In the last 10-15 years, Pakistan’s small and medium sized industries have developed with their own efforts. They are involved in assembling of bikes in collaboration of Chinese assemblers. These small units are facing huge problems and struggling to survive due to multiple issues with the federal government departments and provincial departments of Punjab.
The Federal Board of Revenue (FBR), whose active and pro-industry chairman is performing his duty, but the valuation issue of motorcycle parts on which rulings are being issued every year since 2006 on higher side and nobody is serious in rectifying the issue.
Chairman Association of Pakistan Motorcycle Assemblers (APMA) Mohammad Sabir Shaikh while talking to MOBILE WORLD said that if government resolves the issue of valuation ruling on genuine prices the menace of smuggling of bike parts can be curbed immediately.
Effort is being made to address conflicting interest of stakeholders. The local industry wants high tariff walls and correct valuation of used cars while local auto part makers seek high tariff walls, correct valuation of imported parts and no import as scrap. Parts importers are looking for low CKD tariff and continuation of parts import by weight while vehicle importers seek reduction in CBU rates and allowing of commercial import of vehicles.
Sabir said in the valuation system of FBR there is no one fair including assemblers, vendors, importers and the staff of FBR. Everybody is looking for their own interest instead of talking about country’s benefit. New investors are demanding low CKD tariff, CBU tariff rationalisation, special incentives and policy consistency while consumers’ interest revolve around quality, price, choice and financing.
At present, localised auto components are a part of SRO 693 and they attract higher duty vis-a-vis non-localised parts. Sabir said industry is misusing the SROs especially SRO 655. Under SRO 655 importers declare sub components, sub assemblies and raw materials but in reality they are importing full assemblies. He said the mix system of importing CKDs at various duty rates are becoming reason for the promotion of smuggling and corruption.
SRO-693 is a parallel system to customs general order (CGO) which contains a list of all locally manufactured engineering goods, other than auto. This system has created unnecessary duality and problems in implementation.
The ADP proposes gradual reduction of import duty of 50pc on localised parts from first year to 45pc, 40pc and to reach 35pc in the third year and become uniform for all categories of automotive.
As 35pc is also the duty rate of commercial import of auto parts, all parts that would stand localised at the end of 2016 would become part of the CGO and attract the same duty of 35pc.
Sabir said the government should introduce only two types of duty systems – one is for commercial parts, CKDs, assemblies, sub assemblies, components, sub components and secondly the CBU rate of duty on cars, bikes and commercial vehicles. For assemblers who are importing 100 percent CKDs, the government should give 10-20 percent discount for assembly of vehicles.
He alleged that Pakistan Standards and Quality Control Authority (PSQCA) does not have any permanent director general on its top post due to which low grade directors especially director standards development centre takes bribe for clearing CM licenses of small assemblers. In case an assembler does not grease the palm of director SDC the file of the assembler remains unmoved.
Sabir Shaikh urged that prime minister should immediately appoint a permanent director general of PSQCA for resolving the issues of small industries.
Similarly, Engineering Development Board (EDB) has been running its affairs for the last two years without permanent CEO of the board. As a result, all stakeholders are not invited by the board in the meetings about policy matters.
Auto industry is being run on the EDB’s auto industry development plan of 2006 and all the committees are also part of the 2006 development plan. Almost a decade is gone, the auto industry is in hot waters especially small and medium sized bike assemblers. Sabir said either the EDB policy staff is deliberately avoiding small assemblers’ issues or they are taking some dictation from a leading bike assembler.
He said Prime Minister should interfere in this matter and every stakeholder must be invited in the meetings being held to decide future policy for the auto sector. Due to pending issues of the industry, sales of bikes during the current financial year have been slow despite sharp price cut in petrol from September 2014 onward.
Since last four financial years, sales of bike remained pegged at 1.6 million units per year. Due to slowdown in sales of new bikes, the second hand market has improved a bit after five years. Customers prefer using used bikes due to curtailing buying power and incidents of bike snatching which has spread all over the country.
A strange phenomenon has arrived in the market in the last two years in which buyers were seen shifting towards 100-150cc bikes from 70cc bikes. He said people are fed up using low power engine bike as only 70cc bikes have been ruling the roads since late 1970s. Even today no serious efforts have been made to replace the 70cc whereas the production of this kind of two wheelers had been closed down all over the world especially in India
He said the 70cc model is highly unfit keeping in view the body structure of a human being. This bike is mainly meant for the youngsters and young girls but in Pakistan girls do not ride the bikes.
