By Engr. Muhammad Awais
As the new government is dedicated to resolve long lost issues of legislature and policy making, dramatic changes in policies and financial structures of country is affecting every engineering unit. Both production & IMPEX are highly affected as machine building in Pakistan is limited to a certain level of sophistication and majority of plants utilize imported machinery & equipment while exporters of Pakistan face biggest competitor i.e. China. A change of financial trends has increased not just the import value but also the material that could be exported is facing issue of being at higher price than before.
When ever fuel prices go up, exportable items become more costly while global competition is sustaining its pricing at a much steadier level than our products. For an exporter to be an international competitor, it is mandatory that product needs to be of higher quality as well as with a lower price tag. This in particular involves lowering of cost even by dropping the quality standards as China being the world’s ultimate manufacturer is the most cost-effective in production of goods. Increased transportation cost affects every engineering industry with increase in final product price while the world is focusing on reducing transportation costs in every aspect of their economy.
Devalued currency has its biggest impact on both supplier and consumer. Supplier has to invest more and consequently, consumer has to pay more. ‘More’ is just not a term that affects the value of the product but also the taxation as more value means more tax as well. Transport cost is again crucial to supply & demand cases for any industry including imports as the consumer faces higher pricing due to costly transportation. This has such a powerful impact on engineering industry development that many projects which are under financial justification process get shelved due to fluctuation of prices and destabilization of country’s economy.
Following charts signify the destabilization of our financial trends in terms of foreign exchange (Courtesy of XE.com Inc., USA):
These trends depict a clear view of financial disturbance that is now affecting every business in Pakistan. Moreover, the previous trends suggests that fluctuations before new government were far more stable than current trends. If a 5 year chart is studied, we see an a major difference in financial trends and related to it the suddenly dropping growth rate of our developing engineering industry.Any finance expert or mathematician can understand the implications of these trends over the industries in Pakistan. No wonder, our economy is dropping and many people are losing jobs due to dramatic inflation, while introduction of new jobs was already restricted in Pakistan. Unless, some measures are taken to stablize the trends (not just increase but fluctuation as well), our country will face many finance oriented disorder not mention the economic crisis that can arise from fluctuations.