April 13, 2006	Thursday	Rabi-ul-Awwal 14, 1427

KARACHI, April 12: Apparently unhappy over the government’s long term policy outlined by Jehangir Tareen, the federal industries minister, in a meeting on March 24, the four big foreign auto assemblers have demanded adequate protection against the import of re-conditioned cars and auto parts, manufactured locally. They have also demanded that the new investors in auto assembling should be asked to commence their business from the deletion stage where the existing assemblers have reached.

“The proposed policy will discourage new investment and create unemployment,” the four auto assemblers -–Pak Suzuki, Indus Motors, Honda Atlas and Dewan Farooque—warned in a joint petition to the minister, informing him of their future expansion and investment plans up to 2011-12 when they intend to produce 516,000 units, employment opportunities for 13,900 persons and Rs103 billion taxes to the government.

Pointing out that the proposed government policy has created “a lot of uncertainty”, the auto assemblers have sought clarifications so that their plans of future investment and expansion are not derailed.

They have drawn the federal minister’s attention towards the proposal given by them on tariff-based system (TBS) with a long term auto policy for inclusion in government package to be launched with the 06-07 budget. This proposal, they maintained, provides a transparent level-playing field to all—the new entrants as well as the existing ones. It is essence of the TRIMS as outlined in WTO rules.

But the proposed government policy outlined in the meeting on March 24, the assemblers contended, negates the basic premise of the TBS which is transparency and uniform application of rules.

In the absence of any reward for localisation, the new entrant will continue with a strategy of least localisation for three years and may subsequently phase out the model.

The government indicated to the auto assemblers about moving away from the penalty-driven localisation policy to a policy which is being termed as incentive-based that offers returns for local value addition and exports of auto parts and completely built units (CBUs) from Pakistan.

In the proposed new policy, any new entrant, who introduces new models, or if the original equipment manufacturers (OEM) bring new platform, they will have the relaxation on the localisation by way of import of 100 per cent CKD at the CKD duty rate as an incentive for three years after which TBS will apply.

The government also declared to gradually reduce over a period of three years the custom duty, as proposed by the auto industry of 50 per cent on A-max parts. The CKD duty will be reduced further after three years for all the OEMs.