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ISLAMABAD: The government is considering revalidating import quotas of new entrants till June, 30, 2023 in the light of decision of Sindh High Court (SHC) aimed at countering concerns of suspending operations after December 31, 2023 due to lack of clarity in CKD ordering process, sources close to caretaker Minister for Commerce and Industry said.

The Apex Committee of the Special Investment Facilitation Council (SIFC) in its agenda circulated by Prime Minister’s office, on November 6 2023 directed Ministry of Industries and Production to provide an update on auto sector localization and exports without interrupting existing operations and to ensure localization/exports wherever the policy so stipulates.

In compliance of SIFC directions a meeting with new entrants under Automotive Development Policy (ADP 2016-21) was held on November 13, 2023 wherein participants were apprised about directives of SIFC localization and export of auto sector.

Automakers in Pakistan announce temporary shutdowns as economic woes bite

During the meeting it was acknowledged that the protection provided in investment agreement to the new entrants and referred to in the High Court decision in the petition “KIA Lucky Motors vs FOP” which granted relief to the new entrants.

Following agenda items were discussed at length: (i) localization plan for import substitution; and (ii) export plan/the way forward.

The sources said, industry argued that localization must be considered seriously. However, automotive industry may be considered as an import substitution industry rather than export oriented industry, foreign exchange is saved and jobs are created in the local market due to import substitution.

The industry also pointed out impediments that are hurting localization such as: (i) low volumes; (ii) discontinuity of policies; (iii) ease of doing business; (iv) non-presence of authorized vendors of the OEMS in the local market; (v) unavailability of export incentives; (vi) tariff barriers in export markets due to absence of FTAs; (vii) non-tariff barriers (testing, quality, standardization); and (viii) presence of Principle OEMS in the export market.

The industry also requested that new entrants should be considered as infants in the market who are striving for their existence.

The new entrants will evolve with the passage of time and will be ready for localization and export at an appropriate stage. The industry requested the Government abide by the investment agreement signed with the new entrants and continue quota allocation beyond December 31, 2023 without interrupting the operations.

The sources said it was unanimously agreed by all the participants that due to lack of clarity, they are unable to plan their operations after December 31, 2023 as CKD ordering processes is on hold. EDB/MoI&P may grant a clear operating environment to the new entrants in the light of decision made by Sindh High Court.

After detailed discussion, the meeting took following decisions: (i) auto Industry, particularly KIA Lucky Motors, Sazgar Engineering Works and Master Motors will submit proposals for export and support needed from government of Pakistan; and (ii) a record note will be sent to MoI&P to seek advice with reference to revalidation of import quotas for new entrants till June30, 2023 in the light of decision taken by Honorable Sindh High Court with regards to applicability of export targets.

Copyright Business Recorder, 2023

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