KARACHI: Three vehicle assemblers will present their investment plans and projected multiplier impact on the economy in a meeting, which will be chaired by Federal Minister for Water and Power Khawaja Asif, on March 1.

Pak Suzuki Motor Company Limited (PSMCL) had sent an investment plan of $660 million to the government, requesting same benefits/incentives for two years from the start of mass production of new models instead of five years granted to new entrants in the Auto Policy 2016-21.

Al-Haj Faw Motors Private Limited and Daehan Dewan Motor Company Limited would also highlight their investment plans in the meeting.

According to Prime Minister’s Office Al-Haj Faw obtained new entrant status in 2012 for assembly of heavy vehicle trucks and light commercial vehicles under Automotive Industrial Development Plan (AIDP) 2007-2012.

It was the only company that obtained Greenfield status in the last AIDP under a technical licence agreement with China’s Faw Motors.

The assembly plant had been constructed in Karachi with 100 per cent equity. The company, as a new entrant, was allowed three years for localisation of mandatory parts as per SRO 693. During this period, the company was allowed to import 100pc completely knocked down (CKD) kits at the prevalent rate of duty.

However, Al-Haj could not achieve the desired localisation level in the given time frame due to low market demand and consequent drop in sales. The company had been paying additional duties for CKD consignments on parts not localised.

The Chinese maker is now in the second phase of its plant modernisation. The main projects completed or in progress include acquisition of additional land (which is now approximately 25 acres), progressive manufacturing of V2 passenger car, completion of electro deposition painting facility, CKD assembly for heavy duty trucks, truck chassis assembly line and new level down welding activities for minivan and mini pick up models.

The investment on these projects is Rs3.5 billion. To acquire these initiatives, Al Haj had signed an MoU for joint venture with Faw Motors China. The Chinese company had requested for new entrant status under the new ADP 2016-2021 as Greenfield. The company opined that the new policy deprives companies of any benefits and as such it would not be able to compete with new entrants.

Daehan Dewan has requested the government for granting Brownfield status to their unit under new ADP 2016-2021 for production of Daehan, Ssangyong and KIA range vehicles.

According to Board of Investment (BoI), the applicant company closed its operation in Oct 2010 owing to problems and requested the Auto Industrial Development Committee (AIDC) in 2013 to renew its manufacturing licence so as to consume the leftover inventory/CKD units. The AIDC accepted the request and the company was allowed to consume leftover inventory/CKD kits from Sept 2013 to Feb 2014 which were imported in Aug 2010.

The request of Daehan Dewan along with its business plan was earlier referred to EDB for determining its eligibility. The EDB technical team visited the manufacturing facility on Nov 10, 2016 and recommended the company be permitted to avail the facilities of SRO 656 for making of LCVs and SUVs.

The cases of Al-Haj and Daehan Dewan were referred to Ministry of Industries highlighting the facts that though these are not exactly within the strict parameters of ADP 2016-21, both matters present opportunities for investment, competition in the market and thus might justify special treatment.

However, the ministry felt the treatment can trigger similar requests from others and company specific modifications in the ADP 2016-21 at this stage as it would counterproductive.

Published in Dawn, February 26th, 2017