JAPANESE COMPANIES DOMINATE AUTO SCENE IN PAKISTAN
Sep 24 - 30, 2012
Automobile sector in Pakistan is completely dominated by Japanese companies and Japan's share in car and truck market is almost 100% and it has almost 50% share in the motorcycle market.
Japanese manufacturers are producing goods at a high cost in Japan for Pakistan and the neighbouring markets. Japanese investors can take advantage of low cost production, abundant raw material and cheap labour available in Pakistan. By virtue of its unique geographical location, Pakistan can serve as hub for Japanese production houses.
Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) say Japanese goods enjoy consumer's confidence all over the world as well as in Pakistan. Despite a strong Yen and high prices, consumers prefer Japanese products in Pakistan.
PAAPAM Chairman Syed Nabeel Hashmi said the share of local content in vehicles needs to be increased, as the country is still importing almost 50 per cent of the automotive parts. There is an opportunity for Japanese investors to fill the remaining half, as it will cut manufacturing costs in Pakistan and enhance profitability of Japanese investors, he added. The PAAPAM sought further investment and technical collaboration with the Japanese automobile companies for high-tech auto parts manufacturing in Pakistan, he said.
Syed Nabeel Hashmi urged the Japanese companies to increase the share of the local content in the automotive parts. He said Pakistan's investment policies have been consistent and investors' friendly. He recounted various incentives available to the investors including freedom to invest without any restrictions, complete ownership of the businesses, equal treatment to local and foreign investors, free repatriation of profits and capitals, and generous tax and customs incentives for bringing raw materials, plant and machinery into Pakistan.
He said Pakistan is the 6th most populous country in the world and offers a large consumer market. He said energy shortage was a great challenge. However, we are not deficient in potential and resources in meeting the challenge, he added. "Pakistan looks towards Japan and Japanese technologies to assist it in meeting the energy challenge too and it will be a mutually profitable venture," he added.
Nabeel Hashmi opposed the proposal to reduce duties on import of CBUs and said the decision seems to be another well-conceived plan against the fast growing local bike industry, as China being the largest producer of motorcycles in the world, still maintains a custom duty of 90 per cent on CBU import while India, the second largest producer, keeps a tariff rate of 60 per cent.
Syed Nabeel Hashmi feared that the move to cut down rates on import of completely built units (CBU) to 35 per cent from 65 per cent would destroy the engineering base of the country, also endangering millions of jobs and investments. He said that the proposal indicates that the policy makers intend to make the country a trading instead of manufacturing state.
"The two largest producers of bikes in the world, including China and India, protect their industry through limited import permits and homologation system. These systems make it impossible to export anything to these countries that can be in competition with locally produced motorcycles," he said.
He said that China, with a production of 27 million units in 2010-11 and having custom duty of 90 per cent on CBU import, does not allow everyone to import motorcycles, as its government regulates imports through issuance of import permits, he said. "India, with total production of 15.38 million units of bikes, maintains a tariff rate in the first schedule of 100 per cent, however levying a tariff rate of 60 per cent on import of motorcycles, he added. He urged the government not to indulge in any policy changes for an industry that is an excellent example of localisation and growth over the last five years in spite of the countries worsening economic and law & order situation.
On the other hand, Indian commercial attaché Arvind Saxena, while assuring business community of introducing a businessmen-specific flexible visa policy very soon, has already announced to issue six-month visas with three entries to PAAPAM managing committee members.
At a luncheon meeting recently hosted by Pakistan Association of Automotive Parts Accessories Manufacturers (PAAPAM), Saxena stated that the association's chairman, former chairman and all managing committee members will be facilitated and they would have the facility of visiting India thrice in six months, without intimation to any government agency including Police. He agreed with the proposal by members of PAAPAM to ease India visa procedure for the whole business community to increase people to people contact.
Saxena said that Pakistani businessmen were always facilitated whenever they intended to visit their counterparts in India and over 5,000 businessmen have been issued visas in the last six months alone.
On the issue on Non-Tariff Barriers (NTBs), the Indian diplomat made it clear that Pakistani businessmen should not be afraid of Indian NTBs which were not at all Pakistan specific and were debatable.
Addressing the meeting, PAAPAM Chairman Nabeel Hashmi, said that PAAPAM is seeking for technical collaborations with Indian companies for high tech auto parts manufacturing in Pakistan. He said that PAAPAM was looking forward to develop contacts with Indian manufacturers, besides analysing the possibility of joint ventures with them.
The decision of Indian government for allowing investments in India is a positive step, but the procedures are not clarified for Pakistani investors, which should be flexible if the step was taken honestly for enhancing trade in the region.
Nabeel Hashmi also noted PAAPAM's support to formally invite the Original Equipment Manufacturers belonging to all sectors (Two & three wheelers, cars, truck, buss & tractor), of India to visit Pakistan and setup manufacturing facilities here to cater for the Pakistan and CIS countries. He noted that this can be a win-win situation for both countries and their auto sectors.
He further stated that transferring financial funds, non-acceptance of letters of credit issued by Pakistani banks and vice versa need to be addressed also.
Business community is happy with the Federal Cabinet decision to grant Most Favoured Nation status to India but it definitely wants that all genuine reservations of various sectors must be removed through discussions.
He said trade promotion is the only way to minimise the political tension in the region and the two neighbouring countries should not mix trade with politics, and business community should be allowed to carry on trade without hurdles. If we will have strong trade relations, the political relations will get better automatically, he observed.