INTERVIEW WITH H.M. SHAHZAD, CHAIRMAN, ALL PAKISTAN MOTOR DEALERS ASSOCIATION (APMDA)

KHALIL AHMED
(feedback@pgeconomist.com)
Feb 7 - 13, 20
11

PAGE: WHAT ARE YOUR VIEWS ABOUT LOCAL AUTO ASSEMBLERS IN PAKISTAN?

H.M. SHAHZAD: The Pak-Suzuki Company has been here for last 30 years. To date, it has not become a manufacturer. In 1980, when it signed the deletion program, it had mentioned that within five years, transfer of technology would be brought into Pakistan and they would start manufacturing vehicles. It is unfortunate, that till today nobody has asked them why it has still not started manufacturing vehicles locally.

The same case is with Toyota and Honda companies in Pakistan. They too had announced in the 1990s that they would bring in localization but even after 20 years, they have not done so.

All local assemblers have imported complete knock down (CKD) and semi knock down (SKD) since the beginning till date, because of which billions of dollars in valuable foreign exchange of Pakistan have been wasted. If these companies had localized their production, it would have benefited immensely the government and the public, who would have been able to purchase low cost vehicles.

The local auto assemblers have finished the Deletion Program and now they are importing CKD and SKD on tariff basis.

PAGE: WHAT ARE YOUR COMMENTS ON RECENT DECISION OF THE GOVERNMENT ON IMPORT OF RECONDITIONED VEHICLES?

H.M. SHAHZAD: The decision taken by the government regarding import of used cars (five years old) is very good since it will help the public to get good quality cars at economical price. By this decision, the government will be able to get good revenue.

PAGE: PLEASE TELL US ABOUT TAXES ON IMPORTED VEHICLES?

H.M. SHAHZAD: The custom duty and other taxes are too high in 2011. All taxes work up to 210 per cent to 250 per cent. The government has to reduce the duty and taxes and bring them back to 2007-2008 rates, which was 130 per cent.

PAGE: WHICH COUNTRIES ARE MORE SUITABLE FOR PAKISTAN FOR IMPORT OF VEHICLES?

H.M. SHAHZAD: Japan is the most suitable because it manufactures the best automobiles for its own domestic public. And, the used cars we import from Japan have the world's best safety standards and are fuel efficient, pollution-free and low priced. These used imported cars from Japan are luxury cars in spite of their low cost.

PAGE: WHAT INCENTIVES ARE YOU EXPECTING FROM THE GOVERNMENT?

H.M. SHAHZAD: We request the government of Pakistan that in order to finish the monopoly of the local automobile assemblers, it has to remove the hurdles in the import of used vehicles. If the hurdles in import of used vehicles are removed, the public will be benefited the most. They will get good quality vehicles at cheaper price and the government will get greater revenue. Besides, this will reduce the monopoly and cartel of the local assemblers. The millions of people, both in Pakistan and aboard, who are associated with this trade will be benefited and countless people in Pakistan will have employment opportunities.

PAGE: WHAT ARE THE BENEFITS OF USED CARS IMPORT ON THE LOCAL ECONOMY?

H.M. SHAHZAD: Millions of Pakistanis are engaged in the trade of import, sale, purchase and ancillary trade activities related to used vehicles and earning bread and butter for their kith and kin.

This trade got fatal blow when the government increased customs duty and imposed 50 per cent regulatory duty on the importation of used vehicles in 2008.

The Federal Board of Revenue in 2009 amended its custom general order according to which depreciation on vehicles was decreased from 2 per cent to 1 per cent resulting in increase of value of vehicles to the extent of 25 per cent.

We submitted various budget proposals before the taxation authorities prior to Budget 2010-2011 in order to revive the trade activities pertaining to trade of used vehicles, but strangely none of those proposals were incorporated in the Budget.

The currency fluctuation and steps taken by the government gave a severe blow to this trade and quantum of importation of used vehicles drastically fell during last three years.

The drastic cut in the volume of import of used vehicles made the life difficult for millions of Pakistanis related to the field of denting and painting of vehicles, mechanics engaged in the maintenance of used imported vehicles, clearing agents and their staff providing services to the importers of used vehicles, drivers at Port driving vehicles from port to car dealers, car dealers engaged in the selling of used vehicles, commission agents and other entities engaged in carrying out ancillary trade activities.

The policy of the government created the monopoly of the local auto assemblers who increased the prices of local assembled vehicles and started fleecing the public by providing substandard vehicles on inflated prices and thus earned billions of rupees on this account.

The shrinkage in the volume of import of used vehicles due to defective and one sided policy adopted and enforced by the government to provide financial benefits to the local auto assemblers, deprived public from their right to purchase good quality imported used vehicles on competitive prices.

Recently, our efforts gave some result when the ministry of commerce, government of Pakistan, provided partial relief and issued SRO 1113 (I)/2010 dated 8th December 2010 permitting import of used cars up to five years old. This amendment gave partial relief to millions of Pakistan related to the business of used imported cars business who thought that now they will earn enough to make their both ends meet and provide bread and butter to their kith and kin.

The entities engaged in the trade and hundreds of Pakistani living abroad purchased about 8000 cars in the light of above cited SRO and invested their hard earned billions of rupees in such purchases.

While the vehicles were shipped or were in the process of shipment to Pakistan, government rescinded the above captioned SRO under the Cover of SRO 1167(I)/2010 dated 30th December 2010;

The rescinding of captioned SRO after twenty days of its issuance had stunned the entire trade and is being termed by the trade circles an act of broad day dacoity on the hard earned and tax paid investment of Pakistanis living abroad and Pakistanis carrying out business activities in Pakistan. This act of the government has shattered the hope of millions of Pakistanis related to the trade of used imported vehicles in various capacity.

The local auto assemblers with the tacit indirect approval and support of present government increased their prices of their assembled vehicles during last three years i.e. Pak Suzuki by 32.87 per cent to 78.10 per cent; Toyota Indus Motors by 32.95 per cent to 63.54 per cent; Honda by 20.58 per cent to 53.50 per cent.

Our organization has carried out study revealing that Pak Suzuki has increased prices 18 times in last three years; Toyota Indus Motors 16 times in last three years; and Honda 13 times in last three years.

The recent decrease in the prices by local assemblers, which led to the rescinding of SRO under reference, is negligible and only eyewash. We fail to understand that on what basis/record the present government accepted their one time decrease in prices and rescinded the SRO.

The record of the local assemblers will confirm that they book vehicles on hundred percent advance payment. The government revenue such as sales tax, income tax, and excise duty is included in the booking price. This amount is used by the auto assemblers for about four months by depositing the amount with bank and earning interest on it and government revenue taken as advance is deposited at the time of delivery of vehicles after using the government revenue for about four months.

The local auto assemblers have formed business cartel and thus depriving public to purchase vehicles on competitive prices.