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Fan Industry Presenting by M. Asad Jilani & Taha Mehmood (sp06-bb-0044) (sp06-bb-0086)

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Agenda <ul><li>Vision </li></ul><ul><li>Introduction </li></ul><ul><li>Historical Background </li></ul><ul><li>Overview </li></ul><ul><li>Industry Profile </li></ul><ul><li>Division of Units </li></ul><ul><li>Percentage of Production </li></ul><ul><li>Variety of Products </li></ul><ul><li>Raw Material </li></ul><ul><li>Quality Segment </li></ul><ul><li>Benefits & Importance </li></ul><ul><li>Increasing Demand </li></ul><ul><li>Company Average Price </li></ul><ul><li>Exports </li></ul><ul><li>Projection </li></ul><ul><li>Fan Development Institute </li></ul><ul><li>Gujrat Fan Cluster </li></ul><ul><li>Manufacturers’ Problems </li></ul><ul><li>Government Incentives </li></ul><ul><li>Problems </li></ul><ul><li>Recommendations </li></ul><ul><li>SWOT Analysis </li></ul>

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Vision <ul><li>Pakistan Electric Fan Industry To penetrate the global fan market with a diversified product base by making the domestic fan industry internationally competitive . </li></ul>

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Introduction <ul><li>Pakistan is Self sufficient in Fan Industry. </li></ul><ul><li>There are two types of fans: </li></ul><ul><ul><li>Domestic Fans </li></ul></ul><ul><ul><ul><li>The fans that consume less than 125 watts of energy </li></ul></ul></ul><ul><ul><ul><li>(SITC 74341) </li></ul></ul></ul><ul><ul><li>Industrial Fans </li></ul></ul><ul><ul><ul><li>The fans that consume over 125 watts of energy </li></ul></ul></ul><ul><ul><ul><li>(SITC 74343) </li></ul></ul></ul><ul><li>The industry is producing a variety of products in different sizes and designs. </li></ul>

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Historical Background <ul><li>Fan industry is one of the industries that existed at the time of independence. </li></ul><ul><li>In the early 1950s, it was declared as cottage industry and its more than 50 per cent units still fall in this category. </li></ul><ul><li>In 1992-93, only two-lac fans were exported to only two countries, Iraq and Yemen. </li></ul>

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<ul><li>The fan industry is mainly clustered in Gujrat and Gujranwala, whereas some units are also operating in Lahore and Karachi. </li></ul><ul><li>Besides small and medium units, a few units are quite large and have integrated system i.e. from motor winding to high-pressure dies casting. </li></ul><ul><li>Sales are fairly concentrated with five large firms in Gujrat and two in Gujranwala, accounting for 40% of total industry sales. </li></ul>Overview

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<ul><li>Fan Industry has some more than 500 units in the sector, yet the registered number of units with PEFMA in Pakistan is only 206. </li></ul><ul><li>Pakistan used to produce 3 million electric fans a year in 1999 and also use to export 50,000 electric fans and now the Electric fan industry is producing over 6 million electric fans and exporting 2 million fans. </li></ul>Overview (cont)

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Industry Profile 2005-2006 - GDP Contribution 0.16 Imports (US $ Million ) US $16.66 Million Exports ( 2005-06 ) Rs. 5.25 Billion Annual Revenue 40,000 people Indirect Employment 30,000 people Direct Employment 5.6 million Fan / year Total Production 80% Current Capacity utilization 7 million Fan / year Installed Capacity Rs. 5 Billion Total capital investment

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Industry Profile 2005-06 2000-01 Rs. 1.5 billion - GDP Contribution - 0.16 Imports (US $ Million ) US $ 3.89 Million US $16.66 Million Exports ( 2005-06 ) Rs. 2.25-2.7 billion Rs. 5.25 Billion Annual Revenue 40,000 people Indirect Employment 25,000 30,000 people Direct Employment 2.5-3 Million Fans/year 5.6 million Fan / year Total Production 50% 80% Current Capacity utilization 5-6 Million Fans / year 7 million Fan / year Installed Capacity Rs. 3-3.5 billion Rs. 5 Billion Total capital investment

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Division of Units Rs. 150-250 Mn REVENUE GENERATED 60,000-250,000 PRODUCTION 200-300 EMPLOYMENT Rs. 250-350 Mn PROJECT COST 8 UNITS LARGE SCALE UNITS Rs. 150-250 Mn REVENUE GENERATED 20,000-60,000 PRODUCTION 60-80 EMPLOYMENT Rs. 10-20 Mn PROJECT COST 50 UNITS MEDIUM SCALE UNITS Rs. 2.0-5.0 Mn REVENUE GENERATED 2,000-10,000 PRODUCTION 20-25 EMPLOYMENT Rs. 0.5-1.0 Mn PROJECT COST 450 UNITS SMALL SCALE UNITS 5-20 EMPLOYMENT Rs. 0.45-1.0 Mn PROJECT COST 1000 UNITS VENDORS

