Hardware manufacturing clusters in Punjab

Economic diversification is vital for adding new jobs and securing quality growth. Manufacturing is critical to achieving such objectives. Hardware manufacturing, in particular, is important in this regard because it simultaneously enjoys domestic, commercial, industrial and agricultural demand. The sector is fundamental to economic revival.
In emerging and developing economies, hardware manufacturing sector has experienced robust growth performance on the heels of population increase and infrastructure development imperatives. Pakistan's experience is somewhat different. The country is still heavily dependent on imported hardware. Local production is insufficient. Quality needs improvement. Majority of Pakistan's hardware manufacturing is based in Punjab making substantial contributions to the industrial and agricultural value-addition in the province. But the geography and the economic significance of the provincial hardware manufacturing base is neither well-understood nor is recognised.
Punjab has long established hardware manufacturing clusters situated in and around Lahore, Sheikhupura, Gujranwala, Gujrat, Faisalabad and Multan. Many predate the independence of the country. Majority of these industrial clusters directly or indirectly relate to the burgeoning hardware economy in the province serving the needs of the manufacturing, agriculture and construction sector. These industrial agglomerations are diverse in size, productivity, technology-level, skill profile and manufacturing capabilities, producing similar and complementary goods and services in close proximity. Hardware clusters of Punjab have made substantial inroads into productivity enhancement and export competitiveness in terms of design, quality, cost and meeting delivery deadlines in time. Yet many need support to catch up with competitive pressures. Being the most industrialised province of Pakistan, these clusters have special significance for efforts to develop private enterprise for economic growth, job creation, increasing incomes and lift people out of poverty.
Hardware clusters in Punjab predominantly consist of small and medium enterprises manufacturing nuts and bolts, tools and equipment, plant and machinery and countless articles used in homes and offices. Punjab is leading the country in manufacturing of white goods, auto parts, agricultural implements, ceramics, foundries, electrical fittings and light engineering; the latter has shown great export potential in the past few years. These non-traditional exports mostly manufactured in Punjab increased by over 27% during July-April of FY2010-11. This is only a tip of the iceberg given the promising export potential in the sector. This calls for special policy attention in terms of improving investment, technology, skills, productivity and competitiveness of these enterprises. In particular, a strategic approach to developing the export competitiveness of light engineering goods sector is needed. The geography of light engineering manufacturing spreads across central Punjab having the highest population density in the country. This sector has a great albeit latent export potential.
Hardware clusters located in Punjab can unleash much-needed economic diversification especially involving decreasing the country's heavy reliance of textile sector that contributes nearly half of the country's industrial output and two-third of export earnings. The province is well-placed to induce such a structural transformation in search of an economic breakthrough commensurate with the national potential and fully reflective of provincial natural and human resource endowment. This will help manufacturing of quality and low cost hardware with modern technological and design features that can help Pakistan catch up with fast-changing high-value global supply chain. Low cost labour and geographical position of the country can attract large-scale foreign investment in new hardware manufacturing projects including joint ventures with global hardware players. It will facilitate the transfer of technology and know-how. This has a special significance for Punjab vis-à-vis efforts to increase trade with India and across South Asia.
Currently, the growth, development and export competitiveness of the local hardware sector is restricted. Resultantly, Pakistan continues to heavily depend on expensive hardware imports especially from China catering for almost two-third of the local demand. High-tech and precision equipment are mainly imported from Europe, North America and Japan. The sector needs strategic support in terms of policy, technology upgradation and skill development. In particular, the manufacturing of auto parts, steel products, home appliance, electrical machinery, fans, pumps and motors, heavy engineering, consumer electronics, foundry output and castings and refectories and ceramics should be accorded a strategic importance. These industries have a unique investment, employment generation and export potential. This is specially so in the context of increasing economic openness in South Asia. The region is set to experience an unprecedented construction boom in the current decade.
Punjab can be a major provider of hardware in the region. In addition to that, the development of agricultural hardware sector in Punjab is also of critical importance. This is also the key of focus global investment-seeking opportunities in agricultural economies to tackle growing food insecurity. Punjab with its comparatively better business environment can readily take advantage of emerging competitive opportunities. But it would require deeper understanding and commitment on the part of the government. Manufacturing and value-addition fares well on the economic development priorities of the provincial government. These efforts need enhancement in two areas. First, the local industry should be provided metallurgical skill development support. Special attention is needed in the field of material sciences. Well-funded university-industry linkage can also help overcome shortcomings in material processing. Second, local firms should be linked to their global counterparts with full public support to forge joint ventures. The government of Punjab has the wherewithal to take these initiatives.
(The writer is Central Chairman of Pakistan Hardware Merchant Association)