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New entrant policy shocks automakers - Lahore_Real_Estate - 05-23-2011 11:01 AM
Policy favours foreign OEMs, risks crowding out existing players Newcomers allowed 100pc CKD import at 32.5pc ‘concessionary’ rate Customs duty at CKD imports relaxed
LAHORE - Automobile companies have voiced concern over the government’s decision to invite foreign Original Equipment Manufacturers (OEMs), offering preferential treatment against existing players in the Pakistani market, and expressed fears it will impact investment in an established industry.
Sources in the automobile industry stress that manufacturers have demanded a level playing field for existing players as well as new entrants without disrupting industry dynamics. Such moves create unnecessary imbalances in government policy.
They added that automakers welcomed new OEMs in the Pakistan’s market as it would strengthen the industry overall through the attraction of badly sought investment and healthy competition, but were unhappy with the government’s expected policy to give a perceived unfair advantage to the new entrants at the expense of revenue generating local players.
It is indicated the Auto Industry Development Policy (AIDP) allows new entrants 100 percent Complete Knock Down (CKD) import at a concessionary rate of 32.5 percent without using local components for a three-year period. The policy also relaxed the customs duty at CKD imports to be levied at 5, 10 and 20 percent in the first, second and third year.
There was no such duty concession extended to current auto industry players when they commenced operations in the country, sources stated. In marked contrast, operational OEMs faced a Product Specific Deletion Program which involved initial localisation of component fabrication. Later, the system was replaced with Industry Specific Deletion Program (ISDP) which was followed before the current Tariff Based System (TBS).
It was also noted that industry officials said that the new entrants should be asked to follow deletion program along the lines of the ISDP which local OEMs are following. They went on to say that industry players resent the government’s discriminatory attitude with the existing OEMs and urged that it should alter the policy, which was also applied to existing OEMs.
The government should facilitate new entrants with soft loans, land provision and infrastructure development in order to develop the local auto sector in the country, sources quoted automaker officials.