Govt sets out to break Japanese monopoly in local auto sector

ISLAMABAD: In a major policy decision, the government has decided to give tariff concessions to new automobile players to break the monopoly of the Japanese car cartel in the country. According to official sources, the decision was made after a detailed analysis of the local automobile sector by the Ministry of Industries and Production. They recommended tariff incentives to attract new players in the local car-manufacturing sector. Since the Japanese car assemblers failed to adhere to the government's advice on rationalisation of local car prices, a decision was made to open up the auto sector for Chinese, Korean and European brands. The country's current car production capacity is 269,000 units per annum while assemblers only manufactured 121,790 units during the financial year 2009-10. Japanese brands had a market share of 99.6 percent during the last fiscal year. Their dominance was attributed as the main reason for lack of competition and higher prices of cars. They maintained under utilisation of their plants, as they could not export their products due to inferior product quality. The Ministry of Industry has proposed to reduce the existing import duty of 32.5 percent on the Complete Knocked Down (CKD) for new investors to five percent in first year, 10 percent for second year and 20 percent for third year. This would help the new investors to enhance assembly of 100,000 units per annum. The tariff concessions for new entrants would commence from the date of manufacturing, the sources said. Meanwhile an official announcement by the Ministry of Industries on Wednesday said that after the permission for import of used cars up to five years old, the ministry has prepared a proposal to allow the import of five year old used buses, coaches, wagons, trucks and tractors. The statement said the Minister for Industries Mir Hazar Khan Bijarani had been given the task to prepare a comprehensive proposal with attractive incentives for new entrants in the car manufacturing industry. The government was very upset over the increase in car prices by the local car assemblers and is very keen to break the monopoly of present car manufacturers and to rationalise prices of cars. The government has finally decided to open the local auto sector for China in particular and other international competitors with attractive incentives. It said the ministry has also prepared a new entrant policy in the automobile sector and the government has decided to invite Chinese and other

international market players to invest in Pakistan. For immediate start of new car assembly, the government has decided to provide bases of state owned enterprises including HMC, HEC, PMTF, PECO, KTDC, TUSDEC and SEL to the new entrants. Interested investors of China and other countries could become partners under a mutually agreed equity basis of these SOEs. The summary of these proposals has been sent to ECC of the Cabinet for approval.