The government will again take up the case of incentives to Japanese Company M/s Yamaha in the upcoming meeting of Economic Coordination Committee (ECC). The company intends to invest $150 million in Pakistan to manufacture motorcycles of 100 cc and above.
Board of Investment (BoI) tried to successfully persuade the Federal Board of Revenue (FBR) and Ministry of Industries to allow M/s Yamaha to start constructing their plant in the light of decision taken in ECC an and SRO issued by FBR during Pakistan People's Party's tenure.
A meeting of the representatives of BoI, FBR and Ministry of Industries held here on Wednesday to mend their divergent views on the early decision of ECC and SRO, allowing Japanese company to set up a manufacturing plant in Pakistan. The meeting initiated by BoI has been convened on the directives of Minister for Finance Ishaq Dar. Board of Investment is desperate for a success story to encourage of foreign investors to make investments in Pakistan. M/s Yamaha's investment of $150 million could lead the inflow of foreign investment as Pakistan is in dire need of investment. The country can also make this case an example for other foreign investors, Chairman BOI Mohammad Zubair told Business Recorder.
An official of BoI, who familiar with the decision of the meeting, said the stakeholders have divergent views on the early decision of ECC and the language of the SRO subsequently issued by FBR in this respect. The stakeholders in the meeting agreed to take back the early decision of ECC again to the same economic forum, which is scheduled to meet next week, in a bid to make it more comprehensive, removing all loopholes. The representatives also agreed to notify incentives to Yamaha in four days after the ECC takes decision.
Former Finance Minister, Saleem H Mandviwalla, tried hard to guarantee incentives for new entrant. A meeting was convened on March 14, 2013 in this regard by Ministry of Industries on the directives of the then Finance Minister, Saleem Mandviwalla, in which a subcommittee was constituted under the chairmanship of the CEO Engineering Development Board (EDB).
New entrant policy for motorcycles sector was not included in AIDP (2007-2012). New entrant policy for motorcycle of 100cc and above was notified by FBR vide SRO 09(I)/2013 on January 4, 2013 to encourage new investment and technology in this sub-sector. As per the decision of the ECC of the Cabinet, the tariff structure for motorcycle sector was defined as under which is applicable across the board and subject to review after one year.
The tariff rates have been notified by FBR after amending relevant SROs: Raw materials 0 percent duty; sub components/ components 7.5 percent duty; sub-assemblies 15 percent duty; CBU (all engine capacities) 57.5 percent duty; CKD kits not manufactured locally 10 percent duty and CKD kits manufactured locally 38.75 percent duty.
The policy for new entrants was notified by FBR vide notification No SRO 09(1)/2013 dated January 4, 2013 stating that in line with a summary on "Policy for New Entrants" submitted by Ministry of Commerce and approved by the ECC of the Cabinet case No ECC-135/14/2012 dated October 23, 2012 which specifies that the additional customs duty leviable under this notification shall not be charged on sub-components and components imported in any kit form by a manufacturer declared to be a new entrant approved by the new entrant committee comprising representatives of Ministry of Industry, Ministry of Commerce and Board of Investment for the motorcycles of 100cc and above with new technology for a period of five years from start of commercial production subject to following major conditions.
At the start of commercial production by new entrants, localisation level shall be kept at a minimum of 25 percent. By the end of five years, localization level shall reach a minimum of 85 percent. The agreement template for new entrants, including the localisation plan will be developed by EDB in consultation with the National Tariff Commission (NTC). The agreement would be designed in such a way that new entrant scheme is not misused.
The new entrant would mean a potential assembler/manufacturer, whether local or foreign, bringing in new technology for the first time in Pakistan and have had no assembly/manufacturing of similar motorcycles in Pakistan in the past. Any existing player bringing in new technology would be eligible for tariff incentives to the extent of parts and components to new technology.
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