the State Engineering Corporation practically for all purposes, which met almost all the fund requirements and human resources needs of the EDB.

Chairman of the State Engineering Corporation was given additional charge of the chief executive EDB for a period of one year till a full-time chief was selected on merit.

He held the charge for last four years in his capacity as the Chairman of the Corporation. The EDB was transferred to the ministry of communications when he was transferred there. Then, again, the EDB was placed under the control of the ministry of industries and production on his subsequent transfer to this ministry where he continued holding additional charge till retirement from service in 2003.

For many years, the EDB had no proper office, and it lacked professional manpower to perform effectively. The government rightly decided to merge it with the resourceful Experts’ Advisory Cell (EAC) of the ministry of industries and production in 2002. But the takeover of financial and human resources of the EAC came along with other constraints as a package.

The EDB focus was then diverted towards facilitating the working of the ministry that enjoyed undue influence and interference on its working. Resultantly, the EDB prepared recommendations for resolving the problems of soap industry and prepared reports on growth of chemical industry, for instance, neglecting its original mandate. It is reported that the EDB may now be entrusted with the development of energy and telecommunications sectors also.

The board was mandated to resolve problems of the sector on a fast track basis by projecting strategic development plan with focus on modernisation and technology up-gradation, both for import substitution and export enhancement.

It was to undertake sub-sector surveys and studies, to set up a national technology development fund and an engineering training fund, in order to achieve the outlined objectives. The body, however, focused only on revising the deletion programme for automobile industry, and its monitoring, that hitherto was being done by the ministry of industries and production directly, and extended tariff and non-tariff concessions to the automobile industry alone.

The results were devastating. The growth performance of manufacturing of engineering goods has remained between a low of 0.1 in 2000-01 to a high of 11.3 per cent in 2004-05. While the sector is open to foreign investment and, apparently, liberal investment policy is in vogue extending attractive tax and tariff incentives for setting up new engineering units, the actual investment has remained stagnant. An analysis reveals that over the last five years, the share of engineering industry (machinery other than electrical) was hardly two per cent to the total foreign direct investment inflow in any year.

The capital goods industry was ignored by the EDB, as evident from Engineering Vision 2010 that has no projections either for investment or for technology development in heavy or light engineering. The industry is generally characterised by low productivity, high cost of production, small volumes and non-competitiveness.

Though managerial and technical skills are of good standard, the industry is constrained by financial resources, high cost of raw materials and other inputs. Other factors hampering its growth are lack of plant modernisation, absence of technology up-gradation and non-adherence to quality control standards. The EDB has not taken effective steps, if any, in this regard.

Of late, Pakistan’s suffers from widening trade deficit. The share of engineering goods in the total annual exports remain dismally low, in the range of $200-300 million, which is even less than two per cent, against EDB’s target of $1 billion by 2005. Exports of heavy engineering goods are practically non-existent.

During the last five years, the trade deficit is rising primarily because of continuous large-scale import of transport, telecom equipment, engineering and capital goods. The fact is that major share in overall imports consistently remains that of engineering goods alone – plant, machinery, equipment, components and spare parts. The machinery group contributed in the range of 30-42 per cent towards total imports during the years 2001-02, 2002-03 and 2003-04.

In comparison, minerals, fuels, lubricants and related material (as categorised by the Federal Bureau of Statistics) were at the level of 28, 26 and 21 per cent during these years, respectively, which remained significantly less than the share of capital goods. In succeeding years, however, the share of machinery group reduced considerably, basically due to high oil import prices.

Out the total imports of $11.443 billion during the four months of current fiscal year (July-October 2007), oil import bill stood at $2.859 billion. In comparison, import of transport and machinery group amounted to $3.163 billion. The machinery group alone has a share of $2.195 billion or over 19 per cent of total import bill.

The trend of large-scale import of machinery will continue, in future too, as the policies related to promoting investment in the power, petroleum, cement and fertiliser sectors are being implemented successfully. The government has reserved an additional amount of $3 billion for the import of textile machinery for modernisation of the industry under textile policy. The oil, gas and petroleum sector has attracted foreign direct investment to the extent of $5 billion. Likewise, Power Policy 2002 has been successful in attracting $5 billion investment while another $10 billion investment is in the pipeline. A few cement plants still continue to expand their existing production capacity.

Investors continue to import a large number of machinery and equipment, in spite of the fact that local capacity and capability for manufacturing exists. Most of machinery, equipment and components for power generation, petroleum, cement and fertiliser sectors are being produced locally, as announced by the Federal Board of Revenue periodically, but the mechanism to support indigenous machinery is not effective. Again, capacity and capability exists with the domestic engineering industry to designing and manufacturing of additional items of machinery that are currently being imported or envisaged to be imported, such as textile machinery and power generation equipment.

On the other hand, selected sectors, such as oil and gas companies and refineries, are given concessions to import the required machinery and equipment for their projects even if produced locally, and that too duty -free and without any conditions for transfer of technology. This situation has resulted in continued reliance on foreign sources, and above all, under-utilisation of facilities with the engineering industry.

Efforts made by industry, mainly in the public sector, to enter into the production of new machinery items for textile and energy sectors were not supported by the EDB. The short-sighted and inconsistent policies proved detrimental for the expansion of capital goods industry.

Progress of engineering industry, or capital goods industry, is the key to social and economic progress and deserves immediate attention to achieve self-reliance, import substitution and significant exports.