by Imran H. Khan
Pakistan’s current export of engineering goods stands at around $243 million out of total exports of $19 Billion. If we are to also include $300 Million in defense oriented exports and $169 Million in Software products and services exports, the total high margin high tech industrial export is a meager $712 Million for last year.
Bulk of Pakistan’s exports is either in commodities or in textiles.Both these categories are low margin and resource intensive in nature. Because of Pakistan’s inability to generate foreign exchange it has to depend on unpredictable foreign remittances and foreign aid.This increased dependence is resulting in increasingly intrusive terms associated with such packages, as exemplified by the Kerry-Lugar Bill. The cost of maintaining the seventh largest armed forces cannot be maintained by export of commodities and textiles. The defense equipment unit costs are in the order of $80 Million per aircraft and $300 Million per submarine. This structural weakness is strategically going to have an adverse impact on Pakistan’s defense posture as well as the ability to provide an adequate standard of living for her increasing population. Pakistan has many things going for it that should help her in overcoming these shortcomings if the leadership decides to make the necessary structural changes and put into place longer term plans. Most developed nations transitioned from being agrarian societies into modern post-industrial societies over centuries. Pakistan on the other hand needs to make this transition within the next twenty years or it will slide even further backwards with respect to countries in its neighborhood.
There is no reason why Pakistan’s high tech exports over the next twenty year period should not be more than $60 Billion per year based on the number of quality engineers she creates and her investments defense and infrastructure. This will not happen in a haphazard manner of stove pipe thinking and lack of focus and planning. There is a need for establishing a long term plan (over 20 years) which focuses resources in just a couple of markets. By excelling globally in those markets will bring in the necessary Return On Investments (ROI). Pakistani defense forces have developed capabilities to produce complex weapon systems. No leading defense manufacturer in the world is run by a defense force. There are many reasons, too numerous to enumerate here. Pakistan needs to transition the defense industry to responsible civil ownership that is globally competitive. Pakistan can overcome lack of middle and top management by engaging the Pakistani technical diaspora. She needs to create an eco system that is conducive to the growth of technical entrepreneurs. We have the world’s premier manufacturing base in China that could be leveraged in all sorts of ways. The leading educational institutions and research laboratories should be challenged to create intellectual property to excel in the targeted industries. Some percentage of defense expenditure should be channeled to funding research in these institutes in a model similar to that of DARPA in the US. A public private venture fund needs to be created that will fund the startups in the selected areas. The pace can be further accelerated by buying foreign companies. The diaspora can identify and provide the senior management needed of these key technology acquisitions.
Should we choose to make these changes; the impact will be felt across the society as the new wealth can be channeled towards the well being of the general population.