Tyre industry: Govt must curb smuggling to attract foreign investment

37% of demand is met from tyres smuggled through Afghan border.

KARACHI: Keeping in view the growing demand, the government could attract domestic as well as foreign investment in the rubber tyre industry by resolving structural problems of the sector, said officials of General Tyre and Rubber Company (GTR).

A steep increase in gas and electricity tariffs in the last few months, along with security issues, is creating problems for future investment, said officials, adding that besides these issues, some tariff anomalies and smuggling are also the major impediments to the sector’s growth.



“Heavy smuggling of tyres in Pakistan has scared away foreign investors. India, though, is taking advantage of the situation by offering them incentives and that’s why global tyre manufacturing players are strengthening their place in the Indian market,” they said.

“If the government is desperate for foreign investment, then it must curb smuggling, as mounting volumes of smuggled goods, especially tyres, are affecting the sector.”

With 23% share in the overall rubber tyre market, the 51-year-old company is the only player that produces passenger car tyres. It also produces tyres for light and heavy trucks, farm tractors and rickshaws. It produces both radial and bias tyres and has recently entered into one of the fast growing segments of tyres – the motorcycle market. According to industry estimates, Pakistan produces around 23% of the total demand while 40% is met through imports. The remaining 37% is grabbed by smuggled tyres.

Total market demand in the year 2012-13 was 8.2 million tyres, out of which 1.65 million were produced locally, 3.94 million were imported and over 2.6 million were smuggled mainly through the Afghan borders of Chaman and Landi Kotal.

Talking about the technology GTR is using, the officials said that the company has the latest equipment of American, German, English and Chinese origin for production as well as a well-equipped lab for testing the products.

“GTR’s raw materials are imported from sources approved by Continental AG, yet each batch is further checked in our lab,” they said, adding that the primary objective is to produce tyres of international quality for all kinds of automotive vehicles so that the government saves millions of dollars through import substitution.

GTR has a workforce of 1,800 people including engineers that are trained in Germany, USA, Japan and other countries.

Published in The Express Tribune, February 20^th,  2015.

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