The Auto Industry Policy (AIP) waiting ECC approval will be a huge scandal in making for the present government which is already under fire for many of its projects and policies being played in the hands of vested interests to further deteriorate the situation, according to industry sources here. The AIP 2, which should have been a hotly debated public issue, has been securely locked behind closed doors with access allowed only to special interest groups. This is the result drawn from a few documents available to Business Recorder.
The policy document is geared more towards allowing a free import for everyone and it is obvious that trade lobbies have had their say in formulation of this policy whereas the manufacturing sector has been left out in the cold. "This is more of a trade policy document that will ease import of autos and auto related products rather than a policy to promote local production of the same. It will be a recipe of disaster for the auto sector and the final casualty will be the Pakistani consumers who will be ultimately deprived of the local cars that are made keeping in mind the climatic and road conditions of the country and they will have to rely on the importers for even spare parts while trained mechanics for the imported cars are also a scarce resource," claimed a source belonging to the auto sector.
While the topics covered by this policy such as tariff structure, supporting R&D, design and testing infrastructure, developing human resource and training infrastructure, introduce technology acquisition support scheme for auto-parts manufacturers, and formation and constitution of AIDC etc, are the same as the AIDP of 2006, the content and drift is totally different.
Objectives are identified as: i) Facilitating horizontal and vertical growth of both automobiles and auto-parts manufacturing industry to attain higher volumes, more investment, better quality and latest technology, ii) Creating a balance between open trade and industrial growth with minimal risk to local industry and Pakistan's economy, iii) Enhancing government revenues both through stimulating growth in the auto sector and streamlining trading activities, iv) Ensuring consumer welfare through provision of quality, safety, choice and value for money, v) Providing policy consistency and predictability for investors as well as mid-term policy review mechanism to cater for emerging developments in the automotive sector.
"These objectives do look rosy but how these will be achieved is a whole different story as we all know what happened to the previous auto policy with similar objectives," the source added. "The only paper the policy-makers are likely to read as the policy document in ECC briefing will be introduced at the last moment in the agenda of the committee denying any chance of a deliberation or debate by the members of ECC," he added.
The major cornerstones of the proposed new Auto Policy are the new entrant policy and allowing commercial import of vehicles. Many strong lobbies are behind these initiatives. One of them is a well known Senator, chairman of the first company to get the benefit of this policy Al Haj FAW Motors (Pvt) Ltd. He is also known to be the force behind release of SRO 1098(I)/2011, the SRO that oversees the new entrant policy in auto sector.
However, according to the minutes of the 16th to 20th AIDC meetings, his company has failed to meet any of the milestones to justify the billions of rupees in remissions of the taxpayers' money. In review of the progress made by this company by AIDC as recorded in minutes of various meetings it has been recorded that even after the passage of almost four years of the working of the project not even first year of localisation targets have been achieved. The company continues to import parts at reduced rates of duty that it was required to produce locally to promote investment, technology transfer and most essentially job creation.
Forced by the policy presently in place, the AIDC had recommended a review by the FBR and levy of additional duty. Reportedly, the senator was not happy with that aspect of the policy and now the new proposed policy is to address this enforcement clause by allowing increasing the period for which the remission of duties and taxes is allowed. Also the requirement of yearly review of localisation by the new entrant has been done away with which will now be done after the five year period.
"Matter of concern for the policy-makers should be that with nothing or very little at stake for the so called new entrants, what assets will be there of those taking such huge benefits to force recovery of government dues?" the source questioned. While a country like Bangladesh is now introducing a localisation policy and our next door neighbour is graduating from "Made in India" to "Make in India", Pakistan's policy is moving towards "Import from Everywhere - Everything".
A country with a population of over 180 million people cannot import all its needs. There is a limit of how many persons we can send abroad to remit back home the foreign exchange needed to purchase all the stuff we are planning to import. "It is ridiculous that by lowering custom duties on luxury vehicles thus promoting larger imports, policy proposes to increase government revenues. So what happened to the poor consumers' interest now? From where will the jobs and the purchasing power come? What will happen to sales tax and income tax streams from the manufacturing sector? What will happen to high end and technical jobs within the country?" the source added. "Ultimately our educated youth, the engineers the technically qualified labour force will all have to go out of the country to get employment and send the foreign exchange to purchase limos for our ruling elite," he concluded.
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