The federal government has decided to open motorcycle manufacturing after a long protection of four decades as the Cabinet Committee on Investment (CCOI) has directed the Ministry of Commerce (MoC) to slash tariff for new entrants and Completely Built Unit (CBU).
Official documents made available to Pakistan Today show that the tariff reduction decision was made in the recent CCOI meeting that instructed the MOC to cut tariff for new entrant and CBU. “The CCOI unanimously recommended tariff reduction for new entrants from 15 per cent to five per cent for five years duration and CBU from 65 per cent to 35 per cent”, and directed the MoC to move a summary to the CCOI accordingly. The MoC has prepared that summary as per direction, which would be submitted in the forthcoming CCOI meeting. Documents further indicate that a follow-up meeting of tariff rationalisation case of Motorcycle Project in Pakistan was held on 5th April 2012 in which representatives of motorcycle industry and committee members under the Chairmanship of Planning Commission Deputy Chairman participated. The chair inquired about the issues in the tariff rationalisation of motorcycle industry of Pakistan. The Chairman / Minister of State of Board of Investment (BOI) Saleem H Mandiwala pointed out that the high tariff rates were the main hurdle in attracting investment in the motorcycle industry in country. He suggested that there was need to rationalise these rates for new entrants. Similarly, the Deputy Chairman Planning Commission, Dr Nadeem-ul-Haq observed that artificial barriers needed to be removed and no protection to local industry after long period of 40 years of its running “Holistic approach pertaining to duty is required rather than imposition/reduction of duty on Components and Subcomponents”, he asserted. The National Tariff Commission Chairman in its presentation highlighted the background of the case and stated that earlier a meeting of the tariff rationalisation committee was held on January 18th, 2012, wherein it was decided that NTC in consultation with Engineering Development Board (EDB) would conduct a study and put-forth the recommendations pertaining to rationalisation of duty on Completely Knocked Down (CKD) and CBU within a month’s time. NTC after doing all the necessary procedures considered the following issues in consultation with major stakeholders:
“Whether the domestic industry is adequately protected or the protection offered an industry is or the higher side; and “Whether the incentive in the existing scheme for new entrants are adequate or not? He further added that in-depth analysis of the issues revealed the following with regard to motor cycle industry in Pakistan: “The industry survived behind high tariff walls. However, due to lack of competition the industry could not be developed as an efficient industry and remained as a ‘negative value added industry’. This conclusion is true for both motorcycle industry and the vendor industry”. “Due to infinite protection, which at present is prohibitive for imports of parts as well as CBU motor cycles, manufacturers heavily depended on easy resulted into lack of research an, development and innovation”. “The Industry is as old as 40 years and no more a ‘nascent industry’. Therefore argument of nascent industry could not apply to the existing industry. It also cannot be argued that the industry could not achieve volume of production necessary or achieving the economies of scale”. “The protection of the vendor industry increased over time in-spite of trade liberalisation in other sectors, after the end of ‘Deletion Policy’ in 2005. There is a lack of policy for new entrants in motorcycle industry and they are heavily depended up on clones of ‘Honda 70’ and Chinese parts only. The existing vendor base of the parts manufacturers helped the mushroom growth of copying assemblers but discouraged the research and development. It seems essential that existing manufacturer as well as new entrants be encouraged to carry out research and development and innovations”, document stated. In the light of the in-depth analysis’, the NTC has recommended to maintain zero and 5 per cent tariff for raw material and sub-component while tariff reduction to 5 per cent from 20 per cent for component and sub-assemblers.
On yer bike, mate!
