By Syed M. Aslam
Mar 15 - 21, 2003





MUHAMMAD YOUSUF SHAIKH is a member of three sub-committees of the Karachi Chamber of Commerce and Industry (KCCI) Customs & Valuation, Imports & Anti-Smuggling and Fairs & Exhibition. He is also the President of Association of Motorcycle Importers of Pakistan (AMIP) and Pakistan Motorcycles Importers Forum. Yousuf's association with the two-wheelers dates back to 1989 that not only included trading but also imports of used Japanese motorcycles till 1998, the year the ban was slapped on the import of used two-wheelers. Yousuf is currently importing completely-built-up MoonStar brand of motorcycle from China. He is also importing the semi-knock-down units of the same brand of the two-wheeler at his own plant soon. Yousuf feels that local manufacturing of Chinese motorcycles as well as its imports have not only offered people with affordable choice but also helped push the demand of two-wheelers in the country for the overall benefit of the buyers. It has also helped force the traditional manufacturers to substantially reduce the prices.

PAGE: There are many who say that the Chinese two-wheelers, either locally produced or imported, are inferior to traditional Japanese brands produced locally. What do you say?

YOUSUF SHAIKH: Chinese brands have been able to make a substantial inroads into the markets to a level where they make up almost half of all the two-wheelers sale in Karachi. They have also making a niche in the agriculture belts of Punjab. In short, they have been able to carve out a niche to push sales to record levels thereby bringing a real competition that was never there before. The very fact that the imported as well as locally produced Chinese two-wheelers have been able to bring competitiveness in the market otherwise monopolised by expensive traditional brands even when subjected to discouragingly high duties have not been at the likening of vested interests who wanted to keep on enjoying the monopolistic tendencies in the absence of imports.

PAGE: Discouragingly high duties? Please elaborate?

YOUSUF SHAIKH: The duty of motorcycle in completely-built-up form is subjected to a 90 per cent duty. The rate of duty for the semi-knock-down units is the same which discourages progressive assembly. Interestingly, in 2002-03 budget the import duty on CBU motorcycles was substantially reduced by 30 per cent to 75 per cent. However, just a few month later the duty was increased by 15 per cent to 90 per cent where it stays till now. I am unable to understand the reason to take away the major portion of the duty relief within months. But that's not all, the imports of two-wheelers, despite all too obvious benefits to the people, is systematically discouraged in many other ways.

PAGE: For instance?



YOUSUF SHAIKH: It ITP (Import Trade Price) for Chinese motorcycles is fixed on a much higher side irrespective of landed price. Presently ITP, which serves as the basis for duty and tax evaluation, is fixed at $ 280 for 70cc bikes and $ 275 for 125cc bikes. The fixing of ITP at high levels makes it impossible for the importers and the assemblers to pass off any benefits to the buyers even if the units are imported at much lower prices. It deprives the importers and the assemblers of a level playing field to pass off any benefits to the buyers. As is, the import of two-wheelers whose primary market comprises of middle and low income segments of the society is subjected to higher duty on completely-built-up cars up to 1000cc which are subjected to 75 per cent duty compared to 90 per cent for cars.

PAGE: Can you be specific about how high ITP discourages imports and local assembly?

YOUSUF SHAIKH: The export prices of completely-built-up motorcycles fluctuates wildly in China. The C&F prices of 70cc units range anywhere between $200-260 while that of 125cc fluctuates between $275-400 depending on the make and the manufacturer. However, the ITP for the 70cc bike is fixed at $280 while that for 125cc is fixed at a high 420. Moreover, the duty on the import of two-wheelers in SKD form is at par with the CBU units contrary to 10 per cent relief that is offered elsewhere in the world not only for two-wheelers but for every other machinery. The total impact of duty and taxes including 90 per cent duty, 15 per cent sales tax and 6 per cent income tax adds up to a discouraging 138 per cent. That negates all norms of fair business and level playing field. The difference of a single dollar, thus, pushes the landed price by over Rs 138 and with the fixing of ITP at such high levels irrespective of lower import prices deny the buyers of much better prices on the one hand and instilling a real competition on the other.

PAGE: What could be done?

YOUSUF SHAIKH: It is imperative to lower the ITP. However, we feel that the import and local assembly of Chinese two-wheelers have been discouraged systematically. The Customs and the CBR had accepted to allow 10 per cent reduction on the fixed ITP for import of 70cc SKDs from $280 to $252. A little later, the relief was reduced to 5 per cent or $266. A little later the rebate on the SKDs was slashed by only $5 to $275. At present, there is no ITP discount for the SKDs which are treated at par with CBUs at ITP of $280.