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Customer comes first

November 18, 2012

THE automobile industry in Pakistan is correct in registering its protest against the flood of used cars that have been entering the country for the last year and a half. It takes courage and tenacity in business affairs here to lay down large stakes in the economy, and substantial fixed investments require a stable policy environment in order to be viable. It’s true that in the past, demands for policy stability have been used to cover up rent-seeking opportunities. But this isn’t always the case, and the present situation with the automobile companies protesting against the tsunami of used car imports should not be seen as a demand for rentier protections. It’s a fair and reasonable demand for policy stability and the government needs to treat it accordingly.

But on the flip side, the government also has a point in underlining the rising costs of local cars, and the degradation of quality. The auto companies are reminding us all of the jobs that they create, and the foreign exchange that is saved through local assembly. But they should also recall that the main purpose of any business is to make money thro-ugh satisfying consumer demand. There are legitimate complaints of constantly rising prices of local cars and constantly falling standards of quality. The automobile companies need to understand that there are grounds for the suspicion that they are using the protections afforded to them as opportunities for making rentier profits. Of course some of the complaints are very challenging to address, such as artificial shortages created by speculators who buy up large quantities of new cars and then sell them on with ‘own money’ charges. But addressing these complaints must remain a priority, and the companies are welcome to publicly ask for the government’s assistance where it can help, such as in tracing speculative buyers.

So where does one take things when both parties have a valid point? In this case, the automobile industry and the government should sit down together to devise a long-term policy for the sector. The mixed experience of previous strategies should be allowed to become a source of discouragement. The last long-term strategy was the so-called deletion programme which sought to use the sector as a job-creating motor by emphasising the growth of indigenisation and local manufacture. Those are worthy goals, but in today’s world, where further liberalisation of trade is a certainty, the emphasis needs to be on competitiveness. And our auto sector can only hope to become truly competitive when it is more sensitive to the needs of its customers.