Pakistan Association of Automotive Parts and Accessories Manufacturers flays changes in policy regarding motorcycle industry

Lahore, July 23, 2012 (PPI-OT): The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), flaying the abrupt changes in current policy regarding motorcycle industry, has said that the plan to allow a new investor to import all motorcycle parts at 5% duty (as against current rate of 15%) will not only be a negation of previous policies, but it will also encourage producers to bypass local vendors and manufacturers. New Entrants to circumvent SRO 693, decrease use of local components and lead to heavy losses in vendors’ business .

The PAAPAM managing committee members, in a meeting, said that the sector had progressed tremendously due to consistent policy making on part of the government, but the new policy has threatened the industry growth.

They said that following the Board of Investment’s initiatives to incentives a Japanese motorcycle manufacturer’s re-entry in the Pakistani market at 5% rates had shaken the confidence of investors and local manufacturers. It is also worth mentioning that the so called “new entrant” will recover its total investment in 4-5 years in the form of duty concessions alone, at a heavy cost to the exchequer.

“Import of already localized parts at CKD rate of duty will cause a rollback of the deletion program already achieved after a lot of efforts. In fact several new local bike makers have also introduced a new 125CC motorcycles but no relaxation in localization was given to them.

However, those parts, which are not being developed locally, could be imported but at higher rate of duty,” the vendors’ association members observed collectively.

Addressing the meeting, PAAPAM chairman Syed Nabeel Hashmi, said that the policy u-turn is worrisome and against the interests of the country and future industrialization. He says that the portrayal of the motorcycle manufacturer as a new investor conveniently overlooks the fact that the same brand was produced and marketed for decades in Pakistan, and was only forced to wind up due to its failure to compete with other brands, especially those from China.

He said that the vendors are dismayed at the government’s insistence in granting special status to this OEM on its re-launch.

“Motorcycle production has increased from 100,000 units at the start of the century, to around 2 million this fiscal year,” he said adding that no other industrial sector has shown such high and sustained growth during the past decade.

In fact, Pakistan has emerged as a global leader in the production of 70CC motorcycles, where no single vendor dominates the market for a single part, but multiple vendors for a single part are available. This indicates the depth of the vendor industry in motorcycle parts. He claimed that Pakistan now exports 125CC bikes as well.

Addressing the meeting, PAAPAM vice chairman Munir K. Bana pointed out that government claimed the new investment would introduce new technology to the country was a mere eyewash, as existing players had introduced the latest Euro-2 engines in their products without any special incentives.

“Current players are even willing to import hybrid and EFI-based engines without special incentives”, he said. This is because many engine parts complying with new emission standards are produced locally, he added.

He said that Pakistan needs foreign investment, however, the country should not be so desperate in attracting investment by catering to unit specific investment proposals so as to destroy one of its most vibrant sectors. The Vice Chairman observed that it was a wrong perception portrayed by various circles in the government that local industry was manufacturing substandard products. “We are making products as per design specification and quality as required by our customers,” he reiterated.

The meeting concluded with consensus that PAAPAM welcomes all foreign investments in Pakistan which only supports the engineering industry and can lead to further growth in the economy and job creation.

For more information, Contact:
Chairman
Syed Nabeel Hashmi
Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM)
16-B, Westwood Colony, Thokar Niaz Baig, Lahore.
Tel # +92 42 37498474-5
Fax #+92 42 37498476
Cell: +92 333 4372500
E-mail: paapam@brain.net.pk ; chairman@paapam.com