The government has responded to the auto industry with a clear long-term future road-map by announcing pre-determined five-year tariff, to carry out expansion programmes, in the Draft Auto Industry Development Programme (AIDP), designed to strengthen the auto sector by making the vendors and manufacturers more inter-dependent and encouraging the new entrants to invest in Pakistan.
Engineering Development Board (EDB), Chief Executive Officer (CEO), Imtiaz Rastgar stated this while briefing newsmen on the new draft AIDP on Friday.
Rastgar said the government was sensitive to the industry's demand of a long-term policy to carry out their expansion programme, which has been provided in the new AIDP.
He said the efforts were made to include all the recommendations of stakeholders in the policy to make the auto sector and vendor industry sustainable.
EDB CEO said the auto industry development programme had been designed to expand the base of the industry enabling it to export parts worth $300 million and to check the liberal import of used cars.
He conceded that the existing industry was working under high protection tariff and it subsequently led to absence of competition, which resulted in low quality, high cost, fewer models, long delivery times and poor service to the customers. The advent of new entrants in Pakistani auto industry would create competition and eventually the people would have quality cars, he observed.
"We have responded the industry with a clear future roadmap by announcing pre-determined five-year tariff so that they could carry out expansion program to increase production turnover of the auto industry and annual export of parts which are envisioned in AIDP by 2011," he added.
He dismissed the impression that the permission of importing 100 Completely Knocked Down (CKD) kits at the rate of duty applicable to non-indigenised parts (35 percent) to the new entrants would harm the local vendor industry saying that new investors would have to develop the local vendors industry as they would not be able to import every part.
Giving details of the plan, Rastgar said it would discourage import of used cars through tariff measures, calls for introduction of a computerised registration system on a uniform basis, projects increase in production turnover 185 percent, envisages development of two auto-parts vendor clusters to reduce the existing monopolistic tendencies of the existing manufacturers by encouraging new entrants.
The plan to seeks 5.6 percent auto-sector's contribution to GDP and the share in manufacturing sector to 25 percent by 2011, projects employment level to 250,000 as direct jobs and 2.5 million indirect jobs and proposes a phased reduction in the tariff.
Zahid Yaqoob, an EDB official, who has been one of the key members involved in preparing the AIDP and accompanied the CEO during the media briefing, deplored that there was a mechanism ie deletion programme but it was not supported by any policy document and AIDP, in fact, would be the first policy of its kind.
When asked what guarantee would be given to the investors that there would be no other policy regarding auto sector in the presence of AIDP as was seen lately when the Ministry of Industries and Production moved a summary seeking reduction in the tariff on CKD and CBU, he said the EDB wanted consensus of all the stakeholders and acceptability of the AIDP.
However, it is difficult to predict that the fate of auto industry development programme would be different from that of textile and other policies.