Auto parts manufacturers have criticised Competition Commission of Pakistan's (CCP) portrayal of the auto sector. Auto parts manufacturers claim that they are disillusioned and frustrated by the ongoing tussle between the government officials and passenger cars Original Equipment Manufacturers (OEMs).
In an 80-page rejoinder to the Competition Commission of Pakistan (CCP) in response to a report titled "competition impact assessment report on the auto mobile industry" Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) stated that it is deeply disappointed as CCP official did not visit OEMs and Auto Parts Manufacturers (APMs) to understand the dynamics of Pakistan's auto industry and the huge investments that have already been made.
Instead, CCP chose to rely on second-hand studies which reflected obsolete data, fallacious conclusions and malicious intensions. As a logical result Competitive Impact Assessment Report (CIAR) is rife with factual errors, lack of originality, selective use of irrelevant figures, derivation of incorrect conclusions and proposals/recommendations with a myopic view that would have disastrous consequences for the future of the auto industry.
CCP proposed to encourage commercial import of used cars and extend their allowable age to five years while increasing depreciation allowance to two per cent. PAAPAM accused CCP of citing an 'incomprehensible' argument that such measures will make domestic industry competitive. "PAAPAM considers this as preposterous! If CCP argument is to be accepted, wouldn't it be worthwhile to expand appendix C of the Import Policy Order to allow import of all used articles into Pakistan, with the presumption that it will lead to competitiveness of our entire industrial sector," the rejoinder added.
"Had it been a proposal to further reduce duties on import of new cars, PAAPAM should have somewhat understood the rationale. However, the thought of encouraging commercial import of new cars is incomprehensible and an act of discrimination against APMs and PAAPAM members," the Association argued.
According to PAAPAM, the locally Effective Rates of Protection (ERP) which have been used to evaluate the automobile industry as highly protected are wrongly calculated by the CCP. Neither has any analysis of the regional duty structure been made available in the CIAR. The factual situation is that the auto sector in Pakistan is one of the least protected in the region, especially when the regime of de-facto commercial import of used cars is factored into the situation. "Logically and fair-mindedly, new local cars must compete with the new imported cars, not with used cars that have been discarded in their own country of origin.
What PAAPAM and its 375 APM members companies demand from the government is the following: (i) a clear-cut GoP policy on the future of auto industry. Do we want local manufacturing or not? (ii) continuation of a ban on commercial import of used cars; (iii) effective restrictions, on same pattern as Thailand, India, China and Indonesia (where used cars have punitive tariffs and non-tariff barriers) on misuse of gift/ transfer of residence/ baggage schemes, through which de-facto commercial import of used cars is being done; (iv) requirement of road worthiness certification of used cars by Japan Auto Appraisal Institute (JAII). This certification is a mandatory requirement for import of used cars even in Sri Lanka; (v) give confidence to OEMs and APMs and take them on board to consult on future direction vis-à-vis launch of new models to provide choice to consumers, promotion of localisation on same pattern as India and Indonesia.
The Association further stated that the shaping of auto policy through SROs should end. The three SROs that manage the import of autos should be revoked and any tariff protection levied through the customs tariff. Auto parts manufacturers argue that control of the Engineering Development (EDB) over the materials and components used in the auto industry, the degree of local content and management of new entrants, should end. "When these matters are determined by the market, this will give a boost to the domestic and global competitiveness of the auto industry," the rejoinder maintained.
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