10pc duty cut for Yamaha Motors: BoI fails to muster support from FBR, EDB

MUSHTAQ GHUMMAN

ISLAMABAD: Board of Investment (BoI) has failed to muster support from Federal Board of Revenue (FBR) and Engineering Development Board (EDB) on the proposed 10 per cent reduction in duty as a special case for M/s Yamaha which intends to establish modern manufacturing unit in Pakistan with the investment of $ 150 million.

According to Pakistan Auto Parts Manufacturers Association (PAPAAM), EDB supports only 'briefcase' investors whereas FBR, according to former Finance Minister, Shaukat Tarin, involves in corruption of about Rs 300 billion annually.

Official documents, M/s Yamaha Motors Japan plans to establish a facility for manufacturing motorcycles in National Industrial Park (NIP), Bin Qasim, Karachi at a cost of $ 150 million. The company will manufacture motorcycles having engine capacity of 125cc and above and 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 will also enable them to export to neighbouring markets such as Middle East , Central Asian countries and Africa.

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 institute for developing skills and capacity of the vendors.

It is pertinent to mention here that Pakistan is manufacturing motorcycles mostly of 70 cc and the industry is producing 1970 models based on old technology which are not being used even in the third world. No new motorcycle investment can come under the present framework.

The present 15 per cent duty on CKD of motorcycles is not viable for a new investment that promises to be new technology of international standards. 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.

They plan to develop local capacity of parts manufacturing from the start through a process of relationship building with the vendors.

The company is also expecting to achieve localisation of 85 per cent of parts in the 10th year with an investment of 13.149 billion Yen. BoI being facilitator of investments the company strongly feels that new investment in motorcycle industry needs to be encouraged through reducing the present prevailing duty of 15 per cent on CKD parts to 5 per cent as an incentive for new investment in Pakistan for five years from the start of production.

The draft summary was circulated amongst the Ministry of Industries, Finance and Federal Board of Revenue (FBR) for their comments.

FBR has refused to support reduction in duty from 15 to 5 per cent on CKD parts for five years. However, Ministry of Industries has partially supported the reduction in customs duty from 15 to 5 per cent on EFI and transmission assemblies (in CBU condition).

Official sources told Business Recorder this issue will be considered by the Cabinet Committee on Investment (CCoI) on Tuesday (today) to be presided over by the Prime Minister, Syed Yousaf Raza Gilani.