Pama flays new entrant policy

The Pakistan Automotive Manufacturers Association (Pama) has strongly objected to the proposed ''unprecedented preferential treatment'' to the newcomers at the cost of the investment already made by the existing original equipment manufacturers (OMEs).
At the same time, it has suggested that if the government wants to facilitate new entrant, it can provide facilities like soft loans, land, infrastructure, etc, to the new entrants, which may not hurt the existing players. In a letter sent to Finance Minister Dr Abdul Hafeez Sheikh on December 31, PAMA referred to reports that the government is planning to further relax the New Entrant Policy (Auto Industry Investment Policy), contained in Auto Industry Development Program (AIDP).
PAMA members welcomed the addition of new OMEs to Pakistan''s auto industry as "healthy competition always results in increase in the market size and benefits the consumer and the local vendor industry." However, giving an undue and unfair edge to the new entrant will damage the investment already made by existing OEMs. The AIDP provided facility to a new entrant to import 100 percent CKD kit at a concessionary rate of 32.5 percent for three years without using any locally made component.
Again, PAMA, referring to reports, said that the government has further relaxed this new entrant policy by allowing import of 100 percent CKD at 5 percent customs duty in the first year, 10 percent duty in the second year and 20 percent duty in the third year, "which is worrisome for our members as it provides unequal opportunity for new and existing players." To support this policy change, it is cited that the existing OMEs, when they started their operations, also enjoyed such concessions, which is inaccurate and could be confirmed from the ministries'' records, PAMA said.
It further emphasised that no existing OME enjoys the privilege of importing 100 percent CKD. There was a Product Specific Deletion Program (SPDP) which had to be followed with initial localisation. Later, the system was replaced with Industry-Specific Deletion Program (ISDP) which was followed before the current Tariff Based System (TBS). New entrant or introduction of new mode by existing OEM enjoyed same treatment.
To update, initially in the ISDP (first edition from 1996 up to June 2001), the new entrant was supposed to start at the industry level of localisation achieved in the previous year, which used to be 2 percent less for 800cc, 3 percent less for 800 to 1000cc and 4 percent less for above 1200cc. This was followed by the current Tariff Based System (TBS).
Later in the second edition of ISDP ie, from July 2001 to 2005, deletion level for new entrants was further relaxed to 6 percent less than the existing deletion target but had to catch up with the industry level in two years, and half of which was to be done within the first year. Thus, in no case duty concession was allowed to the existing OEM when they started their operations.
In the light of above, PAMA submitted that the new entrant policy in its proposed form is discriminatory and the same may, therefore, be modified so as to give level playing field to all players, the existing and any new entrant in the automobile sector.