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Friday March 29, 2024

Without regulatory road map, auto sector may again hit a growth gridlock

By Mansoor Ahmad
May 06, 2018

LAHORE: The auto sector is in disarray after the closure of its regulator, the Engineering Development Board (EDB), which, after a long period of underperformance, had significantly contributed towards capacity-development, helping the industry to reach new heights of performance in the last five years.

The sector players are worried because the guardian of the five-year auto industry development program (AIDP) is gone leaving stakeholders without a clue as to whose door to knock on in case of violation of this policy.

Some may say the commerce ministry, the parent department of EDB, should be approached; however, they ignore the fact the ministry has abdicated its responsibilities as far as import duties are concerned. Now Federal Board of Revenue (FBR) fixes these duties to increase revenue generation instead of facilitating the industry.

The planners also turn a blind eye to the fact that the EDB was one sane voice in the ministry of commerce that opposed policies that hurt the local industry.

It, for instance, opposed the import of used cars as the rules of import were in sharp contrast with the rules applied on import of used vehicles in countries like India and Thailand.

With that same voice gone, the auto industry fears more concessions are in the offing for used cars. These favours deny level-playing field to the domestic industry.

Already the ministry of finance has played a masterstroke by banning non-filers from booking new locally produced cars or importing new cars.

This means that the non-filers would now be able to buy used cars only. This would be a boon for used car importers and a bane for the domestic industry.

The government has not explained the reason for disbanding the EDB. Under its regulatory eye all the segments of auto industry posted robust growth for five straight years, which is unprecedented in Pakistan’s auto industry history. There was double digit growth in manufacturing of cars, motorcycles, three-wheeler and tractors.

The bus and truck industry that was dormant for over a decade was on the move. And for the first time in two decades new entrants from all around showed real interest in Pakistan’s market.

Plants from European, Korean, Japanese, and Chinese carmakers are in different stages of completion in the country.

The consumers are going to benefit from real competition for the first time. The monopoly of three Japanese brands was about to be challenged. Even these plants were upgrading technology to face the new competition from upgraded technology.

The newcomers, the vendors and the existing players badly need an experienced regulator to file their grievances and suggestions.

The industry wants no changes in AIDP. Some subtle changes have already been made by restricting the car market for new cars only to filers while giving freehand to non-filers to enjoy the used car market.

Another change that EDB would have resisted was to allow used jeeps of all brands at a uniform duty of $5000.

The AIDP was further tempered when the duty on import of electric cars (used or new) was reduced by fifty percent. This will discourage plans of making electric cars in Pakistan because the duty of CKD of these cars is the same as that on imported cars.

The stakeholders are shocked by these violations of AIDP that was announced very late after three years of deliberations.

The EDB was in fact the forum that all stakeholders used to go to in case an agreement was breached. Now they are airing their complaints at every government forum without knowing whether it is the right one or not.

It is a pity that we build institution after years of experimentation, bear their teething problems, waste lot of public money on them and then disband them when they start delivering.

The EDB was not an ideal regulator but it was in the process of becoming one as its capacity was regularly increasing.