The automobile sector needs a shot in the arm to jack up cars to population ratio, which is incredibly low--12 cars per 1000 persons. The same stands at 200 cars per 1000 persons in Malaysia and 120 cars per 1000 persons in the whole world, according to official figures available here on Saturday.
The Engineering Development Board (EDB) believes that Pakistan can exploit the latent potential in this sector and generate huge employment's for the burgeoning youth of the country, on the one hand, and expanding the industrial base, on the other, by shifting to engineering products which is the panacea to the problems which Pakistan's industrial sector is currently confronted with.
Needless to mention, the policies and the positive interventions of the Ministry of Industries in the market are to support industry to harness new investments, employment opportunities and technology transfer to Pakistani manufacturers. The way out was discussed during separate meetings held recently with the representatives of Pakistan Automotive Manufacturers Association (PAMA) and Pakistan Auto Parts Manufacturing Association (PAPMA) on the issues of new entrant policy and tariff rationalisation. The participants were assured that the government would take all stakeholders on board before the issuance of any policy, and would not take any step at the cost of industry itself. It was acknowledged that the automobile industry has shown remarkable growth over the past few years and there is still huge potential in this industry.
Representatives of PAMA and PAPMA supported government's decision to bring new foreign investors into the market but, at the same time, asked the government to take care of the genuine demands of the auto industry. They were of the view that Pakistan should follow the example of other countries in the region which, despite being in the World Trade Organisation (WTO) regime, have imposed huge duties on the imports of automobiles to safeguard the interests of their industry. New investors would rush to Pakistan when the local market starts showing signs of resurgence, they believe.
In another meeting with the stakeholders held in Karachi recently, the EBD underlined the need for achieving localisation targets, as stipulated in the Auto Sector Development Plan (AIDP). Issues relating to ECC observations and various summaries moved by the ministries of Industries and Commerce on price reduction and Planning Commission's recommendations on tariff rationalisation were also discussed.
Following proposals were presented by the EDB at the meeting, which was called on the directive of the ECC to evaluate the auto sector's future and current regime:
----- Low affordable price of Pakistani cars.
----- Revised new entrant policy to contain tariff rates for CKD, first year 5 percent, second year 10 percent, and third year 20 percent, with incentives based on Special Economic Zone (SEZ) industries.
----- Testing and RD facilities to be upgraded.
----- Re-visit agreements of OEMs to CBU and components to world-wide markets.
----- Downward revision of the import tariffs.
----- Existing level of protection increase due to yen-dollar parity, and
----- Minimum level of standards by PSQCA with consultation of stakeholders.
The ECC had earlier changed the new entrant policy in AIDP from production of 500,000 units to 100,000 units outside Pakistan, which meant that in case of local manufacturers/joint ventures the target of 100,000 units should be achieved in three years from the date of operation subject to prescribed international standards. Moreover. there would be no restrictions in setting up of new automobile units in Pakistan.
The ECC had observed that there should not be any restriction in setting up of new car manufacturing units in Pakistan. Following details were sought by ECC:
----- Profit/loss of the OEMs to set a benchmark.
----- It is preferable to formulate a good transport policy to support the transport system in Pakistan, and
----- Allowance of used cars to compel auto manufacturers to reduce prices by using full capacity to reduce the production cost.