Actual investment in the auto industry is said to be Rs. 120 billion

Mar 13 - 19, 2006

The automobile manufactures have sounded a note of warning that the investment in auto sector could be at risk if the government failed to outline a long-term policy for this most vibrant sector of Pakistan.

The automobile sector has been growing with tremendous strides for the past five years. However, owing to the permission granted by the government, commercial importers are misusing this facility meant for the overseas Pakistanis.

These views were expressed by the manufacturers at a workshop organized by Engineering Development Board (EDB), to discuss the future of auto industry in Pakistan. The workshop was spread over four sessions.

The event was fully represented by almost all stakeholders except the tail end buyers and users of automobiles. Nor was there any mention of their problems in the proposed future manning.

They called for rationalization of the tariff regime so that the present and future investment in the auto sector could be protected and promoted simultaneously. They called for a policy that stood unchanged for a reasonable long period, at least for three to six years. The workshop was attended by a large number of experts from the auto industry, including car, motorcycles and tractor manufacturers.

Speaking on the occasion, Saquib H. Shirazi of the Atlas Honda Group said the exporting countries of the region were enjoying export subsidies. Further, their utilities cost, fixed infrastructure and financial costs were lower than those in Pakistan. He called for allowing the exporters of motorcycles/auto parts the duty free import of their CKD parts, plant and machinery, dies and equipment equal to 25 percent of wholesale value of their annual production. He also proposed for launching export complementation scheme, allowance for new investment and vendor export complementation. The low image of the country, absence of infrastructure support, slow modernization, no investment from Pakistanis and the culture of rules and regulations were the key concerns of the automobile industry, Mr. Shirazi said.

Kenichi Ayukawa, MD Pak Suzuki Motors, also called for the continuity of policy for at least six years so that investors could take concrete steps to consolidate their position. He feared that the present road infrastructure could not bear the burden of vehicles as the Pak Suzuki was providing around 50,000 cars a year.

Mohsin Syed, Managing Director of Hybird Technics (Pvt) Limited, said the automobile industry was facing a situation like television manufacturers who had faced a similar situation when TV sets being imported through the Afghan Transit Trade were smuggled back to Pakistan.

Pakistan had to increase its share in global engineering, as it had a negligible share in the global trade. He said the actual investment in the auto industry was Rs. 120 billion. The new policy should address the tax structure with a view to providing incentives to the investors for exports, he added.

Sikandar Mustafa Khan, Chairman Millat Tractors, said tractor manufacturing was largely an unorganized sector and it faced the problems of lack of proper design, sub standard engineering and production facilities, low technical skills, non availability of specified material and components at the retail level and the lack of testing facilities.

Chairman of the Central Board of Revenue Abdullah Yusuf said there was consistency in the policies of the present government. The private sector should come forward and take benefit of the market potential as a level playing filed had been provided. He rejected the assumption of the car manufacturers that the facility being granted under the transfer of residence and baggage schemes to the overseas Pakistanis for import of used cars was being misused.

Waseem Haqqie, EDB Chairman, and Imtiaz Rstagar, CEO EDB, said the economic policies of the government were intact. However, they assured that every possible effort would be made to support the automobile industry in Pakistan.

Surprisingly, however, none of the speakers pointed out the exploitation of the users by the automobile manufacturers, specially cars, as they make their consumers wait for months even after making full payment. In case of financing through banks, the lessees have to pay bank interest from day one although the delivery is made after, on an average, four months.

Similarly, no speaker came out with any solution of these problems or any plan of action to meet this gap between supply and demand. Why the buyers should be forced to make full payment of a unit they intend to purchase at the time of booking. Justice demands that booking is made at the payment of token amount-say 10% of the price of the vehicle booked. No body even made a passing reference to the car users' complaint about the rising prices. How the Indian manufacturers of cars of the same origin as of Pakistan can afford to survive evenly, selling at about 25% lesser prices than Pakistan.

It may be recalled that auto sector is one of the largest segments in the world trade. In Pakistan production of cars and two wheelers have registered remarkable growth over the last five years. The growth in domestic market has risen from 40,601 in 2001-2002 to 126,817 in 2004-2005, which is to cross 150,000 units during 2005-2006. The vendor industry has the potential for the overall development of entire sector.