BLACK CABS 'SCAM'

A number of these cabs is said to be lying in the company's warehouse, with the management making its best efforts to dispose of these units to countries like Nigeria, South Africa and Mexico, besides Pakistan.

Engr HUSSAIN AHMAD SIDDIQUI
Apr 30 - May 13, 2007

To many, Pakistan is wonderland where one can make anything happen in the name of foreign investment, given the necessary resources and connections. These favors could be unlimited, from speedy project approvals to allocation of land (without fulfilling the legal and procedural requirements) and from grant of unparalleled concessions to government patronage. The recent permission granted by the government for the import of duty-free and sales tax-free purpose-built taxicabs, better known as London Cabs, is a case in point, wherein the sole beneficiary is a group of expatriate Pakistanis.

The national press had created commotion in business circles in June last, exposing the non-transparent process in which a company was pre-selected for import-cum-progressive manufacturing of purpose-built taxicabs, the famous London Cabs or Black Cabs, with the provision of granting attractive fiscal and financial benefits. A press notice had appeared in a section of press on June 06 and 07, 2006, inviting proposals for import-cum-manufacturing of purpose-built taxis, to be received by the Ministry of Industries, Production and Special Initiatives within 15 days of publication of the advertisement. On June 15, however, a week before the deadline, the Minister of State for Investment and Privatization announced in a press conference, conspicuously held in the presence of three other ministers of state and an MNA, the name of 'successful bidder'.

AS TRANSPARENT AS WOOD

Minster of State for Investment and Privatisation, who was also Chairman of the Board of Investment, had said that Prime Transport Limited (PTL), a private company, was allowed to import 300 London Cabs, 2400 cc diesel, in CBU (completely built-up unit) condition at zero tariff, which would also operate the proposed taxi fleet in the country. Ironically, according to the press advertisement, an authorized sub-committee was to conduct verification/evaluation of the proposals to be received on the basis of the set criteria, according to which the government was to take a final decision subsequently for award of the lucrative project.

Though on record there were no proposals received till then, yet the Minister of State had disclosed the details of the 'selected' company's programme and special features of the proposal, to the extent of indicating taxi fare per kilometer to be charged by the company. The related advertisement issued by the government was equally questionable as the specifications mentioned for the taxis were tailor-made, openly in favor of one company only. Two weeks were provided to the interested parties to submit the respective proposals, which by all standards, international as well as national, was inadequate time.

Interestingly, the proposal was to be submitted along with proof of land acquisition for the project, joint venture and technical agreement with foreign partner, administrative and financial plan of an associate company designated to operate fleet of taxis and other documentation, which was simply not possible prior to approval of the proposed project by the government. On one hand, the government appeared to act in such haste, and on the other, it was to allow the 'selected' company to establish letter of credit for import of cabs within one year, i.e. by June 30, 2007.

Succumbing to the media and public pressures, and also for the reason that not a single proposal, not even from PTL, was received by the government in response to the advertisement by the due date - the government was assumed to have decided to shelve further processing related to the project. Nonetheless, it proved to be wrong. As soon as the dust settled, the well-connected investor somehow managed its revival, and on December 06, 2006 the Economic Coordination Committee (ECC) of the Cabinet approved, once again, duty-free import of taxicabs, and sales tax-free too, in the CBU and CKD (completely knocked-down) conditions. Earlier, on May 22, 2006, the ECC had allowed duty-free import of first batch of 300 Black Cabs of the UK in the CBU form, on the specific request of the project sponsors, namely PTL.

PROJECT BACKGROUND

In fact it was in December 2005 that the project sponsors had unveiled their plans for progressive manufacturing of Black Cabs, to which they claim of having marketing rights for Pakistan and other Asian countries, under the title of Prime Transport Limited (PTL), said to be set up by the Pakistani expatriates in the USA. The website of the company www.ptl.com.pk provides an interesting, and at the same time dubious, reading. It discloses that it is "...a public limited company, incorporated and functioning in Pakistan under the Companies' Act 1984. But, there exists no company under the name and style of Prime Transport Limited (PTL), among online list of the companies on the website of the Securities and Exchange Commission of Pakistan (SECP). Shockingly, PTL is not listed even among 43,618 registered companies in Pakistan, public listed, public non-listed, private limited and others, of which database is maintained by the Board of Investment on its website.

