Favouring specific motorcycle companies: BoI faced with embarrassing situation at CCoI meeting

Board of Investment (BoI) was reportedly faced with an embarrassing situation at a recent meeting of Cabinet Committee on Investment (CCoI) for seeking special fiscal incentives for a Japanese motorcycle company, well-informed sources in Ministry of Industries (MoI) told Business Recorder.
Prime Minister Syed Yousuf Raza Gilani, who is the Minister-in-Charge of BoI, presided over the meeting and witnessed the disgrace of top officials of BoI for bringing a summary to favour one motorcycle company ie Yamaha. "There are six motorcycle manufacturing units in the country and the proposals brought before such a high forum should not be industry-specific rather these should cover the entire sector," the sources quoted one the members of CCoI as commenting on the proposal. Official documents available with the Business Recorder reveal that the CCoI was informed that M/s Yamaha Motors Japan plan to establish a facility for manufacturing motorcycles in National Industrial Park, Bin Qasim, Karachi at a cost of $150 million.
The company will manufacture motorcycles with an engine capacity of 125cc and above and will offer electronic fuel injection (EFI) engine, automatic transmission and environment friendly exhaust system consistent with European standards. The manufacturing facility will not only meet the demand of Pakistani market but also export to neighbouring markets.
According to the BoI, the investment is expected to create 45,000 jobs and ancillary industries. The project will lead to transfer of technology in manufacturing of motorcycles and the company will establish exclusive training institutes for developing skills and capacity of the vendors. At present, Pakistan is manufacturing motorcycles mostly 1970 models of 70cc, based on old technology, which is not used in other third world countries.
CCoI was further informed that no new motorcycle investment could be expected under the present framework. The present 15 per cent duty on CKD of motorcycles is not viable. M/s YAMAHA has, therefore, requested for reduction of duty on CKD from 15 per cent to 5 per cent during the first five years of their operations. The company has also planned to develop local capacity of parts manufacturing from the start through a process or relationship-building with vendors. They are expected to achieve localisation of 85 per cent of parts in the 10th year with an investment of 13.149 billion Yen.
BoI recommended that new investment in motorcycle industry should be encouraged through reducing the prevailing duty of 15 per cent on CKD to 5 per cent as an incentive for new investment in Pakistan for five years from the start of production. After criticising BoI for seeking special favour for one motorcycle company, CCoI also observed that a committee headed by the Deputy Chairman Planning Commission, Dr Nadeem-ul-Haq, which was constituted by the Economic Co-ordination Committee (ECC) of the Cabinet is already considering the matter relating to tariff rationalisation and the proposal made by BoI should also be considered by that committee.