Innovation in informal sector: Lost opportunity to industrialise ingenuously (JR120)

Innovation in informal sector: Lost opportunity to industrialize indigenously (JR120)

Introduction

Pakistan since its inception in 1947 has been focused upon nation building and security issues. This mostly because a large powerful aggressive neighbor presented real or imagined threats ( real I would say as the bad boy of South Asia , India, did plan , mastermind and actively participate in the separation and creation of Bangladesh, Indians have  not given up their quest to destabilize Pakistan and have interfered in Baluchistan and elsewhere)  This attention upon survival has meant that other aspects have been ignored, development issues and economic process has received less than deserved attention. This has resulted in an lost opportunity. There was and still is considerable ability and talents in the country and had these been recognized, nurtured and assisted Pakistan may well have been able to industrialize by means of locally developed technology. This opportunity still exists and can be harnessed to indigenously industrialize and modernize.

Early history

Pakistan did not process much industry, Pakistani agriculture produce was processed by industries located in Bombay and Ahmadabad or was exported to England for processing. There was however the famous Mughalpura Railway works (MRW) which were at that point in time state of art. This facility was manned by Pakistani talent and had ability to manufacture machinery and structures. By 1940 MRW had over 4000 machine tools, some were more advanced than any other available, in the sub continent. there were about 1500 machine tools in workshops in Sukkar, Karachi and Rawalpindi  Bridge making and fabrication facility was developed at Jhelum, which provided structures for many bridges in the sub continent railway system..Even more importantly these works were manned by Muslim technicians and workers and were subsequently joined by Muslims who migrated to Pakistan after 1947 this ironically was the result of the strict caste system followed by the Indian society. The lohars or blacksmith was almost exclusively Muslim. This is why Muslims had an -edge over Hindus in the engineering profession. . At partition about 14000 skilled workers were available in the Railway engineering system in Pakistan.

BECO

The company was named Batala Engineering Company after the name of C.M. Latif's home town. During the year 1932 the idea of what is now known as BECO or PECO first flourished in Latif's mind (he was 25 years old).

When it was certain that Batala was going to the Indian side Muslims started mass exodus from the town. Though Latif had no difficulty crossing over to Lahore, long lines of people on the small road from Batala to Kalanor could be seen. Some were also trying to cross river Ravi at that point. There was a horrifying blood-bath through which the Muslims of the Indian Punjab had to go. Batala and its surroundings were struck with a greater fury as it was a Muslim majority area which was treacherously handed over to India under the Radcliff Award. The hearts and homes of innumerable innocent Muslims were destroyed ruthlessly. They were attacked again and again as their refugee caravans trekked towards Pakistan for security and safety. The distinction was only between the frenzied killers and the helpless victims. BECO engineers, workers, Muslim citizens and villagers around Batala became BECO's evacuation concern. This is how the BECO family came to Pakistan leaving all their machines, plants and financial assets behind.

BECO begins from scratch.

From here began the second phase of BECO's development. It was a beginning from scratch all over again. When the family arrived in Lahore, Latif fell sick. He was bed ridden with fever for ten days. As soon as he was well, he went to the Mall road branch of Bharat Bank. He had an account with their branch at Batala. At the very moment of his visit, the bank staff was loading their registers, etc, into a lorry to take them to Delhi. The manager could only offer Mr. Latif a cheque for Rs 20,000, which could be encashed at Grindlay's Bank in Karachi. He sent it promptly to brother Siddiq for encashment. That is how they started again. After a few months they were allotted a house and also the Mukand Iron Works at Badami Bagh. This was located almost in a bed of water as the Ravi had over-flowed and the flood waters had reached up to the General Post office. At that time there were no bunds around the city of Lahore.

The business of the company was commenced by purchasing scrap. The first wagon arrived with cast iron and old railway sleepers. It was bought from a scrap dealer Mr. Maquand Lal. The rate at which the 20 tons of caste iron was between Rs 20-22 per ton (in September, 2005 the rate of this commodity in Lahore, was being quoted as Rs 20,000/- per ton, giving an inflationary ratio of almost 1:1000).After much hard work the company's works at Badami Bagh became a beehive of manufacturing activity.

