ECC still undecided on policy for new entrants in motorcycle industry

ISLAMABAD: The Economic Coordination Committee (ECC) failed to take a final decision regarding incentives for new entrants in the motorcycle industry on Tuesday, after the Ministry of Industries strongly opposed a plan proposed by the Ministry of Commerce. The meeting was deliberating the terms on which to allow reentry of Japanese bike maker Yamaha in the Pakistani market, which critics say will come at the cost of local manufacturers. Finance Minister Dr Abdul Hafeez Sheikh had presided over the meeting.

Sources told The Express Tribune that the ECC meeting discussed only one agenda on Tuesday – that regarding new entrants in the motorcycle industry. The discussion continued for four hours, but concluded without a final decision.

During the meeting, the Ministry of Commerce tabled a new entrant policy for the motorcycle industry, complete with duty and tax cuts. It was to be applied to motorcycles of 100cc engine capacity and above, which had been made using the latest technology.

The commerce ministry had proposed a reduction in tariff for new entrants on the import of Completely Built Units (CBU) from 65% to 35%. On the other hand, local industry had demanded that the tariff be reduced only to 50%, in order to protect it.

Yamaha wants to invest $150 million in a plant that will manufacture motorcycles of 100cc engine capacity and above. The Japanese firm had left the Pakistani market some time ago, but now wishes for a reentry.

Countering the Ministry of Commerce’s proposal, the Ministry of Industries told the ECC that 86 local manufacturers operating in the country would be forced to wind up their businesses if new entrants were allowed with the proposed reduction in tariff.

The Ministry of Industries had pleaded to the ECC that Yamaha should not be allowed incentives that come at the cost of local manufactures, which currently produce 1.6 million motorcycles per year. These manufactures had made heavy investments in manufacturing, and Pakistanis would be forced to rely on imports if bike makers were forced to wind up operations, officials had said. “We need to give some protection to local manufacturers,” they concluded.

“The Economic Coordination Committee (ECC) has agreed in principle to gradually reduce the tariff for new entrants so that existing local manufacturers will not be hurt,” sources said; adding that a majority of federal ministers had supported the Ministry of Industries’ stance.

Agenda for Wednesday

The ECC will meet again on Wednesday (today) to discuss the Yamaha issue along with other items, including: the import of LNG, indemnity for hydropower projects in Azad Jammu and Kashmir, and the renewal of Rs2 billion guarantee for Pakistan Steel Mills.

The ECC will consider approving government guarantees for the building of hydropower projects in Azad Jammu and Kashmir (AJK), in order to meet a key demand of foreign investors keen to invest in the state.

Foreign firms had told the Ministry of Water and Power that international lenders are not willing to provide loans for hydropower projects in AJK because of the state’s legal status. They had sought government guarantees to win loans and undertake the projects.

The issue of guarantees had first emerged after South Korea-based Star Hydropower Limited sought guarantees from the Government of Pakistan for investing in the 147 megawatt Patrind Hydropower Project, which is to be built on the boundary of Abbottabad and Muzaffarabad (AJK). The firm will complete the project in three-and-a-half years, at an estimated cost of $400 million.

The ECC will also consider a new proposal for the import of one billion cubic feet per day (bcfd) of LNG. The Ministry of Petroleum and Natural Resources has proposed the LNG import project be implemented in three phases. In the first two phases, 400 million cubic feet of LNG per day (mmcfd) will be imported in the first round, and the same quantity will be imported again in the second round. In addition to these, 200 mmcfd of LNG will be imported on a fast-track basis from international sources through direct negotiations, competitive bidding or spot purchases.

The ECC will also discuss a summary sent by the Production Division, seeking the renewal of a Rs2 billion government guarantee for the financially-troubled Pakistan Steel Mills. It will also decide whether to release latex foam imported from India by Shafi Lifestyle Limited, Lahore.

Published in The Express Tribune, October 3^rd, 2012.