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Percentage of Production <ul><li>Out of the total production, approximately </li></ul><ul><ul><li>30% fans consist of pedestals. </li></ul></ul><ul><ul><li>7% are brackets fans. </li></ul></ul><ul><ul><li>63% are ceiling fans. </li></ul></ul>

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<ul><li>The industry is producing a variety of products in different sizes and designs, these are: </li></ul><ul><ul><li>Ceiling </li></ul></ul><ul><ul><li>Pedestal </li></ul></ul><ul><ul><li>Table </li></ul></ul><ul><ul><li>Table-cum-pedestal fans </li></ul></ul><ul><ul><li>Circumatic fans </li></ul></ul><ul><ul><li>Wall bracket </li></ul></ul><ul><ul><li>Exhaust fans </li></ul></ul><ul><ul><li>Propellers </li></ul></ul>Variety of Products

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<ul><li>Most of the raw materials used by the fan industry are directly or indirectly imported from different countries. Some of the raw materials used in the manufacturing of a fan are: </li></ul><ul><ul><li>Electric steel sheets </li></ul></ul><ul><ul><li>Aluminium </li></ul></ul><ul><ul><li>Enamelled copper wire </li></ul></ul><ul><ul><li>Ball bearing </li></ul></ul><ul><ul><li>Steel rod </li></ul></ul><ul><ul><li>PVC </li></ul></ul>Raw Material

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<ul><li>Some major fan producing countries are: </li></ul>Quality Segment High Quality Segment Japan Middle Quality Segment Korea Hong Kong Low Quality Segment Pakistan India Taiwan China

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<ul><li>It has made life comfortable. </li></ul><ul><li>It enhances the energy of the labor. </li></ul><ul><li>The use of Fans avoid mosquitoes. </li></ul><ul><li>It has improve educational environment. </li></ul><ul><li>Fans increases the number of hours available for economic activity in shops and workshops by between two and four hours a day, and work itself has been made more efficient. </li></ul><ul><li>Improvement in hygiene. </li></ul>Benefits & Importance

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<ul><li>Due to increase in population. </li></ul><ul><li>Speedy migration of people towards big cities. </li></ul><ul><li>Increase in Exports. </li></ul><ul><li>Local demand for quality products is increasing. </li></ul><ul><li>Climate of Pakistan. </li></ul><ul><li>People are becoming quality conscious. </li></ul>Reasons of Increasing Demand

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Major Electric Fan Companies M/s Hi Tech Industries (Pvt) Ltd, , G.T. Road, Gujarat MATRO FAN M/s Rafiq Engineering Industries (Pvt) Ltd, , G.T. Road, Gujarat ROYAL FAN M/s Younas Metal Works , G.T.Road, Gujarat YUNUS FAN M /s General Fan Company(Pvt) Ltd, G.T. Road, Gujarat G.F.C. FAN M/S Wahid Industries Limited, G.T. Road, Gujarat PAK FAN COMPANY BRAND NAME

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Company Average Price (Rs) 2003 2007 Rs. 1700 Rs. 1584 Average Price Rs. 1600 Rs. 1282 G.F.C Fans Rs. 1600 Rs. 1391 Parvaz Fans Rs. 1600 Rs. 1512 Younas Fans Rs. 1650 Rs. 1563 Royal Fans Rs. 1750 Rs. 1470 Pak Fans Rs. 2000 Rs. 1975 Ahad Fans

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Average Unit Price Comparison 5 38 CHINA 16 40 INDIA 30 48 MALAYSIA 46 64 USA 17 16 PAKISTAN Fan under 125 Watt (US $) Other Fan Unit Value (US $) COUNTRY

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Exports

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Countries to Export of Pakistan’s Fan 16% 17% OTHERS 17% 25% UAE 19% 14% SAUDI ARAB 48% 44% BANGLADESH Fan under 125 Watt Other Fan COUNTRY

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<ul><li>Major exporters of fans include: </li></ul><ul><ul><li>Germany </li></ul></ul><ul><ul><li>China </li></ul></ul><ul><ul><li>Japan </li></ul></ul><ul><ul><li>USA </li></ul></ul><ul><ul><li>Taiwan </li></ul></ul><ul><ul><li>exporting nearly 70% of the total international market of fans industry. </li></ul></ul><ul><li>These fans consisted of Industrial fans & Domestic Fans . </li></ul>World’s Export of Fan

