The representatives of auto industry have called for ensuring long-term and consistent policies and put restriction on import of used vehicles by allowing registration of vehicles in name of returning Pakistani expatriates for at least one year and reduce vehicle life from three to two years.
The recommendations were given by representatives of PAAPAM, PAMA, Deewan Farooque, Ghandhara Group, Hino-Pak, Honda Atlas, Indus Motor and Pak Suzuki at Automobile Advisory Board's first meeting at BOI on Friday, which was presided over by Secretary investment division/BOI Mushtaq Malik. It was also suggested in the meeting that trucks and buses should be taken out of Gift/Transfer of Residence scheme.
It was also mentioned that when compared CBU tariff structure of Pakistan with India and Thailand, average CBU tariff in PKR is 68 in Pakistan, 153 in Thailand and 134 in India.
Mushtaq Malik said that automobile industry is the strength of engineering sector and if it could be integrated with the world market, it may become driving force for economic growth. He said that in this quarter FDI registered 4 per cent increase.
Engineering Development Board made a detailed presentation to the members. It was told that auto sector has received a much focused attention of the government, and that is why "Deletion Programme" in 2005 was replaced with Tariff Based System (TBS). It was said that in 2006-07 auto industry contributed 2.8 per cent to GDP, which would be 5.6 per cent in 2011-12. Also contribution to indirect taxes in 2006-07 was Rs 63 billion and in 2011-12 it would be Rs 190 billion.
Direct employment is also expected to increase to 250,000 in 2011-12 from 190,000 in 2006-07. In the same period, contribution of auto industry to manufacturing sector would increase from 16 per cent to 25 per cent.
The Auto Industry Development Programme (AIDP) was also discussed which aims at providing policy framework for auto industry to facilitate long term investment and enhance competitiveness by stimulating innovation.
The representatives of the companies observed that the auto industry was experiencing a production gap due to continued imports of used vehicles, substantial increase in the cost of financing, significant reduction in auto financing, deviation from announced AIDP (new levies of 2.5 per cent withholding tax, 1 per cent excise duty), and reduction in demand due to uncertainties, it added.
They asked for application of tariff and non-tariff barriers on the similar system as followed in India and Thailand. They were of the considered view that withdrawal of 2.5 per cent withholding tax and 1 per cent excise duty and relaxation's in State Bank of Pakistan conditions for enhancing availability of financing for consumers, would be big incentives for the Industry.