Recently, Muhammad Ashraf Shaikh, Chairman of Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has written a letter to the Prime Minister Imran Khan regarding his concerns over the imported cars. In his letter, the chairman of PAAPAM strongly opposed any such proposals which will allow the influx of imported cars in the country, as it can seriously damage the local industry of auto parts of manufactures. Hence, PAAPAM has requested PM to not to accept any proposal regarding the usage of imported cars and save the local automobile/ auto part manufacturers industry.
Around 400 auto parts manufacturing industries are a part of the PAAPAM. PAAPAM, thus representing all these local industries, wrote this letter to PM in response to the news of proposal that has been floated by Car Dealers Federation Lahore (an unregistered trade body) through Ministry of Commerce. Mr. Ashraf said that “ The car dealers’ federation in their letter mentioned that they are well aware of how the imported vehicles can boost the country’s economy. But, it should not be forgotten that under the Import Policy Order, commercial use of import of used cars is not allowed into the country.”
He further added that in the past, in order to facilitate the overseas Pakistanis, through the misuse of baggage, gifts, misdeclaration, and transfer of Residence Schemes, a large number of the car were being imported. Thankfully, he added that now under the SRO-No. 52(I)/2019 (dated January 15, 2019), it is now compulsory that duties and taxes be paid on imported vehicles. And it must be paid in foreign exchange remittance from abroad. Hence, this step would help in avoiding the misuse of imported cars to be used here under the name of overseas Pakistanis.
Payments of the important cars that were sent through illegal money laundering and hawala channels had resulted in tremendous economic fall in our country, which not only has affected the local market but also resulted in the pressure on Pak Rupee in the Kerb Market and draining of foreign exchange, said the Chairman PAAPAM.
Around $500 to $700 million remitted abroad every year if on average, an imported vehicle cost around $10,000. Mr.Ashraf further reasoned that “this practice leads to the black economy, which would attract the conditionality of the (FATF), Financial Action Task Force.”
Mr. Ashraf further added that this step every year created black economy worth around Rs 75 billion, which managed the flight of foreign exchange. This black economy was created due to the Benami accounts, which generated around Rs. 1.5 million per vehicle because the sales of used cars were either done via these accounts or through cash.
Furthermore, he stressed upon the fact that the local auto industry’s biggest threat is the import of used cars by the OEMs. And in 2005, the liberalized of used car policy has led to the shutting down of many local auto parts manufacturing plants set up as well as the Adam, KIA, Chevrolet, Nissan and Hyundai which has caused severe financial damage.
It should be noted that under the scheme made for the overseas Pakistanis, out of the 40 automobile manufacturing countries around the globe, Pakistan was the only one to allow the increased import of used cars. In Pakistan, the local industries use around 55% to 70% of local parts, which would cost around Rs. 475,000 per vehicle. So, if a yearly import of vehicle is approximately 50,000 used cars in our country, the local auto manufacturer industry of Pakistan lead to Rs 25 billion loss of massive revenue yearly. Apart from this loss, Mr. Ashraf further stated that this step also leads to either direct or indirect loss of jobs like engineers, management professionals, workers, and technicians, etc.
He added that if the proposal regarding the uncontrolled import of used cars if granted, will severely affect the investments made by the new vendors and entrants in the local industry. Hence, by the end Chairman of PAAPAM mentioned in a letter to PM that “We believe that your honor will support our contention on the issue of used cars to save local auto parts manufacturing industry.”
