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Problems/Impediments Hindering the Growth of the Industry.

There are numerous problems and bottlenecks, which always hamper the growth of the Automotive Engineering Sector in the country. Most of the factors affecting the positive growth of the Industrial Sector originate from the Government Policies, though, there are some international controlling factors as well. In that, we feel the following as the most critical aspects which affect the economic and industrial growth in a negative manner:-

a) As per WTO agreement duties on the imported Auto Parts and Assemblies have been brought down from 85% to 35% which are likely to reduce more in the coming years.

b) There is no ITP consideration for the duty structure which, in turn, paves the way in an indiscriminate manner for the import of parts, assemblies and accessories from abroad.

c) The markets are flooded with the smuggled goods all over the country thereby leaving very little margin for the business activities of the local products.

d) Through unfair means and under invoicing practices, imported parts and products in most of the cases are available in the country at cheaper rates than the prices of the local products.

e) The industry owners are harassed and have to settle many a bureaucratic hindrance of endless number of Government Departments. In this context, no government has ever introduced facilities of the one window tax collection for the industrial community of the country.

f) Unprecedented high rates of tariffs of electricity, gas, oil and local raw materials ex-Pakistan Steels and other mills positively contribute for the high price base of input costs for the local products. The survival of the industry under the ever increasing charges of service facilities is thus becoming more and more difficult day by day to compete in the local and especially, in the international markets.

Views and Suggestions for Improvement for the Short and Long Term Implementation Suiting the Master Industrial Plan

My views and suggestion in this respect are very simple, to the point and are given hereunder:-


a. All imports of raw materials against Form 'S' be on 0% Custom Duty and exempted from deduction at source of Income Tax. Products be taxed once at their supply stage.

b. Import of Tools/Workshop consumable be allowed at 0% duty.

c. Import of machinery be allowed at 0% duty.

d. In the absence of ITP, rampant business of under-invoicing/misdeclaration is crippling the efforts of revenue generation Which needs to be restored.

e. Cascading Scale (value addition) must be kept while formulating duty structure for the import of finished parts.


f. In order to streamline exports, in the first phase Trade Centres be introduced at Karachi, Islamabad and Lahore on the pattern of World Trade Centres functioning in Korea, China and Taiwan. These Centers shall be giving a centralized projection of engineering activities both for the local and foreign buyers. Such centres shall also be helpful for introduction of engineering operations and creating a liaison for sub-contracting.

g. The process for refund against export rebate is very cumbersome which is needed to be made easier so that speedy refund could be recycled for the next export.

h. Notax be deducted on export of Engineering Goods.

i. OEM's be instructed to arrange exports of local made deleted parts equivalent to their CKD imports.


j. For the purpose of revenue collection "One Window Tax Collection" be managed. The amount being collected against Social Security, Education Cess, Old Age Benefits etc. be merged for collection by single source of Income Tax Department.

k. No purchase at Government level be allowed without issuance of Sales Tax Invoice by the seller.


I. Industrial procurement of imported items by the Government Departments be curtailed @10% each year and met through local manufacturing.

m. In view of the rapid increase in inputs, a protection of 30% higher slab for purchase of local manufactured items be allowed by according preference over imported items.


n. Interest on the bank loans should be reduced to as low as 12% per annum for the economically viable business of the local engineering industry.


o. Policy of the Government for the promotion of Industrial and Agricultural Sector should be pursued vigorously and maximum tractors should be made available to the farmers for the maximum output of the agricultural sector thus utilizing the growth potential of the country's Agro-Economic Sector.


p. Deletion programmes should be implemented strictly as per ISDP's yearly targets. For boosting the economic activities of the local engineering industry, the deletion for imported parts should be further enhanced for the additional 5% parts so as to ensure 5% more indigenous development and production of parts.

q. Through this, overall cost of the local Cars/Trucks/Buses/Vans would also reduce automatically and will be available on reasonable prices.

r. Simultaneously, maximum deletion programme should be implemented for the Defence Procurements and at least 10% per year purchases from abroad should be cut down for the indigenous manufacturing of the stores for procurement through the local manufacturers and suppliers.
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Publication:Economic Review
Article Type:Brief Article
Geographic Code:9PAKI
Date:Apr 1, 2001
Previous Article:Automobile industry: Problems and Constraints.
Next Article:Revival of the Country's Economy and The Master Industrial Plan.

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