It has been claimed that the sponsors were experienced and successful businessmen in the USA and Pakistan; nonetheless their associated companies or their CVs have not been presented on the company website. None of the company bigwigs, either Chairman Abdul Sami Khan or Chief Executive Muhammad Dawood Khan or Director Mahreen D. Khan, was known in the business circles prior to launching the project in Karachi.

FEASIBILITY, WHAT FEASIBILITY?

Apparently, a professional approach is lacking towards implementing the project as no feasibility study, which is considered an essential element of an industrial project of this magnitude, has ever been prepared. The detailed feasibility to be conducted by independent consultants need to cover, inter alia, market demand, business and technical operations such as design, engineering, production processes, required plant machinery and tooling, assembly components and raw materials, survey of local manufacturing facilities, development of vendor parts and financial issues like capital cost and return on equity, as well as environmental impact study. Nothing has been done by the sponsors, as is evident from various statements made by the management to the press on different occasions, or information provided on the company's website, about salient features of the project.

Take the example of annual output of the proposed plant on single shift basis that was initially disclosed as 3,500 to 4,000 cabs, later revised to 6,000 units and then to 18,000 units. It may be noted that the only factory in the UK produces 2,500 cabs per year. Likewise, project cost was envisaged to be $200 million, and then inflated to $850 million and now to 850 million. It was indicated that 2,500 jobs would be created when the plant goes into operation, however, this figure was later revised to 21,000 and then rose to as high as 45,000 jobs. All these figures appear to be a cruel joke with the nation.

It may be pointed out here that Indus Motor Company plant, producing 44,000 Toyota and Daihatsu cars annually, currently employs 1,429 persons, whereas Pak Suzuki Motor Company has today a total manpower of 1,723 and manufactures 68,000 vehicles per year. Imagine, Toyota plant at Bin Qasim industrial zone Karachi is spread over an area of 105 acres and nearby Suzuki plant on 64 acres, whereas sponsors of taxicabs project require 400 acres land for the taxicab plant.

The 400-acre land has already been allocated by the Sindh government for the purpose to the company at Dhabeji Industrial Estate near Karachi, which is proposed to develop an area of 13,000-17,000 acres between Dhabeji and Gharo, especially for the foreign investors. The company claims, and it was reported in the press, that the provincial Land Utilisation Department had issued it the provisional Allotment Letter on April 07, 2006. Also, that the Chief Minister Sindh, after chairing a meeting at the Chief Minister's House on the subject, visited the same day, accompanied by the Minister of State/Chairman BOI and PTL management, the site area earmarked for the project.

But nothing is on ground as yet and the proposed industrial estate remains devoid of any infrastructure facilities. Still, it has been planned by the sponsors to commence assembly of cabs at the plant by early 2007, and the manufacturing of cabs is scheduled to start in another nine months. Obviously, in the absence of basic essential facilities, like water, electricity, communications, etc. in the proposed industrial area, PTL would not be able to start construction of the plant under given circumstances. Perhaps it is all a farce, and the intention of the sponsors may be just to import duty-free cabs, without ever launching a assembly-cum-manufacturing plant but instead grabbing a piece of 400-acre land and availing other benefits, under the garb of foreign investment.

OUTDATED MODEL AND TECHNOLOGY

In all probability PTL is importing Black Cab TX II being a thing of the past. The company claims that it has signed a Memorandum of Understanding (MoU) with London Taxis International (LTI), which is a division of Manganese Bronze Holdings plc, UK. It is reported that its manufacturing plant at Coventry has discontinued the production of last generation taxicab TX II model that was introduced in 2002 but was not successful. A number of these cabs are therefore said to be lying in the company's warehouse and the management makes its best efforts, for sometime, to dispose of these units, understandably, to countries like Nigeria, South Africa and Mexico, besides Pakistan.

