BY Syed M. Aslam
Feb 23 - 29, 2004

The federal cabinet's decision to allow import of cars on the 11th of this month has stirred quite a sensation among all the stakeholders the local automobile industry, the anxious importers and the general public. While the first two stakeholders are slugging the decision out with each other the first voicing strong concerns about its destabilising impact on the industry and the second hailing it for offering freedom of choice that it would offer to the people to stir real competition the voice of the third stakeholder, the buyers, has been given far less coverage by the media.

The decision, historic as is, is also ambiguous. On the one hand, it seems to have called the industry that not only refused to cooperate with the high-level Task Force formed last June but also rejected all proposals made by it to check malpractices such as long delayed delivery to the bookers, selling cars on heavy premiums to those willing to pay cash for immediate delivery, bookings of cars on 100 per cent price, etc. to lay down all its cards on the table. On the other, the decision to set up yet another committee to draw import perimeters, such as types and models and duties revision, has made many to shrug off the decision as just another 'ploy' to stir up expectations that the people could do without.

The inclusion of word "allow" and the absence of word "used" before the word "cars" also makes the decision even more ambiguous. While the word "allow" implies that import of used cars would be allowed, simply because import of new cars are already allowed albeit at excessive high duties to discourage imports, the absence of word "used" before the word "cars" implies that the import of new cars would also be allowed at reduced rates of duty. The text of the decision, thus, is highly ambiguous thereby casting serious shadow of doubt in many minds due to lack of clarity which in turn undermines whatever good intentions the top policy makers may had.

The immediate impact of the decision resulted in sharp fall of sales cars in Karachi, the biggest auto market in the country, and for that matter nationwide. Market sources told PAGE that many prospective buyers decided to extend their buying plans and many of them have also tried to cancel their bookings. PAGE has also learnt that bookings of new cars fell drastically thereby resulting in almost two-third reduction in the premium on new cars which ran between 125,000-150,000 for locally produced up-market cars of 1600-2000cc and between Rs 40,000-80,000 for less expensive models.

Prior to the slapping of ban in 1994 by the then government cars can only allowed to get into the country under personal baggage, Gift or Transfer of Residence schemes. The first scheme, allowed a national returning from overseas after a stay of six months or more to bring a car, the second allowed an expatriate to send a car as a gift to his relative while the third permitted an overseas Pakistani to bring a car with him on his return.

As stated above, the wording of the decision as reported in the print media clearly indicates that this time around no distinction would be made between 'new' or 'used' cars. Anxious importers, many of whom work as a group, are also encouraged by the wordings which they feel would allow commercial imports of both new and used cars.

Yunus Warind, the commercial importer of 800 cc Korean Daewoo Chevrolet cars, expressed serious doubts at the failure of the federal cabinet to back up its decision by firm commitment the most vital of which could have been the announcement of the vital import parameters. "Nine months after the formation of the high level task force last June, and its absolute failure to bring any sense to the local car producers whom haughtily rejected all its proposals aimed at checking numerous malpractices, the decision to allow import of cars on reduced duties in principle alone without backing it up with import perimeters, clearly shows the lack of resolve on the part of the government. As usual, nothing would happen this time around as well."

Yunus said that the decision has not only resulted in cutting the sales of his imported Korean car by half but has also made him stop booking more orders. "Like everyone else we are waiting for the situation to clear up in the absence of import parameters." He said the failure of the government to back up its decision by announcing 'import parameters' has not only resulted in creating more confusion than necessary but also posed more questions than it answers."

The local car producers have also reacted strongly to the decision. Pakistan Association of Automotive Parts & Accessories Manufacturers has expressed 'dismay and surprise on the decisions of the federal cabinet to consider reduction of duty on CKD and small car imports. Asking the government to reconsider its decision PAAPAM said that government's policies for the auto sector is like contemplating to hamper the local auto sector resulting in immediate stoppage of further investments and job creations in a sector which has created over 40,000 new jobs in the last two years.

PAAPAM Chairman, Syed Nabeel Hashmi, also rejected the reduction in import duty of Completely Knock-Down (CKD) kits used by the local car producers adding that allowing car imports would only benefit the industries outside Pakistan.

We have to wait if the decision was merely meant to send strong signal to the industry to mend its ways or if the government was serious to protect the interests of all the stakeholders.