KARACHI: A meeting between the Engineering Development Board (EDB), Pakistan Automotive Manufacturers’ Association (PAMA) and the Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM) has been adjourned without conclusion, as local manufacturers and the EDB refuse to budge from their respective viewpoints. The meeting was held to discuss the Auto Industry Development Program (AIDP-II) for 2012-2013 to 2016-2017.
According to sources, representatives of the local auto industry strongly opposed EDB’s claim that the new AIDP will bring in more investments and technology to the country.
They said the EDB’s proposal will wipe out local auto parts manufacturers as original equipment manufacturers will prefer to import their models from Japan and other countries. After the drastic cut in import duty on completely built units (CBU), manufacturing a vehicle and paying the duties on it will be more costly, they said.
According to sources, representatives of the auto industry claimed that the EDB’s recommendations will affect the employment of over 1.5 million workers in auto and allied industries, besides eroding foreign reserves and the national economy by a massive amount.
They said the industry is already faced with the menace of smuggling, under-invoicing and mis-declaration on customs papers; the new proposal will only result in junk – and not technology – being dumped into the country. Pakistan will follow New Zealand, where the local auto manufacturing industry has vanished completely, they warned.
They said the changes are being implemented to facilitate the entry of a bike maker which does not fit the criteria of a ‘new entrant’.
As per the EDB plan, in 2012-2013, 50% import duty is proposed on CBUs for the two-wheeler sector; reduced 15% from the present 65%. Duty on non-localised completely knocked down vehicles (CKD) is to be slashed to 5% from 15%; while duty on localised CKDs will be slashed from 47.5% to 25%. Similarly, after annual reductions in subsequent fiscal years, duty on parts will be brought down to 5% by 2017-2018.
On the other hand, the two wheeler industry had suggested the government bring down the CBU rate to 55% from 65%, and import duty on CKD kits to 10% from 15%.
For cars, duty on non-localised CKD kits is currently 32.5%, which the EDB has proposed to slash to 20%; while on localised parts, import duty will be reduced to 35% from 50% next year, and brought down further to 20% by 2016-2017. Duty on 1,000CC engine CBUs has been suggested at 40%, from 50-55%; 50% on 1,000-1,500CC, from 60%; while CBU duty on 1,500CC to 2,000CC is proposed at 60% from 75%.
The EDB road-map also includes withdrawal of the regulatory duty of 50% on cars exceeding 1,800CC. If the proposal is accepted, the biggest gainers will be importers of Pajero, Land Cruiser, BMW and Mercedes vehicles.
The automakers took an issue with the proposition and said that it will benefit only luxury car importers. They said the claim that consumers will get cheaper cars is baseless, as cars above 2,000CC are not attractive to the common man’s budget – which proves the policy and expected results are poles apart.
According to industry sources, Senior Minister for Industries Chaudhry Pervez Elahi had asked the EDB to take auto manufacturers on board and reach a consensus before proceeding. But sources fear the AIDP-II has already been finalised for implementation and the EDB is only conducting a mock exercise to satisfy the minister.
Published in The Express Tribune, May 8th, 2012.
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