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Exclusive Article on construction machinery
Monthly AutoMark Magazine
On the other hand the state of old/used machinery demands government intervention to stop mass in flow of used construction machinery from Afghanistan due to slow down or complete halt of development projects over there (in 2014 NATO is pulling out their armies from Afghanistan) Pakistan is a developing country with anenormous potential to get developed in a short span of time as God has bestowed this land with excellent manpower, with majority falling in the working age, mountains full of minerals, rivers, tourist sites, agricultural lands, Asia’s largest irrigation system, abundant vegetables and fruits, large cash crops, suitable weather, fertile land and deserts, world’s largest coal reserves, china clay, marble, and granite, almost every terrain and weather due to long spread of latitude. All these factors coupled with its geographical location, Pakistan enjoys a key position in south-Asia. These factors have granted the country a strategic position in the eyes of world powers that are interested in business and development in Pakistan. On the contrary, the ground reality portrays a darker picture dueto the nation’s inability to tap into these resources. Besides other deficiencies, the construction machinery sector, which should be given priority on account of tremendous potential of development in each area, is ignored badly. The provision of acquiring new machines is extremely difficult due to absence of financial mechanism and easy solutions for the end-users. There are no retail and proper renting outlets av ailable in the country. The government departments are starving due to funding difficulties. As a result, we are unable toexploit these natural bounties by developing tourist sites, cleaning canals, rivers and dams, reclamation of agricultural lands, infrastructure such as rural to urban roads, linking of big cities, coal mining, marble, china clay and granite excavation, oil and gas, and many others, that require heavy machinery.
Although in order to meet basicrequirements, this industry is importing around 2000+ second-hand construction machinery and approximately 200 new machines each year, but this volume is insufficient when looking at the jobs needed
to be accomplished swiftly. Current developmental projects include the construction of 7 or 8 dams, anew airport in Islamabad, Iran-Pakistan gas pipeline, Karakoram highway being upgraded to a double road, HyderabadKarachi and Faisalabad –Multan motorway, increasing development of Gwadar, and many other major projects, like the Thar Coal project are underway, all of which demand machinery. Provincial governments, private entrepreneurs and construction companies need machinery such as bulldozers, excavators, wheel loaders, backhoe loaders, motor graders, and many other machines. The escalating prices of diesel, high maintenance costs, and environmental awareness, are now even compelling buyers of old machines to go for new machines to be more cost effective, productive and efficient. On the other hand the state of old/used machinery demands government intervention to stop mass in flow of used c o n s t r uc t i o n m a c hi n e r y f r o m Afghanistan due to slow down or complete halt of development projects over there (in 2014 NATO is pulling out their armies from Afghanistan). These machines were exported around 20052008 during Gen. Musharraf’s government when business activities in Afghanistan were at their peak. At first place these machines were already “used” when imported by Pakistani importers from different countries. One can imagine the physical state of these machines after an exhaustive/extensive use in different constructions projects in Afghanistan. It is said that during these years average 7000 machines /year were imported by Pakistani companies. Due to high demand in neighbouring Afghanistan 70% of these machines were sold there in hefty prices. The demand could be gauged from the fact that the rent of an excavator or other major construction machinery was three to four times higher than Pakistan. The back flow of these machines will turn Pakistan into a massive junk yard and/or the machines fixed to put to work will have brutal effect on
productivity, operating cost and environment. Consultations with various usedmachinery importers revealed that new machines are required but due to weak purchasing power of buyers, no easy availability of bank loan /leasing opportunity, high tax rate and dollarrupee parity are making it next to impossible for small private groups to import new machinery. The benchmark to assess tax to be imposed on used machinery is the weight of the machine and not the invoice value. This creates a major difference in the final price when 24% tax is applied to an invoice value of a new machine compared to 1.5 USD/kg to the weight of the used machinery. The impact on the price could be assessed from the example that a 40 ft. container containing two units of Daewoo 130 used to cost 100,000 rupees before the imposition of tax on old machines, now it cost 1 million rupees to clear the same container. There are three prominent companies like Orient Energy Systems (New Holland Construction Machinery), Allied Engineering and Services Ltd (Caterpillar) and Jaffers Brother Ltd (Komatsu) providing necessary infrastructure to market new machines in Pakistan. However, the market segment for them is mainly limited to government tenders. There is a long list of second hand machinery retailers. Usually these machines are imported from Dubai, Korea, Japan and Canada.
The most popular among them are Japanese and Korean machines. The names and current market prices of popular brands/models of used machinery available for sale are as such: D-155 Komatsu (3.2 million rupees) Roller Dynapac CA251D/CA301 (3.0 million rupees) Nishan Dumper 96/97 V-8 engine (3.5 million rupees) Excavator solar 130 Korea 2003 (3.3 million rupees)
ww.automark.pk | July-2013 | Page 21