INCONSISTENT POLICIES: MAJOR SETBACK

INTERVIEW: RAZA ANSARI, DIRECTOR MARKETING INDUS MOTOR

AMANULLAH BASHAR
(feedback@pgeconomist.com)

Nov 28 - Dec 4, 20
11

Currently, the government's leaning to do away with the factory fitted CNG provision is the most burning issue not only amongst the common motorists, but the automobile companies, and the importers of the CNG kits who have made huge investment on imports of the kits.

When the attention of Raza Ansari, Director Marketing Indus Motor, was invited towards this new development, he said that so far the automobile companies have not received any official directives in this regard. However, the reports have triggered a sort of uneasiness among the stakeholders.

The representatives of automobile industry are in touch with the authorities on this issue and have asked the authorities to make things clear to avoid uncertainty in this regard.

If the authorities decided to stop automobile industries from fitting CNG, the import bill on the back of ever-increasing international oil prices may easily go up to $20 billion next financial year. He agreed that oil import bill is surely to reach over $14 billion by the end of this financial year. There seems no valid reason in favor of non-CNG car production.

Commenting on the current state of affairs internationally, Raza said that the current auto policy under auto industry development program (AIDP) is approaching to its close in coming June 2012, and the government is taking advice from an Australian consultancy firm Gary Persu to set future direction.

The discomfort of the local auto industry is quite noticeable. The local industry has expressed its concerns that it might meet a collapse due to inconsistency in the policies if the government goes in accordance with the proposals of the foreign consultant.

The consistency in policies is of vital importance to make things predictable for the investors especially for the long term and capital-intensive projects like automobile industries. It is important for the investors as well to operate with a peace of mind on the back of assurance about stable policies.

In fact, the reports suggest that the government has been advised by some quarters to reduce the import tariff to a level of 20 percent and go for gradual decline in tariffs. This would naturally open a floodgate of imported vehicles leaving no room and reason for the local industry to survive.

However, even if the authorities desire to encourage trade in its policy rather than industrialization, the investors in automobile would also swim along with stream and go into trade. The matter of concern is that the policies should have some clarity of direction so the stakeholders would also move in the light of that policy. The industry would have a choice to go into import business. However, the consequences in terms of unemployment would be serious in that case, Raza warned. He pointed out that encouraging import of vehicles would badly affect our vendor industry where almost 2.5 lakh families have to rely on this industry.

Since the term of the current auto policy is about to close in June 2012, it is the major concern of the industry that any abrupt shift in policy may harm the growth of the industry. Favoring imports would make Pakistan a nascent market having no manufacturing and employment oriented activity in the country.

The automobile industry has not come out of the adverse effects of the floods in Thailand, which disturbed the supply chain of auto industry in Pakistan as well as India. It may be noted that Honda Motors in India had to stop production of City cars mainly because of disrupted supply chain due to floods in Thailand last Monsoon.

He said that Indus was also facing difficulties in meeting delivery dates, which are causing delays in delivery. However, his company is trying to compensate to the customers through incentives in different forms including one-year free maintenance of their cars.

Despite increasing cost due to yen appreciation and imports of parts by air at least three times a week, his company ensure that the buyers are not affected just to ensure credibility of his company, he said. When asked why IMC has decided to stop production of its popular Model Coure,

Raza explained that every model has its life and Coure reached to that maturing time. However, so far it is in the production and whenever the company would decide to stop its production, it will be duly announced, he said.

NORMALIZATION OF TRADE WITH INDIA

When he was asked to comment on impact of normalization of trade with India and grant of most favored nation status, Raza Ansari in his calculated remarks was of the view that normalization of trade with any country cannot be denied yet a word of caution is quite necessary before opening the doors. "You know India is one of the largest economies and enjoys the benefit of the scale of production. The government would have to see the tariff and nontariff barriers applied by India on imports from Pakistan and even other countries," he advised. Normalization of trade does not signify a single track, it should be a two way process. He recalled that India had accorded MFN status to Pakistan in 1996, which means that there is no negative list for Indian importers and they can import any thing from Pakistan. But, see the volume of imports by India from Pakistan, the balance of trade always remains in favor of India.

When he was reminded that India was a big exporter of motor parts and the vendor industry in Pakistan could benefit of this huge market by getting outsourcing jobs and even exporting spare parts to India's huge automobile market, Raza said he had his reservations on the subject in view of the experience that Indians might not happily allow Pakistani goods in its market.

He, however, said that there is no harm in improving trade relations with neighboring India, yet the authorities have to ensure a level playing field and ensure balance between the sides.