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Auto sector: An emerging sector in Pakistan exports

Published on 6th Oct, Edition 40-41, 2014


Top Chinese firm Zotye holding group taking interest to make Pakistan an export base country for automobiles

Auto sector is one of the emerging sectors in Pakistan exports and efforts are being taken by Trade Development Authority of Pakistan (TDAP) for the promotion of exports of this sector to the world over.

A leading Chinese Group Zotye Holding Group has expressed its interest to make Pakistan an export base country for automobiles under a joint venture with Pakistan in auto manufacturing. Zotye Holding Group is interested in having a joint venture with Pakistani firm Raja Group of Industries to make Pakistan the manufacturing base for export of Zotye vehicles to South East Asian markets.

Zotye Holding Group is a modern automobile enterprise taking the R&D and manufacturing of vehicle, new energy vehicle and key auto parts like engine, auto mould, transmission as its core business. In recent years, Zotye’s every development and every breakthrough have got much care and kindness from different leaders at all levels. The Chinese state leaders such as Xi Jinping, Zhang Dejiang, Yu Zhendgsheng had visited Zotye many times and given their affirmation and encouragement to Zotye’s development.

On the other hand, Pakistan Automotive Manufacturers Association (PAMA) has urged the government to tread carefully on trade agreement with Sri Lanka as it indirectly provides market access to India which using joint ventures will dump its subsidized products in Pakistan.

In a letter written to the Ministry of Industries, DG PAMA pointed out that in January 2008 the Sri Lankan FTA negotiators admitted that Sri Lanka does not have the potential to export different auto parts. He said that during 2008 meeting the concerns of Pakistani auto sector were duly recorded in the minutes as under:

After discussion the following decisions were taken on ad referendum basis:

— Sri Lanka agreed to allow Pakistan to place 49 direct tariff lines in its No Concession List.

— The remaining 38 tariff lines relating to auto sector will be discussed in the next meeting along with Sri Lanka’s request list tabled during the meeting. Meanwhile Sri Lanka will not issue certificates of Origin for these products for export to Pakistan under the PSFTA.

However, PAMA says it seems that the expected potential investment into Sri Lanka is now materialized and most likely source of this investment is India. “This is a major concern for the auto industry and should be equally alarming situation for Ministry of Commerce. A mistake that was committed at the time of first negotiation of PSFTA with Sri Lanka should not be allowed to undermine now a thriving Pakistan’s vending Industry,” quoted DG PAMA in the letter.

“Our industry is already facing a hostile tariff regime where local vending industry is importing castings and forging 20 percent duty. With the finished products, like gears, being allowed to be imported at 5 percent or less duty from Sri Lanka the local industry will suffer massive hemorrhage. Parts like Ignition Coils (HS Code 851130), CD’ Units (Old HS Code 853230 Revised HS Code 851180) and parts and accessories for motorcycles including mopeds (Old HS Code 871419, revised HS Code 871410, this HS Code includes 49 localized parts) etc. are attracting basic custom duty at 35 percent and an additional duty of 15 percent. These parts being imported from Sri Lanka will again be coming at 5 percent duty or less. We will be giving away our market to Indian products routed through Sri Lanka at the cost and peril of a domestic value adding industry,” the letter quoted.

DG PAMA requested that Ministry of Commerce should refer back to the minutes of the review meeting dated: 24th-25th January 2008 in Colombo and the subsequent meetings and take the same stance that Pakistan may negotiate on other lines that are of interest to Sri Lanka, not allow these 38 lines to be opened to the concessionary imports and leave the position of auto related items, as above, unchanged.

According to the newly-elected President of the Lahore Chamber of Commerce & Industry (LCCI) Ijaz A. Mumtaz, Senior Vice President Mian Nauman Kabir and Vice President Syed Mahmood Ghaznavi, Pakistan, like other developing countries of the region, is facing growing energy demand dilemma and the private sector would have to work hard to exploit all resources to bridge the demand.

Talking about ongoing economic scenario, they said that tightening of belt was a must to wear off the intensity of economic challenges. They said that high mark-up was crushing the whole industrial sector like anything and this needs to be taken care of by the concerned authorities. The Federal Board of Revenue should also focus on simplification of taxes as existing procedures were cumbersome in comparison with other economies of the world.


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