Engineering Goods

The engineering industry accounts for 14.8 percent of value added and comprise
basic metals (4.3 percent), metal products (1.2 percent), machinery (1.1 percent) electrical machinery (3.3 percent), transport equipment (4.7 percent) and measuring instruments (0.2 percent). It has forward and backward strong linkages and as such can play a crucial role in the growth process. The share of engineering goods imports is 31.2 percent of Pakistan’s total imports. The Korean and Malaysian economies have built their foundations on the engineering industry; both Korea and Malaysia had a large percentage of their exports concentrated in engineering goods. Share of engineering goods in Pakistan’s exports is only 4 percent compare to Korea (55 percent) in Malaysia (46 percent). Studies suggests a requirement of US$ 10 to 12 billion investment to raise the engineering sector exports from its present level of 4 percent to 12 percent with the next ten years. The exports of engineering items would increase eight times from $ 270 million to US $ 2.13 billion by 2010 besides
meeting the growing domestic consumption of engineering goods.

The auto industry is a medium technology industry presently catering mainly to the
domestic market, with 44 units engaged in assembling, supported by over 850 tier-I vendorsand around 1200 tier-II vendors engaged in manufacturing auto parts. Around $ 300 million has been invested by the OEMs & vendors during the last 3 years with another $ 390 million planned during 2004-06 to cater to increasing demand. Local production capacities has built up significantly leading to higher indigenization levels and a sharp increase in exports ofauto parts to over US$ 30 million in 2004.

The major threat to the sector lies in inconsistent policy framework which can lead to distortion in duty structures and reduction of investment in long term projects.