KARACHI: Following government’s Jan 15 decision to mandate payment of duties and taxes on imports of used cars in foreign exchange to be arranged by Pakistani nationals themselves or local recipients supported by bank encashment, imports of used cars plummeted by 74 per cent in February — lowest in the last five years.
The data released by the Pakistan Bureau of Statistics (PBS) for the month of February reveals that import bill for completely built-up units (CBU) — comprising over 90 per cent of used car — fell by 74per cent to $9.5 million against $37m in January.
Year-on-year, CBU vehicle imports during February plunged 64pc compared to same month last year. As a result, total car imports during the eight months of current fiscal year fell by 38pc to $203m.
Pakistan’s monthly used car imports averaged between $25-$50m even during strict restrictions imposed by the previous governments.
Following Ministry of Commerce’s order on Jan 15, duty and taxes on all imported vehicles, in new and used condition, under personal baggage or gift scheme have to paid out of foreign exchange arranged by Pakistani nationals themselves or local recipients supported by bank encashment certificate showing conversion of foreign remittance to local currency.
The ministry in January revived the condition for used car imports which was imposed in November 2017 but was later abandoned in February 2018.
As per the ministry’s order, remittance for payment of duties and taxes must now originate from the account of the Pakistani national sending the vehicle from abroad. The remittance shall either be received in the account of Pakistani national sending the vehicle from abroad or, in case his account is non-existent or in-operative, from the account of a family member.
The government had taken the decision to restrict misuse of this facility by traders, since the practice created a drain on foreign exchange reserves by sending the cost of vehicles from Pakistan in foreign exchange through hundi and hawala channels.
All Pakistan Motor Dealers Association Chairman H. M. Shahzad said that only those vehicles were cleared under old procedures which had landed at the port prior to Jan 15.
He said after the January decision, our suppliers from Japan suspended their shipments to Pakistan. “Under the current rules, import of used cars is not feasible. The government will lose handsome revenue in terms of customs duty” he added.
He claimed that number of vehicles cleared in February from the port was very negligible as compared to monthly clearance of 4,000-5,000 used vehicles.
Shahzad informed Prime Minister Imran Khan that the local auto industry comprises of money-minting cartels based on assembly operations without any manufacturing -- converting raw materials into usable products.
In absence of any cogent indigenisation, these assemblers have been making hefty profits for decades, most of which is sent back to Japan owing to foreign companies’ majority shares in their local partners.
Assemblers are flourishing on customers’ advance bookings and rampant black marketing. The market also lacks any competition as one assembler has been rolling out 800-1000cc vehicles for decades, while others have divided the larger segment of 1300cc to 1800cc models.
Due to low localisation, these assemblers send much needed foreign exchange abroad for the import of completely-knocked-down and semi-knocked-down kits. Furthermore, huge amounts in foreign exchange are remitted back to Japan as profits, he claimed.
Published in Dawn, March 17th, 2019