EDB closure feared to discourage use of Pakistani auto parts

PAAPAM says EDB had played a vital role in encouraging domestic parts industry

KARACHI: The closure of Engineering Development Board (EDB) will negatively affect localisation of the auto industry, which is heavily dependent on imported parts.

Pakistan has been facing immense pressure on its foreign exchange reserves, which are depleting and the State Bank’s reserves currently stand at slightly over $10 billion.

Pakistan’s exports stood at $20.55 billion while its import bill reached $45.56 billion for the first 10 months (July-April) of FY18. The government has been searching for ways to limit the import bill and the auto sector’s reliance on domestically produced parts will help slash the bill. The rupee’s depreciation since Dec 2017 has also made imports of auto parts expensive.



According to Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Senior Vice Chairman Mohammad Ashraf Sheikh, the EDB has played a vital role in encouraging the use of local auto parts in the industry.

“The EDB was the platform that helped grow the vendor industry and now over 300 parts manufacturers are supporting the industry in achieving greater localisation - 75% in cars, 96% in tractors and motorcycles, and 80% in three wheelers,” Sheikh said.

According to him, aggressive localisation in the Pakistani automotive industry was due to the EDB and import substitution now saves the country over $3 billion annually.

“It is unfortunate that the government has failed to safeguard the AIDP (Auto Industry Development Plan) 2016-21 and it is no more being followed. Its custodian has been dislodged and the industry has lost a one-window facility. Our members’ grievances are not being alleviated. It will devastate ongoing growth of localisation in the country,” Sheikh said.

He pointed out that the EDB, with its extensive experience, had been playing an important role in safeguarding the sector during negotiations for free trade agreements (FTAs) with different countries.

The EDB was set up in 1995 with the objective to encourage domestic production of engineering goods and provide an environment for job creation in Pakistan’s industrial sector and increasing industrial exports.



According to auto parts manufacturer Omer Butt, the owner of Precision Engineering Services, the EDB has helped manufacturers import raw material or parts, which are not available or manufactured in Pakistan, with duty exemption.

“It has also encouraged many to start manufacturing by bringing down the cost of production,” Butt said. Former Paapam chairman Aamir Allawala said the EDB had been one of the best performing government departments, but unfortunately, it had been wrapped up.

However, according to officials, new companies that were entering Pakistan’s auto arena had complained that the EDB was hindering their entry into the market. The EDB was required to implement the new auto policy 2016-21 but it, according to them, caused hurdles in the way of potential new entrants.

Published in The Express Tribune, May 30^th, 2018.

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