GPCCI warns of consequences if LCs not entertained

Says commercial banks deliberately targeting German firms by refusing to open LCs

ISLAMABAD:

The German-Pakistan Chamber of Commerce and Industry (GPCCI) has reached out to the government and State Bank of Pakistan (SBP) to solve the issue of commercial banks refusing to open letters of credit (LCs) for German auto companies to avoid protests being launched with the European Union (EU) and World Trade Organisation (WTO).

In a letter sent to the SBP governor, GPCCI said, “Germany and Pakistan have enjoyed close and diverse relations since 1951. German Automotive Giants’ Mercedes, Audi and BMW have been present in Pakistan via their respective partner networks for several decades – now providing both sales and after-sales service for their respective brands.”

“Since the SBP banned imports in May 2022, however, these German companies are now viewing Pakistan in a critical and sceptical manner,” warned the letter.

During FY21-22, the total value of vehicles imported into Pakistan from Germany (by authorised representatives) was less than €70 million – a negligible fraction when compared to the total import bill of $80billion.

In the current FY22-23, the LCs figures are less than €8 million, through the three authorised German brand representatives.

Since the ban was lifted in August 2022, vehicle imports dropped due to the implementation of a hefty RD (Regulatory Duty), which made the vehicles beyond any reasonable price tag.

While the RD was revoked in November 2022, imports have been almost non-existence, as financial institutions are refusing to establish LCs for German brands, it lamented.

Adding to the situation is the recent news circulating in the mainstream and social media targeting specific German automotive companies being represented in Pakistan. “We strongly protest such fabricated news being spread, specifically targeting German brands to promote an anti-establishment agenda, and this adversely affects the long-standing relationship between Germany and Pakistan,” the letter stated.

“Unfortunately, these tactics have now been brought to the attention of German Automobile companies’ highest echelon in Germany; accordingly, protests are likely to be launched with not only the Foreign Office, but also the EU and WTO, highlighting that these restrictions (without any legal basis) seem to be specifically targeted towards German companies only,” warned the letter.

The ripple effect of this will be quite damaging considering Germany announced an additional 84 million euros to support Pakistan as part of a climate partnership in wake of the catastrophic 2022 floods.

“On the one hand, Pakistan is expecting help from Germany and the EU in these dire times, but on the other, the country is targeting German automotive companies operating in Pakistan,” lamented the GPCCI.

“We strongly urge you to intervene in this critical matter so that the notion of German companies being victimised is removed, and banks are able to establish LCs/remittance for these German brands as otherwise the results will be devastating towards the image of Pakistan,” said the chamber.

Published in The Express Tribune, February 10^th, 2023.

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