Clustered in the traditional metalwork skill triangle of Punjab province, the surgical instruments industry is over 100 years old. The industry is diverse and large, ranging from micro enterprises to small and medium scale manufacturing concerns, as well as large scale manufacturers. Surgical Instruments Manufacturers Association of Pakistan (SIMAP) has over 2000 members, out of which over 600 small and medium scale companies are involved in exports. In addition, significant export business is generated by trading houses having offices in USA and Europe. According to industry sources only 5% of the instruments produced are sold in domestic market, while the rest 95% are exported either directly or through export houses. Although exact production capacity is not known, it is estimated to be 2 million pieces a year with an investment in productive assets around Rs. 12 billion. The industry has achieved approximately 70% capacity utilization. Direct employment provided by this industry is approximately 150,000 workers. The industry claims to have achieved value addition of around 75%.
Product Mix & Technology:
The product mix includes surgical instruments, dental instruments, veterinary instruments, stainless steel hollow ware for use in hospitals, hospital furniture, manicure instruments and pedicure instruments. The industry uses imported as well as local stainless steel and steel forgings as major inputs. Most of the processing chemicals and materials are imported. Stainless steel of required grades is normally imported from Japan, Taiwan and Europe and is used for production of operation theatre instruments and hollow ware. The local stainless steel is mainly used in production of single use/ disposable instruments. Forgings are sourced mainly from Daska where a number of units having forging capabilities are located and concentrated. Major technologies and processes used by the industry are milling, shaping, grinding, polishing, hardening, tempering, ultrasonic cleaning, electroplating and etching etc.
The export performance of surgical goods industry has been impressive. It has been the top foreign exchange earner amongst the engineering sub-sectors. The industry had exported goods worth US$ 185 million in 2005, US$ 171 million in 2006, US$ 241 million in 2007 and US$ 280 million in 2008. The exports have shown a growth trend throughout the history. However, according to critics from within the industry, the performance is negligible when compared with the potential. The questions they raise are about weak market penetration. The world market of surgical instruments is approximately US$ 50 billion. According to them, if the industry organizes itself by avoiding cut throat competition, the unit values of exported items can be much higher as compared to what they are getting. According to their estimates, the exports could have been around US$ one billion if full potential was realized.
On its part, the Government of Pakistan has been putting in efforts to assist surgical instrument industry to grow further. Surgical instruments have always been the focus of Ministry of Commerce and Trade Development Authority of Pakistan as far as facilitation for exports is concerned. The Federal Board of Revenue has always adjusted import tariffs to facilitate surgical industry to import its inputs at zero or minimal rate of customs duty. There are other zero rating schemes for import of inputs by the export sectors as well which can be used by the surgical instruments industry. More recently, the Government of Punjab has established a centre within the surgical cluster to serve as a common facility centre for testing, outsourcing of ancillary processes and training of manpower.
Export Potential & Markets:
There is an enormous potential for the surgical instruments industry in the world market. Considering the fact that Pakistani share in the world market of surgical instruments is merely 0.50%, the exports can easily be augmented as Pakistani Surgical Instruments are the most economical choice in the global market. The existing export markets include Germany, France, Italy, UK, Belgium, Hungary, Spain, Turkey, India, UAE and USA. The potential export markets for the surgical instruments are Europe, North & South America, Central America, East Asia, South Asia, Central Asian Republics, Middle East, African Continent and Australia. It is observed that there is a potential of exponential growth in exports. The industry is facing a challenge of brand development and product development. The conflicts within the sector are hindering the industry of its potential to reach an export target of over US$ 1.25 billion per year, within 10 years.
Strengths & Weaknesses:
The surgical instruments industry is not without inherent strengths and weaknesses. Over the time the industry has become mature and a large pool of low cost human resource with basic skill set is available. The availability of sufficient basic manufacturing capacities and technology add to the strength of this industry. Most of the products are generic and the industry is predominantly export oriented. There are few large companies who have adequate managerial and financial capabilities to expand internationally.
One of the major weaknesses of the industry is the absence of skill set for higher value addition. Majority of the micro or small sized units either lack or have little managerial skills and also do no not have all ancillary processes. Furthermore, the industry also lacks the knowledge about potential markets and their dynamics. Due to the absence of any brand development and marketing, the industry is mostly dependent upon third party marketing mechanism based in Europe. There is no research and development and new product development. Moreover cut throat competition within the industry is resulting into constant reduction of unit prices.
The industry needs to resolve its internal conflicts. Further, additional Common Facility Centres needs to be set up to provide testing facilities, assistance in standards and certification and assistance in design development and product diversification. Moreover the industry needs to improve its technical and managerial skill set. Product wise market studies of potential markets are required for assistance of exporters. The industry also needs guidance in brand development. A business support centre may be set up to help micro and small scale manufacturers. Targeted financing facility for expansion of capacities, productive asset acquisition and technology acquisition may be provided. Effective participation in trade fairs and trade delegations can add winning flavour.