According to a news report in this newspaper on September 28, local car manufacturers have chalked out suggestions for the consideration of the Engineering Development Board (EDB).
The suggestions are aimed at switching over to what has been described as a "tariff-based" system to regulate the import of auto parts, in place of the existing system, which is designed to provide complete protection to locally manufactured auto parts on the basis of deletion programmes assigned to the assembly plants.
New thinking appears to have been prompted among the manufacturers by the fact that the deletion programmes in the automobile industry are due to be phased out with the turn of the year 2005 in keeping with the WTO's framework of free market access. The tariff-based system would therefore be more advisable as there is room in the WTO rules for customs tariff limitations to protect local industry.
It has been pointed out in the manufacturers' suggestions that the deletion programme applicable to each automobile industry in Pakistan was largely misused.
Some manufacturers, under the cover of protection, were encouraged to maintain prices of their vehicles, including cars and tractors, much higher than the international prices of similar vehicles.
The advantage available in the form of deletion programme to the existing assembly plants not only caused a slowdown in the development and expansion of this industry but also ran counter to the interest of consumers in the home market because of high prices which obviously also made it impossible for the industry to enter the export market.
Thus the country continues to be far behind with its present stage of development as compared to several other countries in the region.
The suggestions offered to EDB inter alia favour liberalisation of the import of auto parts at internationally competitive prices subject to appropriately high protective tariff for those parts which are successfully and efficiently manufactured locally not only by the assembly plants themselves but also by the SMEs engaged in the manufacture of auto parts for assemblers. It has been argued that the change-over in import policy would contribute significantly to faster development of the automobile industry with the import of parts not manufactured in the country.
The industry would thus be enabled to increase production substantially and offer low-priced cars in the local market.
The reaction of the Engineering Development Board to these suggestions is yet to come to light. It is well known that the EDB is the final authority to determine policies with regard to the development of the engineering industry as a whole of which the automobile industry is the largest segment. It has been claimed by the promoters of the new scheme that two CBR consultants have favoured the idea and have even gone to the extent of drafting notifications for the CBR to bring into effect changes in the tariffs for auto parts.
On the whole, it has been admitted by the auto parts manufacturers association, the plan is a complicated one because it involves different rates of import duties for components to be imported by auto parts manufacturers and by commercial importers. Moreover, hundreds of auto parts would have to be classified as to which part is manufactured locally and which is not.
The whole exercise may take a long time to formulate a feasible action plan. It may, however, be pointed out here that an end to the deletion programme in the near future as per the WTO requirements would ultimately force the government to bring about drastic changes in the entire framework of measures to regulate the affairs of the automobile industry and therefore initiative in this direction needs to be taken promptly.
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