Baggage, gifts schemes and the heavy vehicle industry
By Sabihuddin Ghausi
A more than Rs13 billion heavy commercial vehicles industry has been hit these days by what the investors call ‘unbridled import’ of used buses and trucks from Japan under baggage, gift and transfer of residence schemes. They complain that these imports have reduced operations of five assembly plants to hardly 20 per cent of their individual capacity.
“Import of used and old heavy vehicles under gift, baggage and transfer of residence schemes has been liberalised to such an extent from 2005 that imports have outgrown the local production”, Mr S.M. Salar, one of the leaders of assemblers' industry, told Dawn. He said over 11,000 trucks were imported since July 2005 to March 2007 against which the five assembly plants rolled out 7,600 units.
This year after July 2006, the government came out with an SRO 574 which allowed importers to regularise their illegal imports or smuggling by paying 30 per cent penalty. When the industry raised hue and cry another SRO was issued on March 27 to put some restrictions on such imports. But the importers lobby was so strong that the prime minister issued special instructions to clear 1,000 heavy vehicles which were said to have been booked for shipment before March 27, 2007. The prime minister on more than one occasion had earlier claimed: “We have done away with SRO culture”.
Industry is abuzz with rumours that the influential importers of Pakistan origin in Japan are working hard to get this facility extended for import of 10,000 more used heavy vehicles during the next fiscal year for which another notification may be issued or may be announced in next the trade policy.
One wonders, whether the SROs on import of heavy vehicles under gift, baggage and transfer of residence schemes are helping the local industry, creating employment or generating revenue. Assembling industry alleges loss of more than Rs27 billion because of imports under gift and baggage schemes with a possible adverse impact on employment of about 280,000 persons in five plants and 300 vendors.
With federal budget weeks away, the lobbies of local assemblers and vendors the importers of Pakistan origin in Japan, Dubai and Singapore are working overtime to influence the government. The industry is seeking protection against liberal imports and the importers lobby wants an ultra-liberal import policy..
In a booming economy, growing industrial and agricultural production, expanding domestic and international trade and above all an $8 billion National Trade Corridor plan under implementation, the demand for heavy vehicles is growing fast. The small but influential group of Pakistani importers are in close tangent with their Pakistani clients -- the goods transporters and public transporters -- want liberal import of heavy vehicles. The assemblers want a secured market so that they can expand their production.
At present, the four truck plants have an installed capacity of 19,200 units a year against which actual production in the year 2005-06 was 4,257 trucks. Three more plants are being set up or being expanded to produce 8,500 more trucks in next few years. After the addition, the total capacity will go up to 27,700 trucks a year.
Against an estimated installed capacity of 5,000 units of buses, the three units produced only 917 units in 2005-06 down from 1,582 from 2004-05. Two more units are coming up with 5,000 units capacity. By the year 2010 or 2011 the country will have an installed capacity of more than 27,000 trucks and 10,000 buses which the goods transporters and public transporters say is less than the rising actual demand.
The goods transporters and bus operators blame local assemblers for charging a high price-from Rs2 million to Rs3 million per vehicle. The used trucks and buses from Japan cost less than 50 per cent and are found to be relatively more durable and road worthy. Captain Asif of Pakistan Goods Transporters Association said two imported used trucks can be bought at the price of one locally-assembled new truck. Transporters argue that none of them will buy a vehicle even at a throw away price if it is over- used and is of no utility.
While the assemblers of heavy commercial vehicles and goods transporters are involved in this blame game, the government is a silent spectator. The government perhaps does not realise the fact that an efficient, economical, safe, environment-friendly and a quick and smooth logistics, which is an integral part of trucking and bus transport system, is a prerequisite for economic growth and trade expansion.
“Scrap is being imported in the name of used trucks and buses from Japan'', Mr Kunwar Idrees, the Chairman of Pakistan Automobile Manufacturers’ Association (PAMA), said while informing that about 15-year-old trucks and buses have been imported as used vehicles recently. Vehicle assemblers say that these 15-year-old trucks and buses are obviously sold at a much lower price than a new one and are in great demand which is hurting their industry.
In provinces, vehicle fitness certificate is given by examiners in traffic police which, the assemblers say, is not difficult to obtain. “It costs only a few hundred rupees”, said one assembles. The fact is not difficult to verify as just a glimpse of the roads of Karachi, Lahore, Peshawar, Quetta and other cities is enough to know how many smoke emitting vehicles are plying on roads.
The heavy vehicle assembly is said to be one of the oldest industries as the first plant was set up in 1954. The government offered all protection and import of truck and bus under gift was restricted to only one vehicle with a condition that it should not be more than two years old. The importer was required to present documents such as earning certificate and registration book of imported vehicle to determine the age of vehicle.
Import of vehicles under gift, baggage and transfer of residence schemes continued till 1993 when minor changes were made in the policy. In year 2,000 the import conditions were slightly modified but still there were safeguards to regulate inflow and protect domestic industry. In the year 2005, drastic changes were introduced in the rules for import of used vehicles and the importers of Pakistani origin, mostly clustered in Japan but those who are also doing the same business in Singapore and Dubai were given literally a free hand. As if this was not enough, the Central Board of Revenue issued an SRO 574 after July 06 to facilitate clearance of even smuggled or illegally imported vehicles by paying 30 per cent of the duty.
“This opened flood gates for import of very old trucks and buses with all types, descriptions and models with no guarantee of availability of parts and service facilities'', Mr Salar, one of the assemblers, said.
With fast economic growth, Pakistan has to meet another challenge in the coming days and that is conforming to international standards of mechanical operation and environmental friendly transport system. The importers from Europe, USA and Japan now demand social compliance and conformity to hygienic standards in export-oriented industries. Environmentalists all over the world are targeting diesel-run trucks and buses .There is a switch over to gas-run trucks and buses world over.
Heavy vehicle assemblers have started producing gas-run buses and have given a few vehicles to the Punjab government. The local manufacturers are focussing on European-standard vehicles and multi-axle trucks to meet the demands of new trade corridor. This warrants expansion in plants and high investment in machinery and equipment and training in skills and technologies.