IF one wants a better idea of the kinds of distortions that a heavily protected auto sector can create in a country like Pakistan, with porous borders and a massive informal economy, just take a look at the thriving trade in ‘Kabuli vehicles’ across Balochistan. Informal estimates given by dealers suggest there could be as many as 50,000 smuggled vehicles being driven in Quetta alone. In part, this racket is the product of porous borders and lax law enforcement. But in equal measure, it is also the product of an auto sector that is famously unresponsive to the needs of the lower segments of the market, those looking for a car below the Rs1 million price point. The racket thrives mainly because this vast segment of the market is not served well in Pakistan, while close by are the Gulf countries that offer a rich supply of lightly used cars that any enterprising smuggler can pick up and arrange to have driven over here.

Not only does the racket deprive the state of its share of revenue in the form of customs duties and excise taxes, the vehicles it traffics in are also commonly used by criminals and terrorists. This is why it needs to be reined in, but since it has deep economic roots, the response will need to be more carefully designed than a simple, heavy-handed law enforcement drive. Maybe it is time to consider opening an overland avenue for used cars to be imported into the country, with different duty rates applicable to them, and perhaps restrictions on where these cars can be driven, a scheme similar to the NCP vehicles of the Northern Areas. Ultimately though, the biggest priority here is to find a way to urge the auto assemblers to move beyond serving only elite needs, and also search for profits towards the lower and more populous segments of their consumer market. Clearly, there is a vacuum there which needs to be filled.

Published in Dawn, March 28th, 2017