$1b investment by new auto firms challenged in court

Petitioners argue the companies do not qualify for incentives under new policy

ISLAMABAD: A planned investment of $1 billion by two new auto industry players is in jeopardy as their Greenfield status have been challenged in the Sindh High Court.

Two existing auto companies - Tayba Motors and Master Motors - have filed cases against the Engineering Development Board (EDB) for processing applications of two new players interested in setting up manufacturing plants in Pakistan under the new auto policy.



The government has awarded Greenfield investment status to Regal Motors for establishing its plant in Pakistan whereas the case of Foton JW Auto Park is being processed. Tayba Motors has challenged the Greenfield status of Regal Motors in the court, claiming it was already manufacturing variants of trucks and mini-passenger buses in Pakistan.

It pointed out that Regal Motors’ manufacturing certificate had expired in 2016, but the EDB did not renew it. It pleaded the court to direct the EDB to renew the certificate.

Master Motors, on the other hand, has challenged the process initiated by the EDB to grant Greenfield status to Foton JW Auto Park under the new policy, which provides attractive tax and duty concessions for new industry players.

It argued that Foton JW was already manufacturing trucks and it could not be treated for Greenfield investment under the new policy.

It further said there was no joint venture with the Chinese company according to records of the Securities and Exchange Commission of Pakistan. The government has granted Greenfield status to Regal Automobile Industries Limited, United Motors Private Limited, Kia-Lucky Motors Pakistan Limited and Nishat Group, which is collaborating with Hyundai.

Sources said work on projects being developed by Regal Automobile and Foton JW had come to a halt following the court cases. However, work on the remaining three new entrants is progressing.

Other new players who have applied for setting up plants in Pakistan include Habib Rafiq Private Limited, Khalid Mushtaq Motors, Pak-China Motors and Cavalier Automotive Corporation. Their documents are currently going through the verification process.

According to officials, one plant needs an investment of at least $500 million and the suspension of work by two new players means $1 billion of investment is at stake in the wake of the court cases.



The government, which had so far granted Greenfield status to four new investors, was hoping that they would pour at least $2 billion into the automobile industry, the officials said. In Pakistan, three Japanese auto companies, working in collaboration with local firms, have enjoyed monopoly over the years. However, recently calls are growing that they are using obsolete technology and receiving premium from consumers for swift delivery of vehicles.

After holding deliberations for a long time, the government is bringing new companies to break the monopoly of existing auto manufacturers and assemblers.

Published in The Express Tribune, August 24^th, 2017.

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