Import of used cars only discouraged, not stopped: Dagha

Secretary insists measures taken to arrest the swelling trade deficit

KARACHI: Commerce Secretary Younus Dagha has said that the government has neither stopped the import of used cars nor it intends to completely close down such a channel in the near future.

“We just want to discourage unnecessary imports at this time to curtail the growing trade deficit,” he said while talking to The Express Tribune.

Perturbed about the ballooning trade deficit, the government in the third week of October imposed regulatory duties on 356 essential and luxury goods.



Since the government believes used car imports have a role in growing imports, it introduced some new conditions to reduce such imports.

For years, car importers have been importing used vehicles through three major schemes - personal baggage, transfer of residence and gift scheme.

According to the new rules, the owners or local recipients of all new and used vehicles will pay duties and taxes supported by a bank encashment certificate, showing conversion of foreign remittances into local currency.

The government believes this will significantly reduce imports of used cars in coming months because this way only genuine overseas Pakistanis could bring vehicles into the country.

Government officials are of the view Pakistan is importing too many cars. So if it succeeds in reducing used car imports for the next few months, it will help reduce the country’s trade deficit in the current fiscal year ending June 30, 2018.

Local car assemblers and money changers have long been blaming used car importers for hurting the national economy, saying they take out dollars from the domestic market through illegal means.

What happened after new rules?

Currently, importers say most of the clearances are being done under the transfer of residence scheme and not under the two other categories.

Since the implementation of the new rules, industry officials say used car imports have taken a hit. However, those import deals that were finalised prior to the announcement of the new measures, are all exempted.

Most of the used cars are imported from Japan and it takes about 40 days for a ship to reach Pakistan. Therefore, used cars would continue to arrive at Karachi, which have already been shipped from Japan.

Pakistan’s annual car sales have crossed over 300,000 units including imported used cars that constitute roughly 20% of total sales. The country imported about 65,000 used cars in fiscal year 2016-17 compared with about 56,000 units in the previous year.

The domestic industry is anxiously waiting for used car import numbers of November and December 2017 to assess the actual impact of new rules. Similarly, the government also waits for the numbers.'



“You will see the change in used car imports from January 2018,” said Dagha when asked about the impact of new rules.

Importers’ hope

Used car importers are, however, hopeful that the government will accommodate their concerns by mid-December.

“I think the government will take back the new rules,” said All Pakistan Motor Dealers Association Chairman HM Shahzad.

Analysts say Pakistan spends at least $300 million on used car imports annually. However, domestic automobile assemblers estimate the country spends close to $750 million a year on such imports. Last year, Pakistan’s import bill jumped to over $53 billion at a time when it was unable to increase exports, resulting in a ballooning trade deficit of $32.6 billion.

Published in The Express Tribune, November 30^th, 2017.

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