Pakistan, the land of the pure, is not meant for the poor. Despite its large population living in poverty apart from the sharply vanishing middle class, it is a place where survival of the richest is ensured.
Cars are no exception in this country where skyrocketing inflation has been punishing its citizens to unprecedented degrees. In the absence of an effective and respectable mass transit system even in the major cities, cars are the only realistic option for families to move around. But, thanks to the Pakistan People’s Party (PPP) government for restricting that option too.
With the government’s recent decision to reduce the importable age of used cars from five to three years, the common man will be left with no choice but to pay more. How? Because three-year-old imported cars cost significantly more than the five-year-old ones. Alternative? New cars marketed by local assemblers at much higher prices.
The PPP-led government’s decision to limit the imports of used cars will bring dividends for local industrialists, while limiting people’s access to better-quality, cheaper cars.
Official sources told Pakistan Today that the Ministry of Industries, in connivance with local car assemblers, had made the decision to promote the interests of multi-billionaire industrialists at the expense of the common man’s hard-earned money.
On the other hand, used-car dealers complain that their businesses would suffer badly. “The reduction in the age limit of importable cars would badly influence the used cars’ business in Pakistan. In Japan, a three-year-old car is way more expensive than a five-year-old one. Our people cannot afford purchasing a three-year-old imported car,” said HM Shahzad, chairman of the All-Pakistan Motor Dealers Association.
Criticising the eventual monopoly of the three local car assemblers – the Indus (Toyota) Motor Company Limited, Pak-Suzuki Motor Company Limited, and the Honda Atlas Cars Limited – after the government’s decision, Shahzad said that it was sheer injustice with the people of the country as they were now forced to purchase only the locally assembled cars. “The government claims that the local industry is under threat from the imported cars business, but in fact during the last four years up to June 2012, the local assemblers have made large profits,” he said.
He said that after the government’s decision, people would be forced to purchase the poorly-manufactured 800CC Suzuki Mehran for Rs 650,000, and Suzuki Cultus for Rs 1 million. He said that both of these cars had become obsolete in Japan several years ago.
Giving details, Shahzad said that between June 2011 and June 2012, as many as 54,000 used cars had been imported and the government earned Rs 30 billion in customs duty. He said the government’s decision would not only deprive the middle class of affordable cars, but will also deprive the national exchequer of Rs 30 billion every year.
Hasan Danji, another used-cars’ dealer, said the powerful “Auto Mafia” would further increase the prices of cars after the government’s decision to reduce the age of importable cars. “The monopoly of local assemblers will be firmly established and we should now be ready for a new increase in car prices and black marketing,” he said.
Danji said the “Auto Mafia” was increasing car prices under the pretext of Rupee-Yen parity. “But in reality, they are purchasing parts from China, Thailand, Malaysia and Singapore, and not from Japan,” he said. “One auto part which is being sold in Japan for $10 is being purchased by our assemblers for $2 from China. So the prices of cars should be reduced, not increased,” he added.
He said that previously the Pakistani customers could choose between 18 available models of used imported cars of 650CC, but now they only could buy Suzuki Mehran in this price range. He said that while on one hand the government was complaining about the shortage of CNG, but on the other it had restricted the import of used cars with smaller and more efficient engines.
HITTING OVERSEAS PAKISTANIS:
A senior government official told Pakistan Today that the decision would cause instant loss to overseas Pakistanis engaged in exporting used cars to Pakistan, particularly those who had booked the consignments in advance. “The overseas Pakistanis, who have purchased cars worth millions of dollars for Pakistan and are holding them for shipment in Japan, will go bankrupt instantly. In addition, thousands of Pakistani families engaged in this business in Pakistan will lose their source of livelihood,” he said.
MONOPOLISED: The Competition Commission of Pakistan (CCP), a subsidiary of the Finance Ministry responsible for breaking the monopoly of business cartels in the country, also believes that there should be a five-year age limit for used cars instead of three years. “Our domestic car manufacturers are not exporting firms; they are just catering to the domestic market. Therefore this may result in a loss of consumer surplus, and producers would gain at the expense of consumers,” a CCP official said.
