Billions at stake Unrestricted import of used cars

With the increase in the age limit of imported used cars up to five years and the decision to raise depreciation allowance from 50% to 60%, Pakistan has moved towards an extremely liberal import policy, which was already more liberal than other countries in the region.
Without understanding the ground-realities of the auto industry, these decisions have been implemented putting the viability of auto assemblers and auto parts manufacturers at stake. The original used car import policy was devised primarily for the benefit of overseas Pakistanis who intend to bring in their cars while moving back to their home country. However, recent changes in the policy have made it very liberal with almost no binding conditions to control or curb its misuse which is evident by the recent influx of used imported luxury vehicles.
The government previously allowed import of only up to three year old cars under various schemes which was raised to five years in December last year followed by an increase in depreciation allowance to 60% early this year. The only condition under various schemes as stipulated by the policy is 180 and 700 days of minimum stay abroad under personal baggage and gift/TOR scheme. These changes in the policy are not only harmful for the local auto industry but are also equally damaging for the national exchequer as it deprives it from custom duty/taxes along with precious foreign exchange.
A review of regional policies pertaining to used cars import would further validate the fact that Pakistan has the most liberal import policy. In India, used car imports are subject to 100% basic duty along with additional 32% taxes which basically discourage car imports and protect the local auto sector. In Thailand, the duty structure is the same as that of a new vehicle ie 150%. Moreover, there are strict conditions: the imported vehicle has to remain registered in the name of the migrating citizen for at least a year thus ensuring that the policy is not abused.
As a result, the used car imports of India and Thailand are very insignificant as compared to those in Pakistan. The differences in import policies of the three countries are reflected in the way their auto industries are developing. The Indian auto industry is one of the largest industries and a key sector of the economy. Thailand is a major automotive production centre with high auto exports. Several auto giants consider it a prime location for R&D investment and as a base for regional exports.
The processes and production techniques used by the local auto and parts manufacturers are also in line with the global best practices of their parent companies but pro-import policies are impediment for the progress of the local auto industry and thus the engineering sector as a whole, ultimately discouraging investors to take up long term projects.
Over 200,000 skilled workers are employed by the 1,600 auto vendors and parts manufacturers. They are major contributors to the national economy through the localisation of 90 percent parts in the case of tractors and motorcycles, and 45 to 70 percent parts in the case of passenger cars. If manpower and industrial infrastructure are protected in the auto industry, it can greatly improve the local economy through increased employment, further development of infrastructure and a lower import bill.
In greater national interest, the Economic Co-ordination Committee (ECC) should revise the liberal used cars import policy after consultation with Engineering Development Board (EDB) and the Ministry of Industries (MoI). If immediate steps are not taken, the industry will lose billions of rupees, with massive job cuts and bankruptcy/closure of auto vending units a likely situation. Apart from leading to a further deterioration of the macroeconomic situation, this can also result in a serious law and order problem in a country where more than 3 million people are already unemployed.