Bet­ter poli­cies to drive auto in­dus­try

Enterprise - - Trade watch -

De­spite the fact that auto sales wit­nessed a 3.4 per­cent in­crease in growth dur­ing the fis­cal year 2011, vol­ume sales in the sec­tor still re­main low as com­pared to pre­vi­ous years. In­di­vid­ual au­to­mo­tive com­pa­nies ex­pe­ri­enced a var­ied sales per­for­mance; Pak Suzuki sus­tained a ma­jor dent of 68 per­cent fol­lowed by In­dus Mo­tors with 33 per­cent de­cline. Only in the month of June there was a 43 per­cent de­cline in au­to­mo­tive sales.

An­a­lysts of­fer a num­ber of rea­sons for this pat­tern. To be­gin with, the over­all re­cov­ery in sales pri­mar­ily stems from an im­proved ru­ral econ­omy which has ben­e­fited from in­creased farm in­come as com­mod­ity prices of farm prod­ucts have re­mained firm. Sub­dued sales in ur­ban cen­tres through­out the year were due to ris­ing in­ter­est rates which has low­ered the con­sumer fi­nanc­ing po­ten­tial. More­over, nat­u­ral calami­ties also kept sales down in the be­gin­ning of the year while later the sup­ply dis­rup­tions caused by the Ja­panese earth­quake also ham­pered lo­cal pro­duc­tion.

As sup­ply chains from Ja­pan re­cover, out­put is ris­ing. The car man­u­fac­tur­ing sec­tor of Ja­pan was the worst hit by the dis­as­ter. A short­age of parts cou­pled with power sup­ply con­straints saw lead­ing man­u­fac­tur­ers like Toy­ota and Honda sus­pend fac­tory pro­duc­tion. The same car-mak­ers were able to re­cover very quickly from the loss, with their out­puts hav­ing plunged to 50 per­cent and 80 per­cent re­spec­tively.

Ne­go­ti­a­tions be­tween the gov­ern­ments of Pak­istan and Ja­pan, over firm­ing up a long-term con­ti­nu­ity of au­to­mo­bile poli­cies will fur­ther help in the restora­tion of con­fi­dence of for­eign in­vestors in the sec­tor. The con­cerns for Pak­istan au­to­mo­tive in­dus­try lie in the fact that the in­creas­ing prices of cars on ac­count of rapid de­cline of ru­pee against in­ter­na­tional cur­ren­cies have turned im­ports into a high-cost fi­nanc­ing is­sue. More­over, high fuel prices have also hin­dered the com­mer­cial vi­a­bil­ity of this sec­tor. In these cir­cum­stances, the global auto giants are will­ing to make a big push in the In­dian mar­ket, where the auto in­dus­try is bloom­ing.

In­dus Mo­tors is play­ing a pos­i­tive role in bridg­ing the gaps which is ev­i­dent from the visit of the Ja­panese am­bas­sador to the man­u­fac­tur­ing plants at In­dus Mo­tors. The am­bas­sador ap­pre­ci­ated the ef­forts of both com­pa­nies for bring­ing the lat­est au­to­mo­tive tech­nol­ogy to Pak­istan. In­dus Mo­tors, in par­tic­u­lar, has re­mained loyal to lo­cal­iza­tion and in­creased em­ploy­ment prospects in the in­dus­try.

The pro­posal of set­ting up a Ja­pan-spe­cific Spe­cial Eco­nomic Zone, pre­sented by the Pak­istan Board of In­vest­ment is a step to­wards strength­en­ing bi­lat­eral re­la­tions be­tween Ja­pan and Pak­istan, based on com­mon­al­ity of in­ter­ests and as­pi­ra­tions for peace and de­vel­op­ment in the re­gion. The Spe­cial Eco­nomic Zone has been al­lot­ted 1 mil­lion acres of gov­ern­ment land near Port Qasim in Karachi and of­fers mul­ti­ple fea­tures. The lo­ca­tion ad­van­tage for in­dus­tries would be di­rect ac­cess to the port which would save ma­jor inland trans­porta­tion and time costs.

The al­lo­ca­tion of land to the lead­ing Ja­panese com­pany Yamaha re­flects the spe­cial in­cen­tive plan of SEZ, which is de­vised to pro­mote the mo­tor­bike in­dus­try in Pak­istan. To fur­ther sus­tain the auto in­dus­try, Small and Medium En­ter­prises De­vel­op­ment Au­thor­ity (SMEDA) and Ja­pan In­ter­na­tional Co­op­er­a­tion Agency (JICA) have ini­ti­ated an In­dus­try Sup­port Pro­gram.

These two or­ga­ni­za­tions are work­ing to­gether to pro­vide tech­ni­cal as­sis­tance to var­i­ous in­dus­trial sec­tors through se­nior Ja­panese ex­perts. Auto man­u­fac­tur­ers in Pak­istan carry out assem­bly op­er­a­tions and are heav­ily de­pen­dent on the lo­cal auto parts ven­dors. Im­prov­ing the ven­dor in­dus­try will di­rectly ben­e­fit the as­sem­blers in terms of costs, on-time de­liv­ery and qual­ity. Auto in­dus­try ven­dors face ma­jor chal­lenges as a re­sult of lib­er­al­iza­tion of the econ­omy and phas­ing out of dele­tion pro­grams. They need to be ed­u­cated in ca­pac­ity build­ing, ap­pli­ca­tion of TQM and JIT tech­niques, pro­duc­tion and op­er­a­tions man­age­ment and in­te­grated prob­lem solv­ing

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