AUTO INDUSTRY IN CRISES

IMPORTS BE BANNED TO HELP THE INDUSTRY, THE ECONOMY

SHAMIM AHMED RIZVI
Mar 02 - 08, 2009

Inbox: Just have a visit to the parliament house when it is in session or PM or President House, with score of latest model imported luxurious automobiles parked over there, you cannot convince yourself that they belong to public representatives of a poor country like Pakistan where 50% population cannot afford two proper meals

Auto analysts and business community are demanding complete ban on import of all types of cars-used as well as luxury-to help industry in its efforts to come out of its present crises. It would also help the government to curtail its import bill and rising trade deficit. The local auto industry has the capacity to meet the national demand for small and medium size of cars. Apart from the consumers of the industry, even the country cannot afford the import of luxury items under the prevailing difficult economic situation.

Auto analysts are of the view that the growth of the auto sector has been badly hampered during the outgoing year of 2008 because of many factors. These included economic instability, political uncertainty, high interest rates, deviation from agreed auto policy, liberal car import policy, increase in the prices of locally assembled cars because of falling rupee value and enhanced input costs and most importantly the slowing down of auto financing schemes of the commercial banks.

Most of the leading commercial banks have altogether stopped car-financing schemes because of rising defaults in payment of installments from the borrowers.

Launched by almost all commercial banks, liberal car financing schemes on easy installments with low interest rate encouraged lot of people belonging to low income group to buy small cars for their family use. They had been somehow managing to pay the installments on time. The mounting inflation especially of food items increasing their kitchen budget by almost 100% during the last 18 months made it almost impossible to spare money for payment of loan installments out of their limited income. This led to rise in defaults.

Above all these factors responsible for sharp decline in the auto sales, the government in the current year 2008-09 budget imposed 5% uniform Federal Excise Duty on all type of cars, locally assembled as well as imported, with engine capacity higher than 850cc. It was done thoughtlessly and against the demand for some relief to the local industry. The authorities have equally treated import of luxury car and locally assembled smaller cars. As a result, the import of cars especially big and luxury type has increased significantly causing further recession in the local industry.

A highly placed source in the ministry dealing with auto sector, while fully agreeing with this correspondent that in view of prevailing difficult situation and crises in the auto industry imports of all types of cars should be totally banned, said on condition of anonymity, that "presently the economic managers of the country are working only one point agenda i.e. raising the quantum of state revenue to satisfy the IMF. They are least lathered about rationality, merit or demerit of their decisions as long as it helps to achieve their basic objective. The moneyed class has been highly encouraged to import big and luxury type of cars and the government is earning money. Just have a visit to the parliament house when it is in session or PM or President House, with the abundance of latest model imported luxury type of automobiles parked over there, you cannot convince yourself that they belong to public representatives of a poor country like Pakistan where 50% population cannot afford two proper meals a day, he lamented.