Curbs on import of used cars

Pressure groups, adhocism and lack of evidence-based decisions have caused significant damage to Pakistan’s economy. This often leads to abrupt changes in policies. On Jan 15, the ECC re-introduced certain restrictions on the import of used cars. It approved the Commerce Division’s proposal that duty and taxes on all imported vehicles in new and used condition under the personal baggage or gift scheme would be paid out of the foreign exchange arranged by Pakistani nationals themselves or the local recipient supported by a bank encashment certificate, showing the conversion of foreign remittance into local currency.

The Commerce Division has shown unusual haste in implementing the decision. It issued the notification to give effect to the decision the same day, without waiting for the minutes of the ECC meeting. The notification was issued before the decision was ratified by the cabinet. The Commerce Division had also placed the summary before the ECC without prior consent by the PM, who is also in charge of the commerce ministry. This raises suspicions about the motives of the decision. The government has taken the step to check outflow of foreign exchange and misuse of the existing policies. There is no doubt that the used cars import scheme, meant for overseas Pakistanis, is grossly abused as only 5% of the used vehicles are imported by bonafide expats.

There was a need to study the reasons behind misuse of the facility instead of erecting non-tariff barriers, which will essentially benefit local assemblers. The dealers’ association claims nearly one million vehicles are sold in the market, including 700,000 imported cars. Local assemblers have failed to offer quality products at competitive rates. In the absence of any competition, local assemblers would be free to increase prices and exploit customers by controlling the production. The only practical solution would be to review the used cars import policy, keeping in mind the stakes of all existing players in the automobile sector.

Published in The Express Tribune, January 20^th, 2019.

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