ECONOMY-PAKISTAN: Car Imports Seen as Boom by Some, Bust by Others

By IPS Correspondents Reprint | | Print |

Muddassir Rizvi

ISLAMABAD, Mar 4 2004 (IPS) - Auto sellers anticipate a car boom following a government decision to allow imports of new and used vehicles. Local car and parts makers, however, are bracing for job losses.

Khurram Nasir, a car dealer in the city of Lahore, said he has already stopped investing in locally-manufactured cars.

”The dynamics of the car business are going to change,” Nasir said. ”People will have more choices and better options, but most importantly, the prices of used and reconditioned cars will be much lower than the ones manufactured by Pakistani companies, enticing people to opt for them.”

”This will also translate into the creation of new demand,” he added.

The government’s decision came after carmakers unable to keep up with rising demand refused requests to lower their prices.

Major players in the domestic market include local subsidiaries of Toyota, Honda, Suzuki, Hyundai, Kia and Mitsubishi. Together, they made some 90,000 cars in 2003 and expect to turn out 114,000 this year – still short of demand, which is being pushed up by leasing and financing companies offering lucrative, low interest plans to consumers.

The government had banned commercial imports of new and used cars in the early 1990s in a bid to aid the local auto industry. Individuals seeking to import a car had to pay tariffs as high as 200 percent, something few could afford.

Officials in the Ministry of Industries and Production said the old protectionist policies helped strengthen local car and related manufacturing. However, they added, it also enabled the big car makers to establish a cartel that remains unwilling to change prices, increase production, or improve quality.

A ministry spokesperson said relaxing the prohibition on commercial imports would aid consumers and local manufacturers.

”We believe that the decision would alleviate the hardships of consumers of particularly smaller cars with the engine capacity of 800cc or lower. At the same time, we will ensure that car industry in Pakistan continues to grow and become competitive,” the spokesperson said.

But car manufacturers as well as the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) voiced unhappiness about the decision and have lobbied officials to retain the ban.

”We are already under strenuous pressure under rising prices of raw material and also market competition that awaits us after the full imposition of the WTO (World Trade Organisation) rules. The new decision will only add to out woes,” said PAAPAM chairman Syed Nabeel Hashmi.

”The automobile parts industry alone employs more than 400,000 people. The government’s decision will not only jeopardise the existing industry, but will also halt further investments and job creation,” he said.

He added that the government was putting at stake hundreds of thousands of jobs to

ensure swift delivery of vehicles to a few thousand rich people in the country.

”The demand essentially is the result of the government’s own policy of encouraging car financing business. Why should the car manufacturers be punished for it?” said Hashmi.

The government has yet to finalise all the details of the new import rules. Car buyers, mostly salaried city dwellers, have begun rejoicing the decision and expressing hope that they would be able to purchase vehicles at prices they could easily afford, and take delivery of them as soon as they have paid.

Mujtaba Hussain, who works at a travel agency here, said a locally manufactured Suzuki Mehran car with an 800 cc engine cost some 5,000 dollars – about 2,000 dollars more than a comparable Chinese vehicle.

”But what is even more painful is the long wait for its delivery,” said Hussain, who like other car buyers had to wait for six months before receiving his car.

A select few consumers might be able to avoid the lengthy wait, however, if they pay a premium – sometimes as much as 2,000 dollars – to black-market dealers who receive entire lots of vehicles from manufacturers.

While consumers said relief was in sight, environmentalists said the expected car boom could spell trouble.

”We have already more than doubled the vehicle population on roads over the past 15 years. Our urban centers are showing some of the highest percentages of air pollution, mostly because of a rising number of vehicles and little effort to strengthen public transport and encourage people to use it,” said Asif Shujja Khan, who heads the Pakistan Environmental Protection Agency.

According to the Federal Bureau of Statistics, the number of vehicles of all types has risen from 2.7 million in 1990 to more than six million in 2003.

Khan said the latest decision could speed the rise in the vehicle population in the absence of regulations to phase out older cars.

”Our economic decision-making ignores its socio-environmental repercussions,” he said. ”Consumers’ interests are not limited to low prices but also include a better environment. We need to see the link between economics and environment.”