People who use bike in Pakistan are over 80 kg for them the 70cc bike is not fit as long ride causes pain in back and shoulders. “I am sure that people have realized this issue and that is why they are shifting towards 125-150cc bikes despite their high prices,” Sabir added.
He said unfortunately Pakistan does not have any variety of 125-150cc models as compared to India and China. People are literally waiting for new model of Yamaha 125 and 150cc besides also looking forward for a new auto policy which may encourage assemblers to roll out new higher engine power bikes.
The federal government, car and bike assemblers are reportedly miles away from reaching an agreement on the much-awaited five-year Automotive Development Policy (ADP 2014-2019) tailored by the Engineering Development Board (EDB) in isolation.
Chairman Privatisation Commission Muhammad Zubair is now dealing with the auto sector because Minister for Water and Power, Khawaja Asif, convener of the committee, is unavailable for such meetings due to other official engagements. Sources said EDB, which is the architect of the policy, finally shared the new draft with the industry after which a couple of meetings were convened to discuss the draft with the industry.
Chairman Association of Pakistan Motorcycle Assemblers Mohammad Sabir Shaikh said that no one invited us in the previous and January 7, 2015 meetings. “We are more than 100 members of bike assemblers but the people who attended the meetings belonged to only four assemblers – three car and one bike assembler,’ he said adding that these companies have a lot of influence in policy making for the last 25 years. Hardly any successive governments had tried to understand this kind of one sided practice of ignoring the majority of bike makers’ representatives.
He was very much hopeful from the current government for being heard their grievances and suggestions in the policy making but the government maintained the same attitude which had been in vogue since 2006.
“I guarantee if our suggestions are given due consideration in the auto sector then this will definitely end corruption on imports and amount being spent in terrorism through smuggling of auto parts will also stop,” he added that uniform policy will lure foreign and private investments and the industry will grow.
“The government has to end up the monopoly of Japanese car and one bike assemblers in order to flourish the local industry otherwise the situation will remain the same,” Sabir said.
When everything was going late and there are remote chances of clearance of draft policy, Finance Minister Ishaq Dar recently assured in Japan that new auto policy would be approved by the ECC very soon.
For the import of CBU bikes, no separate policy was announced for the last 25 years. This is a big segment which could generate more revenues for the government. Many assemblers are importing over 100cc bikes in 100 percent CKDs. The government must announce a clear cut policy for every assembler as it would discourage smuggling and improve localization.
President of Pakistan Mamnoon Hussain belong to same group of traders of Karachi from where Sabir Shaikh is representing. “Fortunately, Mamnoon Hussain knows the industries and traders’ issues but at federal government level there should be a mediator which would understand the issues and resolve them. The government has already lost two years to curb smuggling of auto parts in the country.” Sabir said. He said that being in the field for the last 40 years at least; the government should take some benefits from my experience to bring new changes in the system.
The draft of Automotive Development Policy 2015-2020 has proposed at least eight measures for consumers’ welfare. The draft was shared with auto stakeholders on Jan 7, 2015, in a meeting chaired by Privatisation Commission Chairman Mohammad Zubair, and also attended by relevant officials. Stakeholders were asked to submit their feedback through their respective associations by Jan 20, 2015, as the government would not entertain any individual case as the policy has already suffered delays.
Chairman APMA, Mohammad Sabir Shaikh replying to a question said the small bike assemblers were not invited by any one in January 7 meeting. “Nobody talks or debate on two wheelers’ issue and only car industry issues were discussed. In the last 20 years China and India have developed their bike industry but our policies created smugglers only followed by no localization,” he said.
According to him Consumer-related suggestions include phasing out of vehicle models older than 10 years in case of cars and light commercial vehicles and 15 years in case of heavy commercial vehicles by the assemblers. The draft proposes product recall system in line with global practice and compulsory installation of immobilisers in cars by the assemblers. Amount of advance payment shall be limited up to 50pc of the total price.
-Published on pages# 22-23 March-2015 edition of MOBILE WORLD Magazine