“Almost 90% of the funds employed by the bike assemblers to run their operations actually belongs to the vendors,” says Paapam Vice Chairman. PHOTO: FILE
LAHORE: Payment delays faced by the auto part vendors as local bike assemblers tighten their grip on finances could be the final nail in the coffin of the industry. The industry is already in the midst of unbearable financial burden due to adverse policies, lack of export incentives, unavailability of credit and absence of utility service, said the Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam).
In a meeting called to deliberate on the issue of non-payments by local bike assemblers to Paapam members, the convenor of the Two-Wheeler Standing Committee of Paapam Iftikhar Ahmed provided details of defaulting firms. Ahmed said that unpaid invoices for the 70cc Chinese version of motorcycles will likely escalate in the near future.
The Engineering Development Board of Pakistan (EDB) issues licences to motorbike manufacturers and auto parts vendors consider EDB’s certification as credible to supply them the goods on credit.
However, Paapam Chairman Munir Bana complained that the situation has gone from bad to worse as more and more motorcycle assemblers default on or delay the scheduled payments.
According to Bana, the parts vending industry is unable to meet its operational capital requirements due to “exceptional” hike in the rupee-dollar parity, which had increased the cost of doing business in Punjab.
Paapam Vice Chairman Usman Malik said, “Almost 90% of the funds employed by the bike assemblers to run their operations actually belongs to the vendors.”
Malik said that a number of small and medium auto parts suppliers have closed shop due to non-payments.
“This situation will not serve the industry well. The small parts manufacturers go to extreme lengths to arrange funds for their companies as the banks do not lend them easily.”
It is the hard-earned money of these small entrepreneurs which is being misused by the motorcycle manufacturers in running their own operations, he added.
“This practice must stop immediately.”
Published in The Express Tribune, May 9th, 2013.
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This is like circular debt situation, which should be addressed. I would suggest Mr. Usman Malik that the EDB is the standardisation of automobile parts, and manufacture/integration is the local companies. How would EDB resume responsibility of the vendors payment. This is the matter of credit bureau or credit data base which should adress the vendors credibility to suppliers. The integration should be on international standards in order to secure export orders.