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World’s Export of Industrial Fans 7% TAIWAN 33% GERMANY 19% JAPAN 14% USA 9% ITALY 4% UK 5% CANADA 1% KOREA 3% SWEEDEN 3% NETHERLAND 2% FRANCE 0.02% PAKISTAN SHARES COUNTRY

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World’s Export of Domestic Fans 13% OTHER 2% JAPAN 2% SPAIN 2% ITALY 3% USA 5% GERMANY 6% THAILAND 44% CHINA 20% TAIWAN 1% UK 1% SINGAPORE 0.1% PAKISTAN SHARES COUNTRY

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World Vs Pakistan Export of Fans 66% 34% US $ 30 Million PAKISTAN 27% 73% US $ 3.9 Billion WORLD FAN UNDER 125 WATT OTHER FAN VALUE IN US $

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Fan Export by Type (Rs. Million) 422.6 232.1 42.0 45.0 Total 2.0 5.3 9.7 3.0 Other Fans -- 0.7 13.2 24.9 Fan Blowers 27.2 5.1 6.9 2.9 Other Fans -- 0.1 0.1 0.1 Exhaust Fans 0.9 -- -- 1.1 Table Fans 183.6 161.6 66.4 32.4 Pedestal Fans 208.9 59.3 15.7 2.6 Ceiling Fans 2001-02 2000-01 1999-00 1998-99 Type

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Projection

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<ul><li>Facilitate the manufactures in testing their fans. </li></ul><ul><li>Provide facilities of material testing. </li></ul><ul><li>Provide Display Centre facility to introduce latest types of fans in international markets for the local entrepreneur to match their products. </li></ul><ul><li>Provide technical training to existing manpower and new entrants in the field of fan industry. </li></ul><ul><li>Also provide technical support in production management, material control, management and marketing. </li></ul>Fan Development Institute

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Fan Development Institute <ul><li>Training courses offered </li></ul>6 Months Certificate Course (Mgt/Marketing in Fan Ind.) 2 Years Diploma Course in Elect. & Mech secs of Fan 6 Months Certificate Course (Fan Technology) 4 Months Certificate Course (Fan Technology) Duration Course Title

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<ul><li>Gujrat Fan Cluster </li></ul><ul><li>In collaboration with </li></ul><ul><li>Ministry of Science & Technology and </li></ul><ul><li>Pakistan Electric Fan Manufacturers Association </li></ul><ul><li>Dated: November 2001 </li></ul>

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Gujrat Fan Cluster <ul><li>Name & Place of Cluster </li></ul><ul><ul><li>Cluster Council for Fan Industry, Gujrat, Pakistan. </li></ul></ul><ul><li>Sector of Industry </li></ul><ul><ul><li>Electrical Fan Manufacturing. </li></ul></ul><ul><li>How many units in your cluster </li></ul><ul><ul><li>400 </li></ul></ul><ul><li>How many people are employed in your cluster </li></ul><ul><ul><li>Approx. 50,000 </li></ul></ul>

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Gujrat Fan Cluster (cont) <ul><li>The size of largest unit in the cluster </li></ul><ul><ul><li>500,000 fan/annual </li></ul></ul><ul><ul><li>Workforce: 600 Employees </li></ul></ul><ul><ul><li>Productive Assets: N/A </li></ul></ul><ul><li>The size of smallest unit in the cluster </li></ul><ul><ul><li>30,000 fans/annual </li></ul></ul><ul><ul><li>Workforce: 30 Employees </li></ul></ul><ul><ul><li>Productive Assets: N/A </li></ul></ul>

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Manufacturers’ Demands and Problems <ul><li>The fan industry should be given the status of zero rated sales tax like textile, leather, surgical, sports and carpet industries. </li></ul><ul><li>The local fan manufacturers have enhanced the prices of fans by 20 per cent due to increase in raw material prices. </li></ul><ul><li>The increase has been made due to what the manufacturers called a ‘100 per cent’ increase in raw materials’ cost. </li></ul>

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Manufacturers’ Demands and Problems <ul><li>An exporter of electric fans and allied goods can not survive if he does not have sufficient stock of imported raw materials as well as finished goods so as to cope with the requirements of its buyers both at home and abroad. </li></ul><ul><li>The prices of the imported raw material had risen in the international market and it had become very difficult for exporters to export electric fans and other allied items unless the industry is given the zero tax rate status so that they could purchase and import their raw materials without paying sales tax. </li></ul>

