Which way, auto in­dus­try?

Enterprise - - Snapshot -

Ac­cord­ing to data re­leased by the Pak­istan Au­to­mo­biles Man­u­fac­tur­ers As­so­ci­a­tion (PAMA), the Pak­istan au­to­mo­bile in­dus­try faced de­pre­ci­a­tion in sales in 2008, af­ter ex­pe­ri­enc­ing an en­cour­ag­ing growth pe­riod from 2001 to 2007. The au­to­mo­bile in­dus­try and the gov­ern­ment of Pak­istan had then set a tar­get of half mil­lion units pro­duc­tion by the year 2011-2012.

At that stage, the Pak­istan As­so­ci­a­tion of Auto Parts and Ac­ces­sories Man­u­fac­tur­ers (PAAPAM) and Pak­istan Au­to­mo­bile Man­u­fac­tur­ers As­so­ci­a­tion (PAMA) had pro­posed a mod­i­fied im­port pol­icy for cars and spare parts. This was tar­geted at giv­ing the lo­cal au­to­mo­bile in­dus­try more sta­bil­ity. The pro­pos­als in­cluded with­drawal of 5 per­cent ex­cise duty on cars and im­po­si­tion of a ban on im­port of used parts in­stead of al­low­ing their im­port at 30 per­cent re­demp­tion duty. The pro­pos­als also asked that the gov­ern­ment should place strin­gent checks on auto parts im­ported com­mer­cially or as semi knocked down kits.

Fur­ther pro­pos­als fo­cused on in­tro­duc­tion of non-tar­iff mea­sures to curb im­port of parts be­ing man­u­fac­tured in Pak­istan. It was pointed out that the im­posed 50 per­cent duty had failed to stop im­port of these parts as the im­port prices were be­ing eas­ily ma­nip­u­lated by im­porters. Both as­so­ci­a­tions had shown concern over the frozen in­vest­ment of Rs. 98 bil­lion, which was ex­pected to re­main at the same level by 2011-12. In ad­di­tion to these ma­jor con­cerns, the as­so­ci­a­tions had ap­pealed for spe­cial in­cen­tives for the auto sec­tor, in­clud­ing lower mark-up on loans and a waiver of 35 per­cent mar­gin on L/Cs.

How­ever, the 2011-2012 bud­get con­tains in­cen­tives for new en­trants in the au­to­mo­bile sec­tor and pro­pos­als en­cour­ag­ing the im­port of cars. As such, the lo­cal in­dus­try again ap­pears to be sur­rounded with fears of stilted pro­duc­tion and prof­its. A re­laxed duty struc­ture for new en­trants, rise in price of the Ja­panese yen against the ru­pee and pro­duc­tion con­cerns have fur­ther pres­surised the ex­ist­ing lo­cal auto in­dus­try. There are also ap­pre­hen­sions of a dis­crep­ancy oc­cur­ring be­tween ex­ist­ing and new as­sem­blers’ prod­uct prices.

Cur­rently, there are some 82 ve­hi­cle as­sem­blers in the in­dus­try pro­duc­ing pas­sen­ger cars, light com­mer­cial ve­hi­cles, trucks, buses, trac­tors and 2 and 3 wheel­ers. The lead­ing names are In­dus Mo­tors Com­pany, Honda At­las Cars Pak­istan Ltd., Pak Suzuki Mo­tors, Nexus Au­to­mo­tive, Al Ghazi Trac­tors, De­wan Mo­tors, Gand­hara In­dus­tries, Hino-Pak Mo­tors and Adam Mo­tors. It is re­al­ized that the au­to­mo­bile in­dus­try in Pak­istan has a huge pro­duc­tion po­ten­tial and gen­er­ates a rev­enue of Rs. 63 bil­lion an­nu­ally, be­sides pay­ing taxes and pro­vid­ing em­ploy­ment to more than 200,000 peo­ple.

The ma­jor ini­tia­tives pro­vided by the gov­ern­ment in the form of the Na­tional Trade Cor­ri­dor Im­prove­ment Pro­gram (NTCIP) and the Auto In­dus­try De­vel­op­ment Pro­gram (AIDP) have the po­ten­tial to re­solve some key con­cerns of the in­dus­try. The En­gi­neer­ing De­vel­op­ment Board (EDB) has also ac­tively im­ple­mented the AIDP to in­crease the GDP con­tri­bu­tion from the au­to­mo­tive sec­tor. How­ever, there is fur­ther need to ad­dress the in­dus­try’s con­cerns by mak­ing the sug­ges­tions put for­ward by the Pak­istan Au­to­mo­biles Man­u­fac­tur­ers As­so­ci­a­tion and the Pak­istan As­so­ci­a­tion of Auto Parts and Ac­ces­sories Man­u­fac­tur­ers a part of pol­icy for­mu­la­tion to achieve the set tar­gets for the cur­rent fis­cal year. This will carry the na­tional auto in­dus­try for­ward

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