Contract Manufacturing in Pakistan: The Next Industrial Revolution

In pursuit of product diversification of exports along with industrial and employment growth in Pakistan, the Export Promotion Bureau has identified knowledge based Contract Manufacturing Engineering sector. In order to sensitize the related Pakistani industry and obtain feedback the Export Promotion Bureau for the first time arranged an “Engineering, Electronics and Electrical Contract Manufacturing Seminar” on April 27, 2006. Mr. Pervaiz Lodhie, an American entrepreneur of Pakistani origin, Mr. Miguel Santos, Director, Boeing Company and Mr. Glen A. Green, Vice President, Boeing addressed an audience highlighting “The Next Industrial Revolution” which is outsourcing and contract manufacturing of engineered products, electronics and electrical parts by the developed countries to developing nations like Pakistan.
The effect of outsourcing is of huge benefit for developing countries like Pakistan by increasing our export base in electronics and electrical field also thus diversifying our export base from cotton based to manufacturing. The world market is very large and growing fast as cost of production increases in developed countries and technical capabilities improve in the developing ones. The United States of America alone out-sources annually over $600 billion worth of products to the developing countries and this figure is growing rapidly. This unique opportunity provides increased employment and growth in Pakistan from the production and enhanced exports when such goods are exported back to the buyer.
After the Seminar the Chief Executive of Phillips, Mr. Shahid Zaki, Mr. Miguel Santos, Director, Boeing Company, Mr. Glen A. Green, Vice President, Boeing had a meeting with Minister of State and Chairman Export Promotion Bureau Mr. Tariq Ikram to discuss this opportunity and outline the way forward.
Mr. Miguel Santos, Director, Boeing Company informed the Minister of State that Boeing has placed electronics contract manufacturing orders on Precision Engineering Company and Pakistan Aeronautical Complex for around $100 million. Mr. Santos expects that in the next two to three years, Boeing could surpass one billion dollars for precision engineered parts manufacturing companies. Boeing is not only placing the orders but providing the technical know-how by deputing their engineers to train Pakistani counterparts. Boeing has even supplied the machinery needed to prepare these parts used in their 777 Aircraft model series to be sold globally.
After almost two hours of discussion, Mr. Tariq Ikram, Minister of State and Chairman Export Promotion Bureau advised that this opportunity be taken up very seriously as it not only helps increase exports in value-added engineering sector but also creates employment and skill development in Pakistan. He constituted an action team comprising following persons who are experts in their related fields.
Mr. Pervaiz Lodhie, President, LEDtronics based in Torrance, California.
Mr. Miguel R. Santos, Director, Boeing Company based in Seattle, Washington
Mr. Sultan ul Arfeen of Arfeen Group of Companies.
Mr. Shahid Zaki, Chairman & CEO, Philips-Pakistan Operations.
Mr. Mohsin Ali, Secretary General, The American Business Council of Pakistan
Mr. Riaz Khan, Executive Director Marketing, Export Promotion Bureau.
The Action Committee will develop proposals further. He hoped that he will be able to have the final proposal presented to the Prime Minister and the President of Pakistan in a few months.
The line of action agreed was to first do a concept paper on the nature and size of opportunity and broadly how Pakistan could exploit this opportunity and the export and employment opportunity that could be expected. Thereafter the would identify the sectors where outsourcing would be possible for Pakistan to cater to in the short and medium term. Thirdly to develop a paper on the ‘Case for Pakistan’ which should identify the benefits that a company abroad could expect if it outsources to Pakistan. Minister of State suggested that because such an industrial venture was generally high-tech, needed a different culture, had common vendors etc it may be useful to request the Sindh government to provide a 100 acre piece of land to set up a dedicated and EECM City (Electronics and Electrical Contract Manufacturing City). He agreed to discuss this further with the Governor and Chief Minister of Sindh. The Minister of State suggested that the State Bank should also include this contract manufacturing industry in the Long Term Export Project Financing Scheme which had been developed by the State Bank on the request of the EPB to support innovative and new export initiatives.
In the meantime, Export Promotion Bureau will contact the International Trade Center to get their technical expertise in order to launch the project.
All the members of “The American Business Council of Pakistan” are fully supporting this project and have assured the Export Promotion Bureau to help the local electrical and electronics manufacturers in helping them get order from USA.
Later, such cities would be established in all major cities of Pakistan.

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Editor: Akhtar M. Faruqui
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