Former PAAPAM chief leaps to defend Pakistan's auto sector

A former official of the auto sector has leapt to the industry's defence, arguing that it has created jobs and contributed to government revenue while stressing that number free trade agreements 'de-industrialised' Pakistan and added to the import bill.

Syed Nabeel Hashmi, a former chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), said numerous free trade agreements have "de-industrialised Pakistan" including the ones the country has with China, Thailand and Malaysia.

"What do we have to sell them in return? Nothing,” he told Business Recorder.

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His remarks come at a time when the country's auto sector is undergoing a bit of an identity crisis with rupee depreciation raising the cost of production to a point where many onlookers are essentially labelling the industry mere importers rather than manufacturers.

However, Hashmi said the current fiscal policies of the government, which restricted import of CKD kits to curb dollar-outflow amid falling foreign exchange reserves, will result in massive losses for the economy as well as the government.

“CKD is also raw material for us,” he said. “For every dollar the State Bank is trying to save, it is basically ensuring job losses in an already depressed environment.

“The government should continue to restrict import of luxury goods and big ticket items. But restricting CKDs is killing the auto industry."

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Hashmi claimed that an internal auto sector study suggests every car made in Pakistan generates nearly 4 jobs.

“If government restrictions reduce car volumes by 100,000 cars, then 380,000 jobs will be reduced,” he added.

“Now they want to repair the damage overnight. The problem blows up when people dealing with numbers become your policy and decision makers,” he said.

He added that for decades the FBR has continued to easily collect customs duties and withholding tax on imports to meet its targets, and it has done that on "the back of imported items".

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Hashmi stressed that close to 3,000 auto part manufacturers operate all over Pakistan, engaging 500,000 skilled workers as direct and 2.4 million as indirect employees. "The sector has generated an investment volume of Rs400 billion, and contributes revenues of Rs90 billion per year to the national exchequer. It has also achieved an import substitution worth $3 billion per annum and an exports volume of $200 million per annum. Pakistan is the cheapest source in the world for producing tractors."

While Hashmi defended the industry, many experts criticise the auto sector for relying heavily on imports. They argue that the industry has not increased its localisation level, which is reflected in the manner in which car prices follow the exchange-rate.