NEW AUTO POLICY 2016-21 COULD NOT BRING ANY CHANGE IN AUTOMOBILE INDUSTRY OF PAKISTAN, AS YET

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After a hiatus of almost two and half years, the economic co-ordination committee of the cabinet gave the go ahead to the automotive development policy 2016 – 21 in the month of March 2016. Now almost one year has been passed but no material / significant result or achievement can be seen after implementation of this policy on the horizon of automobile industry of Pakistan.

The Twenty Fourth meeting of the Auto Industry Development Committee was held on 13th April 2017 and its minutes were confirmed on May 05, 2017, by EDB, the issue discussed and decision made during this meeting is also indicate the incapability of new auto policy in delivering solutions for the challenges being faced by the automobile industry of Pakistan.

Primary objective of the policy was to bring new investment which could boost the competition among the players, resultantly consumer shall get due benefits.The Government was hopeful that new policy will attract the European Car maker. However definition of medium knocked – down unit – MKD was not included into the policy so leading European Cars maker i.e. Fiat, Audi and Volkswagen scrapped their plan to enter in this market. French Car makers Renault was the first to announce its plans to invest USD$100 million in Ghandhara Nissan Plant to bring its brand into the country’s market but reliable source disclosed that Renault has stopped all activities in relation to Pakistan ventures due to some unknown reasons.

Under automobile development policy 2016-21 the following applications were submitted for approval.

1. Request of M/s. Regal Automobile Industries Limited for Green Field Investment.
2. Request of M/s. Dewan Farooque Motors Ltd for Brown Field Investment.
3. Request of M/s. Al Haj Faw Motors (Pvt) Ltd for Green Field Investment.

M/s. Regal Automobiles Industries Ltd (RAIL) applied for the Greenfield Investment incentives under New Investment Policy of ADP 2016-21 for establishing auto assembly plant in Lahore for the production / assembly of light commercial vehicle (LCV’s) and Mini Van / Bus under Technology Transfer Agreement with DFSK Motor Co. Ltd, a subsidiary of Dongfeng Motors Corporation, China.

Further, it was informed that M/s. Tayyaba Motors (Pvt.) Limited, approached EDB claiming that their and M/s. RAIL’s principal is same i.e. DongfengSokon and DFSK, even their factory address and vehicles offered by both of them are physically same with the only difference of label / logo. The firm therefore claimed that M/s. Regal Automobile Industries Ltd., cannot avail the concessions of Greenfield Investment under ADP 2016-21. However, M/s. Regal Automobiles denied. The committees decide that both the firms shall provide information of design patents from their principals and other related information facilitating EDB to evaluate and decide, accordingly.

The Engineering Development Board (EDB) is the apex government body under Ministry of Industries & Production entrusted to strengthen engineering base in Pakistan. EDB focuses primarily on the development of engineering goods and services sector on modern lines enabling it to become technologically sound and globally integrated. On the other hand committee decision is purely of commercial nature. In my point view EDB is not capable to take such type of decision independently.

It was learnt by reliable source that ministry if industry is not convinced with the contention of DFML that their plant was operational beyond the cutoff date of July 2013, exactly DFML plant was operational during September 2013 to February 2014. So the approval for brown field investment category cannot given. It is only possible through amendment in the policy, since it is mentioned in the policy that it can only be reviewed after two years, while it is only in its first year of implementation so ministry could not support any change in the policy.

The request of M/s. Al Haj Faw Motors for the green field category was also turned down with the same reason. Furthermore some more new companies are establishing their assembly plants and some only announced their intention to enter in automobile assembly business under ADP 2016-21, keeping in view the disputed case of DFML and RAIL, we feel that responsibilities of EDB are increased.

Procedure for approval under ADP 2016-21 may be strengthen. Stringent documentation for application process may be adopted. Questions / details of commercial nature may be asked by the new entrant. It may be noted that RAIL assembly plant is near completion and DFML has already imported CKD kits for Shahzore assembly from Dehan Laos. It seems that both companies could not start their assembly operations due to these confusions / delays.

According to our information one of the new entrant from Lahore is planning to assemble Chinese Alto which is the carbon copy of Pakistani Suzuki Mehran. We feel that its application shall also be challenged by Pak Suzuki Motors on the same ground and reasons, claimed by Tayyaba Motors in case of RAIL application.

In view of the above scenario we suggest that EDB may call an emergent meeting of AIDC also request to State Bank, SECP, Trade Mark Authorities, Intellectual Property Organization of Pakistanetcetc for the participation in this meeting. This meeting should have one point agenda i.e to chalk out detailed and foolproof procedure for the approval of application under ADP 2016-21 for the new investment in automobile sector.

This exclusive article, published in Monthly AutoMark Magazine’s June-2017 printed edition
by Anwar Iqbal

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