BECO capability at time of nationalization

By the time BECO was nationalized in 1972 BECO had developed capability to manufacture: bicycles, pumps, diesel engines, cement mixers, lathes and other equipment and machine tools. BECO also was able to export some of their products to the developing and developed world. At that point in time BECO had a team of trained engineers including foreign engineers and about 6000 trained workers. BECO was  manufacturing a variety of metal engineering goods including various types of machine tools, engines, pumps, structural’s, textile looms, agricultural implements, etc. in  Badami Bagh  Works. BECO was manufacturing bicycles, electric motors and heavy structurals at new works at Kot Lakhpat 

Ittefaq Group 

Sharif was born in 1919.^[Sharif was born in a small village in Punjab province near Amritsar (now in the Indian part of Punjab) . In 1936, the family relocated to Lahore, the then capital of Punjab, for business reasons. With his 6 brothers, Mian Sharif founded a foundry in 1939 , which was gradually developed into a large corporate empire. His operations became the nucleus of the steel company Ittefaq and Sharif became the largest industrial tycoon in the country. Unlike Mr. Latidf Sharif was not educated as an engineer but He acquired the services of a German engineer at a very high salary, who managed the establishment of the steel works the family owned.

Industrial activity in Punjab

The earliest known production of machine tools in India was in 1890, workshops in Punjab had started to manufacture machine tools. The diesel engine manufacturing industry made a beginning in 1900. Other products manufactured were : machine tools; electric fans(Muhammed Din) ; surgical instruments ; cinema projectors (Shafi) ; flour grinding machines ;Other notable products were : cane crushers(Ramzan and Subhan). Fly presses (Ilam Din of Lahore) ; oil expellers (K.B>Chisty and Sons)Diesel engines ( in 1920 Abdul Majid); carding engines; ginning machines rice hullers . When Pakistan came into being there were : thirteen machine tool manufacturing units ; sixty diesel manufacturing units ; four fan manufacturing units ; one cinema projector manufacturing unit; ten surgical instrument manufacturing units ; and about twelve units manufacturing a number of products

Surgical Instruments

Scottish surgeon broke his instrument in 1908, this was repaired by a lohar from Kotli Loharan, near Sialkot, The lohar was commissioned to repair and manufacture these instruments. The industry started and slowly shifted to Sialkot.

Capability at Partition

Pakistan inherited a significant number of manufacturing units manufacturing equipment and products that were competitive and more importantly a large number of engineers, technicians and workers who was skilled and trained. This was a very significant legacy.

Opportunity squandered

The Pakistani leadership was clueless as far as economic development was concerned and the possibility of utilizing the manufacturing industry and skilled professional never entered into the political plans for Pakistan. PIDC (Pakistan Industrial Development Corporation) under Ghualm Faruque did manage to partially industrialize the industry but after he left PIDC went into stagnation and eventually became totally ineffective. President Ayubs government also made efforts, which were successful, in developing the industrial base (most was the result of the green revolution which gave a surplus to the farmer who diversified into small implement manufacture) . The Bhutto government with their nationalization killed most industries, BECO (now PECO) never returned to its former glory, and other industries that were taken over discouraged their owners who refused to invest in Pakistan anymore.

 Government Failures

The Government could have helped by setting up training institutes and by establishing research facilities. Technology appropriate to the country could have helped .Few, largely ineffective steps were taken, but by and large the small industry was left to its own, even foreign exchange   earning industries such as cutlery, surgical instruments and sports good was provided with little assistance. These and other industries progressed almost entirely on their  own. 

The diesel industry could not survive, diesel engines demand was for high speed engines, the conversion required investments which the small manufacturers could not afford .The last nail was driven by the labor reforms of 1972 that completely discouraged the struggling small diesel manufacture owners, who eventually closed down and this aspect of our manufacturing niche went into terminal decline.

The electric fan industry did not devolve into a large export oriented section of our industrial

assets. With a little investment and training Pakistan could have developed into a fan export hub. Investment and training could have assisted this farm industry to evolve into a significant electric motor manufacturing player.

The surgical instrument industry performed brilliantly, but this was not due to any government assistance, they had no assess to bang sector funds and were able to survive and grow on their own. Germen and Dutch help was made available though, but this resulted in reverse technology transfer as the technology was passed on to surgical manufacturing industry in Ludhiana in East Punjab India.

The Darra Adam Khel arms industry was self developed with no assistance, help in form of testing facilities, metallurgical knowledge, testing facilities would have enabled this sterling effort to blossom into a export oriented industry

Bicycle industry blossomed and Pakistan was able to produce a large number of bicycles in small manufacturing plants around Lahore and elsewhere. Pakistan could have emerged as a bicycle exporting country but this opportunity was squandered. Instead the technology -was stolen by Indians who managed to establish Hero Industries in Ludhiana, India.

