Firms miss targets due to outages: survey
PHOTO: REUTERS/FILE
The unavailability of electricity is having a devastating impact on the engineering industry’s ability to meet production targets, with a staggering 83 per cent of companies that took part in a survey raising the issue.
The Pakistan Institute of Development Economics (PIDE) on Sunday released a report on the challenges faced by engineering firms and provides insights into the state of the industry. The research team was led by Dr Nadeemul Haque and included Dr Usman Qadir, Dr Abid Rehman, and Mohammad Armughan, according to PIDE press release.
The report is based on a survey of 328 engineering firms from across Lahore, Gujrat, and Gujranwala – with the area often referred to as the ‘golden triangle’ of engineering firms. The report reveals statistics that underscore the critical concerns affecting the industry's growth and productivity.
One of the foremost issues outlined in the report is the severe impact of electricity unavailability on daily production targets, it said.
“A staggering 83 per cent of surveyed firms expressed that the unavailability of electricity creates hurdles in achieving their production goals, resulting in a detrimental gap between demand and supply for the industry,” it said.
Moreover, 78 per cent of these firms reported that electricity scarcity hinders their operational efficiency, a crucial factor where economies of scale need to be achieved.
Scheduled and unscheduled power outages and voltage fluctuations further exacerbate the challenges by increasing the risk of machinery malfunctions and damage, affecting 68 per cent of the firms.
The financial strain of arranging alternate supply adds to the burden on firms' operations, impacting 72 per cent of the surveyed companies.
It recommended that engineering firms adopt international and national quality standard certifications to maintain quality standards, a move endorsed by 89 per cent of the surveyed firms.
Moreover, the government is urged to focus on enhancing the electricity supply in industrial areas, with smaller firms exploring backup power options to ensure uninterrupted operations, a sentiment echoed by 76 per cent of the respondents.
An interesting finding of the report was the lack of an online presence among Pakistani engineering enterprises.
With a surprising 63 per cent of surveyed firms lacking any online presence, there is an urgent need for businesses to establish themselves online to reach a wider customer base and enhance engagement.
The study revealed that while a significant portion of firms (63 per cent) showed no intent to expand in the coming years, a minority was planning to invest in advanced technology, machinery, land, and skilled labor to boost their business prospects.
Another critical issue highlighted in the report was the lack of access to credit for the majority of firms.
The majority of firms lacked adequate collateral to secure loans due to their small size. This reduces their marketability to commercial lenders and has resulted in only five per cent of surveyed companies having loans or lines of credit. Limited access to finance hampers the industry's growth potential, it noted.
To address this, the report suggests that financial institutions introduce special credit schemes for small and medium-sized enterprises to encourage business expansion and development.
The research also explored the complex landscape of international trade for Pakistani engineering firms, revealing obstacles related to tax implications, product quality, branding, and pricing.
Most notably, a substantial 84 per cent of firms source their raw materials domestically, emphasising a need to diversify suppliers and engage with international markets.
The report emphasizes the importance of a thriving relationship between businesses and the government for economic prosperity. However, political instability and unfavorable economic policies have led to a lack of trust and dissatisfaction among business owners, impacting productivity and profit margins.
With ADDITIONAL input from APP
Published in The Express Tribune, September 4th, 2023.