Money Matters

Concluding failures

June 19, 2017
By Hussain Ahmad Siddiqui

INDUSTRY

Reportedly, the government has decided to dissolve, with immediate effect, the Engineering Development Board (EDB), a wing of the Ministry of Industries and Production, for alleged involvement of its staff in corruption and malpractices as well as for creating hurdles in the way of large investment flows into the automobile sector pursuant to the Automotive Development Policy 2016-21.

Apparently, the government is implementing its undeclared policy of phase-wise wrap-up of the national strategic institutions, in particular engineering, perhaps, with a reprisal and vengeance. The modus operandi is simple.

First, the incompetent and unqualified persons are appointed as the chief executive officer (CEO) and board members of the organisation, primarily on political considerations, and they are allowed to mess up with the institutions with nepotism, inefficiency, mismanagement and irregularities, without any checks or balances.

Second, when the organisation becomes sick over a period of time, it is put on sale or closed down. A typical example is that of Pakistan Steel Mills in Karachi, which has been non-operational for the last two years, and the government is least bothered. It has been continuously incurring huge losses that now amount to over Rs70 billion. There are no chances of reviving Pakistan Steel and going into production at a time when various infrastructure projects under the China-Pakistan Economic Corridor (CPEC) require, over subsequent years, millions of tons of iron and steel products, valuing billions of dollars annually.

It is apathetic that none of the major political parties are worried about the worsening affairs of the only integrated steel mills in the country. Another recent case is that of the unsuccessful privatisation of the Heavy Electrical Complex in District Haripur, an industrial unit manufacturing power transformers.

Now, the Cabinet Committee on Energy, in a meeting presided over by Prime Minister Nawaz Sharif, has observed that the EDB was not performing any function, either in terms of regulation or promotion of engineering enterprises. Earlier, there were reports of the EDB being dysfunctional due to massive shakeup in the organisation’s administrative structure without approval of the competent authority, and resultantly, persistent deterioration of the overall performance of the organisation. Federal Audit, a wing of Auditor General of Pakistan, has detected as many as 31 violations in the EDB ranging from appointment of its CEO to arbitrary increase in the CEO’s salary to misuse of his authority.

The contract of the controversial CEO, whose degrees remained in question, expired on March 31, and the EDB is being run on ad hoc basis, like some other national institutions, as adhocism has become order of the day.

Indeed, the EDB has a chequered history. As an apex body, it was set up in May 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 (BOI), the EDB was transferred, in its infancy, to the Planning Commission, but without any resources; physical or financial.

It thus remained a constituent of the State Engineering Corporation (SEC) practically for all purposes as its chairman was given additional charge of CEO of the EDB. Unfortunately, EDB was never allowed to establish as an independent organisation for the reason of deep-rooted vested interests. For many years, no full-time CEO was appointed, until the board was transferred to the Ministry of Industries and Production in the Musharraf period, and was merged with its Experts Advisory Cell.

The EDB was mandated to resolve problems of the engineering sector on fast track basis by projecting strategic development plan with focus on plant modernisation and technology upgrade, both for import substitution and export enhancement. To achieve the objectives, it was to establish a national technology development fund and an engineering training fund. This was not done.

The EDB was chartered to create a large base for export of engineering goods through product diversification and latest technology acquisition. These objectives could not be achieved for a variety of reasons, primarily due to the fact that successive governments failed to accord priority to the engineering sector.

Pakistan’s engineering export proceeds are abysmally low, in spite of its high potential, estimated to billions of dollars annually, given the enabling environments. Annual export of engineering goods remains about four percent of national exports for the last ten years or so. During the six-month (July-December) period of the current financial year 2016-17 export proceeds of engineering goods were valuing $409.40 million compared to $434.84 million during the same period last year, registering six percent decrease.

On the other hand, the imports of engineering goods increased to 24 percent during the same period, accounting for $9,521.42 million compared to $7,685.88 million during the same period of the previous year. The share of Pakistan’s engineering goods in overall global exports is negligible, at 0.0151 percent, whereas engineering goods constitute around 50 percent of the world trade.

The engineering sector is generally characterised by low productivity, technological obsolescence, high cost of production, and non-competitiveness. The EDB has not taken effective steps in this direction either. Nonetheless, the EDB’s achievement of developing automobile sector is remarkable that has resulted in higher contents of indigenisation, and significant investment in the sub-sector.

However, the Ministry of Industries and Production abused the EDB in the recent past by engaging it on non-related assignments, such as promotion of soap industry, development of chemical sector, and facilitation to energy projects, obviously at the cost of engineering industry.

Thus, the engineering sector was neglected and could not develop on a sustainable basis and at a substantive scale. Resultantly, performance of the EDB remained sluggish and static, rather deteriorated over a period of time. It is ironical that currently the Board of Directors of the EDB includes (i) Chairman of Basmati Growers Association, (ii) Pro-Rector of National University of Sciences and Technology (NUST), and (iii) representative of Higher Education Commission (HEC), among others. 

Development of engineering industry is the key to social and economic progress. The need for developing this strategically important industry is universally recognised despite its low profitability. The significance of engineering sector lies in strong links and services it provides, particularly to the large manufacturing sector, besides other numerous benefits, such as the immense employment opportunities, promotion of auxiliary and ancillary industries, enhancement of defence capabilities, and manifold increase in export earnings. For these reasons, the sector receives regular and special attention of many developing as well as industrialised countries.

Pakistan’s engineering sector too deserves due attention to achieve the cherished goals of self-reliance, import substitution, and significant exports, following the examples of other developing Islamic countries like Malaysia and Indonesia.

The decision to disband the EDB should therefore be reviewed and withdrawn forthwith by the government, and it should be allowed to frame and implement concrete policies for promotion of the engineering sector, with a long term perspective. Also, CEO of the EDB should be appointed on merit, Board of Directors reconstituted, and impediments in its proper and effective functioning according to its mandate be removed, on priority.

The writer is the retired chairman of the State Engineering Corporation