New auto players oppose tax relief for Pak Suzuki Motor

Believe tax concessions will spoil their investment plans

ISLAMABAD: New entrants into the auto sector have protested against the government’s willingness to allow Pak Suzuki Motor Company tax exemptions under the auto policy 2016-21.

After introduction of the new policy, French automobile manufacturer Renault and South Korean players Kia Motors and Hyundai announced their interest in starting vehicle assembly in Pakistan. Last month, Volkswagen also inked an agreement with a luxury car dealer for the assembly of vehicles in Pakistan.

These new players plan to invest over $3 billion in Pakistan for the production of cars and trucks.

Pak Suzuki Motor tried to get tax exemptions under the Greenfield investment category from the previous government, but it refused to treat the company, which was planning fresh investment, as a new entrant. However, the present Pakistan Tehreek-e-Insaf (PTI) administration seems to be caving in to the pressure from the Japanese government and has shown willingness to give the incentive to the automaker.

According to officials familiar with the development, Adviser to Prime Minister on Commerce, Industries and Investment Abdul Razaq Dawood has played a major role in convincing Prime Minister Imran Khan that Pak Suzuki Motor should be treated under the Greenfield category in order to secure an investment of $450 million.

Officials said the commerce adviser was of the view that the country could encourage Pak Suzuki to make the investment but at the same time new entrants would be disturbed by the treatment of Pak Suzuki like a new entrant.

Currently, three Japanese companies - Pak Suzuki, Indus Motor and Honda Atlas - have a monopoly in the auto market. However, they are using obsolete technology and their vehicles are of poor quality.

Officials revealed that representatives of the new entrants held a meeting this week at the Ministry of Industries and Production and raised the issue of allowing Pak Suzuki to invest under the Greenfield category.

They raised serious concern and protested against giving incentives to Pak Suzuki. They feared that it would spoil their investment plans and demanded that the company should not be given the status of new entrant. They also asked the government to impose ban on the import of used cars.

The previous Pakistan Muslim League-Nawaz (PML-N) government had approved the new auto policy to break the monopoly of the existing three auto players. Now, the PTI government wants to amend the policy to make way for Pak Suzuki which wants to invest $450 million in Pakistan.

During tenure of the previous government, the Japanese government had also put pressure, asking Pakistan to treat Pak Suzuki’s investment under the Greenfield category.

At that time, the Board of Investment (BOI) had refused to accept the demand of existing auto manufacturers, mainly Pak Suzuki, for tax exemptions. It declared categorically that it would not amend the new auto policy in any way that was designed to bring new players, improve vehicle quality and ensure swift delivery.

The PML-N government believed that any change in the auto policy would bring a bad name to the country globally and new investors would walk way. Officials pointed out that Pakistan had also been facing criticism in the past that it had inconsistent policies and therefore new investors were not ready to come to Pakistan.

Published in The Express Tribune, December 7^th, 2018.

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