As Pakistan prepares to unveil its new auto policy, a flurry of diplomatic activity is being witnessed with European and Japanese diplomats visiting various ministries lobbying to get incentives for their auto giants planning to invest in the country.
According to official sources the Japanese Vice-Minister for Economy, Trade and Industry Tuneo Kitamura, Belarus Minister for Industries Vitaly Vovk, and newly appointed French and German envoys met with various ministers including the finance minister, commerce minister and the minister for industries during the last week. They all discussed issues relating to the auto policy.
The Europeans want incentives for their companies to venture forth in Pakistan while the Japanese opposed lucrative new incentives to European giants. They have stressed for providing the same level of incentives to the Japanese manufacturers. Pakistan’s auto market is totally controlled by the three Japanese auto manufacturers, Toyota, Honda and Suzuki. Hyundai Korea and Fiat Italy tried to enter the market but failed.
The ruling PML-N government formed a ministerial committee to draft a new auto policy after coming to power two and half years ago. Auto manufacturing in Pakistan remains in infancy stage. The country produces less than 200,000 cars per annum. The number of buses and trucks remains abysmally low at 5,000 units per annum.
The domestic auto manufacturing peaked in General Musharraf’s era and after that, it declined sharply. Pakistan’s car and light commercial vehicles production peaked in fiscal year 2007 (FY07) to 195,688 units and after many years of decline it bounced back to 180,713 units in FY15. The trucks and buses assembly declined from 4,993 units and 1,146 units respectively in FY08 to 4,039 trucks and 575 buses in FY15. The production of tractors peaked to 71,607 units in FY10 and has declined to 48,883 units in FY15.
The reason for low indigenous production is cited to be the poor quality of locally assembled cars which are highly priced due to heavy taxation. As their quality is far inferior to the same brand of cars produced in other countries they cannot be exported in the region.
With the new auto policy, the government wants to introduce competition in the sector to bring the abnormally high prices to reasonable limit and improve their quality. The government is considering giving tax incentives to manufacturers as with the implementation of the China Pakistan Economic Corridor (CPEC), the country requires new trucks and buses to improve connectivity. All the leading manufacturers are European.
Japanese are lobbying hard for getting incentive for their already operating companies. However, Pakistani market not only requires cars but also tractors, trucks, buses, and dumpers, the incentives are focused on manufacturers of these vehicles, the source said.
French envoy Martine Dorance talking with the Minister for Industries and Production Ghulam Murtaza Khan Jatoi said that many French companies were interested in investing and setting up assembly plants in Pakistan. She revealed that major interest was shown by Renault–Nissan Alliance and suggested that concessions be given at the start to new French entrants.
The Belarusian minister informed Jatoi that investors from his country wanted to set up assembly plants for various products such as tractors, trucks, dumpers, complete range of agricultural technology and machinery and several types of engines. He said that several parties were interested in provision of these products and could also provide the complete range of Euro II, III and IV compliant engines.
Japanese vice-minister for economy hoped that the government would provide incentives under the new auto policy to existing investors as well. Jatoi assured that the government would try to extend as much support as it could for new and existing stakeholders in the automobile industry. Jatoi maintained that pioneering manufacturers would get concessions from the government.
