TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
Feb 18 - 24, 2008

The protectionism given to automobile industry for more than ten years was basically conceived to flourish local industry and it, in definite terms, paved way to domestic productions to earn recognition in automotive competitiveness, which should have, however, ensured fair price for consumers. Let alone principal cost of a new car, an out of pocket expense against own price have made negative impression on ready and prospective customers as an antithesis. Experts believe that relaxation in custom duty on imported used vehicles discouraged practices of black marketing, carried forward by the local assemblers. The baggage and gift scheme that reduced hefty custom duties have certainly contained unjustifiable levy on local assembled cars as local assemblers should confront with the onslaught of rivals existing in the market. Besides, they invited score of private investments and generated sustainable revenue against custom duty for the government. The present budget, having custom incentive for only import of three-year old vehicles, is feared to restore the hitherto unfair practices because of the whipped slash in import of used cars. Notable is the decline in import of used cars from 75,000 units in 2005-06 to estimated 11,000 in the current fiscal year. According to a report available with the PAGE, the elapsed half of this fiscal year recorded 9,000 units of imported used cars while it is estimated that the figure would hardly surge by another 3,000 units at fiscal year end. At the beginning, only 7,000 used cars were imported in the country from various dealers in 2004-05. In the following fiscal year, an incredible jump to 75,000 units was registered. Owing to the shift in automobile policy, in 2006-07 numbers of units imported were reduced to 38,000.


While talking to this scribe, H.M. Shahzad, Chairman All Pakistan Motor Dealers Association (APMDA) said over 1350 members across the country are associated with the association and they import vehicles in Pakistan utilizing their own finances. "This is in entirety private investment." Rather we have been paying custom duties to government and we are the major contributor in revenue collected through custom duties. The reduction in custom duties over used vehicles with 10 year mileage pass initially was a sagacious decision by the government in favor of the public. Because of the choices before customers were to increase, also giving them cost suitability and price advantage. But, unfortunately government didn't take us into confidence while it brought shift in automobile policy, he stated. Similarly, revenue collection has been going down due to strict measures adopted recently in relation to year of made of used cars. Within July to December of this fiscal year, we deposited almost Rs. 5 billion custom duties, he pointed out. While Rs. 20 billion custom duties were collected in the fiscal year of 2005-06, the revenue was trimmed to Rs. 15 billion after wards in the following fiscal year. He is sure that previous import policy would be re-implemented in the upcoming government. He said it was the association that at the first place influenced government in making import policy. Shahzad is the founder member of the association. The association was established in 1980. The members deal in sale and purchase of imported and local used vehicles.


Somehow government's flexing import policy for complete built units (CBUs) and used vehicles got own-price a substantial cutoff. In addition to this, competition as aftermath of the policy increased variety and caused rippling effect in the entire manufacturing and assembling of accessories and automobiles. After a decade-long of protectionism constituted in 1994, which saw hundred of importers shifting of their businesses to Mid East and Japan from Pakistan and stopped billion of rupees custom revenue, finally government pulled off local auto industry protective shield in 2004. Since then, thousands of used vehicles have been landed in. And, 90 motor dealers have returned back to the country. Yet the sword of insecurity is still hanging over the heads of importers. Two different sets of valuations are applied by custom collectorate for assessing the vehicles, higher for the vehicles imported under baggage scheme and lower for vehicles imported by the local agents of assemblers, lamented Shahzad. By assemblers, he meant OEMs, which normally import new vehicles from abroad. Application of import invoices of diplomatic (duty free) vehicles for the assessment of vehicle imported by overseas Pakistanis is in complete violation of Custom General Order (CGO) 2005 that clearly laid down the procedure for the assessment of vehicles imported by overseas Pakistanis. After the association raised the issue in a meeting with the authority, he revealed, it was categorically directed not to make any such application. Instead, it was directed to collectorates to asses by loading 5 % on the value of vehicle model. In contrast, for the reason best known to appraisement administration, he insinuated, assessment of vehicles imported by overseas Pakistanis in terms of import policy 2007-08 was again started. "Previously, we had to spend Rs. 2,000 per unit as speed money to clear our consignment from custom collectorate." Now they are demanding Rs. 1 lakh for each of our fifty over 2500 cc vehicles waiting at the port for clearance, he said. Local agents have underhand collaboration with the collectors so they have their vehicles cleared. "We keep our stand firmly on not to grease the palms any more". He asserted the matter should immediately be resolved to save importers and overseas Pakistanis from financial losses attributable to unscrupulous assessment resulting delay in clearance and to demurrage and detention charges.

The hegemony over engineering technology maintained by developed countries is difficult to surmount and growth of automobile industry in Far East musters a great deal of struggle. The recipe of both hegemony and growth is typically common and that is exploration and exploitation of domestic resources as much as feasible. Ours is one of the countries where automobiles are assembled instead of manufactured completely. In spite of 10 year of protectionism, automobile industry of the nation has not made its mark in value addition. Therefore, reasonably level playing field to all stakeholders should be provided in order to leverage operational synergy as this would allow one to learn from another.