 Proficient pickup was developed during the mid-1980s, by a local engineer Mr. Khalil ur Rahman (late) and was Pakistan’s very first locally assembled 1,000cc pickup. Proficient trucks were as good as most of the foreign brands and were cheaper as well. It competed in the small pickup and medium truck market, primarily against the Suzuki. However, the Proficient project suffered badly due bureaucratic hurdles and lack of support from the government, which then introduced an untimely policy of concessionary rate on CBU imports of Suzuki pickups (then known as ‘Ravi’  ), same capacity as the locally conceived Proficient  The problems faced by the manufacturers of the Proficient, the country’s first locally produced automobile, are typical of those faced by other entrepreneurs in Pakistan — proving yet again that a bureaucracy committed to red tape-ism and inefficiency is the biggest deterrent to industrial growth and self sufficiency  From a distance the pickup looks like any one of the many Suzukis that ply the roads of Karachi. A closer inspection indicates that the headlights and front grill are slightly different. It is only after the proud manufacturer lifts up the front seat to reveal the engine hidden beneath, that disbelief turns to awe at the boldly lettered ‘Proficient’ that proclaims the vehicle’s name. Despite a number of advertisements in the press, very few people actually realize that this vehicle has been manufactured entirely in Pakistan. “Speaking from his Winmark Industries office in PECHS, however, the manufacturer of this vehicle, Mr KhaliIur Rehman, sounds a little unenthusiastic about showing visitors around his factory in the remote North Karachi industrial area. He keeps saying that most people are quite taken aback when they see the primitive setup in which the automobile is manufactured. Indeed, after a grueling journey through city traffic and the narrow lanes of the katchi abadis, the factory is still a quarter of a mile away, without even a dirt track leading up to its entrance.”  Mr Rehman is no longer alive but his sons carry on with his work.The factory is a two thousand yard plot with a boundary wall and a three storeyed, unpainted brick structure in the middle. The front courtyard could easily be any one of a thousand denting and painting shops that litter the city. A chassis is cut and welded in one corner, while the shape of the driver’s cabin is hammered out in another. All the moving and lifting is done manually, and the rest of the work is also accomplished without the use of any tools that are more sophisticated than a blow-torch. The makers of Proficient pickup van also developed a small car, 800cc, but they were not given permission to manufacture this at all.

Pakistan was the the First Islamic Country in the world which made a 4 Wheel Drive Jeep of its own in late 60's called NAYA DAUR in collaboration with WILLIS jeep. Pakistan was the First Islamic Country in the world which was about to manufacture its own Motorcycles in early 70's with the collaboration of JAVA motorcycle but the process was soon abandoned. Pakistan was the First Islamic Country in the world which had made its own prototype Diesel Engines by the Lahore based company called BECO (Battala Engineering Company. Pakistan really was the First Islamic Country in the world which actually made a Motor Car of its own in early 70's with the collaboration of SKODA Motors. It was named SKOPAK. The prototypes had been made, the production was about to be started soon, but alas. This was not to be.

 During the 195 war the Army realized the need for locally manufactured vehicles. An EME Officer took up the challenge. A Karachi based importer of “Jeep” had started assembling these vehicles, he was invited to undertake assembly of these vehicles from locally manufactured parts, he agreed .and was given the order to manufacture four vehicles, called NISSAN. IN about three years some if these vehicles were assembled , these were tested and finally 115 prototypes were manufactured .All expenses were borne by the contractor, each vehicle cost Rs. 27,500 whereas the imported Jeep had a cost attached of Rs., 44000.J.A Rahim the then Minister unfortunately put a stop to this and the project was wound up.

Ice making plant were manufactured in Pakistan these were used by  cold storages and ice making plants, now defunct MAS were manufacturing these in Lahore . Air conditioning plant manufacture was started in 1980s in Rawalpindi, these were even exported.  Haji Shafi was able to manufacture a automatic loam, this was tested and found to be as good as imported loams.
 

Present Status

Rising demand for mist fans on the international market has helped Pakistan earn at least 18 per cent more foreign exchange from exports during 2016-17 as compared to a year ago. the number of electric fans exports from Pakistan has decreased by 4pc, but in terms of market value the share has increased by some 17.96pc in 2016-17 as compared to 2015-16. According to the data issued by Pakistan Bureau of Statistics, as many as 1.273 million fans were exported during 2016-17, highlighting a 4pc decrease as compared to 1.326 million fans in 2015-16. However in terms of value of these exported fans, the country earned foreign exchange worth $30.168 million (Rs3.15 billion) as compared to previous year’s value of $25.681m (Rs2.678bn). United Arab Emirates has imposed restrictions on Pakistani fans to meet European standards and this could be a reason for decline in quantity, he added. Pedestal fan exports have increased, particularly mist fans that spray water in the air leading to a cooling effect. Pakistani mist fans are sold of $90 per piece as compared to normal pedestal fans which are priced at around 20 dollars in the global market, he said. Price of Pakistani fan is higher than the Chinese ones but these are also more durable and heavy duty in terms of quality, he explained. . The turmoil in Yemen and Iraq for the last few years has also been a cause of decline in the export of Pakistani fans. These countries have always been a good market for Made-in-Pakistan fans

