Dr. Ashfaque Hasan Khan says new Auto Policy has been designed in a way that it should not hurt local industry but attract new investment.

SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
Feb 12 - 18, 2007

Prime Minister Shaukat Aziz, presided over the meeting of the Economic Coordination Committee of the Cabinet (ECC) in Islamabad last week, which took many important decisions, including a 40-year tax exemption to the Gwadar Port operators (the Port of Singapore Authority), making it virtually a tax-free port like Dubai. The ECC also approved a five-year Auto Policy, envisaging many incentives for expansion of this sector.

A formal agreement to implement the decision of the government for handing over the operating rights of the Gwadar Port to the Port of Singapore Authority (PSA) was signed Tuesday last in the presence of Prime Minister at Gwadar. The port is expected to be inaugurated by President Musharraf on March 23. After the ECC meeting Dr. Ashfaq Hasan Khan, Economic Advisor, Finance Division, told newsmen that the tax incentives are meant to give boost to the new port and make Pakistan an economic hub.

The tax incentives approved for the operation of the Gwadar Port, inter alia, include complete exemption from corporate income tax for 20 years, duty exemption on the import of material and equipment for the construction and operation of Gwadar Power and development of Free Economic Zone for 40 years and duty exemption for shipping, bunker oil for Gwadar Port for 40 years and exemption from all local and provincial taxes for 20 years. "It's also understood that the PSA will invest about 550 million dollars in the five to ten years under the concession agreement while the government will provide them incentives and facilities".

Gwadar Port has a strategic importance and can serve as transportation hub for Middle East, South East Asia and China and landlocked Central Asian countries. It's hoped that the measures will give boost to the Gwadar Port, which in turn will contribute towards the economic development of the country. The port, which is yet another symbol of Sino-Pak friendship, will also have a positive bearing on the socio-economic environment in the area and will go a long way in benefiting the local people through initiation of trade and business activity as well as generation of employment opportunity. The operation of the Gwadar port will mark the realization of Pakistan's long drawn dream to have strategically located viable port that has the potential of advantage to all counties of the region.

While talking to the newsmen at Gwadar after signing the agreement with PSA, Prime Minister Shaukat Aziz said that Gwadar Port project will change the destiny of the people of Balochistan by improving their living standards and providing increased job opportunities. "Gwadar will become an attractive destination for cargo traffic providing better facilities to large vessels".

He said that the port will be formally inaugurated in March this year by President General Pervez Musharraf, who has all along taken keen interest in the welfare of the people of Balochistan. Replying to a question, the Prime Minister said that the Port of Singapore Authority will invest $ 550 million during the next five years and no duty will be imposed on the machinery to be imported for development work in this area. To another question, he said the deep sea Gwadar Port will not only enhance Pakistan's strategic importance in South West Asian region but will also usher in a new era of socio-economic development in Balochistan.

About the Auto Policy, Dr. Ashfaque Hasan Khan, briefed the journalists that the five-year policy has been designed in a way that it should not hurt local industry but attract new investment. However, the government has decided not to change current import policy so that consumers' interests could be protected. "Cars import policy will continue in its existing share and if premium becomes a public issue again, the government will take appropriate measures to protect the consumers interests," he said, adding that the total investment in car manufacturing would reach Rs.225 billion by 2011-12 as compared to Rs.98 billion in 2005-06, while this sector's share in GDP would touch 5.6 percent against the current share of 2.8 percent. The contribution of auto sector in the manufacturing sector would increase to 25 percent in five years from its existing share of 16 percent while its share in indirect tax would reach Rs.190 billion in 2011-12 against Rs.63 billion. The sector is presently providing employment to 192,000 people and the number would increase to 2,50,000 by 2011-12, he added.

The ECC has approved 50 percent tariff for localized parts of cars in 2006-07, followed by 50 percent in 2007-08, 47.5 percent in 2009-10, 45 percent in 1010-11 and 45 percent in 2011-12. Tariff for non-localized parts has been proposed by 35 percent in 2006-07, followed by 35 percent in 2007-08, 32.5 percent in 2008-09, 32.5 percent in 2009-10, 30 percent in 2010-11 and 30 percent in 2011-12. In CBU condition, the ECC approved 50 percent tariff for cars up to 1500cc till 2011-12. Cars of 1500 to 1800 cc would have 65 percent duty till 2008-09, followed by 60 percent till 2011-12 while 75 percent duty has been proposed for the cars exceeding 1800 cc till 2008-09 and 70 percent till 2011-12. The ECC approved 50 percent duty on LCV (CKD kits localized parts) for three years i.e. up to 2008-09 followed by 47.5 percent in 2010-11 and 45 percent in 2011-12 while the duty would remain 20 percent for non-localized parts till 2011-12.

Speaking as chief guest at the inauguration of expansion plant at Pak-Suzuki Motor Company in Karachi, Prime Minister Shaukat Aziz said that the present government attaches great importance to the growth and development of automobile industry as it is a key driver of economic growth and technology transfer and a creator of jobs.

He said the expansion of Pak Suzuki's production capacity to 150,000 vehicles per year is indeed laudable. He extended felicitations to dealers, vendors, suppliers and other members of the supply chain who are contributing to this effort. Shaukat Aziz said: "We have seen tremendous growth in automobile industry in Pakistan due to private sector investment facilitated by supportive policies of our government." The increased demand of automobile products has resulted in significant new investment in assembly plants, new brands launch and remarkable growth of vendor industry.

The Prime Minister said that the government expects the auto industry to position itself to become regional hub and a part of global supply chain by enhancing exports to the countries of the region. He pointed out that Pakistan's automotive sector has recorded impressive growth over the past few years, particularly in the car segment.

The ECC also approved relocation of two IPPs from the KESC areas to Wapda as the former refused to purchase power from both the projects. The ECC also approved expansion in the land to be leased out for setting up new industries in the PIDC from 291 acres to 423 acres, which is partially developed.

The meeting was informed that the installed capacity of cement that stood at 15.72 million tons in 2001-02 has more than doubled to 33 million tones in 2006-07. Its domestic consumption has increased from 9.8 to 17 million tons during the period compared with 2003. Pakistan also exported 1.5 million tons of cement, mostly to Afghanistan, UAE and Bangladesh during last year and this year the export is likely to touch 2.5 million tones.