The Competition Commission of Pakistan (CCP) has sought open imports of used cars besides an increase in the age limit – from the current level of three years old to five years – aimed at bringing an end to the monopoly of local car assemblers.
In a study CCP conducted to gauge the level of competition in the local car industry, it found that existing policies are protecting three players at the expense of consumers.
The CCP has also recommended the government to withdraw three notorious Statutory Regulatory Orders (SROs) that give protection to the local industry and restrict entry of new players.
The study confirms that the cars assembled by three major players lack the quality and safety standards when compared with the vehicles of same categories manufactured in other countries.
The CCP makes the draft of the study public at a time when the government is in the process of approving the new auto policy. The CCP’s findings show that the Automobile Industry Development Programme has failed to achieve its objectives.
The CCP also shows concerns over the parallel rise in prices by the three players from 2010 to 2012.
“Pakistan automobile industry is inward looking and it tries to protect itself through the use of regulatory instruments,” says the study. “Pakistan needs to develop the automobile industry instead of protecting it and in this regard imports will have a disciplinary impact on domestic firms.”
One of the most important recommendations of the CCP is that the government should not only increase the age limit for imported vehicles to five years from three but should also allow open imports. Currently, the import of cars is allowed only under the gift, personal and baggage schemes with restriction.
Opening up of the domestic market to the import of new cars at reasonable tariffs and reducing protection of local industry to allow foreign competition for the benefit of consumers will bring in new technology and offer more choice to the consumers, it adds.
This increased competition will reflect in better pricing and improved quality, as well as the availability of cars on demand.
The recent reduction of allowed age limit for import of cars from five to three years in December 2012 further protected the domestic automobile industry.
The CCP finds that carious anti-competitive restrictions are imposed through three SROs. For instance, SRO 693 of 2006 specifies several conditions for new entrants, including the requirement to achieve fast-track localisation within three years, or pay high duties retroactively. “These SROs are periodically amended to comply with the requests of the existing assemblers and vendors after approval by the Engineering Development Board.”
The CCP further notes that due to absence of regulation, the domestic automobile manufacturers do not offer safety features such as Anti-lock Breaking System (ABS), airbags and emission standards along with quality specifications such as alloy rims, power steering and windows in all their vehicles.
Published in The Express Tribune, November 14th, 2014.
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