Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) has expressed its concerns on certain contents of the auto policy announced after a delay of 4 years. Chairman PAAPAM, Mumshad Ali, said in a statement that the basic objective behind the much awaited auto policy, should have been to stimulate rapid growth and investment in the automotive sector through simultaneous incentives to new entrants, existing assemblers and auto parts manufacturers (APMs). Sadly, it seems that the auto policy is entirely focused on new entrants.
The auto policies in countries such as China, India, Thailand, Korea and Indonesia etc are targeted to act as catalysts for growth of investments, government revenue generation, building capacities and creating employment in their respective countries. They acknowledged the contribution of the automotive sector and seek to enhance their role. In his recent article, Finance Minister Ishaq Dar laid down the government's objective to stimulate economic growth to 7 percent by 2018. Mumshad Ali pointed out that the auto policy approved by the ECC on 18th March 2016 will not make any significant contribution towards the goal that the Finance Minister has set for himself and for Pakistan.
Currently, 4 of the top 10 global auto assemblers are producing cars in Pakistan utilizing up to 70 percent local parts. The auto sector which consists of passenger cars tractors, trucks, buses, LCVs and 2/3-wheeler assemblers is supported by 3,000 APM companies which provide 3 million direct and indirect jobs to skilled workers, technicians, engineers and management professionals in the country. It is to be noted that auto sector is one of the top 3 contributors to government tax revenues and LSM growth in Pakistan. This sector is fully documented and part of the formal economy.
The Association further stated that encouraging the auto industry already existing in the country would have been the best option available to the government to speed up economic growth, attract foreign investment & create massive employment opportunities
Mumshad said that, "Since 2013, the auto policy formulation was being spearheaded by Muhammad Zubair, Minister for Privatisation and Deputy Convener of the ECC Committee on auto sector". Zubair held several parleys with PAAPAM and other industry stakeholders and visited the Pakistan Auto Parts Shows in 2015 and 2016 to get first hand knowledge of the industry's capabilities and potential for stimulation of economic growth. "It seems surprising that, at the last minute, the task of finalising the auto policy was taken over by the Chairman, Board of Investment, Miftah Ismail, who was never a part of consultations with the APMs and hence, may not have a clear understanding of the ground realities, dynamics and potential of the domestic auto sector, he added.
Ali invited and urged the Chairman BoI to engage with PAAPAM on top priority basis According to the Association, existing assemblers and APMs have already conveyed to the government, their commitment to make Greenfield investments amounting to hundreds of millions of dollars for setting up new plants and for introduction of new vehicle models Mumshad reiterated the 3 key shortcomings of the auto policy, which he requested the Finance Minister to consider in the ECC.
Firstly, the SEZ incentives for APMs on setting up new capital intensive plants to produce parts that haven't yet been produced in Pakistan must be incorporated as committed to PAAPAM. Secondly, existing assemblers, on condition of setting up a new Greenfield plant, should also be granted the same incentives as offered to new entrants, albeit for a shorter period of 2 years.
Thirdly, import of used cars under the garb of gift, baggage & T/R schemes are the biggest repellent even to new investments in the auto sector and hence the gross misuse of these schemes needs to be curtailed. The conditional gradual drawback of used car age limit will attract investment in this sector from both new and existing OEMs. Chairman PAAPAM stated that during January-December 2015, 45,000 used vehicles with sales value of Rs 67 billion were imported into Pakistan. Had these vehicles been produced in Pakistan with local parts, a total of 143,000 jobs could have been created in the country. He highlighted that Pakistan is the only one of the 40 automobile producing countries which allows import of used cars.-PR
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