In addition, from the competition perspective, the policy goals of consumer protection, technology upgradation and a culture of innovation goals could perhaps be better achieved by allowing imports of five-year-old cars, he said. However, the commission is also of the view that any short-term measures in the form of Custom General Orders (CGOs) and the Statutory Regulatory Orders (SROs) need to be avoided and a long-term policy should be preferred for the benefit of car dealers and consumers.
COMMERCE MINISTRY: The Commerce Ministry, which is supposed to look after the affairs related to imports and exports, initially opposed the initiative taken by the Ministry of Industries to reduce the age limit of importable cars. However, at later stages, the ministry kept mum over the issue and did not opt to challenge the initiative.
When this scribe visited the Commerce Ministry to document its perspective on the issue, almost all officers contacted in this regard refused to talk. “A powerful minister, who on the behest of local assemblers can get a summary approved from the ECC in few days, can get me transferred if I share any information with you,” said one senior official of the ministry in response to a query. Similarly, the public relations officer (PRO) of the ministry also refused to speak on the issue.
MINISTRY OF INDUSTRIES: The Ministry of Industries, which comes under Deputy Prime Minister Chaudhry Pervaiz Elahi who also holds the portfolio of a senior minister, moved the summary of reducing the age limit of used cars, and got it approved from the ECC. The ministry has been claiming that it had acted decisively in greater national interest, and that it was necessary for the local industry’s survival.
LOCAL VS IMPORTED CARS: The claim that used imported cars are affecting the local car industry does not stand up to facts. Figures show that local assemblers have been doing good business over the last three years until June 2012. Only in the third quarter of 2012, the sales have dropped. According to the people involved in the business, the main reason for lower sales in the last quarter of the ongoing year is the ban on CNG equipment, prominently in Suzuki Mehran. Furthermore, the sales of Suzuki Alto and Daihatsu Cuore have gone down because no new models have been introduced. Analysts say these are the main factors for the decrease in sales during the last four months.
MOTOR DEALERS: Being a major stakeholder in car business, the All Pakistan Motor Dealers’ Association (APMDA) has written a letter to the prime minister, seeking his attention on the issue. “This decision is a stab to the Pakistani consumers as well as overseas Pakistanis who send billions of dollars to their motherland in remittance,” the letter said. The APMDA further said that the decision had been taken only to satisfy the strong lobby of local car assemblers without taking the concerns of the used car dealers into account. The association requested the PM to term the ECC’s decision “null and void”. After the introduction of the new policy, used-car dealers have requested the chief justice of Pakistan to take suo motu notice of the issue.
NA body orders ministry to stay notification until surveys complete
Sensing something fishy in the decision, the National Assembly’s Standing Committee on Finance, Revenue and Economic Affairs on Tuesday directed the Commerce Ministry to not issue any notification until surveys were completed by the Competition Commission of Pakistan (CCP) and the National Tariff Commission (NTC) of Pakistan. The committee held its meeting at the Parliament House with Khawaja Sohail Mansoor in the chair. The committee members were of the view that some ambiguities had been found in the matter of imports of three-year-old cars in the country. Additional Commerce Secretary Fazal Abbas told the committee that the Ministry of Industries had contacted the Ministry of Commerce, showing its interest in reducing the age limit of used importable cars. However, Abbas added that after being contacted by the Ministry of Industries, the Commerce Ministry directed the CCP and the NTC to conduct studies to check the outcome of this proposal. “Surprisingly, the Ministry of Industries got the proposal approved from the ECC without waiting for the results of the studies being carried out by the CCP and NTC,” Abbas said. He added that the CCP and NTC were still working on the reports and their findings would be revealed soon. Upon this, committee member Abdul Rashid Gondal said the committee had observed something wrong in the policy passed by the ECC. After showing its serious reservations about the policy approved by the ECC, the committee directed the Ministry of Commerce not to issue the Statutory Regulatory Order (SRO) in this regard before the reports of the CCP and the NTC.