Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has requested to the prime minister to save local auto parts manufacturing industry by not accepting any proposal for the import of used cars. In a letter to Imran Khan, Chairman PAAPAM Muhammad Ashraf Shaikh stated that they are strongly against any proposal to allow import of used vehicles into the country as it will cause serious damage to local auto parts manufacturers.
PAAPAM, which is a representative body of around 400 auto parts manufacturing companies located all over Pakistan, wrote this letter in the wake of a proposal that has been floated by Car Dealers Federation Lahore (an unregistered trade body) through Ministry of Commerce. "The car dealers' federation submitted in the said proposal that the import of used vehicles is necessary for boosting business activities in the country. But the fact is that under the Import Policy Order, commercial import of used cars is not allowed into the country," said Ashraf.
However in the past, he added, massive quantities of used cars were being imported through misdeclaration and misuse of baggage, gifts and transfer of Residence schemes that are specially meant to facilitate overseas Pakistanis. Thankfully, he added, through the SRO-No. 52(I)/2019 (dated January 15, 2019), it is now mandatory that duties and taxes on imported vehicles must be paid out of foreign exchange remittance from abroad and therefore the misuse of importing used vehicles in the names of overseas Pakistanis has been curbed.
Chairman PAAPAM explained that the import of used cars in the past has caused tremendous damage to Pakistan's economy due to the payments for imports of used cars that were sent through illegal money laundering and hawala channels, resulting in drain of precious foreign exchange and pressure on Pak rupee in the KERB market.
"Assuming an average value of 1$0,000 per vehicle, an amount of $500 to $700 million was remitted overseas illegally every year. This practice also encouraged black economy and attracted the conditionality of the Financial Action Task Force (FATF)," reasoned Ashraf.
Also, he added, the sale of used vehicles was entirely conducted in cash or through Benami accounts assuming average price of Rs 1.5 million per vehicle, which created a black economy worth Rs 75 billion every year and managed flight of Foreign Exchange.
Moreover, he added, the import of used cars was the biggest detriment to investment in auto industry by global OEMs and local auto parts manufacturers as used car policy, liberalized in 2005, led to the closure of plants set up by Hyundai, KIA, Nissan, Chevrolet and Adam as well as various local auto parts manufacturers and caused financial damage.
It is worth adding here that Pakistan out of 40 automobile manufacturing countries in the world was the only that allowed rampant import of used cars under the garb of schemes designed for overseas Pakistanis. "The automobiles made in Pakistan use 55% to 70% local parts amounting to almost Rs 475,000 per vehicle. Hence, based on the annual import of 50,000 used vehicles, the auto parts manufacturers suffer a massive revenue loss of almost Rs 25 billion annually, while over 200,000 direct and indirect jobs (workers, technicians, engineers, and management professionals) were also lost," reasoned Ashraf.
Therefore, he added, the permission, if granted, for unbridled import of used vehicles will jeopardize the investment being made by new entrants and vendors. "We believe that your honor will support our contention on the issue of used cars to save local auto parts manufacturing industry," said chairman PAAPAM.
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