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Government Incentives <ul><li>In addition to duties on the inputs used for the manufacturing of the different products have also been reduced to 0%, 5% and 10%.In order to boost local manufacturing. </li></ul><ul><li>The previous rate of duty on these inputs ranged between 5% and 25%. </li></ul><ul><li>Duties on the raw material/inputs have also been reduced/exempted for growth and development of the industrial sectors. </li></ul>

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Government Incentives (cont) <ul><li>Creation of New PCTs for Tariff Rationalization </li></ul><ul><ul><li>To avoid the mis-declaration, accommodate the inputs of industry and to facilitate the capital goods industry around 96 New Tariff Lines (Annexure-I) have been created. </li></ul></ul><ul><ul><li>This includes stainless steel, petrochemical, ceramics industry, articles of stationery, paper & paper board, chemicals and plastics, heavy engineering industry, footwear, Fan Industry , Electronic Sector, foundry & forge, steel and telecom sector etc. </li></ul></ul>

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Problems <ul><li>Non-availability of skilled labour in the fields of: </li></ul><ul><ul><li>Dies and mould making. </li></ul></ul><ul><ul><li>Designing and production of gauges and their calibrations. </li></ul></ul><ul><ul><li>Machine operators in the fields of injection molding, die casting, painting and heat treatment. </li></ul></ul><ul><ul><li>CNC machine operators. </li></ul></ul><ul><li>Industry focus on metal based manufacturing. </li></ul><ul><li>Weak R&D and Design capabilities. </li></ul><ul><li>Technologically weak vendor segment. </li></ul>

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Problems (cont) <ul><li>International marketing support. </li></ul><ul><li>Product Certification (UL, CE, SASO, PSI, JIS etc.) </li></ul>

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Recommendations <ul><li>PITAC to establish common facility centers in Gujrat and Gujranwala: </li></ul><ul><ul><li>Plastics </li></ul></ul><ul><ul><li>Decorative fans </li></ul></ul><ul><ul><li>Efficient electric motors </li></ul></ul><ul><ul><li>Moulds and dies </li></ul></ul><ul><ul><li>Calibrations and designing of gauges </li></ul></ul><ul><ul><li>Painting </li></ul></ul><ul><ul><li>Packing </li></ul></ul><ul><li>Facilitate relocation of major Global Manufacturers in Pakistan with domestic manufacturers. </li></ul>

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Recommendations (cont) <ul><li>Certification </li></ul><ul><ul><li>Government should subsidize the costs of various certifications UL, SASO, CE, etc (as in case of ISO 9000) </li></ul></ul><ul><ul><li>FDI should certify the quality of fans being exported on voluntary basis. </li></ul></ul><ul><li>TEVTA to proactively develop human resource in following fields in Gujrat and Gujranwala District: </li></ul><ul><ul><li>Plastic technologies </li></ul></ul><ul><ul><li>Moulds and Die making </li></ul></ul><ul><ul><li>Painting, printing and surface finishing </li></ul></ul><ul><ul><li>Sheet metal stamping, motor winding </li></ul></ul><ul><ul><li>Heat treatment </li></ul></ul>

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Recommendations (cont) <ul><li>International marketing support through appointment of consultants to develop marketing strategies of at least five leading players to enable them to enter in the N. American, L. American, European and Japanese market. </li></ul><ul><li>SBP to allow retention of 10% of export receipts for international marketing and for paying salaries to employees working abroad. </li></ul><ul><li>Accelerate rural electrification in Pakistan. </li></ul><ul><li>Construction Industry be assisted to attain a growth rate of above 5%. </li></ul>

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SWOT Analysis

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Strength <ul><li>Extensive labor is available </li></ul><ul><li>Produces at lower cost </li></ul><ul><li>Capacity of Production </li></ul><ul><li>Self Sufficient </li></ul>

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Weakness <ul><li>Unskilled labor </li></ul><ul><li>Weak research and development </li></ul><ul><li>Weak technology </li></ul><ul><li>No innovation in designs </li></ul><ul><li>Cost of imported raw material is high </li></ul><ul><li>Lack of policy framework </li></ul><ul><li>Low capital-output ratios </li></ul>

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Opportunities <ul><li>Environmental changes </li></ul><ul><li>WTO will allow to export more </li></ul><ul><li>Potential markets like US & EU could be explored </li></ul><ul><li>Increase in demand with increase in population </li></ul><ul><li>Industrial Fans could be focused </li></ul>

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Threats <ul><li>No focus on industry </li></ul><ul><li>Technological shifts </li></ul><ul><li>Quality of Fans </li></ul>

48.
Thank You…

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Any Question…