Auto industry considering blocking Rs 80b investment
- Move against import of second-hand cars
- Meeting with Dr Salman Shah crucial
By Arshad Hussain
KARACHI: Car manufacturers are determined to fight with the government policy dealing with the auto industry and have decided to announce the final strategy after discussing the situation with the adviser to the prime minister on finance, revenue and economic affairs, Dr Salman Shah, on Friday.
The local car manufacturers and assemblers will have an indoor meeting with Dr Salman Shah in Karachi, an industry official told Daily Times here on Thursday.
“The assemblers and manufacturers are seriously considering to stop the expansion of their plants and further investment in the country,” said Shafiq Ahmed Shaikh, head of public relations in the Pak Suzuki Motor Company Limited. “The decision of the ministry of commerce to allow the import of used cars in the country will be a serious set back for the local auto industry,” he added.
Through the Trade Policy 2005-06, the ministry of commerce has further allowed the import of cars under the gift and personal baggage up to three years old for parents, husband, wife and children, brothers and sisters.
The ministry also withdrew the condition of registration on the name of Pakistani nationals prior to import. The overseas Pakistanis holding Pakistan origin cars would also be eligible to import vehicles, the ministry said in the trade policy.
He said the local car manufacturers would have a meeting with Dr Salman Shah and ask him to stop the flood of used vehicle into the country to save the local industry, which has around 200,000 employees.
He said: “With the liberalized import of used cars, the wheel of economic and technological growth would turn back, forcing the manufacturers and vendors to hold their planned investments of over Rs 80 billion by 2010 in capacity expansion projects.” “As a chain reaction, 200,000 people may loose their jobs,” he added.
The contributions to the GDP, investment and government revenues would significantly be reduced and car financing and the financial sector would be adversely affected, hurting the economic activity even further, he said.
A statement said the auto and vendor industry has enhanced its production from 49,000 units per year to 160,000 units per year in four years. This had encouraged further transfer of technology and many technical agreements and joint ventures were in the pipeline.
The statement said the representatives of the Pak Suzuki Motor Co. Indus Motor Co, Honda Atlas Cars and Deewan Farooque Motors met on Thursday to discuss the negative impact of the trade policy.
They expressed serious concern and said that the new trade policy would cause significant damage to the auto manufacturing industry.
The drastic changes made in the trade policy, coupled with the increase in depreciation rate and reduction of duties on the import of CBU cars, would cause colossal damage to the growing local auto manufacturing and vendor industry, they said.
They said that India and Thailand supporting their local industry through higher tariff on used cars than those for new CBU and CKD cars and non tariff barriers such as registration in importers name conformance to original homologation certificate, pre shipment inspection and testing, conformance of specifications to the local vehicle code, etc.
Compared to an effective rate of duty of 25 percent in Pakistan, the duty on used cars in India was as high as 156 percent, the statement said.
While the government was interested in facilitating overseas Pakistanis, the real beneficiaries to this drastic liberalization would be used-car traders and there would always be the issue of availability and cost of spare parts, properly equipped dealership with trained labour, and adequate resale value for these used cars, the statement added.
The representatives of the industry pleaded to the government to provide a consistent, long-term and resilient policy, imperative for maintaining the growth of the auto industry.
The total car production increased by 28 percent to 126,403 units during the year 2004-05 compared to 98,461 units locally manufactured or assembled in 2003-04, according to the data of Pakistan Automotive Manufactures Associ-ation (PAMA).
http://www.dailytimes.com.pk/default.asp?page=story_29-7-2005_pg5_1