The study called by National Tariff Commission on Motorcycle industry is being seen as another attempt to provide duty free entry to just one bike maker from Japan. According to the industry sources the NTC has for the first time decided to reverse its role and use the authority given to it by the government to protect the local industry to conduct an investigation on the proposal by an importer (in this case Yamaha) to evaluate local tariffs with a view to facilitate imports.
The present NTC investigation is based on the premise that the local industry is overprotected and importers need some unprecedented relaxation to be competitive against a vibrant and growing industry. This will be a unique case in the history of tariff protection not only in Pakistan but probably in the world at large where an importer’s comments are used against the national industry in the way. As per sources a proposal by Board of Investment (BoI) failed to find any favours at any ministry except BoI itself, this is a desperate attempt to get the proposal through NTC. In case the BoI gets its way at NTC, it may prove to be a unique case of its nature as in face of opposition from all major ministries and departments like the Ministry of Industries, Ministry of Commerce, the FBR and the EDB, a proposal for providing tariff relaxation to an entity is managed. The industry and the ministries are of the view that such relaxation to the new entrants in a growing and expanding industry will create distortions and will encourage brief case assemblers to miss use any relaxation by changing their name and getting themselves declared as new entrants. Already several brief case assemblers have cases opened against them. As reported the NTC has called a meeting of manufacturers, vendors and importers of motorcycles and spare parts in Islamabad on February 1st, after which a decision is likely that will allow new investment in the domain of two wheeler industry by putting at risk the investment that is already there in far greater size. The local motorcycle assemblers and vendors expressed their concern over this study by NTC as this simply appears as a facilitation exercise for a blue eyed entrant, through heavy concessions in duties and taxes. The amount of concessions being demanded and made possible through this exercise will translate into financing the purported investment capital free. The amount of concessions over a five year period may well be more than the promised foreign investment coming in. In addition, according to the Pakistan Automotive Manufacturers Association (PAMA) data the two wheeler industry has shown recovery with a 13 per cent increase in production during the last fiscal year. The present tariff structure allows import of CKD at 15 per cent duty, and an approved assembler wanting to import certain localized parts is allowed to do so at a duty rate of 47.5 per cent. Under AIDP, the current CKD was supposed to be further reduced to 10 per cent in the current fiscal year. This tariff structure has worked well for the industry and at present more than 70 motorcycle assemblers and another around 20 manufacturers of three wheelers are now part of this vibrant and growing industry. It is to be noted that new entrant policy kept the two-three wheeler sector out of its ambit in view of the peculiar stage of the industry. The industry needs stability and not adventurism.