Meanwhile, the company has launched the new generation, re-styled and most advanced cab known as the TX 4 model, which incorporates a cleaner and more efficient engine, anti-lock breaking technology and other special features, complying with the Euro Emission Rules. There are three versions of the model available; diesel automatic, diesel manual and petrol vehicles, replacing earlier model TX II that was diesel version only. These cabs are already plying on the roads in major cities of the UK. Each cab imported by the PTL is reported to cost Rs 6 million or $98,000 (though exempted from levy of custom duty and sales tax), whereas the price of latest re-styled model TX 4 in the UK is in the range of $40,000 to $48,000.

Interestingly, LTI Division (established in 1987) of the Manganese Bronze is the manufacturer and distributor of purpose-built taxis whereas the other division Mann & Overton looks after service and repair support. LTI has no legal status to transfer know-how or to sign licensing agreement for the manufacturing to any other party. In fact, the parent company Manganese Bronze is the engineering company authorized to conclude any technical collaboration or licensing agreement with a foreign partner. Notwithstanding the fact that the MOU is not considered a legal document, Peter Shillcock, Managing Director of LTI, did not confirm signing of any agreement with PTL, and has said on June 20, 2006: "We have been in discussion with Prime Transport for a number of years concerning their project to produce and sell a purpose-built taxi in Pakistan."

TOO HIGH COST OF THE PROJECT

On the other hand, Manganese Bronze had signed, on December 22, 2006, an agreement with Geely Automobile Holdings, Shanghai, for the production of Black Cabs in China, of course the latest model, under buy-back arrangements. The joint venture (JV) company will produce 20,000 vehicles by 2008 and has export rights within Asia, including Pakistan. It is thus clear that no export rights will be available to PTL for Asia, as claimed, to the level of half of their annual installed production capacity at Dhabeji plant.

Obviously, there is more than meets the eye in this case. The Chinese JV factory will be established at a total cost of 53 million, which is almost six percent of the 850 million investments in proposed plant in Pakistan. According to the JV agreement, land of the Chinese plant is estimated to cost 9.00 million, machinery and equipment 38.40 million, whereas Manganese Bronze will charge 5.60 million for technology, engineering and other technical services.

Radio cabs have been successfully introduced in Pakistan, not only in the private sector but also by the Government of Punjab. Six companies have initially launched 300 radio-cabs in Islamabad and as many in Lahore, whereas another 400 radio-cab taxis are plying in Karachi. These are locally produced 1300/1200 and 1000 cc cars, air conditioned, radio-controlled and economical as these are, generally, CNG-fitted. In the situation of good market response to these radio cabs within a short time do we really need a diesel-operated luxury taxicab with a seating capacity for six persons, equipped with wheel-chair ramp, mobile data terminals, seat and door sensors and credit card readers? Targets of the Pakistani company are certainly unrealistic and difficult to achieve, to say the least, if at all the sponsors are serious about setting up a manufacturing unit. Now, with the departure of Minister of State Umar Ahmad Ghumman, not only from the cabinet but also from the country, the proposed project, however, may not see light of the day.

NO LESSONS LEARNT

Alas, we do not learn lessons from history. In the recent past, Raja Autocars Ltd had imported duty-free FIAT UNO cars under the similar pretext, but the proposed assembly-cum-manufacturing plant could never takeoff physically. The plant was proposed to be located at Mirpur, Azad Jammu & Kashmir at a cost of $20 million for producing 10,000 units annually, for which they had signed a technical collaboration agreement with FIAT, Italy. The sponsors, however, wanted to import 1,500 cars in CBU condition, under concessionary duties and taxes, without fulfilling the basic requirements as per regulations for the proposed manufacturing plant. Resultantly, the import of cars was not allowed by the government in the absence of project feasibility, production plan and deletion programme, etc. in spite of the top management of FIAT having persuaded the then Prime Minister Nawaz Sharif, during his visit to Italy in April 1998. The sponsors nonetheless maneuvered, in subsequent years, the requisite approval for the package. As suspected, the investor simply imported 1,500 FIAT UNO cars in CBU condition and sold in the market, which were allegedly lying with the foreign partner for many years as a result of cancellation of an order, whereas an upgraded version of the car was launched meanwhile in Europe. These cars are no more visible on the roads.

Indeed, Pakistan is haven for the 'investors'---and there are numerous innovative methods of investment introduced here lately!