The surgical instruments industry is mainly clustered in and around the skirts of Sialkot. Over 99% of the countries production is centered at Sialkot. The sector comprises over 2300 companies, of which around 30 can be considered large and the remainder can be split as 150 units of medium sized and remaining as small. The industry produces on average over 150 million pieces a year with an estimated value of around Rs 22 billion. Out of the total production, approximately over 95% is exported1. The industry belongs to the light engineering industry category, and is one that has specialized in skill and stable export market share.
Besides small and medium units, a few units are large and have a 90% integrated system. Most of the larger and medium sized firms are exporting, however, the smaller/vendor units usually supply to commercial exporters/traders. The main raw material used in the production is ‘steel’. Around 60% of this steel is manufactured locally and the remaining 40% is imported from Germany mostly.
For the purpose of trade; four broad categories can be defined where Pakistan is supplying in the export markets. The categories include; (i) HS Code 9018 – Instruments for medical, surgical and dental; (ii) HS Code 9021 – Orthopaedic appliances; (iii) HS Code 9022 – Equipment using X-rays, alpha, beta, gamma rays. The exports of Pakistan predominantly fall in the category 9018.
Contribution of Surgical Instruments Industry to National Economy
|To Direct Employment (Numbers)||100-150,000|
|To Indirect Employment (Numbers)||400-450,000|
|To Exports (%)||1.21%|
Source: Pakistan Cutlery & Stainless Utensils Manufacturers & Exporters Association, Pakistan Economic Survey 2008-09 and UN Commodity Trade Data Base
The sector employs around 100,000-150,000 workers. However, employment is volatile as there is high degree of temporary and contractual employment. Over the last four years the exports from the sector has grown by just under 48% to get to US$245 million in 2009.
Pakistani exports make up only a small fraction of world trade in surgical and medical device industry, which amounts to over $113 billion (just for above 4 HS Codes). This is one sector where Pakistan has developed special capabilities to penetrate high income markets such as Germany, USA, France, Belgium etc. The average export price of goods made in Sialkot is around $1.5-2.5 (Note: some products sell for much higher prices – the price quoted is the average trade price for disposable products), which is much higher than what Chinese products fetch (US$0.35 – in disposable products). However, the price is lower than some of the more sophisticated producers such as Germany and France.
The sector, whereas, has achieved reasonable export performance growth in the recent years has suffered from lack of product diversification, inadequate shift out of low value disposable instruments to high value sophisticated products and uncertain business environment. The major impediments of the sector are low levels of productivity, inadequate technology upgrade and shortage of skilled staff. The production process value chain analysis suggests several productivity detractors. Moreover, most of the companies operate without any brands with only a couple moving to branding of their products. Furthermore, the industry in the years to come will face higher compliance requirements, especially as the industry tries to diversify into more value added products and enter into more sophisticated markets. Compliance, testing and certifications are going to be critical for the the surgical industry to move up the value curve. Some firms have developed basic design capabilities and often experiment by bringing in newer designs into the market.