Surgical goods and medical instruments worth US$ 221.298 million were exported from the country in first seven months of the current financial year as compared the corresponding period of last year. During the period from July-January, 2017-18, the exports of medical goods and surgical instruments grew by 15.27 percent as above mentioned commodities worth $221.298 million exported as compared the exports of $191.979 million of the same period last year. Meanwhile, cutlery goods valuing $52.200 million exported in last seven months as compared the exports of $46.224 million, showing an increase of 12.93 percent during the period under review, said data of Pakistan Bureau of Statistics (PBS).

In 2010, a record 1.8 million motorcycles were manufactured in the country. Its production is still on the rise. For instance, Honda’s Sheikhupura plant plans to produce 900,000 units by April 2017 under the first phase of its expansion project. The company’s two manufacturing facilities have the capacity to manufacture 1.35 million units a year in Pakistan against the current production level of 750,000. The company is currently exporting up to 5,000 units to Afghanistan, Bangladesh and Sri Lanka. Afghanistan, Bangladesh and African countries are the markets for Pakistan’s low cost bikes. The illegal exports of two wheelers to Bangladesh and Afghanistan are reportedly thriving due to hurdles in legal exports and problems in getting export rebate. The low cost Chinese bike makers have been facing suspension in bike exports to regional countries due to bureaucratic hurdles and influence of a power lobby of Japanese-based automotive association. The government should remove all hurdles and announce incentives to encourage exporters. Pakistan lacks a comprehensive automobile policy covering two-wheelers. The present automobile policy only covers four-wheelers, hence making it ‘not feasible’ for any foreign company to manufacture bikes in the country. The country is likely to lose a proposed investment of $150 million by Japanese giant Yamaha Motors because of its unclear automobile policy. Yamaha had reportedly submitted the proposal with Board of Investment three years ago, but it was facing delays due to confusion about Islamabad’s automobile policy. Japanese company not only wanted to assemble and manufacture motorbikes and engines in Pakistan, but also planned to export these to the Middle East, Africa, Afghanistan and other countries. In the wake of the investment, 25,000 Pakistani engineers and technicians could get jobs in the automobile industry. Besides, many small industries could get a chance to produce auto parts.

The exports of sports goods from the Country witnessed an increase of 7.83 percent during the fiscal year 2017-18 as against the corresponding period of last year, Pakistan Bureau of Statistics (PBS) reported. The Country exported sports goods worth $332.516 million during July-June (2017-18) against the trade of $308.361 million during July-June (2016-17), showing growth of 7.83 percent, the PBS data revealed. Among the sports products, the exports of footballs increased by 9.38 percent by going up from $152.565 million last year to $166.881 million during the fiscal year under review. The exports of gloves increased from $107.918 million to $111.740 million, showing growth of 3.54 percent while the exports of all other sports products went up from $47.878 million to $53.895 million, witnessing increase of 12.57 percent. Meanwhile, on year-on-year basis, the exports of sports products during June 2018 increased by 3.89 percent to $29.275 million when compare to the exports of $28.180 million during June 2017.On year-on-year basis, the exports of footballs decreased by 2.59 percent while the exports of gloves and other sports products increased by 11.44 percent and 8.78 percent respectively.  

EXPORT RECEIPTS BY SPORTS GOODS (Thousand US $)
Details	Jul-Jun	Jul-Jan
Sports Goods	539,115	313,362
A)     Footballs	221,569	112,966
B) Gloves	120,944	68,50

Conclusions

There was and still is considerable talent, innovation and ability in the Pakistani masses. There was and still is almost illiterate workers who have the ability to manufacture complex machines, products and systems. This ability has not been recognized by Pakistani leadership. Economic planning has side stepped this extraordinary ability  . The possibility to industrialize using indigenous technology still exists but this talent needs to be nurtured and assistance provided. Such assistance need to be provided very carefully so as to avoid dampening of the innovative talents that the country possesses. Intervention needs to be soft and carefully crafted.