Stakeholders' moot on March 1 to review auto policy

Board of Investment (BoI) has convened stakeholders' meeting on March 1, 2017 to review Auto Policy 2016-21, announced last year in March aimed at attracting foreign investment in the auto sector.
To be presided over by Minister for Water and Power, Khawaja Asif, the convenor of the ECC's auto committee, the meeting would also receive brief presentations on business plans from three local companies' which have already approached the government ie M/s Daehan Dewan Motor Company(Pvt.) Limited, M/s Suzuki Motors and M/s Al Haj Faw Motors.
Talking to Business Recorder, Chairman Board of Investment (BoI), Dr Miftah Ismail, who was the key architect of five year auto policy, said that the government intends to go for an intelligent review of the policy which was approved and implemented last year after consultation with the stakeholders.
"We have invited the representatives of Dewan, Suzuki and FAW in the meeting. The three companies want some amendments in the existing Auto Policy. It's the government's responsibility to hear the viewpoint of investors. We will present their viewpoint before the committee. This doesn't mean we are ready to amend the policy or will amend it but we will hear them and if we feel that their proposals have worth, then we will give them due weight," he added.
"Three entities have been asked to give a short presentation highlighting their investment plans, the expected multiple effect on the local economy and have sought justifications for the requested benefits," he added.
Besides this, the committee would review auto policy's implementation including new committed investment in green field, he said, adding that South Korean automaker Kia's joint venture with Lucky Group, another Korean automaker M/s Hyundai and French automaker M/s Renault have already shown an interest in auto sector. Two new plants will be established.
"We will highlight new investment before the committee in addition to issues and proposals of local venders," he continued.
Answering a question, Dr Miftah Ismail said that he was ready to grant an exception to M/s Dewan as it remained functional for a few months but there was no required support from other line Ministries. He argued that it is not possible to give exception to only one party or company.
Al-Haj FAW Motors obtained new entrant status in year 2012 for the manufacture of Heavy Duty Trucks (220 HP; 260 HP & 330 HP) and Light commercial vehicles (970 cc Mini Van) & (970cc 1 ton capacity Carrier) under automotive Industrial Development Plan (2007-2012). Al-Haj FAW Motors is the only company that obtained green field status in the last Automotive Industrial Development Plan with the technical license agreement with Chinese FAW Motors Ltd.
In its first phase of investment Rs 3.5 billion was invested to build basic manufacturing facility for the above vehicles. The assembly plant has been constructed in Karachi with 100% equity. The company as new entrant was allowed 3 years for localisation of mandatory parts as per SRO 693. During this period Al-Haj FAW was allowed to import 100% CKD at prevalent rate of duty at that time. However, Al-Haj FAW Motors could not achieve the desired level of localisation in a given time frame due to low market demand and consequent drop in sales. Resultantly, the company has been paying additional duties for CKD consignment on parts not localised.
Al Haj FPW Motors is now in the second phase of its plant modernization. The main projects completed or in progress include acquisition of additional land (which is new approximately 25 acres), progressive manufacturing of V2 passenger car, completion of electro-deposition painting facility, CKD assembly for heavy duty trucks, truck Chassis assembly Line and new level down welding activities for minivan and mini pickup models etc. The investment in these projects is to the tune Rs 3.5 billion rupees. To complete these initial projects, Al-Haj FAW Motors has signed a MOU for Joint venture with FAW Motors, China.
M/s Al-Haj FAW Motors has requested for new entrant status under new ADP (2016-21) as Greenfield. The company argues that the new policy will deprive companies like Al-Haj FAW Motors of any benefits and as such it would not be able to compete with new entrants under ADP (2016-21) policy given the various incentives offered in the form of reduced tariff for both localised and non-localised components. Director General, BoI Karachi office also visited the plant to ascertain the facilities claimed by the company.
According to official documents, M/s Daehan Dewan Motor Company (Pvt.) Ltd has requested for the grant of Brownfield status to their unit under new Auto Policy for production Daehan, Ssangyong and Kia range vehicles.
BoI closed its operation in October 2010 and requested the Auto Industrial Development Committee (AIDC) in 2013 to renew their manufacturing licence so as to consume their leftover inventory/ CKD units. The AIDC accepted their request and the company was allowed to consume leftover inventory/ CKD kits from September 2013 to February 2014 which were imported in August 2010.
The request of M/s Daehan Dewan Motor Company (Pvt.) Ltd along with business plan of the company was earlier referred to Engineering Development Board (EDB) for determining its eligibility. After analysing their business plan, the EDB technical team comprising members from EDB, FBR, Pakistan Machine Tool Factory (PMTF) and Motor Vehicles Research and Development Est. (MVRDE) visited their manufacturing facility on November 10, 2016 and recommended to allow the company to avail the facilitates of SRO 656(1) 2006 for manufacturing of Light Vehicles (LCVs) Specialised utility Vehicles (SUVs).
M/s Suzuki interested in investment of $460 million through Pak Suzuki in Pakistan have requested for the same benefits/ incentives for two years from the start of mass production of the new models, instead of five years which is given to completely new entrants in the Auto Policy. In case of the grant of 2 year benefits of green field category to M/s Suzkui the company has committed to set up a state of the art new green field plant and introduce new and advanced models.
The sources said, the cases of M/s Al Haj FAW Motors and Daehan Dewan Motor Company (Pvt) Ltd were also referred to the Ministry of Industries & Production highlighting the facts that though these are not exactly within the strict parameters of ADP 2016-21, both present opportunities for investment, early kick off and enhancing the competition and thus might justify special treatment. On the other hand that treatment can trigger similar requests from well entrenched manufacturers. Either way, there are revenue and consumer welfare implications. A holistic examination of both cases is required.
In response, Ministry of Industries and Production maintained that issues regarding company specific modifications in the ADP 2016-21 at this stage cannot be supported as it would not only be premature but also counter-productive in respect of new investors. They suggested supporting necessary modifications in consultation with AIDC and EDB after incorporating view points from all stakeholders regarding two years performance of the ADP 2016-21 as per clause 4.3 of the ADP 2016-21.